Wednesday, May 29, 2013

On the Decline and Fall


As events inform us, it is not a pleasant experience to witness the decline and fall of a once vibrant civilization. There is a sadness in any deathwatch, particularly when one’s vigil is interrupted by memories of a once robust parent, aunt, or uncle—with whom one learned and enjoyed so much of life—now in a weakened and terminal state. Whether we are considering a relative or the society in which one lives, there is no joy to be found in the final days of either. In either instance, one realizes that his or her life experiences, if not sense of being itself, are connected with others. As with any relationship, each of us helps to fashion the other, such that the sadness and joys of one sadden and delight the other.
The society in which I was born, raised, and work, and into which my wife and I brought our children, is now in a state of rapid decline. But as most of us are wont to do when informed of the impending death of a loved one, we desperately reach out for a remedy that we hope will reverse the fatal condition. Surely there is some new “leader” or political/religious ideology that can reinspire us, or some as yet undiscovered legislative nostrum which, if unable to reverse our apparent fate, may at least disguise the symptoms for a period of time.

Because civilizations transcend individual lives, we are unaccustomed to thinking that the society in which we live could ever have an end point or, if it did, that we might find ourselves in its final days. I strongly suspect that those who lived in the civilizations that preceded our own, were thoroughly convinced that their social structures, practices, and culture would endure forever. But history teaches us otherwise. Just as small children must eventually confront the mortality of their parents—and, in the process, theirs as well—there is nothing remarkable in the pattern of civilizations, like human beings, being born, growing into adulthood, and eventually dying.

What defines a great civilization, and what conditions are necessary to its existence? Is it wondrous buildings and monuments to its political leaders, or a succession of military conquests and elaborate systems of social control? These are the features that government schools have trained us to consider, characteristics that define the aspirations of political institutions.

To my mind, such a view is far too noun-oriented, conceiving of greatness more in terms of the things produced, rather than the verb-oriented processes by which such civilizations function. Has Western Civilization been great because of the works of such people as Shakespeare, Michelangelo, Beethoven, and Einstein, as well as the life-enhancing products of industrialization, or because of the existence of conditions in which such creativity could take place?

Because the principle of entropy maintains its constant influence in the world, all living systems must generate new energy (or “negative entropy”) if they are to resist—at least temporarily—their collapse into their ultimate fate. We eat, in other words, not because someone has prepared an attractive meal for us, but because our continuing failure to do so will soon bring about our death.

The health of any system—be it an individual or a society—depends upon the production of those values necessary for that system’s survival. The production and distribution of goods and services, technology, the sciences, medicine, the arts, and agriculture, are just a few of the more prominent examples of the values upon which Western societies have depended.

If we misfocus our attention, we may erroneously conclude that our material well-being is dependent upon the creation of the “things” that we consume in our efforts to sustain ourselves. In so doing, we tend to ignore the underlying conditions that make the production of such values possible. The Industrial Revolution was a humanizing epoch because it taught us how to produce the material wealth that can sustain the lives of millions of people. It would take a misanthropic disposition to deny the benefits to mankind arising from this period. But when our mind connects up the benefits with the organizational systems that created them, we are inclined to regard them as inseparable. We come to value, and depend upon, the goose that lays the golden egg, rather than upon the processes by which creative individuals might produce more geese, or more efficient means of generating gold.

Western Civilization is in the crisis it is because we have sacrificed more profound values than the immediate and quantifiable consequences we tend to associate with the pursuit of our material interests. Among these are peace; liberty; respect for property, contracts, and the inviolability of the individual; truthfulness and the development of the mind; integrity; distrust of power; a sense of spirituality; and philosophically-principled behavior. But when our culture becomes driven by material concerns, these less tangible values recede in importance, and our thinking becomes dominated by the need to preserve the organizational forms that we see as having served our interests.

In such ways do we create institutions. In order to clearly distinguish one form of organization from another, I define an “institution” as “any permanent social organization with purposes of its own, having formalized and structured machinery for pursuing those purposes, and making and enforcing rules of conduct in order to control those within it.” In short, an “institution” is a system that has become its own reason for being—rather than just a means for producing life-sustaining values—with people becoming fungible resources to be exploited for the accomplishment of collective ends.
The very existence of institutions depends upon people developing a collective identity for themselves, a topic I explored in depth in Calculated Chaos. We learn to associate our very being with the herd(s) of which we are part and to which we consider ourselves subservient. While organized behavior is both natural and beneficial to us as social beings, institutions invert the role of social systems: organizations that began as tools of cooperation to foster the mutual interests of individuals, get twisted into systems that become their own reasons for being (i.e., institutions).

Having accepted the primacy of such agencies over our lives, most of us express nary a doubt about the necessity of taxpayers coming to the rescue of such systems when they face difficulties. When banks faced substantial losses as a result of New York City’s financial crisis in the 1970s, only a handful of people found any flaw in having the taxpayers bail them out. So, too, with major corporations, or professional baseball and football franchises calling upon the taxpayers to underwrite their expenses. The government schools have also relied upon our worship of institutions to get taxpayers to continually fund a system that should have been allowed to die its entropic death decades ago. In the aftermath of the September 11, 2001 attacks at the World Trade Center (WTC), airlines, insurance companies, and various other institutions managed to get whisked through Congress, legislation to force the taxpayers to recompense them for their losses. Even commercial advertising can dredge up no more meaningful response to these events than for us to equate spending our money—with such advertisers, of course—as acts of patriotism! More recently, the major recession of the Bush/Obama years led the federal government to provide major corporate interests with billions of dollars of loans and bailouts on what so clearly expressed the institutionalist premise: “too big to fail.”

“But what is wrong with coming to the rescue of these institutions?,” it may be asked. “Think of all the money that has been invested, and all the men and women who are employed by such firms.” The same argument might well have been made, a century ago, when the buggy whip and carriage manufacturers, horse ranchers, and hay farmers, were faced with bankruptcy as a consequence of the automobile. Or what of the motion picture industry, which has regularly sent lobbyists to Washington to fight the “threat” of television, then cable television, and then VCR’s—all of which ended up being boons to Hollywood: should they have, as they continue to demand, government support for their enterprises?
The problem with all of this, as historians advise us, is that the institutionalization of the systems that produce the values upon which a civilization depends, ultimately bring about the destruction of that civilization. Arnold Toynbee observed that a civilization begins to break down when there is “a loss of creative power in the souls of creative individuals,” and, in time, the “differentiation and diversity” that characterized a dynamic civilization, is replaced by “a tendency towards standardization and uniformity.” The emergence of a “universal state,” and increased militarism, represent later stages in the disintegration of a civilization.

Will and Ariel Durant reached similar conclusions, observing that the health of a civilization depends upon “individuals with clarity of mind and energy of will . . . capable of effective responses to new situations.” Carroll Quigley demonstrated how the maintenance of static, equilibrium conditions can lead to the collapse of civilizations, a process he directly relates to the institutionalization of what he calls the “instruments of expansion.”

A creative civilization, in other words, is dynamic, not stable; adaptive to change, not seeking equilibrium. It is characterized not by those who seek to preserve what they have, but by those who seek to produce what their minds tell them they can have. Individual liberty abounds in such a society, as men and women advance new ideas, new technologies, and new practices.
The explanation for the interrelatedness of institutionalism and the collapse of civilizations is not difficult. Because of their size and bureaucratic sluggishness, institutions tend to become less adaptable to the constancies of change inherent in all living systems. Life is a continuing process of making adjustments and creative responses in a world of complicated inexactitude. But institutions insist not only upon their illusions of predictability, but their systems of control by which they imagine they can direct the world to their ends. This is why institutions have always aligned themselves with the forces of power, in order to compel the rest of nature—particularly mankind—to conform to their interests.
But power wars against life, for power seeks to force life to become what it does not choose to be. Because “life” expresses itself as autonomous and spontaneous activity, it is inextricably dependent upon the liberty of individuals. Liberty is not simply a proposition designed to placate intellectuals who want to protect the expression of their opinions. It is, rather, the condition in which individuals—and the societies in which they live—can remain resilient, adaptive to changing conditions, and thus maintain the creative impulses necessary for their vibrancy.

