Have you ever wondered why civilization began where it did? The first place that we usually think of in regard to early civilization is the Middle East and eastward to the Indus Valley, in the eastern hemisphere, and southern Mexico to northwestern South America, in the western hemisphere.
The primary factor which moved humans from nomadic hunting and gathering to permanent communities is generally considered to be the development of agriculture. Someone probably noticed that if seeds are pulled off a plant and dropped on the ground, copies of the plant will later sprout there. This led to planting and harvesting and a settled community.
The development of agriculture is certainly not the only factor in bringing about civilization. The control of fire and learning to measure time, beyond the day, were other important factors. The word "historic" means written, prehistoric means before writing was developed and this was also a vital step in civilization.
But I think that the development of agriculture, planting and harvesting instead of foraging, can be considered as by far the most important step in the development of civilization.
(Note-Remember, once again, the amazing fact that we saw in "The Grass Hypothesis" on the creation blog. The whole reason that civilization exits is really that humans are unable to digest grass. If we could digest grass, like sheep or cattle, there would be essentially an abundance of food and no need for civilization to provide a steady supply of food).
The strange thing about the development of civilization is where it began. If civilization is based on agriculture, then why did it begin in some of the dryest and least hospitable areas to farming? I find that this leads us to a great untold story of human history, there is a major factor that is being left out.
I have just about always had an interest in archeology, particularly that of the Middle East. The reason that I have never written much about archeology here, with the exception of "Ancient Egypt And Hinduism" on the world and economics blog, is that I want this blog to only contain what is new, or at least a new way of looking at things, and I am not in a position to make new archeological discoveries in the Middle East.
But I think I have found a factor here, without going to the Middle East, that explains a lot about why civilization began where it did. That factor is the glaciers of the last ice age, which ended about 12,000 years ago.
An ice age begins when the temperature periodically gets cold enough so that the snow of one winter has not melted when the following winter begins. Snow begins to pile up year after year, decade after decade and, century after century. The weight of the snow above compresses that below into ice, and the landscape ends up covered by a vast sheet of ice that might be 2 km thick.
When an object is large enough, such as a vast sheet of ice, it is affected by the rotation of the earth. The force of this rotation pulls the glacial ice sheet toward the equator, at the same time the momentum of the earth's eastward rotation pulls the glacier somewhat eastward. Usually glacial ice covers about 10% of the earth's surface, during the ice ages this increases to about 30%.
One implication of this is that sea level would have to drop across the world simply because so much more water would be locked up in glaciers. In "Sea Levels During The Ice Ages" on the glacier blog, we saw how this would enable the movement of people to areas of land that would be otherwise inaccessible such as the migration of people from Asia to North America and to Japan.
What I want to point out about the movement of glaciers today is that they would have also forced people away from many areas of the earth's surface and into areas that were more free of glacial movement.
This explains why the Middle East, despite being dry and far from the best area for farming, is considered as "the cradle of civilization". There were mountain glaciers, which came down from the Zagros Mountains of Iran, that were beneficial to the region because they plowed up nutrients in the soil along the so-called Fertile Crescent, and the water from the melting of these mountain glaciers formed the beginning of the Tigris and Euphrates Rivers. But the area was free of the main glaciers, and this is why early civilization was to be found in such an apparently illogical place.
Northern Europe has fertile soil, a moderate climate and is well-watered. Yet civilization in Europe was first found in much hotter and drier Mediterranean lands. Once again, this is explained by glacial movement. There was far less glacial ice in the Mediterranean area, and this gave it a head start on civilization.
Archeologists can see the human history, but the glacial history is a part of the story too. Areas like northern Europe look ideal for farming today but the flora and fauna of a region may have taken thousands of years to fully recover from being covered by glacial ice.
We find exactly the same pattern in the western hemisphere. There are native Indians throughout North and South America. But there were three truly great civilizations to be found, and all were close together in the relatively limited area of southern Mexico, Central America and, northwestern South America.
These great Indian civilizations were the Aztec, the Maya and, the Inca. They were found, as we might expect, in those areas that were furthest from the encroachment of glacial ice during the ice ages. Mountains also produce smaller glaciers, and the Inca were among the Andes Mountains. But their settlements were mainly to the west of the Andes, and remember that the earth's eastward rotation tends to pull glaciers eastward so that the Inca would have been away from the path of glacial ice.
The ice ages, then, explain not only human settlement such a show the Indians got to the western hemisphere, but also why civilization began where it did. I have never seen this pointed out before, but it is where natural history meets human history.
Friday, August 23, 2013
Complexity Theory And Economics
The reason for all of the different economic systems that have arisen since the time of industrialization is explained by my complexity theory, as described on the patterns and complexity blog. This is not quite the same thing as in the posting on that blog, "The Complexity Theory Of Production And Economics", which points out that the complexity of the economics must necessarily match that of the production apparatus.
To understand something, we must construct a mental model of it. But this means that we are limited when it comes to understanding ourselves because we would have to be "smarter than ourselves" to be able to contain a complete mental model of ourselves, which is impossible.
This obvious fact that we cannot be "smarter than ourselves" has a number of ramifications that have been described on the patterns and complexity blog. For one thing, we cannot readily quantify complexity itself. I pointed out the tremendous advantages that this would bring us in "The Quantification of Complexity".
For another thing, the limitation that we cannot be "smarter than ourselves" means that while we can break physics down into formulae, we cannot do that with human behavior (behaviour). This does not mean that there are no formulae that describe and predict all that humans do, it is just that we cannot arrive at these formulae because we cannot be "smarter than ourselves" in the way that would be necessary for us to break ourselves down in the same way as with physics.
If this could be done, sports would no longer make sense because the actions of each player could be described in advance by formula and it would be completely unnecessary to hold the sports event to see which team would win. There is a formula for all that each person does, as well as the entire world, but we cannot be "smarter than ourselves" to arrive at it.
The words that we use are complex, but they are not infinitely complex. This means that out there somewhere is a way to express words in the same way as numbers so that we would not need a dictionary to know what a word means any more than we need a dictionary to tell us what a number means. The trouble is that words, with all of their nuances and subjectivity, are a reflection of our complexity, meaning that we cannot break words down into a formula or express them in a logical sequence like numbers because, once again, we cannot be "smarter than ourselves".
Another way that we are up against our own complexity is in studying. We learn more and more as time goes on, so why does studying what we need to know not get easier? It is because we are learning more that studying what is known never gets easy, even though we are learning more that is balanced by the fact that more is being learned.
Now, back to economics. The sum of all economic transactions is much like words in that it is a reflection of our own complexity. When we look at economics, we are looking at ourselves. So to completely build a mental model of all of it's complexity, we would have to be "smarter than ourselves" which is impossible.
Economics is a vast reflection of ourselves, and it is much easier to simplify it by looking at either one side or the other. This is what brings systems such as capitalism and communism into being. These are the two opposite sides of the total economic picture. Both must have valid points or they would not have attracted so many adherents. Yet, both have been shown to have very serious flaws. The flaws in one creates believers in the other so that economic history has tended to zig-zag from one to the other.
Industrial era economics began with capitalism. People had to start the industries which would produce wealth, but could not be expected to do this if they would not then be the owners of that wealth. But capitalism, at least in it's more extreme forms, is unsustainable. Factories will pay their workers as little as possible, in order to maximize profit, but that will leave too few people with enough money to buy the goods and services that are being produced.
Communism began as a reaction to extreme capitalism. Karl Marx, a German Jew in exile in London, put together the theory in the reading room at the British Museum. The theories of Marx were intended for Britain, but communism never gained significant numbers of followers there. The knock against communism is simply that, while it does not have the unsustainable concentration of wealth that capitalism does, it destroys the incentive that is necessary for people to work hard. Why should a business person put forth his best effort to create wealth every day if he is only going to have to share the wealth with everybody else?
