The Political Economy of Waste (3): Waste through Subsidies and Radical Monopolies

Kevin Carson wrote an excellent study on how much of our economy is actually unproductive and non-contributive.

You can read the full text here. And here is our wiki entry.

We present now it’s typology elements:

Waste from Subsidized Inputs

“In addition to artificial scarcity rents on unequal exchange, by which workers and consumers pay tribute to the holders of artificial scarcity rents, corporate capitalism also creates inefficiency by allowing firms to waste subsidized production inputs at public expense. This includes the supply of transportation, energy, education, and other production inputs to privileged enterprises below their market costs.

Murray Rothbard described the effects of such subsidies:

– The resources needed to supply the free governmental service are extracted from the rest of production. Payment is made, however, not by users on the basis of their voluntary purchases, but by a coerced levy on the taxpayers. A basic split is thus effected between payment and receipt of service. This split is inherent in all government operations. Many grave consequences follow from the split and from the “free” service as well. As in all cases where price is below the free-market price, an enormous and excessive demand is stimulated for the good, far beyond the supply of service available. Consequently, there will always be “shortages” of the free good, constant complaints of insufficiency, overcrowding, etc…. Free supply not only subsidizes the users at the expense of non-using taxpayers; it also misallocates resources by failing to supply the service where it is most needed. The same is true, to a lesser extent, wherever the price is under the free-market price. On the free market, consumers can dictate the pricing and thereby assure the best allocation of productive resources to supply their wants. In a government enterprise, this cannot be done. Let us take again the case of the free service. Since there is no pricing, and therefore no exclusion of submarginal uses, there is no way that the government, even if it wanted to, could allocate its services to their most important uses and to the most eager buyers. All buyers, all uses, are artificially kept on the same plane. As a result, the most important uses will be slighted. The government is faced with insuperable allocation problems, which it cannot solve even to its own satisfaction. Thus, the government will be confronted with the problem: Should we build a road in place A or place B? There is no rational way whatever by which it can make this decision. It cannot aid the private consumers of the road in the best way. It can decide only according to the whim of the ruling government official, i.e., only if the government officials do the “consuming,” and not the public. If the government wishes to do what is best for the public, it is faced with an impossible task.

Subsidized inputs are closely related to the phenomenon of radical monopoly. They are tied together by Ivan Illich’s concept of “counterproductivity.” Illich distinguished the “first watershed” of adopting a technology, in which it has net social benefits, from the “second watershed” beyond which it has negative benefits to society. Beyond the second watershed, the technology becomes counterproductive; society is brought into service to the technology rather than vice versa, and the technology imposes its logic on society”.56 Society becomes dominated by radical monopolies. ”

Radical Monopoly

“Murray Bookchin argued, in the Introduction to Post-Scarcity Anarchism, that the management of scarcity, the control of access to scarce resources, was the “historic rationale” for most forms of hierarchy and authoritarianism.

That really stands to reason. Most of the authoritarian institutions in our society, and most positions of authority within their hierarchies, ultimately derive their power from the threat “Do as I say if you want to get fed and keep a roof over your head.”

In addition, the power of hierarchies results from the fact that exercising power is the primary occupation (and often avocation as well) of those running them, while those on the outside can participate in decision-making only during what little time they are able to extract from their limited leisure after working at their jobs and attending to family concerns and recreation. Comparative scarcity entails a greater amount of labor time required to procure the necessities of life, and a resulting shift in comparative advantage to those administering the hierarchies when it comes to time, energy and attention for making decisions about how things could be done.

Most of the hierarchical institutions in our world, and the people running them, exist only for the sake of rationing scarce goods. The management at your workplace, and the sense of identity they get from their jobs, all revolve around the fact of scarcity and your dependence on them to keep paying the rent and grocery bill. In a world where they no longer get status from control over other people’s livelihoods, they’d be strangers in a strange land. A world in which all the hierarchical institutions formerly required to regulate scarcity become redundant and irrelevant — in which every single person was the equal of Gates and Rockefeller in wealth and power, and could tell them to go to hell with impunity — would be intolerable for them. What fun would it to live like a king, if everyone was a king?

What’s more, a major part of the resources expended by authoritarian structures goes to the costs of enforcing property rights in scarce resources. When that scarcity is natural the costs of enforcing the property system may be rational. When, for example, it takes significant effort to create material goods, and the comparative effort of producing versus stealing makes theft an attractive alternative, then the costs of protecting the producer’s possession of his labor product against theft may be necessary.

But when the scarcity is artificial, the cost of enforcing it is a dead loss to society. When state intervention artificially increases the effort or capital outlay entailed in producing a given unit of consumption goods, the comparative ease of producing without artificial levels of effort might make the effort of circumventing such restrictions an attractive proposition. For example, when the marginal cost of reproducing digital information is zero, and the price of digital information obtained from the content “owner” is significant, the cost difference can only be upheld by a costly apparatus like the Digital Millennium Copyright Act and all the industry and Justice Department machinery required to enforce it.

We have experienced a major shift, in recent decades, from a situation in which most scarcity was natural to one in which most scarcity is artificial. That’s not to say that property rights to scarce goods weren’t artificial in most cases, but simply that they really were scarce in the sense that they required significant effort to produce. The primary effect of artificial property rights, in the old days, was to shift the necessary effort of production to someone other than the beneficiary. The primary effect of artificial property rights today, in most cases, is instead to impose effort where there is no material reason for effort on anyone’s part, so that the privileged can collect rents from the artificially mandated effort. The primary focus of socialism in the nineteenth century was to ensure that the effort required to produce consumption goods was equitably allocated, and that the product was distributed commensurate with contributions to the production process. Today, in contrast, our focus should be on making sure that there are no limits on the free reproduction of non-scarce goods and that there is no effort required for consumption where it does not by nature exist. A growing share of total consumption goods consists of what Carl Menger called “non-economic goods,” whose natural market price absent artificial scarcity rents is zero. As Bookchin put it: “A century ago, scarcity had to be endured; today, it has to be enforced—hence the importance of the state in the present era.”

Samuel Bowles and Arjun Jayadev coined the term “guard labor” for economic activity whose primary purpose is “the perpetuation of social relationships of domination and subordination”—what we saw Edward Wolff describe above as economic activity meant to secure an unproductive class’s control of surplus output. They argued that the higher the degree of inequality in wealth and power, the larger the share of economic activity that goes to guard labor.”

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