The individual, with his or her uniqueness and self-directed nature, is the expression of life on this planet. As such, a condition of liberty tends to generate variation and non-uniformity, with social order arising as the unintended consequence of individuals pursuing their varied self-interests. Manners, customs, the dynamics of the marketplace, cooperation, negotiation, and other social pressures, help to regularize human behavior while keeping it flexible. The antisocial conduct of the few is met with ostracism, boycotts, and other refusals to deal.

But most institutions tend to be uncomfortable with liberty, for the processes of change that are implicit therein run counter to their purposes of a structured permanency. Because of their size and scope of operation, institutions deal with people on a mass, rather than individualized, basis. As our world becomes more institutionalized, standardization and uniformity become more dominant values. The informal systems and practices that connect people to one another get replaced by coercive rules, hierarchically-structured organizations, violence and the threats of violence, SWAT teams, torture, enhanced punishments, and longer prison sentences for an ever-widening group of offenses. As such coercive practices proliferate, there is a continual weakening of the informal social mechanisms and, like muscles that fall into disuse after a serious illness or injury, begin to atrophy. Manners and social habits soon give way to speech codes, “hate” crimes, and other forms of institutionally-mandated standards of conduct. When a civilization reaches the point at which only coercive force is capable of holding it together, it is finished as a viable system.

Civilizations die out for the same reason organisms do: their failure to maintain a sufficient resiliency that will permit them to overcome entropy. As the Durants put it, they then “linger on as stagnant pools left by once life-giving streams.”4 Still, there is no historical determinism at work that would make the collapse of Western Civilization inevitable. The health of any system depends on its being sufficiently resilient to allow it to adapt to the constancy of change that is inherent in all of life. A vibrant system—whether an individual, a business firm, or a civilization—will incorporate the need for self-corrective behavior into its methods. Such thinking is contrasted with what preceded the construction of highly-structured open-hearth steel mills or automobile assembly lines in those American cities that are now referred to as the “rust belt.” When the need for adaptability is ignored or resisted, stagnation is a likely consequence.

In any society, there has always been an underlying current of energy through which the life processes seek expression. Political systems, grounded in coercion and violence, have always represented a continuing war against such life processes. But it is institutionalism—the belief that established organizations are ends in themselves whose interests must be preserved and protected—that makes political systems so dangerous and destructive to the liberty upon which life forces depend. Just as water can be dammed up for only so long until it either bursts through or circumvents the structure kept in its way, life energies will continue to seek their expression. To the extent a civilization welcomes such expression, it will prosper and extend its beneficent influences to the rest of mankind. Indeed, in recent decades, Western society has been exhibiting a sufficient resiliency to overcome many of the institutionalizing tendencies of a pyramidally-structured world. Organizations have been moving from systems of centralized, vertical authority, to decentralized horizontal networks. The pyramid has been collapsing in favor of what I call a holographic organizational model, wherein authority is distributed throughout the system rather than concentrated at the top.

Well-managed business firms now recognize the greater productivity and profitability of having increased decision-making decentralized into the hands of employees. Alternative health care, educational, religious, and dispute resolution systems have been challenging the Kafkaesque bureaucratic structures of the institutional order. The recent proliferation of private schools and homeschooling reflect such transformations. The Internet, and other computerized technologies, have decentralized the flow of information, as well as banking, consumer-driven retailing, and other business practices.

These decentralizing changes have been occurring in the political realm as well, with the collapse of the Soviet Union providing the most vivid example. The monolithic USSR splintered into fifteen independent countries, while the erstwhile Yugoslavia fractured into five separate countries. Else-where, fourteen additional subdivisions have been created, producing a total of thirty-four new countries since 1990 alone, and with more apparently on the way.5 Secession movements are challenging centralized political authority in cities, states, and countries throughout the world. The previous solidity of a mass-minded culture—exemplified in the phrase e pluribus unum—has centrifuged into numerous hyphenated identities based upon race, gender, religion, nationality, or lifestyles of various groups.

While these changes were taking place long before the terrorist attacks of September 11, 2011, the events of that day portend a much deeper psychic meaning than most of us have begun to realize. As brutal and horrific as these atrocities were, the shock they brought on goes far beyond the numbers of casualties. Nor does the trauma lie in the fact that America, itself, had been attacked by terrorists: the bombing of the World Trade Center in 1993, the downing of Pan Am Flight 103, and the suicide attack on the U.S.S. Cole, preceded September 11th.

It is in the symbolism of the World Trade Center’s demolition that the deeper psychological meaning is to be found. On one level, of course, the WTC symbolized private capitalism, whose virtues and efficiencies had so recently won out over socialism and other forms of state planning as the system best able to maximize the material well-being of humanity. This may have been a contributing consideration, on the part of the terrorists, in its being selected as the principal target.

But the central factor in these buildings being selected as targets was their being symbols of the American government practices through which wars and other military operations have been conducted throughout the Middle East. It was not laissez-faire capitalism or other expressions of liberty that were attacked that day, but corporate-statism, through which major business interests control the destructive machinery of the state to achieve ends they are unable to obtain in free markets.

The World Trade Center symbolized something more, something that I suspect its brutish attackers would never have sensed, but which, I believe, underlies the deeper shock all of us are experiencing. Almost like a pair of Jungian archetypes, the WTC buildings stood, at the base of Wall Street, as towering symbols of a vertically structured, institutionalized world. Such symbols were utterly destroyed by a handful of box-cutter-armed terrorists, who symbolized to the world that war, itself, had become decentralized. For Americans who still think of “defense” in terms of nuclear missiles; fleets of battleships, aircraft carriers, and atomic submarines; and tens of thousands of hierarchically disciplined soldiers, the confluence of these symbolic forces has generated much turbulence within our minds.
The present “war against terrorism” goes much deeper than simply trying to eradicate cadres of maniacal butchers—as desirable as such ends would be if capable of being realized through warfare. The decentralizing influences that have been at work throughout our world for a number of years—and whose processes are becoming better understood through the study of chaos and complexity, marketplace economics, biological systems, psychology, and systems analysis—are proving to be incompatible with the hierarchically-structured forms through which institutions have come to dominate Western Civilization. Institutions tend to lack resiliency. They are generally less interested in adapting their systems and methodologies to a changing environment, than in forcing the environment—including people—to adapt their behavior to conform to institutional interests.

It is just such attitudes, as we have seen, that have brought down prior civilizations. Considered from a broader historical perspective, it becomes evident that terrorists have not been the cause of the decline of Western Civilization any more than were the invading barbarians the cause of the fall of the Western Roman Empire. Each such group was but a symptom, among many, of the vulnerability of a civilization that had become weakened by its own contradictions and lack of responsiveness to the conditions upon which life depends.

Understood in its broader context, this war could more properly be defined as a War for the Preservation of Institutional Hierarchies, a war against the processes of change that are working against vertically-structured, command-and-control social systems. That this has been declared to be a “permanent” war against humanity in general (i.e., “if you’re not with us, you’re against us”) should awaken us to its broader implications. It is ironic—but understandable—that, at a time when the world is becoming more decentralized, institutional interests are hard at work to expand upon their mechanisms of centralized control. Whether flying the banner of the “New World Order,” or NATO, or the United Nations, or the European Community, or the World Trade Organization, the institutional order continues to insist upon its command-and-control mechanisms.

As this war continues, those of us who persist in conducting our lives outside institutional walls, or who continue to use the Internet as though it were a tool by which free minds communicate with one another, or who insist upon the privacy of our lives and business transactions, will discover ourselves thrown into the new suspect class of “terrorists.” As the state increases its demands for national identity cards, secret trials conducted by the military (rather than by untrustworthy juries), the use of torture against suspects, the assassination of Americans, greater surveillance of our lives—including having police enter our homes without our knowledge or consent—and military patrolling of American streets, we should become aware of the truth of Pogo Possum’s observation: “we have met the enemy and he is us.”