Capitalism and communism each represents one side of the complete economic picture. To see the full picture of economics would be to encompass both capitalism and communism into a middle ground to get the best of both and the worst of neither. Both sides did move away from extremes, and toward the economic center, as time went on and experience was gained with industrial-era economics.
I see economics as ultimately coming down to freedom. There are two slants to freedom-"freedom to" and "freedom from". A simple example that I use for illustration is smoking. Should people have "freedom to" smoke, or should they have "freedom from" second-hand smoke?
The truth is that people, being complex, are both competitive and self-interested as well as communal. "Freedom to" represents capitalism, while "freedom from" represents communism. Both are a fundamental part of human nature, and both must be accommodated by an effective economic system. The solution is the middle ground of mild socialism, halfway between capitalism and communism.
There will be maximum economic activity when the available wealth is shared equally between the people. But, on the other hand, equal distribution of wealth will destroy incentive. The purpose of an economic system is to find the best balance of these two facts by seeing the total economic picture, even though it is more complex and thus more difficult, than only seeing either capitalism or communism.
To understand something, we must construct a mental model of it. But this means that we are limited when it comes to understanding ourselves because we would have to be "smarter than ourselves" to be able to contain a complete mental model of ourselves, which is impossible.
This obvious fact that we cannot be "smarter than ourselves" has a number of ramifications that have been described on the patterns and complexity blog. For one thing, we cannot readily quantify complexity itself. I pointed out the tremendous advantages that this would bring us in "The Quantification of Complexity".
For another thing, the limitation that we cannot be "smarter than ourselves" means that while we can break physics down into formulae, we cannot do that with human behavior (behaviour). This does not mean that there are no formulae that describe and predict all that humans do, it is just that we cannot arrive at these formulae because we cannot be "smarter than ourselves" in the way that would be necessary for us to break ourselves down in the same way as with physics.
If this could be done, sports would no longer make sense because the actions of each player could be described in advance by formula and it would be completely unnecessary to hold the sports event to see which team would win. There is a formula for all that each person does, as well as the entire world, but we cannot be "smarter than ourselves" to arrive at it.
The words that we use are complex, but they are not infinitely complex. This means that out there somewhere is a way to express words in the same way as numbers so that we would not need a dictionary to know what a word means any more than we need a dictionary to tell us what a number means. The trouble is that words, with all of their nuances and subjectivity, are a reflection of our complexity, meaning that we cannot break words down into a formula or express them in a logical sequence like numbers because, once again, we cannot be "smarter than ourselves".
Another way that we are up against our own complexity is in studying. We learn more and more as time goes on, so why does studying what we need to know not get easier? It is because we are learning more that studying what is known never gets easy, even though we are learning more that is balanced by the fact that more is being learned.
Now, back to economics. The sum of all economic transactions is much like words in that it is a reflection of our own complexity. When we look at economics, we are looking at ourselves. So to completely build a mental model of all of it's complexity, we would have to be "smarter than ourselves" which is impossible.
Economics is a vast reflection of ourselves, and it is much easier to simplify it by looking at either one side or the other. This is what brings systems such as capitalism and communism into being. These are the two opposite sides of the total economic picture. Both must have valid points or they would not have attracted so many adherents. Yet, both have been shown to have very serious flaws. The flaws in one creates believers in the other so that economic history has tended to zig-zag from one to the other.
Industrial era economics began with capitalism. People had to start the industries which would produce wealth, but could not be expected to do this if they would not then be the owners of that wealth. But capitalism, at least in it's more extreme forms, is unsustainable. Factories will pay their workers as little as possible, in order to maximize profit, but that will leave too few people with enough money to buy the goods and services that are being produced.
Communism began as a reaction to extreme capitalism. Karl Marx, a German Jew in exile in London, put together the theory in the reading room at the British Museum. The theories of Marx were intended for Britain, but communism never gained significant numbers of followers there. The knock against communism is simply that, while it does not have the unsustainable concentration of wealth that capitalism does, it destroys the incentive that is necessary for people to work hard. Why should a business person put forth his best effort to create wealth every day if he is only going to have to share the wealth with everybody else?
Capitalism and communism each represents one side of the complete economic picture. To see the full picture of economics would be to encompass both capitalism and communism into a middle ground to get the best of both and the worst of neither. Both sides did move away from extremes, and toward the economic center, as time went on and experience was gained with industrial-era economics.
I see economics as ultimately coming down to freedom. There are two slants to freedom-"freedom to" and "freedom from". A simple example that I use for illustration is smoking. Should people have "freedom to" smoke, or should they have "freedom from" second-hand smoke?
The truth is that people, being complex, are both competitive and self-interested as well as communal. "Freedom to" represents capitalism, while "freedom from" represents communism. Both are a fundamental part of human nature, and both must be accommodated by an effective economic system. The solution is the middle ground of mild socialism, halfway between capitalism and communism.
There will be maximum economic activity when the available wealth is shared equally between the people. But, on the other hand, equal distribution of wealth will destroy incentive. The purpose of an economic system is to find the best balance of these two facts by seeing the total economic picture, even though it is more complex and thus more difficult, than only seeing either capitalism or communism.
The Big Project Syndrome
There has been so much negativity in the news recently about the city of Niagara Falls, New York. This is the city on the American side of Niagara Falls, there is another city by the same name on the Canadian side. But all of the articles seem to just rehash what we already know. The city is struggling economically, to put it mildly. I would like to actually explain the workings of what has happened to Niagara Falls, NY, in a way that I have never seen it explained.
Yet, this is not a local issue at all and it is not necessary to be familiar with the area to understand it. Niagara Falls, NY suffers from what I have termed "The Big Project Syndrome". This is what takes place over time when a city is host to a major project of some type. The city may greatly benefit from the project. Indeed, it may even be the reason for it's existence. But as time goes on, and economic conditions change, both the thinking and the geography of the city are warped by the big project so that it ends up worse off in the long run.
I am going to use Niagara Falls, NY as a case study in the Big Project Syndrome, but it's lessons will apply to many cities across the world.
Here is a map link, which includes satellite imagery, that you may find helpful: www.maps.google.com .
Niagara Falls, NY occupies a very strategic location because of it's namesake waterfall. It's importance began with what is known as the Portage. This was a route by which things had to be carried from boats in the upper Great Lakes to boats in Lake Ontario, which linked to the Atlantic Ocean. The obvious reason for this is the fact that boats could not go over the falls. The legacy of this is that there are streets named Portage Road today on both sides of the river.
The flow of water was first used to generate power on a large scale, for milling operations, with a hydraulic canal across the downtown of what is now Niagara Falls, NY. Water would flow along the canal, from the upper river (above the falls), drop down a wheel pit with a turbine at the bottom which would be turned by the kinetic energy of the falling water, and then flow out of a shaft to empty into the lower river (below the falls). A lot of mills had operations along this canal.
Next came the generation of electricity by using the force of the falling water. The Adams Power Station (there are articles and photographs online) was a historic use of water to generate large amounts of electricity, using a generator at the bottom of a wheel pit.
After this came the Schoellkopf Power Station, which was constructed at the bottom of the gorge, alongside the lower river. There were actually three separate stations. There is a similar power plant today on the Canadian side of the river, just below the falls. The Schoellkopf Station was further downstream.
It was this Schoellkopf Power Station that really brought industry to Niagara Falls, NY, with abundant and inexpensive electricity. Many industries relied on electricity for their operation, particularly for refining aluminum. Unlike other common metals, aluminum cannot be separated from it's ore by smelting but requires electrolysis. Along the way it was discovered that sand and coke can be fused together by extreme heat to make an inexpensive but effective abrasive, and the name of Carborundum became one of the industrial names associated with Niagara Falls, NY.