Though our civilization finds itself in a state of turbulence, it is not fated to collapse. While the institutional order lacks resiliency, there is a life force within nature that insists upon adaptability. In a material sense, this life force may find expression as DNA, which all living things have in common. Biological evolution fosters the variability that allows living systems to respond to changes in their environments. But such processes are at work beyond—albeit interconnected with—biology. In the dynamics of the marketplace we find the most vibrant expression of the creative, life-sustaining nature of resilient behavior. When institutional interests conspire against change, they have declared themselves to be in a state of war with life itself!

But you and I are part of this same life force, and our resiliency may be the means through which our civilization reenergizes itself and allows all of the institutional entropy to work its way out of a fundamentally new social system. Just as the creative energies of the Industrial Revolution replaced the rigidly structured and stultifying system of feudalism, our present civilization may—if you and I are up to the task—transform itself into an even more productive society.

But to do so, we must be prepared to move beyond the vertically-structured, institutionalized thinking in which we have been carefully conditioned. You and I can bring civilization back into order neither by seizing political power, nor by attacking it, but by moving away from it, by diverting our focus from marbled temples and legislative halls to the conduct of our daily lives. The “order” of a creative civilization will emerge in much the same way that order manifests itself throughout the rest of nature: not from those who fashion themselves leaders of others, but from the inter-connectedness of individuals pursuing their respective self-interests.

In the institutional order’s war to preserve itself against the life-sustaining processes of change, the most treasonable of propositions will be that which affirms that life belongs to the living, not to institutional power structures! We must learn to love our children more than we do the dehumanizing agencies of restraint and destruction that now threaten their futures with announced plans for an endless war against all. The time is now upon us, as individuals, to assert that life is going to prevail on this planet; that we shall reclaim our free and creative spirit and, in so doing, revitalize Western Civilization; and that those structured systems that insist upon exploiting and destroying life in the course of advancing their own interests must now stand aside. What if a fundamentally transformed civilization—one that expresses decentralized, autonomous, and peaceful behavior, while discarding its destructive, anti-life, institutional structures—is already unfolding before you? Would you be prepared for it?


Tuesday, May 28, 2013




Reflections on the Decline and Fall


While I was aware of this fairly common practice in Austria, I was only later able to put names and faces to those who had actually done so. Various musical composers, painters, poets, philosophers, inventors, writers, journalists, found the study of law an integral part of their intellectual development. These major contributors to the life of Western Civilization included such Austrian students of the law as two of the fathers of sociology, Max Weber and Ludwig Gumplowicz; major figures of the “Austrian School” of economics, Carl Menger, Eugen von Bohm-Bawerk, Ludwig von Mises, and Nobel laureate Friedrich Hayek, as well as the economists Friedrich von Wieser and Leopold Kohr (who authored the phrase “small is beautiful”); philosophers Anton Menger, Otto Bauer, Max Adler, Fritz Mauthner, Adolf Stohr, Gottfried Leibniz, and Gustav Bergmann; lawyers and philosophers Erik von Kuehnelt-Leddihn, and Hans Kelsen; the inventor Wolfgang von Klempelen; journalist Karl Kraus; artist and psychologist Anton Ehrenzweig; art historian Alois Riegl; the poet Hugo von Hofmannsthal; music composer Emil von Reznicek; and students of music, Guido Adler and Eduard Hanslick. The world-renowned symphonic conductor, Fritz Reiner, provided another example. Throughout my years of law school teaching, I have often wondered why men and women with backgrounds in music tended to do so well. Perhaps in the interconnectedness of Austrian culture can be found insights lost in modern student concerns over grade-point averages and bar exams! Nor can I overlook the major contributions made to civilization by such erstwhile students of the law as the literary giants Kakfa and Goethe.
The study of law is but one example of the creative nature of the metamorphic powers of an integrative culture. Those who pursued other inter-disciplinary studies illustrate a similar influence. Such dynamics—rather than the modern reductionist emphasis on specialization—helps us understand why Austria became a focal point for the creativity that found expression in such music composers as Haydn, Schubert, Mozart, the two Johann Strausses, Schonberg, Beethoven, and Mahler; such scientific minds as Gregor Mendel, Freud, Alfred Adler, Konrad Lorenz, Ernst Brucke, Theodor Meynert, Erwin Schrodinger, Ludwig Boltzmann, Arthur Schnitzler, Ernst Mach, Fritjof Capra, and Paul Feyerabend; the novelist and first woman to win the Nobel Peace Prize, Bertha von Suttner; the writer and inventor Josef Popper-Lynkeus; as well as such prolific thinkers as Edmund Husserl, Viktor Frankl, Joseph Schumpeter, Karl Popper, Arthur Koestler, Franz Brentano, Bernard Bolzano, Eric Voegelin, and Ludwig Wittgenstein; and actress and inventor Hedy Lamarr. While not all of these persons were students of multiple subject areas, the more holistic, integrated Austrian culture in which they and other individuals worked doubtless produced an environment that added to their creativity.
The processes that allow the genius and creative energies of individuals to merge into a prolific civilization, include such powerful domains as frontiers. The course of American history has led many of us to think of a frontier in geographic terms, as an unknown and uncertain territory existing beyond the known and established. Frederick Jackson Turner has written of the pivotal role played by a politically unstructured environment in which people were free to explore and innovate and, as a consequence, generate a free and productive society.7 States whose political systems were too restrictive and structured found themselves in competition with an ever-expanding “west,” to which creative persons were attracted. The presence of reasonably accessible and less-regulated environments also served to temper state efforts for control.
Of greater significance than geographically defined frontiers are the psychological and intellectual dimensions—the “state of mind”—of people who either accept or disregard the restraints placed upon their behavior by external authorities. As Alfred North Whitehead expressed it, “the vivid people keep moving on, geographically and otherwise, for men can be provincial in time, as well as in place.”8 There is a vibrancy in the life process that manifests itself along the boundary lines that separate the known from the unknown; the stable from the changeable; the familiar from the novel. In the interplay between the conscious and unconscious minds—often experienced when the brain is in an alpha state—we can experience this dynamic of creativity.
One can see this same creativity where the boundaries of various intellectual disciplines meet. The study of “history,” “economics,” “law,” “physics,” etc., takes place within realms whose inviolabilities are often fiercely guarded by certified professors within each field. Not unlike the nature of political “peace” talks, so-called “inter-disciplinary” conferences frequently encounter resistance from participants dedicated to the defense of their respective “turfs.” The historian who invades the territory of the physicists, or the economist who incorporates legal doctrine into his presentation—and, I must add, vice-versa—risks attack from the home-guard.
But it is precisely where such boundary lines meet that much creativity occurs. Looking across the boundary line into the neighbor s space can reveal a frontier to be explored. One might discover qualities on the other side that can be synthesized with their own discipline to create an expanded understanding of the world. Cross-disciplinary similarities might also be found, helping to confirm one’s prior thinking. As one noted historian has observed, nineteenth century medical practice in Austria was premised on allowing natural processes of healing to take precedence over interventionist procedures. This attitude also prevailed among many Austrians regarding politics, as well as in the Austrian economics—pioneered by Carl Menger and Ludwig von Mises—that eschewed government interference with the marketplace.9 Did earlier principles from the realm of medicine influence economic thought, or might this common principle have a deeper basis of understanding that surfaced within each of these fields?
All creative actions confront the energies that seek to stabilize existing systems, practices, and thought. Elsewhere, I use the metaphor of the “cutting-and-filling” functions of rivers to illustrate the constant interplay between forces of stability and change that pervade nature.10 On the cutting side—where its energy is greater—the river eats into the surrounding bank, bringing earth, plants, and other debris into the stream. On the weaker filling side, dirt and silt collect, and it is here where new plant life forms. In this interaction is found the synthesis between the forces of destruction and consolidation that is the essence of creativity.
We are beginning to develop a better understanding of how the turbulence of chaotic systems produces order in the world. From this enhanced awareness comes a growing appreciation for the individualized and spontaneous nature of the creative process. Privately owned property; personal liberty; respect for contracts—which, in turn, is dependent upon longer-term time preferences; and the decentralization of decision-making, provide the necessary social environment for such inventiveness. The creative energies that gave birth to Western Civilization arose from within individuals who were able to transcend the lines that constrain our understanding and practices to within established boundaries. As has always been the case, within free and independent minds are to be found the frontiers for the creation of new ideas and forms to help us live humanely.
We have seen how civilizations are created by individuals. In the following pages, we shall discover how they are destroyed by collectives11 which are good for little more than the destruction of what others have created. We see this in the sharp contrasts between market economies and state socialism; between the Industrial Revolution and the Soviet Union. In many ways does history remind us of the continuing struggles between the creative energies unleashed by liberty, and the repressive forces of politics. The members of collectives are too dominated by “dark side” forces of mob psychology to ever undertake the prolonged and highly-focused inquiries necessary to the creation of anything fundamentally original. Collectives provide mirror images of minds in the default mode, capable of only reflecting the shared ignorance and prejudices upon which the institutionalized control of humans depends. Because we are unable to identify the names of distant ancestors who produced so much of what we modernly embrace as our common understanding, we are inclined to imagine a collective genesis for the insights of ancient individuals. We gaze, in awe, upon 32,000-year-old handprints found in ancient caves in Spain and France, forgetting that these represented the efforts of individuals to communicate something of themselves to others. Even folk-music and ballads were the creation of unknown individuals rather than collective groups. In the words of H.L. Mencken, there is the “sheer impossibility to imagine them being composed by a gang of oafs whooping and galloping around a May pole.”
Returning to the Austrian microcosm that reflects the fate of Western Civilization generally, when collectivism—in the form of German National Socialism—infected that country, many of its more creative individuals fled to such less-repressive frontiers as America, Switzerland, and England. Gresham’s law finds expression beyond the more familiar confines of government monetary practices. Arnold Schonberg, Franz Werfel, Sigmund Freud, Erwin Schrodinger, Leopold Kohr, the brothers Ludwig and Richard von Mises, Kurt Godel, Karl Popper, Otto Loewi, Olga Hahn-Neurath and her husband Otto Neurath, Anton Ehrenzweig, Lise Meitner, Rudolf Carnap, novelist Stefan Zweig, Rose Rand, Walter Mischel, Edgar Zilsel, Philip Frank, Nobel laureates (in physics) Viktor Francis Hess, Wolfgang Pauli, and (in chemistry) Walter Kohn; painters Herbert Bayer and Georg Mayer-Marton; noted lawyer Hans Kelsen, Fritz Lang, Josef Frank, Gustav Bergmann, Robert Stolz, and Billy Wilder, were among the better known to depart Austria. They joined with such refugees from other European countries as the writers Vladimir Nabokov, James Joyce, and Nobel laureate Thomas Mann; painters Marc Chagall, Max Ernst, and Piet Mondrian; conductor Georg Solti, composer Darius Milhaud, anthropologist Claude Levi-Strauss, film-stars Marlene Dietrich and Conrad Veidt; along with Nobel laureates Max Born and Albert Einstein (physics), Fritz Haber (chemistry), and Bernard Katz and Hans Krebs (medicine). In such highly personal ways have civilizations continued the dance between the life-enhancing creativity of individuals, and the collective forces of death and destruction.
Mindful of the historic interplay of forces at work in the creation and death of civilizations, I am of the opinion that Western Civilization—with particular attention directed to its American franchise—has about run its course. While this book focuses on such a prognosis, I also address the question: what is likely to follow from this imminent “decline and fall?” Might the remnants of our terminal culture—like an estate bequeathed us by a rich benefactor—provide the foundations for a fundamentally transformed culture; one that does not cannibalize itself?
Previous civilizations continue to exert their influences, long after their death-certificates have been signed by historians. Philosophy students still begin their studies by reading the ancient Greeks; Roman law and engineering retain their influences into the twenty-first century; Western Civilization, itself, also finds its foundations greatly influenced by the Saracens, whose contributions to mathematics, science, and the replacement of Roman with Arabic numerals, helped lay the foundations for the Renaissance. The evolution of human language, biology, and culture, has arisen through millennia of interconnected, cross-fertilizing relationships. The influences of our ancient, primitive ancestors—who learned how to organize with fellow tribesmen either to hunt for food, or to destroy their neighbors—continue to direct our thought and behavior. Our lineage is traceable both to Attila the Hun and Homer; to Machiavelli as well as Shakespeare; while the contrasting images of Ozymandias and Botticelli’s “Venus” speak to passionate emotions.
Western culture has produced material and spiritual values that have done so much to humanize and civilize mankind. It has also produced highly-structured institutions and practices that not only impede, but reverse these life-enhancing qualities. Is it possible for us to energize our intelligence in order to rediscover, in the debris of our dying civilization, the requisite components for a fundamentally transformed culture grounded in free, peaceful, and productive systems that sustain rather than diminish life?