On the Canadian side of Niagara Falls, the abundance of electricity brought the vast Cyanamid factory that used to stand just north of Hamilton Street, with another factory of the same name on the other side of town.
Niagara Falls not only revolutionized industry, but also bridge construction. The original Honeymoon Bridge was torn from it's foundations by icebergs in 1938, but the area hosts some of the finest examples in the world of steel arch bridges spanning the river.
Not only was there all of the industry, drawn by the inexpensive electricity, but visitors came from all over the world to see the falls.
It was just a place that spawned fantastic plans. A man named William Love began a canal which was to run from the upper river, well upstream from the falls, to the Niagara Escarpment to the north where it would generate the power for what would be known as Model City.
A vivid example of the visions of the future and the grand plans of Niagara can be seen in the now-closed Summit Park Mall, just east of the city limits of Niagara Falls, NY. What city would have a shopping mall built on what was essentially a country road? This could only happen in a city with nearly unlimited faith in it's ecoomic future.
But times began to change. In 1956, a massive rock slide destroyed the Schoellkopf Power Station. The wall of the gorge which collpased was almost certainly weakened by the wheel pits and tunnels along the hydraulic canal years before. The grandest project of all was constructed to replace it, the Robert Moses Power Plant, but now electricity was more expensive and was also not of the same frequency of alternating current as before. As the rest of the world developed, wages were much lower in other countries and factory work could be done with less cost there. The factories that had been the backbone of the Niagara economy began to leave or drastically reduce the local workforce.
This began the present dilemma of Niagara Falls, NY. People began to leave also, and today the city has only about half of the population that it had in 1960.
I find that industry has not left, it has only changed in form. Instead of massive industries employing hundreds, or even thousands of workers, there are smaller specialized industries employing far fewer workers, but with a higher skill level. These smaller industries of the new economy tend to cluster together in industrial parks for ease of delivery. It is as if industry has moved from the age of massive dinosaurs to the age of smaller, but more intelligent, mammals.
To understand Niagara Falls, NY, and other cities suffering from the Big Project Syndrome, it is necessary to understand what is known as the "paradox of plenty", also known as the resource curse. There are articles about it online. This is the phenomenon in which the countries that are blessed with the greatest natural wealth are paradoxically the ones where the average person is likely to be worse off than those in countries with much less natural wealth.
The paradox of plenty comes down to human nature. When a country does not have natural resources, it also has nothing to be corrupt with. The great natural wealth often ends up enriching only a few people, or used by a corrupt government to keep itself in power. A country without such natural wealth is more dependent on the will of it's citizens to remain in power, and so is more likely to be a democracy. It must also make the most of the skills of it's people so that it ends up better off in the long term. (See "the Language Paradox, on the world and economics blog, to see my impression of how this relates to language also).
The paradox of plenty applies to cities as well. Niagara Falls, NY was blessed with the possibility of generating inexpensive electricity and otherwise making use of water power. But now the thinking is stuck in this big project mentality. It does not grasp the new economy of modern industrial parks with smaller, but higher skill, industries.
What Niagara Falls, NY sorely needs is something like the Audobon Industrial Park, that can be seen some distance away in the Buffalo suburb of Amherst. Instead, Niagara Falls, NY keeps thinking in terms of big projects while looking for something to turn the city around.
First, there was the massive convention center downtown. It was an arc of concrete, appearing as if it was an engineering sibling of the Robert Moses Power Project, as was the Earl Brydges Library. In the 1980s, there were plans for a "mega-mall" in downtown Niagara Falls, NY. Then there was the casino.
In the Little Italy project of Pine Avenue, there is nothing in itself wrong with this idea but the same thought patterns can be seen at work. Just as water once flowed through the hydraulic canal to generate milling power, just as water flowed through the penstocks of the Robert Moses Power Plant to generate electricity, so visitors will flow between the arches of Little Italy to generate wealth.
This is related to two other postings on the world and economics blog. In "The Inverse Geographic Prosperity Principle", we saw that there are natural places in North America where we would expect to find cities, but the ones that we can be sure are prosperous are actually the ones where we would not usually expect to find a city, or at least such a major city. In "The Cardinal Rule Of Military Strategy" I explained how when a nation has won a great military victory, it cannot help trying to replicate that victory in later combat and this provides a clue as to what to expect from it's military strategy. Niagara Falls, NY just cannot help trying to replicate it's glory days of massive projects.
The city did handle projects like a new water plant and a new police station. But, once again, these are big projects. The industries of the new economy are still missing.
Promoting Niagara Falls, NY is not really the answer. It is already a world-famous name. There are many stores and shops in the city and the adjoining Town of Niagara, as well as a nice mall. But most of these businesses are owned from elsewhere. These stores attract great number of Canadian shoppers, from across the river, but the bulk of the money that they spend does not stay. After paying out wages and taxes, the rest of the money goes to the distant corporate headquarters of these stores and restaurants.
An economy of stores is unsustainable. At some point, we must actually make something to generate wealth. The casinos in the area only redistribute wealth, by taking it from somewhere else. Las Vegas is based on casinos by tapping into the heritage of the American west as a place where prospectors went looking for gold. But the heritage of Niagara Falls is industry, we should be making things here but are still stuck in the big-project mentality of what we can call the dinosaur era of industry and have failed to grasp the new economy of modern industrial parks with smaller but higher-skill level industries.
Just outside the city limits of Niagara Falls, NY, there are a few of such smaller modern industries. But in all of Niagara County there is very little of this modern industrial economy. There is just something about the name "Niagara" and big project thinking.
Lockport, NY is the city in the middle of Niagara County. It also displays signs of the Big Project Syndrome. Lockport is where the Erie Canal climbed the Niagara Escarpment by way of locks, hence the name of the city. It's economy is largely based on big industry, just as that of Niagara Falls was. The major employer is the Delphi auto parts factory, and there is also a newer facility of Yahoo!
This does represent the new economy well, better than nearby Niagara Falls. But for a city to base it's economic future on one or two major industries is maybe not the best of ideas. Middleport, the town at the eastern end of Niagara County, really suffered a few years ago with the closing of it's major industrial employer. Isn't it better to have an industrial park with 30 or 40 separate modern industries?
In the midst of all this gloom, sorrounding communities that are far less well-known than Niagara Falls are doing much better.
Niagara Falls, Canada is also afflicted by the Big Project Syndrome, to some extent as the observation towers near the falls attest. But the Canadian side of Niagara Falls has adapted much better to the new economy. The Cyanamid factory is long gone but all along the Queen Elizabeth Way, The QEW which runs north to south across the city, there is the industrial park that represents the new economy and is the economic backbone of the city. It may be that since the electric power projects on the Canadian side are much older than the Robert Moses Plant on the American side, the Big Project Syndrome on this side is further in the past and this has made adapting to the new economy somewhat easier.
On Grand Island, just south of Niagara Falls, NY, we see examples of the same type of modern industrial economy along the I-190 highway that crosses the island. The same along the I-290 across the northern Buffalo suburb of Tonawanda. In fact, the new industrial economy can be seen all around the suburbs of Buffalo in the satellite imagery on the map link, particularly the Audobon Industrial Park in Amherst, mentioned above. This is what is lacking in Niagara Falls, NY, which cannot break free of this big project mentality.
North Tonawanda, in Niagara County just east of Niagara Falls, also has an industrial heritage. Yet, it has managed to adapt to the new economy. This city does not seem to have a concentrated industrial park, but has small modern industries scattered around the city particularly on Tonawanda Island and in the Wurlitzer area and Erie Avenue.
The first part of the Big Project Syndrome is the thinking. The second part is the geography. It does not make sense to put an industrial park in a prime shopping or tourist area, and that leaves a city like Niagara Falls with nowhere to put one, at least where it would pay taxes to the city. Workers in the new economy want to live near their jobs, but in homes that suit their income level.
One of my most important ecoomic postings is "The Property Order". A primary reason for the tendency over recent decades to move to the southwestern U.S. is not just for the sun, but for a chance to start the property order over.
The City of Buffalo is also struggling economically, although not as badly as Niagara Falls. Ctities usually lack the space for a modern industrial park and tend to try to revitalize old buildings into the new economy and that is what Buffalo has done with the Larkin Buildings, a former soap company that did not survive the economic depression of the 1930s.
The past industrial era, and the generation of electricity, has left Niagara Falls, NY with essentially nowhere to put a modern industrial park such as the city needs. Much of the space formerly occupied by large industries has a certain level of contamination, so-called brownfields. Other seemingly open space has electric power lines overhead from all of the electricity that is generated. A large area along the I-190 highway, that would have been ideal for an industrial park, is occupied by a landfill. Then there is the contaminated area of the Love Canal, formed when William Love's old and abandoned canal was used to bury dangerous chemicals, that surfaced decades later.
With inexpensive electricity and numerous visitors, Niagara Falls, NY did not see the changes coming. Space that was not taken up by the large industry that could not last was taken up by the stores for the visitors to spend money in and is now inavailable for a modern industrial park. But neighboring North Tonawanda has managed to get it's share of the new industry without such a concentrated park either.
Yet, this is not a local issue at all and it is not necessary to be familiar with the area to understand it. Niagara Falls, NY suffers from what I have termed "The Big Project Syndrome". This is what takes place over time when a city is host to a major project of some type. The city may greatly benefit from the project. Indeed, it may even be the reason for it's existence. But as time goes on, and economic conditions change, both the thinking and the geography of the city are warped by the big project so that it ends up worse off in the long run.
I am going to use Niagara Falls, NY as a case study in the Big Project Syndrome, but it's lessons will apply to many cities across the world.
Here is a map link, which includes satellite imagery, that you may find helpful: www.maps.google.com .
Niagara Falls, NY occupies a very strategic location because of it's namesake waterfall. It's importance began with what is known as the Portage. This was a route by which things had to be carried from boats in the upper Great Lakes to boats in Lake Ontario, which linked to the Atlantic Ocean. The obvious reason for this is the fact that boats could not go over the falls. The legacy of this is that there are streets named Portage Road today on both sides of the river.
The flow of water was first used to generate power on a large scale, for milling operations, with a hydraulic canal across the downtown of what is now Niagara Falls, NY. Water would flow along the canal, from the upper river (above the falls), drop down a wheel pit with a turbine at the bottom which would be turned by the kinetic energy of the falling water, and then flow out of a shaft to empty into the lower river (below the falls). A lot of mills had operations along this canal.
Next came the generation of electricity by using the force of the falling water. The Adams Power Station (there are articles and photographs online) was a historic use of water to generate large amounts of electricity, using a generator at the bottom of a wheel pit.
After this came the Schoellkopf Power Station, which was constructed at the bottom of the gorge, alongside the lower river. There were actually three separate stations. There is a similar power plant today on the Canadian side of the river, just below the falls. The Schoellkopf Station was further downstream.
It was this Schoellkopf Power Station that really brought industry to Niagara Falls, NY, with abundant and inexpensive electricity. Many industries relied on electricity for their operation, particularly for refining aluminum. Unlike other common metals, aluminum cannot be separated from it's ore by smelting but requires electrolysis. Along the way it was discovered that sand and coke can be fused together by extreme heat to make an inexpensive but effective abrasive, and the name of Carborundum became one of the industrial names associated with Niagara Falls, NY.
On the Canadian side of Niagara Falls, the abundance of electricity brought the vast Cyanamid factory that used to stand just north of Hamilton Street, with another factory of the same name on the other side of town.
Niagara Falls not only revolutionized industry, but also bridge construction. The original Honeymoon Bridge was torn from it's foundations by icebergs in 1938, but the area hosts some of the finest examples in the world of steel arch bridges spanning the river.
Not only was there all of the industry, drawn by the inexpensive electricity, but visitors came from all over the world to see the falls.
It was just a place that spawned fantastic plans. A man named William Love began a canal which was to run from the upper river, well upstream from the falls, to the Niagara Escarpment to the north where it would generate the power for what would be known as Model City.
A vivid example of the visions of the future and the grand plans of Niagara can be seen in the now-closed Summit Park Mall, just east of the city limits of Niagara Falls, NY. What city would have a shopping mall built on what was essentially a country road? This could only happen in a city with nearly unlimited faith in it's ecoomic future.
But times began to change. In 1956, a massive rock slide destroyed the Schoellkopf Power Station. The wall of the gorge which collpased was almost certainly weakened by the wheel pits and tunnels along the hydraulic canal years before. The grandest project of all was constructed to replace it, the Robert Moses Power Plant, but now electricity was more expensive and was also not of the same frequency of alternating current as before. As the rest of the world developed, wages were much lower in other countries and factory work could be done with less cost there. The factories that had been the backbone of the Niagara economy began to leave or drastically reduce the local workforce.
This began the present dilemma of Niagara Falls, NY. People began to leave also, and today the city has only about half of the population that it had in 1960.
I find that industry has not left, it has only changed in form. Instead of massive industries employing hundreds, or even thousands of workers, there are smaller specialized industries employing far fewer workers, but with a higher skill level. These smaller industries of the new economy tend to cluster together in industrial parks for ease of delivery. It is as if industry has moved from the age of massive dinosaurs to the age of smaller, but more intelligent, mammals.
To understand Niagara Falls, NY, and other cities suffering from the Big Project Syndrome, it is necessary to understand what is known as the "paradox of plenty", also known as the resource curse. There are articles about it online. This is the phenomenon in which the countries that are blessed with the greatest natural wealth are paradoxically the ones where the average person is likely to be worse off than those in countries with much less natural wealth.
The paradox of plenty comes down to human nature. When a country does not have natural resources, it also has nothing to be corrupt with. The great natural wealth often ends up enriching only a few people, or used by a corrupt government to keep itself in power. A country without such natural wealth is more dependent on the will of it's citizens to remain in power, and so is more likely to be a democracy. It must also make the most of the skills of it's people so that it ends up better off in the long term. (See "the Language Paradox, on the world and economics blog, to see my impression of how this relates to language also).
The paradox of plenty applies to cities as well. Niagara Falls, NY was blessed with the possibility of generating inexpensive electricity and otherwise making use of water power. But now the thinking is stuck in this big project mentality. It does not grasp the new economy of modern industrial parks with smaller, but higher skill, industries.
What Niagara Falls, NY sorely needs is something like the Audobon Industrial Park, that can be seen some distance away in the Buffalo suburb of Amherst. Instead, Niagara Falls, NY keeps thinking in terms of big projects while looking for something to turn the city around.
First, there was the massive convention center downtown. It was an arc of concrete, appearing as if it was an engineering sibling of the Robert Moses Power Project, as was the Earl Brydges Library. In the 1980s, there were plans for a "mega-mall" in downtown Niagara Falls, NY. Then there was the casino.
In the Little Italy project of Pine Avenue, there is nothing in itself wrong with this idea but the same thought patterns can be seen at work. Just as water once flowed through the hydraulic canal to generate milling power, just as water flowed through the penstocks of the Robert Moses Power Plant to generate electricity, so visitors will flow between the arches of Little Italy to generate wealth.