Monday, May 27, 2013

The Wizards of Ozymandias- Reflections on the Decline and Fall by BUTLER SHAFFER


Ozymandias
I met a traveller from an antique land
Who said: “Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown,
And wrinkled lip, and sneer of cold command,
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them, and the heart that fed;
And on the pedestal these words appear:
My name is Ozymandias, King of Kings:
Look on my works, ye Mighty, and despair!
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.”
—Percy Bysshe Shelley (1817)


Introduction
Civilizations begin, flourish, decline, and disappear—or linger on as stagnant pools left by once life-giving streams.
—Will Durant
These essays began as part of a continuing contribution to an E-Book titled The Wizards of Ozymandias: Reflections on the Decline and Fall. Written over a period of several years, they are intended as a collection of personal observations accompanying what I consider the dissipation of the systems and characteristics of Western culture. In my first book, Calculated Chaos: Institutional Threats to Peace and Human Survival,1 I used The Wizard of Oz2 to illustrate how the characters’ dependencies upon external authority provided a metaphor for what I regard as the greatest threat to human well-being: the institutional structuring of society. This book extends the inquiry to consider the impact institutionalism may have on the decline of civilization. My explanations for the major societal transformations now occurring—as well as the prospects for reviving the life-serving qualities of our culture—are offered as speculative impressions rather than as an empirical study of the causes of such changes.
The poet Shelley introduced us to Ozymandias in his poem of the same name, providing the picture of a tyrant whose arrogance of power led him to historical oblivion. Ozymandias is a reminder of the fragile nature of every system—be it biological, institutional, or galactic in character. As we are learning from the advanced course in history in which we seem now to be enrolled, this uncertain existence also applies to so-called civilizations. There is disagreement among historians as to the number and identity of civilizations around which so much of mankind has organized itself. While the values and practices of many past cultures continue to have a diluted influence—both good and bad—on modern societies, Western Civilization has lost much of its once-vibrant character. It is difficult for intelligent minds to dispute that this current system is in the process of joining Ozymandias in the dust-bin of history.
Western culture has added much to the quality of human existence. From the various arts, literature, and philosophy, to systems for producing and exchanging the means for enhancing the material well-being of mankind, to more sophisticated scientific understanding and its technological offspring and revelations in mathematics that have allowed us to take abstract reasoning into dimensions our ancestors could not have fathomed, the well-being of mankind has been greatly advanced during this epoch. We have even imagined ourselves capable of restraining the appetites of the Ozymandiases with written constitutions and structures designed to limit power.
Because of our nature as social beings, and having experienced the productive benefits of a specialization of labor, we have long known the advantages of organizing ourselves into groups to accomplish common purposes. Once in a while, a multitude of factors converge to create what is later recognized as a “civilization.” Western Civilization is the most recent example, having been preceded by, among others, such cultures as the Babylonian, Egyptian, Greek, Hittite, Minoan, Persian, Phoenician, Roman, Mayan, and Incan. Students of human history have tried to unravel the elements that both produced and brought about the demise of past civilizations. Because civilizations are characterized by multitudinous networks of complexities, historians invariably encounter the uncertainties that inhere in complication.
The study of chaos informs us that complex systems are subject to far too many interconnected and inconstant variables to make it possible to control events in order to achieve predictable outcomes. The ability to predict outcomes in a complex system rests on a “sensitive dependence on initial conditions,” meaning an awareness of the presence and strength of every factor that could affect the result.3 In other words, our efforts to describe or to prescribe those patterns of regularity we define as “order” are limited by complexity itself. Events in our world are generally produced by countless networks of influences that make it difficult to identify causation. What may appear—if seen at all—as an inconsequential factor can produce damaging results (thus the nursery rhyme about “the want of a nail” leading to the loss of the war). We also discover that our faith in linear processes to produce anticipated results is often upset by the intervention of nonlinear influences (“the straw that broke the camel’s back”). The hubris that attends all political programs of central planning is fueled by an ignorance of the forces of chaos.
For the same reasons, explanations for historic behavior prove just as difficult. That so many factors have been identified by so many observers concerning both the origin and demise of civilizations, is a confirmation of the uncertainties that lie hidden within the dynamics of chaos and complexity. While there is no consensus of opinion as to the causes of the birth or death of civilizations, there are a number of common components upon which various historians focus.
As we better understand how chaos underlies so much of what we experience as both order and disorder in the world, we begin to discover the presence of what are referred to as attractors within systems. An attractor represents the organizing principle that brings regularity to a system (i.e., “attracts” orderliness). An earthquake fault line can be regarded as an attractor for geologic forces operating in an area subject to plate tectonics while, on a social level, an estate sale can be regarded as an attractor for antique dealers.
There are many who believe the marketplace is a form of undisciplined, disordered confusion, and that political intervention is required to protect the public from such unpredictable conduct. To those who understand the dynamics of the marketplace, however, the seeming chaos is underlain with processes through which the interplay of competing interests provides incentives for orderly behavior. In the language of “chaos,” the pricing system is an “attractor” that brings buyers and sellers together to engage in transactions that benefit both. The study of chaos and complexity make us aware that simplistic, linear explanations no longer suffice for our understanding of a complicated world. Scientific inquiry has helped us move beyond superficial explanations of behavior, and to examine less-apparent influences.
That said, is it possible to identify causal factors that bring about the creation and the demise of a civilization? Are there elements and processes that serve as attractors for the development of a culture? Such inquiries into the “how” and “why” of civilizations are difficult to assess, given the multifaceted variables involved. Like efforts to identify the mechanisms that trigger biological evolution, they are too dependent on abstract speculation. How, for instance, does individual behavior influence collective outcomes? Like the proverbial tale of the blind men reporting on their examination of an elephant, are we too locked in to our particular experiences to be able to communicate to others anything of verifiable substance? Because of my personal history, the focus of this book will be upon that period known as Western Civilization. What can be said of the dynamics of this epoch that distinguishes it from other societies in other periods of time?
Creative and vibrant civilizations do not come into being in some haphazard manner, nor are they the products of careful planning on the part of self-appointed “leaders.” They seem, rather, to have emerged from the convergence of various conditions, whose syntheses provided the opportunity for great numbers of people to pursue their respective interests in mutually-supportive ways. A culture thrives when it is capable of producing the values that define it. While some civilizations were grounded in agriculture, the success of Western Civilization can be traced, to a great extent, to the processes of industrialization, which essentially resolved the problem of how to sustain the lives of millions of people. It is important to note that a civilized society does not necessarily mean an industrialized society. The decline of our present civilization may be abetted by the emergence of an information based culture which might provide the basis for an even more prolific civilization.
The origins of any productive system seem to be traceable to conditions in which the self-interest driven purposes of individuals are allowed expression. These include the respect for autonomy and inviolability of personal boundaries that define liberty and peace and allow for cooperation for mutual ends. Support for such an environment has led to the flourishing of human activity not only in the production of material well-being, but in the arts, literature, philosophy, entrepreneurship, mathematics, spiritual inquiries, the sciences, medicine, engineering, invention, exploration, and other dimensions that fire the varied imaginations and energies of mankind. Our subjectively defined self-interests become energized within a social matrix that both encourages and reinforces novelty through informal, undirected processes.
Civilizations are not mandated by authorities, nor are they the products of systemic planning. People did not get together and say to one another “hey, let’s start a civilization!” Such cultures have been, rather, the unintended consequences arising from the interplay of creative forces that sustain and enhance life. The variability and cross-fertilization of ideas and techniques that can arise in pluralistic settings conducive to diversity and spontaneity, have been indispensable to the life of modern civilization. In much the same way that “brainstorming” sessions provide synergistic opportunities for individuals to come together to produce solutions to problems that none could have brought about on their own, a culture supportive of individuality can generate values and systems at exponential levels of creativity.
It is difficult to think of the dynamics of Western Civilization without identifying its individual creative producers. When mention is made of this culture, do not the names and accomplishments of Aristotle, Plato, Shakespeare, Gutenberg, Beethoven, Galileo, Sophocles, Leonardo, Roger and Francis Bacon, Homer, Austen, Dante, Edison, Kepler, Carnegie, Michelangelo, Alcott, Locke, Curie, Rembrandt, Thomas Aquinas, Adam Smith, Emerson, Orville and Wilbur Wright, Milton, Bach, James Watt, van Gogh, Montessori, Pasteur, Darwin, Van Eyck, Einstein—to identify but a scant few individuals4—immediately come to mind? Do we not think of such persons as the creators of our civilization?
While the works of such people make up so much of the substance of our culture, their efforts, standing alone, would have been insufficient to produce a civilization. What other conditions were necessary to such ends? A factor I have long considered a major contributor to the emergence of highly productive societies can be found in what I call the “power of place.” Why, for instance, did technological inventiveness, standing alone, not produce industrialized societies in such places as ancient Greece, Baghdad, and Rome? In the 1st century AD, the Greek scientist, Hero, invented what we now know to be a steam-engine. He drew upon the works of earlier Greeks Vitruvius (80 BC-15 AD), and Ctesibius (285-222 BC) to create an instrument which, as far as is known, was used only to open and close temple doors. Another Greek invention, the Antikythera mechanism, was created in the second century BC, as a system of gears and cogs used, apparently, to calculate astronomical phenomena. While this device is often referred to as the earliest known computer, its appearance did not transform the pre-Christian world into a “Silicon Valley.” Was the two-thousand year-old copper cylinder found near Baghdad—believed by some to be an ancient electrical device—just another technological cul-de-sac that would await development centuries later? Did the glass industry of ancient Rome suffer from governmental restraints on technological innovation, thus impeding its development?5
My curiosity about the role that “place” might play in the creative process led me to inquire into the underlying conditions that attracted inventive and productive energies to Manchester, rather than Marseilles, as the birthplace of the Industrial Revolution; or Florence, instead of Naples, as the center for the Italian Renaissance. Why did the Roman empire decline in its western region, but continue to prosper in its eastern domain? What forces converged to bring such creative minds as Emerson, Thoreau, Louisa May and Bronson Alcott, and Nathaniel Hawthorne, to live within walking distance of one another in Concord, Massachusetts? Why did an interest in individual liberty develop so strongly in America, and not in Russia? The “places” that provide settings for those outbursts of life-sustaining creativity we call “civilizations,” obviously involve more than just geography.
In order to more deeply explore the dynamics involved in the development of this culture, I would like to focus on one of the major contributors to Western Civilization, one that had a profound impact on my own life. At some point in my youth, I became aware of the long-standing practice in such countries as Austria of many students graduating from college and then going on to law school. Following their legal studies, they would undertake careers that may or may not have involved the practice of law. During my college years, I became very interested in going on to law school, although at no time—whether before, during, or after law school—did I have any intention of practicing law. I wasn’t certain as to what kind of work I wanted to do, but law practice was not one to which I gave serious attention: law school, for me, was to provide the opportunity to synthesize disparate subject areas of learning—what used to be termed a “liberal arts” education—and to develop critical, analytical thinking. This approach was well-expressed by one nineteenth-century writer who observed that the study of law was “a sort of search for truth, carried on by teacher and student in common, and which they feverishly undertook, opening up an endless field for philosophic speculation.”