This is related to two other postings on the world and economics blog. In "The Inverse Geographic Prosperity Principle", we saw that there are natural places in North America where we would expect to find cities, but the ones that we can be sure are prosperous are actually the ones where we would not usually expect to find a city, or at least such a major city. In "The Cardinal Rule Of Military Strategy" I explained how when a nation has won a great military victory, it cannot help trying to replicate that victory in later combat and this provides a clue as to what to expect from it's military strategy. Niagara Falls, NY just cannot help trying to replicate it's glory days of massive projects.
The city did handle projects like a new water plant and a new police station. But, once again, these are big projects. The industries of the new economy are still missing.
Promoting Niagara Falls, NY is not really the answer. It is already a world-famous name. There are many stores and shops in the city and the adjoining Town of Niagara, as well as a nice mall. But most of these businesses are owned from elsewhere. These stores attract great number of Canadian shoppers, from across the river, but the bulk of the money that they spend does not stay. After paying out wages and taxes, the rest of the money goes to the distant corporate headquarters of these stores and restaurants.
An economy of stores is unsustainable. At some point, we must actually make something to generate wealth. The casinos in the area only redistribute wealth, by taking it from somewhere else. Las Vegas is based on casinos by tapping into the heritage of the American west as a place where prospectors went looking for gold. But the heritage of Niagara Falls is industry, we should be making things here but are still stuck in the big-project mentality of what we can call the dinosaur era of industry and have failed to grasp the new economy of modern industrial parks with smaller but higher-skill level industries.
Just outside the city limits of Niagara Falls, NY, there are a few of such smaller modern industries. But in all of Niagara County there is very little of this modern industrial economy. There is just something about the name "Niagara" and big project thinking.
Lockport, NY is the city in the middle of Niagara County. It also displays signs of the Big Project Syndrome. Lockport is where the Erie Canal climbed the Niagara Escarpment by way of locks, hence the name of the city. It's economy is largely based on big industry, just as that of Niagara Falls was. The major employer is the Delphi auto parts factory, and there is also a newer facility of Yahoo!
This does represent the new economy well, better than nearby Niagara Falls. But for a city to base it's economic future on one or two major industries is maybe not the best of ideas. Middleport, the town at the eastern end of Niagara County, really suffered a few years ago with the closing of it's major industrial employer. Isn't it better to have an industrial park with 30 or 40 separate modern industries?
In the midst of all this gloom, sorrounding communities that are far less well-known than Niagara Falls are doing much better.
Niagara Falls, Canada is also afflicted by the Big Project Syndrome, to some extent as the observation towers near the falls attest. But the Canadian side of Niagara Falls has adapted much better to the new economy. The Cyanamid factory is long gone but all along the Queen Elizabeth Way, The QEW which runs north to south across the city, there is the industrial park that represents the new economy and is the economic backbone of the city. It may be that since the electric power projects on the Canadian side are much older than the Robert Moses Plant on the American side, the Big Project Syndrome on this side is further in the past and this has made adapting to the new economy somewhat easier.
On Grand Island, just south of Niagara Falls, NY, we see examples of the same type of modern industrial economy along the I-190 highway that crosses the island. The same along the I-290 across the northern Buffalo suburb of Tonawanda. In fact, the new industrial economy can be seen all around the suburbs of Buffalo in the satellite imagery on the map link, particularly the Audobon Industrial Park in Amherst, mentioned above. This is what is lacking in Niagara Falls, NY, which cannot break free of this big project mentality.
North Tonawanda, in Niagara County just east of Niagara Falls, also has an industrial heritage. Yet, it has managed to adapt to the new economy. This city does not seem to have a concentrated industrial park, but has small modern industries scattered around the city particularly on Tonawanda Island and in the Wurlitzer area and Erie Avenue.
The first part of the Big Project Syndrome is the thinking. The second part is the geography. It does not make sense to put an industrial park in a prime shopping or tourist area, and that leaves a city like Niagara Falls with nowhere to put one, at least where it would pay taxes to the city. Workers in the new economy want to live near their jobs, but in homes that suit their income level.
One of my most important ecoomic postings is "The Property Order". A primary reason for the tendency over recent decades to move to the southwestern U.S. is not just for the sun, but for a chance to start the property order over.
The City of Buffalo is also struggling economically, although not as badly as Niagara Falls. Ctities usually lack the space for a modern industrial park and tend to try to revitalize old buildings into the new economy and that is what Buffalo has done with the Larkin Buildings, a former soap company that did not survive the economic depression of the 1930s.
The past industrial era, and the generation of electricity, has left Niagara Falls, NY with essentially nowhere to put a modern industrial park such as the city needs. Much of the space formerly occupied by large industries has a certain level of contamination, so-called brownfields. Other seemingly open space has electric power lines overhead from all of the electricity that is generated. A large area along the I-190 highway, that would have been ideal for an industrial park, is occupied by a landfill. Then there is the contaminated area of the Love Canal, formed when William Love's old and abandoned canal was used to bury dangerous chemicals, that surfaced decades later.
With inexpensive electricity and numerous visitors, Niagara Falls, NY did not see the changes coming. Space that was not taken up by the large industry that could not last was taken up by the stores for the visitors to spend money in and is now inavailable for a modern industrial park. But neighboring North Tonawanda has managed to get it's share of the new industry without such a concentrated park either.
Margaret Thatcher In Perspective
My opinion is that Margaret Thatcher was a product of the time and situation during which she became British Prime Minister.
During the summer of 1978, I was on my first return visit to my native England just after completing high school in the U.S. I seem to remember a blond woman in the news one day criticizing the present government of Britain. I did not know who she was and did not pay much attention. The following year, she was in the news again. Her name was Margaret Thatcher and she had just become prime minister of Britain.
I am no conservative when it comes to economics, as Thatcher was, but I do have some understanding of the highly controversial policies that she put into place if we consider the context.
The winter of 1978-79 was known as "The Winter of Discontent" in Britain. The economically liberal Callaghan government had gone on a spending spree. The result was a notorious strike-inflation spiral. Inflation was completely out of control, it would reach a dangerous nearly 14% in 1979. Workers in one industry would see workers in another industry getting pay raises by going on strike, and so they would strike too, all of which was fueling the spiral of inflation.
Thatcher won election in 1979 and purposely induced a recession because that was the only way to stop inflation. Nearly two years later, Ronald Reagan would take office in the U.S. and follow a similar course. The recession of the early 1980s was nasty in both countries, but it did succeed in stopping inflation and I agree with what they did. They simply had no choice, going too far left is as bad as going too far right.
It is said that if one list could be made of the most loved people ever, and another of the most hated, there would be many of the same people on both lists. There are few better examples of this than Margaret Thatcher. She knew how to handle inflation, but the resulting recession was really painful. Maybe there would be better memories of her if that had not been necessary, but that is not her fault. She is seen as a divisive figure, but once again that is due to the times and the fact of how far apart Britain's two main parties are.
I was in Britain only once during her 1979-1990 tenure, for a three week visit, but I did follow what was happening from a distance. I also have to agree with her taking on the coal miner's union. We cannot keep coal pits open when they are nearly mined out, and no longer profitable, just to preserve jobs.
I see Margaret Thatcher, and her U.S. counterpart Ronald Reagan, as well as to some extent the Canadian counterpart Brian Mulroney, as not only necessary products of their times, but also as half of the big picture of economics.
The left and the right, which we would call capitalism and communism in their more extreme forms, bring one another into existence because each is only half of the picture. This is because when one exists the other must also exist, on the opposite side, to restore the true economic balance. Put simply, economics is complex but most people are relatively simple so that we tend to see only part of the big picture. My view is that an economic system that is either well to the right, or well to the left, will be ultimately unsustainable because each is only half of the picture. The system will bounce back and forth from one side to the other in an effort to achieve sustainable balance.