Sunday, May 26, 2013

Influence of the Sovereign Power


Money has not been generated by law. In its origin it is a social, and not a state institution. Sanction by the authority of the state is a notion alien to it. On the other hand, however, by state recognition and state regulation, this social institution of money has been perfected and adjusted to the manifold and varying needs of an evolving commerce, just as customary rights have been perfected and adjusted by statute law. Treated originally by weight, like other commodities, the precious metals have by degrees attained as coins a shape by which their intrinsically high saleableness has experienced a material increase. The fixing of a coinage so as to include all grades of value (Wertstufen), and the establishment and maintenance of coined pieces so as to win public confidence and, as far as possible, to forestall risk concerning their genuineness, weight, and fineness, and above all the ensuring their circulation in general, have been everywhere recognised as important functions of state administration.

The difficulties experienced in the commerce and modes of payment of any country from the competing action of the several commodities serving as currency, and further the circumstance, that concurrent standards induce a manifold insecurity in trade, and render necessary various conversions of the circulating media, have led to the legal recognition of certain commodities as money (to legal standards). And where more than one commodity has been acquiesced in, or admitted, as the legal form of payment, law or some system of appraisement has fixed a definite ratio of value amongst them.
All these measures nevertheless have not first made money of the precious metals, but have only perfected them in their function as money.




Saturday, May 25, 2013

How the Precious Metals Became Money


The commodities, which under given local and time relations are most saleable, have become money among the same nations at different times, and among different nations at the same time, and they are diverse in kind. The reason why the precious metals have become the generally current medium of exchange among here and there a nation prior to its appearance in history, and in the sequel among all peoples of advanced economic civilization, is because their saleableness is far and away superior to that of all other commodities, and at the same time because they are found to be specially qualified for the concomitant and subsidiary functions of money.

There is no centre of population, which has not in the very beginnings of civilization come keenly to desire and eagerly to covet the precious metals, in primitive times for their utility and peculiar beauty as in themselves ornamental, subsequently as the choices materials for plastic and architectural decoration, and especially for ornaments and vessels of every kind. In spite of their natural scarcity, they are well distributed geographically, and, in proportion to most other metals, are easy to extract and elaborate. Further, the ratio of the available quantity of the precious metals to the total requirement is so small, that the number of those whose need of them is unsupplied, or at least insufficiently supplied, together with the extent of this unsupplied need, is always relatively large—larger more or less than in the case of other more important, though more abundantly available, commodities. Again, the class of persons who wish to acquire the precious metals, is, by reason of the kind of wants which by these are satisfied, such as quite specially to include those members of the community who can most efficaciously barter; and thus the desire for the precious metals is as a rule more effective. Nevertheless the limits of the effective desire for the precious metals extend also to those strata of population who can les effectively barter, by reason of the great divisibility of the precious metals, and the enjoyment procured by the expenditure of even very small quantities of them in individual economy. Besides this there are the wide limits in time and space of the saleableness of the precious metals; a consequence, on the one hand, of the almost unlimited distribution in space of the need for them, together with their low cost of transport as compared with their value, and on the other hand, of their unlimited durability and the relatively slight cost of hoarding them. In no national economy which has advanced beyond the first stages of development are there any commodities, the saleableness of which is so little restricted in such a number of respects—personally, quantitatively, spatially, and temporally—as the precious metals. It cannot be doubted that, long before they had become the generally acknowledged media of exchange, they were, amongst very many peoples, meeting a positive and effective demand at all times and places, and practically in any quantity that found its way to market.

Hence arose a circumstance, which necessarily became of special import for their becoming money. for any one under those conditions, having any of the precious metals at his disposal, there was not only the reasonable prospect of his being able to convert them in all markets at any time and practically in all quantities, but also—and this is after all the criterion of saleableness—the prospect of converting them at prices corresponding at any time to the general economic situation, at economic prices. The proportionately strong, persistent, and omnipresent desire on the part of the most effective bargainers has gone farther to exclude prices of the moment, of emergency, of accident, in the case of the precious metals, than in the case of any other goods whatever, especially since these, by reason of their costliness, durability, and easy preservation, had become the most popular vehicle for hoarding as well as the goods most highly favoured in commerce.

Under such circumstances it became the leading idea in the minds of the more intelligent bargainers,and then, as the situation came to be more generally understood, in the mind of every one, that the stock of goods destined to be exchanged for other goods must in the first instance be laid out in precious metals, or must be converted into them, or had already supplied his wants in that direction. But in and by this function, the precious metals are already constituted generally current media of exchange. In other words, they hereby function as commodities for which every one seeks to exchange his market-goods, not, as a rule, in order to consumption but entirely because of their special saleableness, in the intention of exchanging them subsequently for other goods directly profitable to him. No accident, nor the consequence of state compulsion, nor voluntary convention of traders effected this. It was the just apprehending of their individual self-interest which brought it to pass, that all the more economically advanced nations accepted the precious metals as money as soon as a sufficient supply of them had been collected and introduced into commerce. The advance from less to more costly money-stuffs depends upon analogous causes.

This development was materially helped forward by the ratio of exchange between the precious metals and other commodities undergoing smaller fluctuations, more or less, than that existing between most other goods,—a stability which is due to the peculiar circumstances attending the production, consumption, and exchange of the precious metals, and is thus connected with the so-called intrinsic grounds determining their exchange value. It constitutes yet another reason why each man, in the first instance (i.e., till he invests in goods directly useful to him), should lay in his available exchange-stock in precious metals, or convert it into the latter. Moreover the homogeneity of precious metals, and the consequent facility with which they can serve as res fungibiles in relations of obligation, have led to forms of contract by which traffic has been rendered more easy; this too has materially promoted the saleableness of the precious metals, and thereby their adoption as money. Finally the precious metals, in consequence of the peculiarity of their colour, their ring, and partly also their specific gravity, are with some practice not difficult to recognise, and through their taking a durable stamp can be easily controlled as to quality and weight; this too has materially contributed to raise their saleableness and to forward the adoption and diffusion of them as money.


Friday, May 24, 2013

The Process of Differentiation between Commodities which have become Media of Exchange and the Rest


When the relatively most saleable commodities have become “money,” the great event has in the first place the effect of substantially increasing their originally high saleableness. Every economic subject bringing less saleable wares to market, to acquire goods of another sort, has thenceforth a stronger interest in converting what he has in the first instance into the wares which have become money. For such persons, by the exchange of their less saleable wares for those which as money are most saleable, attain not merely, as heretofore, a higher probability, but the certainty, of being able to acquire forthwith equivalent quantities of every kind of commodity to be had in the market. And their control over these depends simply upon their pleasure and their choice. Pecuniam habens, habet omnem rem quem vult habere.

On the other hand, he who brings other wares than money to market, finds himself at a disadvantage more or less. To gain the same command over what the market affords, he must first convert his exchangeable goods into money. The nature of his economic disability is shown by the fact of his being compelled to overcome a difficulty before he can attain his purpose, which difficulty does not exist for, i.e., has already been overcome by, the man who owns a stock of money.