Economics is a manifestation of freedom. My doctrine is that there are two slants to freedom, "freedom to" and "freedom from". The simplest example that I can think of is smoking. Should people have "freedom to" smoke, or should they have "freedom from" second-hand smoke. In the economic manifestation, the conservative right represents "freedom to", while the liberal left represents "freedom from".
The right wants people to have freedom to do all that they can to earn as much money as they are able to, and to spend it as they see fit. The right points out that taxing and spending by the government tends to result in destructive inflation. The left wants people to be able to earn money, but since money inevitably equals power they do not want a few wealthy people to use their power to set everything up to suit themselves so that the rich get richer and the poor get poorer, as tends to happen with capitalism. The left points out that when the rich take too much wealth for themselves, it does not leave enough money in circulation to buy all of the goods and services that are being produced in the economy, so that companies begin cutting back on production and a recessionary spiral gets under way.
My view is that an economic system must accommodate the entire freedom spectrum from "freedom to" to "freedom from". It can either do it by bouncing back and forth from right to left so that the two ultimately balance each other, or it can do it by the much more smoother and efficient method of setting a middle course to begin with. Capitalism and communism both have valid points, but also serious flaws, and the goal should be to set a middle course with the best of both and the worst of neither.
I am a dual national of the U.S. and Britain, although I have spent vastly more time in the U.S. It is from Britain that I draw the lesson of going too far left, and it is from the U.S. that I draw the lesson of going too far right. The U.S. economic crashes of 1929, 1987 and, 2008 were caused by the wealthy taking too much money out of the system so that there was not enough consumer spending to buy all of the goods and services being produced.
This is the context in which Margaret Thatcher must be understood. Reagan and Thatcher were too far right, but they had to be because the governments before them, Carter and Callaghan, were too far left. It would be much better just to set a balanced course from the beginning, but most people can only see one side or the other and not the whole picture.
What both Thatcher and Reagan did wrong was not to steer to the right at the beginning of the 1980s, they had little choice but to induce the recession because there was no other way to stop inflation. What they both did wrong is to stay with their conservative economic policies after this objective had been accomplished. They both should have steered toward the center, but they didn't. The result was the 1987 economic crash in America and Thatcher being removed by her own party after her attempt to organize Britain's tax system so that everyone, rich and not-so-rich, would pay just one flat tax.
(By the way, in a parliamentary democracy it is the party which rules and not the prime minister. If a prime minister becomes too unpopular, the party can simply replace him or her with someone else and continue to govern. This is what happened to Thatcher in 1990, and to Brian Mulroney in Canada. In the presidential system, in contrast, the president rules rather than the party and cannot be readily removed until his term is up).
Why was Thatcher so determined and uncompromising? My explanation is simple. Remember in my economic writings how we saw how people are designed to believe in something and when a person may not have really grasped the true religion, their nation or ideology or politics takes the place of religion. I do not know what Margaret Thatcher's religious convictions were, but she was the daughter of a Methodist minister and so would have been very familiar with Christianity. She saw herself as the saviour (savior) of Britain against the falseness of socialism and the diabolical Labour Party. It became very much a religious crusade, in which any kind of compromise would be completely unacceptable.
Another factor was warfare. For centuries, Britain had been in some kind of conflict at least every generation or so. But then along came the 1980s. The nation's collective psyche told it that it was time for another of the periodic battles of history. But, after the Falklands crisis of 1982, there was no significant foreign enemy to be found. So, the country turned inward and reenacted it's own civil war of long ago in the form of the Labour Party and socialism versus Thatcher.
Managing a modern economy does not require an iron will. It requires flexibility and quick reflexes to keep to a center course. It calls for swift and skillful turns, not for ideological dogma. A driver that only knows how to turn left is not going to get any further than a driver who knows only how to turn right.
Capitalism can be compared to a jungle in the same way that communism can be compared to a zoo. I used this analogy in the book "The Patterns Of New Ideas". The animals in the zoo look outside and see the animals in the jungle running free, and they long for their freedom too. One day, they break out of the zoo. At first, the former zoo animals are elated to have their freedom. But after a while they start to see that while the jungle is free, it is also harsh and competitive. Unlike in the zoo, there is no guarantee of the necessities of life. Also, they realize that the animals which they saw outside from their cages in the zoo were the ones that were doing relatively well. There are many more animals in the jungle that are not doing as well. The former zoo animals start to feel that maybe the zoo was not so bad after all. They do not really want to go back to the zoo, but decide to look for a middle way between the zoo and the jungle. The jungle represents "freedom to" and the zoo represents "freedom from", the best arrangement is halfway between the two.
Capitalism and communism can also be compared to two people and a cart. Both people steering the cart and neither of them pushing, is like communism and it does not get very far. Both people pushing the cart, and neither of them steering, is like capitalism. The cart goes faster, and faster, and faster, until it crashes. The mild socialism that is halfway between the two is represented by one person pushing and the other steering, and it does better than either of the other two.
Once again, my belief is that an effective and sustainable system of social programs is one that is based on income from a country's resources, as much as possible, and not in loading people with taxes. The trouble with socialism is that there is a tendency to believe that if a moderate amount of socialism works well, and it does, then more socialism will work even better, except that it doesn't. Economics is like a peak, with the peak of efficiency being halfway between capitalism on the right and communism on the left.
Both capitalism and communism misunderstand human nature. A fundamental flaw of capitalist thinking is that the goal of everyone is to be rich, and they spend their lives doing all that they can to achieve that goal. This simply is not true. It is set up to support those whose goal is to be rich, and that is what makes it unfair.
We could say that the most successful economic system is one that ends with the fewest people in prison. Countries that practice either communism or rightward capitalism tend to have higher prison populations than the mildly socialist countries in the middle. The more difficult it becomes to live by the rules, the more people there will be who don't live by the rules.
I believe that when there is an ideological conflict, the one that is nastier will be the weaker one with the nastiness being an attempt to compensate for the weakness. The least nasty, in my opinion, is the mild socialism that is halfway between capitalism and communism.
The further right or left anyone is, the more ideological they tend to be, making economics operate by dogma. Thatcher's policy of home ownership is an example. She tried to sell off Britain's council houses in order to make as many people as possible into homeowners. This did not work well because a lot of people either do not really want to be, or are simply not cut out to be homeowners.
It is my convinced opinion that a government should maintain certain industries, whether or not they are making a profit. To do otherwise is just more ideological dogma. How can a country really be independent without a certain capacity to make steel? What about sovereignty, should state-run airlines be privatized even though if they should go out of business it would mean that the country would be dependent on foreign planes to fly it's citizens between their own cities? How about buses, they may require subsidy but is this more than the cost of doing without them, making it more difficult for them to work and so cutting into consumer spending? It boosts an economy if people can get wherever they want to go as easily as possible.
The criteria for government programs is cost. The programs will cost money but which is greater, the cost of having them or the cost of not having them?
Economics is not the same thing as quality of life. The Callaghan government that preceded Thatcher is much reviled for going too far left. I first revisited the country where I had been born in the summer of 1978, after having not been there since I was a young child. I thought that I would like it, but was not sure exactly what to expect. However, I was delighted at what a fun and carefree place Britain seemed to be. The main objective seemed to be simply to have fun, the attitude being "one day you were born, and one day you will die, so you might as well have fun in between". I was pleasantly shocked that I could be walking, it would start to drizzle, as it always does sooner or later in England, and people would pull over and offer me a ride. Everything seemed very agreeable, at least as long as one did not try to find a better job.
To get an idea which economic system would work best in a country at a given time, go into a pub or bar and watch groups of people buying drinks. If they buy the drinks one-by-one, or with couples two-by-two, then the thinking is more rightward. But if the people within groups take turns buying rounds of drinks, then there is socialist thinking.
So much depends not on economics, but on the character of the population. We need people who value work, learning and being well-informed, taking care of their health and, following the Word of God. The way to be a patriot is not to wave a flag around, anybody can do that, but to take care of your health so as not to be a burden on the health care system of your country.
Thatcher was the first western leader to meet Mikhail Gorbachev. Him and his wife visited her in late 1984, and he became Soviet leader the following spring. Anyone can say or write all they want about the Cold War, but it would not have ended as it did without him. Gorbachev deserves more credit than anyone, and should not be forgotten even if the present Russian government does not care for him.
(Ironically, Russia would prove the truth of Communist denunciations about the evils of capitalism by it's own history. After the end of Soviet Communism in 1991, the country went capitalist and abundantly demonstrated just what an unfair system it can be. A few people got very rich, but most people were not better off. My opinion is that the present government is the best that Russia has had since the beginning of Communism in 1917).
Another irony is that the Argentine government that Thatcher went to war with over the Falkland Islands in 1982 was so right-wing that they were killing leftists in the so-called "Dirty War". This military government seized power in Argentina in 1976, and ruled until 1983. They came up with a novel way of executing leftist opponents by flying them out over the ocean, and then dropping them out of the plane. Maybe they and Thatcher should have been soul mates.
Thatcher was clearly a skeptic of the European Union. Brits are touchy about giving up sovereignity. The British way of doing things is to make sure that no one gets too much control. Britain began modern democracy by limiting the power of the king with the Magna Charta. Alone among the major nations of the world Britain does not have a written constitution, only the way that things have always been done, because that might mean giving up control to a piece of paper. Britain has never been ruled by a dictator because Brits will not follow someone who steps in and tries to take control. They followed Winston Churchill during the wartime, but swiftly voted him out just as soon as the war was over. Britain's parliamentary system makes it easy to remove a prime minister if he should start to act like a dictator or try to amass too much authority.
Hopefully, other Europeans will understand that Brits do not like to give up control. In fact, it could be called their national characteristic. But it is wonderful that Europe has gone from innumerable wars to where it is now, and Britain should have a vital part in it.
I think that Thatcher's charisma is underrated. She must have had some kind of magnetic personal appeal. One does not transform a country just by argument alone. A charismatic leader does not even have to use force, people will follow because they want to. Truly charismatic leaders can really light up a person's soul. Aung San Suu Kyi seems to be loaded with charisma. She can make people feel as if they can conquer the world, and want to conquer it just so that they can name it after her.
Finally, Margaret Thatcher just looked so English. To anyone that was born over there, she might be seen behind the counter at one of those old fish and chips shops. One might say "I'll have an order of fish and chips and a cup of tea". She would say, in a very British accent, "That'll be three pounds forty (or whatever price inflation has made it by now)".
During the summer of 1978, I was on my first return visit to my native England just after completing high school in the U.S. I seem to remember a blond woman in the news one day criticizing the present government of Britain. I did not know who she was and did not pay much attention. The following year, she was in the news again. Her name was Margaret Thatcher and she had just become prime minister of Britain.
I am no conservative when it comes to economics, as Thatcher was, but I do have some understanding of the highly controversial policies that she put into place if we consider the context.
The winter of 1978-79 was known as "The Winter of Discontent" in Britain. The economically liberal Callaghan government had gone on a spending spree. The result was a notorious strike-inflation spiral. Inflation was completely out of control, it would reach a dangerous nearly 14% in 1979. Workers in one industry would see workers in another industry getting pay raises by going on strike, and so they would strike too, all of which was fueling the spiral of inflation.
Thatcher won election in 1979 and purposely induced a recession because that was the only way to stop inflation. Nearly two years later, Ronald Reagan would take office in the U.S. and follow a similar course. The recession of the early 1980s was nasty in both countries, but it did succeed in stopping inflation and I agree with what they did. They simply had no choice, going too far left is as bad as going too far right.
It is said that if one list could be made of the most loved people ever, and another of the most hated, there would be many of the same people on both lists. There are few better examples of this than Margaret Thatcher. She knew how to handle inflation, but the resulting recession was really painful. Maybe there would be better memories of her if that had not been necessary, but that is not her fault. She is seen as a divisive figure, but once again that is due to the times and the fact of how far apart Britain's two main parties are.
I was in Britain only once during her 1979-1990 tenure, for a three week visit, but I did follow what was happening from a distance. I also have to agree with her taking on the coal miner's union. We cannot keep coal pits open when they are nearly mined out, and no longer profitable, just to preserve jobs.
I see Margaret Thatcher, and her U.S. counterpart Ronald Reagan, as well as to some extent the Canadian counterpart Brian Mulroney, as not only necessary products of their times, but also as half of the big picture of economics.
The left and the right, which we would call capitalism and communism in their more extreme forms, bring one another into existence because each is only half of the picture. This is because when one exists the other must also exist, on the opposite side, to restore the true economic balance. Put simply, economics is complex but most people are relatively simple so that we tend to see only part of the big picture. My view is that an economic system that is either well to the right, or well to the left, will be ultimately unsustainable because each is only half of the picture. The system will bounce back and forth from one side to the other in an effort to achieve sustainable balance.
Economics is a manifestation of freedom. My doctrine is that there are two slants to freedom, "freedom to" and "freedom from". The simplest example that I can think of is smoking. Should people have "freedom to" smoke, or should they have "freedom from" second-hand smoke. In the economic manifestation, the conservative right represents "freedom to", while the liberal left represents "freedom from".
The right wants people to have freedom to do all that they can to earn as much money as they are able to, and to spend it as they see fit. The right points out that taxing and spending by the government tends to result in destructive inflation. The left wants people to be able to earn money, but since money inevitably equals power they do not want a few wealthy people to use their power to set everything up to suit themselves so that the rich get richer and the poor get poorer, as tends to happen with capitalism. The left points out that when the rich take too much wealth for themselves, it does not leave enough money in circulation to buy all of the goods and services that are being produced in the economy, so that companies begin cutting back on production and a recessionary spiral gets under way.
My view is that an economic system must accommodate the entire freedom spectrum from "freedom to" to "freedom from". It can either do it by bouncing back and forth from right to left so that the two ultimately balance each other, or it can do it by the much more smoother and efficient method of setting a middle course to begin with. Capitalism and communism both have valid points, but also serious flaws, and the goal should be to set a middle course with the best of both and the worst of neither.
I am a dual national of the U.S. and Britain, although I have spent vastly more time in the U.S. It is from Britain that I draw the lesson of going too far left, and it is from the U.S. that I draw the lesson of going too far right. The U.S. economic crashes of 1929, 1987 and, 2008 were caused by the wealthy taking too much money out of the system so that there was not enough consumer spending to buy all of the goods and services being produced.
This is the context in which Margaret Thatcher must be understood. Reagan and Thatcher were too far right, but they had to be because the governments before them, Carter and Callaghan, were too far left. It would be much better just to set a balanced course from the beginning, but most people can only see one side or the other and not the whole picture.
What both Thatcher and Reagan did wrong was not to steer to the right at the beginning of the 1980s, they had little choice but to induce the recession because there was no other way to stop inflation. What they both did wrong is to stay with their conservative economic policies after this objective had been accomplished. They both should have steered toward the center, but they didn't. The result was the 1987 economic crash in America and Thatcher being removed by her own party after her attempt to organize Britain's tax system so that everyone, rich and not-so-rich, would pay just one flat tax.
(By the way, in a parliamentary democracy it is the party which rules and not the prime minister. If a prime minister becomes too unpopular, the party can simply replace him or her with someone else and continue to govern. This is what happened to Thatcher in 1990, and to Brian Mulroney in Canada. In the presidential system, in contrast, the president rules rather than the party and cannot be readily removed until his term is up).