This has all the greater significance for practical life, inasmuch as to overcome this difficulty does not lie unconditionally within reach of him who brings less saleable goods to market, but depends in part upon circumstances over which the individual bargainer has no control. The less saleable are his wares, the more certainly will he have either to suffer the penalty in the economic price, or to content himself with awaiting the moment, when it will be possible for him to effect a conversion at economic prices. He who is desirous, in an era of monetary economy, to exchange goods of any kind whatever, which are not money, for other goods supplied in the market, cannot be certain of attaining this result at once, or within any predetermined interval of time, at economic prices. And the less saleable are the goods brought by an economic subject to market, the more unfavourably, for his own purposes, will his economic position compare with the position of those who bring money to market. Consider, e.g., the owner of a stock of surgical instruments, who is obliged through sudden distress, or through pressure from creditors, to convert it into money. The prices which it will fetch will be highly accidental, nay, the goods being of such limited saleableness, they will be fairly incalculable. And this holds good of all kinds of conversions which in respect of time are compulsory sales.9 Other is his case who wants at a market to convert the commodity, which has become money, forthwith into other goods supplied at that market. He will accomplish his purpose, not only with certainty, but usually also at a price corresponding to the general economic situation. Nay, the habit of economic action has made us so sure of being able to procure in return for money any goods on the market, whenever we wish, at prices corresponding to the economic situation, that we are for the most part unconscious of how many purchases we daily propose to make, which, with respect to our wants and the time of concluding them, are compulsory purchases. Compulsory sales, on the other hand, in consequence of the economic disadvantage which they commonly involve, force themselves upon the attention of the parties implicated in unmistakable fashion. What therefore constitutes the peculiarity of a commodity which has become money is, that the possession of it procures for us at any time, i.e., at any moment we think fit, assured control over every commodity to be had on the market, and this usually at prices adjusted to the economic situation of the moment; the control, on the other hand, conferred by other kinds of commodities over market goods is, in respect of time, and in part of price as well, uncertain, relatively if not absolutely.

Thus the effect produced by such goods as are relatively most saleable becoming money is an increasing differentiation between their degree of saleableness and that of all other goods. And this difference in saleableness ceases to be altogether gradual, and must be regarded in a certain aspect as something absolute. The practice of every-day life, as well as jurisprudence, which closely adheres for the most part to the notions prevalent in every-day life, distinguish two categories in the wherewithal of traffic—goods which have become money and goods which have not. And the ground of this distinction, we find, lies essentially in that difference in the saleableness of commodities set forth above—a difference so significant for practical life and which comes to be further emphasized by intervention of the state. This distinction, moreover, finds expression in language in the difference of meaning attaching to “money” and “wares,” to “purchase” and “exchange.” But it also affords the chief explanation of that superiority of the buyer over the seller, which has found manifold consideration, yet has hitherto been left inadequately explained.


Thursday, May 23, 2013

On the Genesis of Media of Exchange


It has long been the subject of universal remark in centres of exchange, that for certain commodities there existed a greater, more constant, and more effective demand than for other commodities less desirable in certain respects, the former being such as correspond to a want on the part of those able and willing to traffic, which is at once universal and, by reason of the relative scarcity of the goods in question, always imperfectly satisfied. And further, that the person who wishes to acquire certain definite goods in exchange for his own is in a more favourable position, if he brings commodities of this kind to market, than if he visits the markets with goods which cannot display such advantages, or at least not in the same degree. Thus equipped he has the prospect of acquiring such goods as he finally wishes to obtain, not only with greater ease and security, but also, by reason of the steadier and more prevailing demand for his own commodities, at prices corresponding to the general economic situation—at economic prices. Under these circumstances, when any one has brought goods not highly saleable to market, the idea uppermost in his mind is to exchange them, not only for such as he happens to be in need of, but, if this cannot be effected directly, for other goods also, which, while he did not want them himself, were nevertheless more saleable than his own. By so doing he certainly does not attain at once the final object of his trafficking, to wit, the acquisition of goods needful to himself. Yet he draws nearer to that object. By the devious way of a mediate exchange, he gains the prospect of accomplishing his purpose more surely and economically than if he had confined himself to direct exchange. Now in point of fact this seems everywhere to have been the case. Men have been led, with increasing knowledge of their individual interests, each by his own economic interests, without convention, without legal compulsion, nay, even without any regard to the common interest, to exchange goods destined for exchange (their “wares”) for other goods equally destined for exchange, but more saleable.

With the extension of traffic in space and with the expansion over ever longer intervals of time of prevision for satisfying material needs, each individual would learn, from his own economic interests, to take good heed that he bartered his less saleable goods for those special commodities which displayed, beside the attraction of being highly saleable in the particular locality, a wide range of saleableness both in time and place. These wares would be qualified by their costliness, easy transportability, and fitness for preservation (in connection with the circumstance of their corresponding to a steady and widely distributed demand), to ensure to the possessor a power, not only “here” and “now” but as nearly as possible unlimited in space and time generally, over all other market-goods at economic prices.
And so it has come to pass, that as man became increasingly conversant with these economic advantages, mainly by an insight become traditional, and by the habit of economic action, those commodities, which relatively to both space and time are most saleable, have in every market become the wares, which it is not only in the interest of every one to accept in exchange for his own less saleable goods, but which also are those he actually does readily accept. And their superior saleableness depends only upon the relatively inferior saleableness of every other kind of commodity, by which alone they have been able to become generally acceptable media of exchange.

It is obvious how highly significant a factor is habit in the genesis of such generally serviceable means of exchange. It lies in the economic interest of each trafficking individual to exchange less saleable for more saleable commodities. But the willing acceptance of the medium of exchange presupposes already a knowledge of these interest on the part of those economic subjects who are expected to accept in exchange for their wares a commodity which in and by itself is perhaps entirely useless to them. It is certain that this knowledge never arises in every part of a nation at the same time. It is only in the first instance a limited number of economic subjects who will recognize the advantage in such procedure, an advantage which, in and by itself, is independent of the general recognition of a commodity as a medium of exchange, inasmuch as such an exchange, always and under all circumstances, brings the economic unit a good deal nearer to his goal, to the acquisition of useful things of which he really stands in need. But it is admitted, that there is no better method of enlightening any one about his economic interests than that he perceive the economic success of those who use the right means to secure their own. Hence it is also clear that nothing may have been so favourable to the genesis of a medium of exchange as the acceptance, on the part of the most discerning and capable economic subjects, for their own economic gain, and over a considerable period of time, of eminently saleable goods in preference to all others. In this way practice and a habit have certainly contributed not a little to cause goods, which were most saleable at any time, to be accepted not only by many, but finally by all, economic subjects in exchange for their less saleable goods; and not only so, but to be accepted from the first with the intention of exchanging them away again. Goods which had thus become generally acceptable media of exchange were called by the Germans Geld, from gelten, i.e., to pay, to perform, while other nations derived their designation for money mainly from the substance used, the shape of the coin, or even from certain kinds of coin.

It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions. But this is neither the only, nor the primary mode in which money has taken its origin. This is much more to be traced in the process depicted above, notwithstanding the nature of that process would be but very incompletely explained if we were to call it “organic” or denote money as something “primordial,” or “primaeval growth,” and so forth. Putting aside assumptions which are historically unsound, we can only come fully to understand the origin of money by learning to view the establishment of the social procedure, with which we are dealing, as the spontaneous outcome, the unpremeditated resultant, of particular, individual efforts of the members of a society, who have little by little worked their way to a discrimination of the different degrees of saleableness in commodities.


Wednesday, May 22, 2013

Concerning the Causes of the Different Degrees of Saleableness in Commodities


The degree to which a commodity is found by experience to command a sale, at a given market, at any time, at prices corresponding to the economic situation (economic prices), depends upon the following circumstances.

1.  Upon the number of persons who are still in want of the commodity in question, and upon the extent and intensity of that want, which is unsupplied, or is constantly recurring.

2.  Upon the purchasing power of those persons.

3.  Upon the available quantity of the commodity in relation to the yet unsupplied (total) want of it.

4.  Upon the divisibility of the commodity, and any other ways in which it may be adjusted to the needs of individual customers.

5.  Upon the development of the market, and of speculation in particular. And finally.

6.  Upon the number and nature of the limitations imposed politically and socially upon exchange and consumption with respect to the commodity in question.

We may proceed, in the same way in which we considered the degree of the saleableness in commodities at definite markets and definite points of time,to set out the spatial and temporal limits of their saleableness. In these respects also we observe in our markets some commodities, the saleableness of which is almost unlimited by place or time, and others the sale of which is more or less limited.
The spatial limits of the saleableness of commodities are mainly conditioned—

1.  By the degree to which the want of the commodities is disturbed in space.

2.  By the degree to which the goods lend themselves to transport,and the cost of transport incurred in proportion to their value.

3.  By the extent to which the means of transport and of commerce generally are developed with respect to different classes of commodities.

4.  By the local extension of organised markets and their inter-communication by “arbitrage.”

5.  By the differences in the restrictions imposed upon commercial inter-communication with respect to different goods, to interlocal and, in particular, in international trade.

The time limits to the saleableness of commodities are mainly conditioned—

1.  By permanence in the need of them (their independence of fluctuation in the same).

2.  Their durability, i.e., their suitableness for preservation.

3.  The cost of preserving and storing them.

4.  The rate of interest.

5.  The periodicity of a market for the same.

6.  The development of speculation and in particular of time-bargains in connection with the same.

7.  The restrictions imposed politically and socially on their being transferred from one period of time to another.

All these circumstances, on which depend the different degrees of, and the different local and temporal limits to, the saleableness of commodities, explain why it is that certain commodities can be disposed of with ease and certainty in definite markets, i.e., within local and temporal limits, at any time and in practically any quantities, at prices corresponding to the general economic situation, while the saleableness of other commodities is confined within narrow spatial, and again, temporal, limits: and even within these the disposal of the commodities in question is difficult, and, in so far as the demand cannot be waited for, is not to be brought about without a more or less sensible diminution in price.


Tuesday, May 21, 2013

Commodities as More or Less Saleable


It is an error in economics, as prevalent as it is patent, that all commodities, at a definite point of time and in a given market, may be assumed to stand to each other in a definite relation of exchange, in other words, may be mutually exchanged in definite quantities at will. It is not true that in any given market 10 cwt. of one article = 2 cwt. of another = 3 lbs. of a third article, and so on. The most cursory observation of market phenomena teaches us that it does not lie within our power, when we have bought an article for a certain price, to sell it again forthwith at the same price. If we but try to dispose of an article of clothing, a book, or a work of art, which we have just purchased, in the same market, even though it be all once, before the same juncture of conditions has altered, we shall easily convince ourselves of the fallaciousness of such an assumption. The price at which any one can at pleasure buy a commodity at a given market and a given point of time, and the price at which he can dispose of the same at pleasure, are two essentially different magnitudes.

This holds good of wholesale as well as retail prices. Even such marketable goods as corn, cotton, pig-iron, cannot be voluntarily disposed of for the price at which we have purchased them. Commerce and speculation would be the simplest things in the world, if the theory of the “objective equivalent in goods” were correct, if it were actually true, that in a given market and at a given moment commodities could be mutually converted at will in definite quantitative relations—could, in short, at a certain price be as easily disposed of as acquired. At any rate there is no such thing as a general saleableness of wares in this sense. The truth is, that even in the best organized markets, while we may be able to purchase when and what we like at a definite price, viz.: the purchasing price, we can only dispose of it again when and as we like at a loss, viz.: at the selling price.

The loss experienced by any one who is compelled to dispose of an article at a definite moment, as compared with the current purchasing prices, is a highly variable quantity, as a glance at trade and at markets of specific commodities will show. If corn or cotton is to be disposed of at an organised market, the seller will be in a position to do so in practically any quantity, at any time he pleases, at the current price, or at most with a loss of only a few pence on the total sum. If it be a question of disposing, in large quantities, of cloth or silk-stuffs at will, the seller will regularly have to content himself with a considerable percentage of diminution in the price. Far worse is the case of one who at a certain point of time has to get rid of astronomical instruments, anatomical preparations, Sanskrit writings, and such hardly marketable articles!

If we call any goods or wares more or less saleable, according to the greater or less facility with which they can be disposed of at a market at any convenient time at current purchasing prices, or with less or more diminution of the same, we can see by what has been said, that an obvious difference exists in this connection between commodities. Nevertheless, and in spite of its great practical significance, it cannot be said that this phenomenon has been much taken into account in economic science. The reason of this is in part the circumstance, that investigation into the phenomena of price has been directed almost exclusively to the quantities of the commodities exchanged, and not as well to the greater or less facility with which wares may be disposed of at normal prices. In part also the reason is the thorough-going abstract method by which the saleableness of goods has been treated, without due regard to all the circumstances of the case.

The man who goes to market with his wares intends as a rule to dispose of them, by no means at any price whatever, but at such as corresponds to the general economic situation. if we are going to inquire into the different degrees of saleableness in goods so as to show its bearing upon practical life, we can only do so by consulting the greater or less facility with which they may be disposed of at prices corresponding to the general economic situation, that is, at economic prices. A commodity is more or less saleable according as we are able, with more or less prospect of success, to dispose of it at prices corresponding to the general economic situation, at economic prices.

The interval of time, moreover, within which the disposal of a commodity at the economic price may be reckoned on, is of great significance in an inquiry into its degree of saleableness. It matters not whether the demand for a commodity be slight, or whether on other grounds its saleableness be small; if its owner can only bide his time, he will finally and in the long run be able to dispose of it at economic prices. Since, however, this condition is often absent in the actual course of business, there arises for practical purposes an important difference between those commodities, on the one hand, which we expect to dispose of at any given time at economic, or at least approximately economic, prices, and such goods, on the other hand, respecting which we have no such prospect, or at least not in the same degree, and to dispose of which at economic prices the owner foresees it will be necessary to wait for a longer or shorter period, or else to put up with a more or less sensible abatement in the price.

Again, account must be taken of the quantitative factor in the saleableness of commodities. Some commodities, in consequence of the development of markets and speculation, are able at any time to find a sale in practically any quantity at economic, approximately economic, prices. Other commodities can only find a sale at economic prices in smaller quantities, commensurate with the gradual growth of an effective demand, fetching a relatively reduced price in the case of a greater supply.


Monday, May 20, 2013

The Problem of the Genesis of a Medium of Exchange


In primitive traffic the economic man is awaking but very gradually to an understanding of the economic advantages to be gained by exploitation of existing opportunities of exchange. His aims are directed first and foremost, in accordance with the simplicity of all primitive culture, only at what lies first to hand. And only in that proportion does the value in use of the commodities he seeks to acquire, come into account in his bargaining. Under such conditions each man is intent to get by way of exchange just such goods as he directly needs, and to reject those of which he has no need at all, or with which he is already sufficiently provided. It is clear then, that in those circumstances the number of bargains actually concluded must lie within very narrow limits. Consider how seldom it is the case, that a commodity owned by somebody is of less value in use than another commodity owned by somebody else! And for the latter just the opposite relation is the case. But how much more seldom does it happen that these two bodies meet! Think, indeed, of the peculiar difficulties obstructing the immediate barter of goods in those cases, where supply and demand do not quantitatively coincide; where, e.g., an indivisible commodity is to be exchanged for a variety of goods in the possession of different person, or indeed for such commodities as are only in demand at different times and can be supplied only by different persons! Even in the relatively simple and so often recurring case, where an economic unit, A, requires a commodity possessed by B, and B requires one possessed by C, while C wants one that is owned by A—even here, under a rule of mere barter, the exchange of the goods in question would as a rule be of necessity left undone.

These difficulties would have proved absolutely insurmountable obstacles to the progress of traffic, and at the same time to the production of goods not commanding a regular sale, had there not lain a remedy in the very nature of things, to wit, the different degrees of saleableness (Absatzfahigkeit) of commodities. The difference existing in this respect between articles of commerce is of the highest degree of significance for the theory of money, and of the market in general. And the failure to turn it adequately to account in explaining the phenomena of trade, constitutes not only as such a lamentable breach in our science, but also one of the essential causes of the backward state of monetary theory. The theory of money necessarily presupposes a theory of the saleableness of goods. If we grasp this, we shall be able to understand how the almost unlimited saleableness of money is only a special case,—presenting only a difference of degree—of a generic phenomenon of economic life—namely, the difference in the saleableness of commodities in general.