Why was Thatcher so determined and uncompromising? My explanation is simple. Remember in my economic writings how we saw how people are designed to believe in something and when a person may not have really grasped the true religion, their nation or ideology or politics takes the place of religion. I do not know what Margaret Thatcher's religious convictions were, but she was the daughter of a Methodist minister and so would have been very familiar with Christianity. She saw herself as the saviour (savior) of Britain against the falseness of socialism and the diabolical Labour Party. It became very much a religious crusade, in which any kind of compromise would be completely unacceptable.
Another factor was warfare. For centuries, Britain had been in some kind of conflict at least every generation or so. But then along came the 1980s. The nation's collective psyche told it that it was time for another of the periodic battles of history. But, after the Falklands crisis of 1982, there was no significant foreign enemy to be found. So, the country turned inward and reenacted it's own civil war of long ago in the form of the Labour Party and socialism versus Thatcher.
Managing a modern economy does not require an iron will. It requires flexibility and quick reflexes to keep to a center course. It calls for swift and skillful turns, not for ideological dogma. A driver that only knows how to turn left is not going to get any further than a driver who knows only how to turn right.
Capitalism can be compared to a jungle in the same way that communism can be compared to a zoo. I used this analogy in the book "The Patterns Of New Ideas". The animals in the zoo look outside and see the animals in the jungle running free, and they long for their freedom too. One day, they break out of the zoo. At first, the former zoo animals are elated to have their freedom. But after a while they start to see that while the jungle is free, it is also harsh and competitive. Unlike in the zoo, there is no guarantee of the necessities of life. Also, they realize that the animals which they saw outside from their cages in the zoo were the ones that were doing relatively well. There are many more animals in the jungle that are not doing as well. The former zoo animals start to feel that maybe the zoo was not so bad after all. They do not really want to go back to the zoo, but decide to look for a middle way between the zoo and the jungle. The jungle represents "freedom to" and the zoo represents "freedom from", the best arrangement is halfway between the two.
Capitalism and communism can also be compared to two people and a cart. Both people steering the cart and neither of them pushing, is like communism and it does not get very far. Both people pushing the cart, and neither of them steering, is like capitalism. The cart goes faster, and faster, and faster, until it crashes. The mild socialism that is halfway between the two is represented by one person pushing and the other steering, and it does better than either of the other two.
Once again, my belief is that an effective and sustainable system of social programs is one that is based on income from a country's resources, as much as possible, and not in loading people with taxes. The trouble with socialism is that there is a tendency to believe that if a moderate amount of socialism works well, and it does, then more socialism will work even better, except that it doesn't. Economics is like a peak, with the peak of efficiency being halfway between capitalism on the right and communism on the left.
Both capitalism and communism misunderstand human nature. A fundamental flaw of capitalist thinking is that the goal of everyone is to be rich, and they spend their lives doing all that they can to achieve that goal. This simply is not true. It is set up to support those whose goal is to be rich, and that is what makes it unfair.
We could say that the most successful economic system is one that ends with the fewest people in prison. Countries that practice either communism or rightward capitalism tend to have higher prison populations than the mildly socialist countries in the middle. The more difficult it becomes to live by the rules, the more people there will be who don't live by the rules.
I believe that when there is an ideological conflict, the one that is nastier will be the weaker one with the nastiness being an attempt to compensate for the weakness. The least nasty, in my opinion, is the mild socialism that is halfway between capitalism and communism.
The further right or left anyone is, the more ideological they tend to be, making economics operate by dogma. Thatcher's policy of home ownership is an example. She tried to sell off Britain's council houses in order to make as many people as possible into homeowners. This did not work well because a lot of people either do not really want to be, or are simply not cut out to be homeowners.
It is my convinced opinion that a government should maintain certain industries, whether or not they are making a profit. To do otherwise is just more ideological dogma. How can a country really be independent without a certain capacity to make steel? What about sovereignty, should state-run airlines be privatized even though if they should go out of business it would mean that the country would be dependent on foreign planes to fly it's citizens between their own cities? How about buses, they may require subsidy but is this more than the cost of doing without them, making it more difficult for them to work and so cutting into consumer spending? It boosts an economy if people can get wherever they want to go as easily as possible.
The criteria for government programs is cost. The programs will cost money but which is greater, the cost of having them or the cost of not having them?
Economics is not the same thing as quality of life. The Callaghan government that preceded Thatcher is much reviled for going too far left. I first revisited the country where I had been born in the summer of 1978, after having not been there since I was a young child. I thought that I would like it, but was not sure exactly what to expect. However, I was delighted at what a fun and carefree place Britain seemed to be. The main objective seemed to be simply to have fun, the attitude being "one day you were born, and one day you will die, so you might as well have fun in between". I was pleasantly shocked that I could be walking, it would start to drizzle, as it always does sooner or later in England, and people would pull over and offer me a ride. Everything seemed very agreeable, at least as long as one did not try to find a better job.
To get an idea which economic system would work best in a country at a given time, go into a pub or bar and watch groups of people buying drinks. If they buy the drinks one-by-one, or with couples two-by-two, then the thinking is more rightward. But if the people within groups take turns buying rounds of drinks, then there is socialist thinking.
So much depends not on economics, but on the character of the population. We need people who value work, learning and being well-informed, taking care of their health and, following the Word of God. The way to be a patriot is not to wave a flag around, anybody can do that, but to take care of your health so as not to be a burden on the health care system of your country.
Thatcher was the first western leader to meet Mikhail Gorbachev. Him and his wife visited her in late 1984, and he became Soviet leader the following spring. Anyone can say or write all they want about the Cold War, but it would not have ended as it did without him. Gorbachev deserves more credit than anyone, and should not be forgotten even if the present Russian government does not care for him.
(Ironically, Russia would prove the truth of Communist denunciations about the evils of capitalism by it's own history. After the end of Soviet Communism in 1991, the country went capitalist and abundantly demonstrated just what an unfair system it can be. A few people got very rich, but most people were not better off. My opinion is that the present government is the best that Russia has had since the beginning of Communism in 1917).
Another irony is that the Argentine government that Thatcher went to war with over the Falkland Islands in 1982 was so right-wing that they were killing leftists in the so-called "Dirty War". This military government seized power in Argentina in 1976, and ruled until 1983. They came up with a novel way of executing leftist opponents by flying them out over the ocean, and then dropping them out of the plane. Maybe they and Thatcher should have been soul mates.
Thatcher was clearly a skeptic of the European Union. Brits are touchy about giving up sovereignity. The British way of doing things is to make sure that no one gets too much control. Britain began modern democracy by limiting the power of the king with the Magna Charta. Alone among the major nations of the world Britain does not have a written constitution, only the way that things have always been done, because that might mean giving up control to a piece of paper. Britain has never been ruled by a dictator because Brits will not follow someone who steps in and tries to take control. They followed Winston Churchill during the wartime, but swiftly voted him out just as soon as the war was over. Britain's parliamentary system makes it easy to remove a prime minister if he should start to act like a dictator or try to amass too much authority.
Hopefully, other Europeans will understand that Brits do not like to give up control. In fact, it could be called their national characteristic. But it is wonderful that Europe has gone from innumerable wars to where it is now, and Britain should have a vital part in it.
I think that Thatcher's charisma is underrated. She must have had some kind of magnetic personal appeal. One does not transform a country just by argument alone. A charismatic leader does not even have to use force, people will follow because they want to. Truly charismatic leaders can really light up a person's soul. Aung San Suu Kyi seems to be loaded with charisma. She can make people feel as if they can conquer the world, and want to conquer it just so that they can name it after her.
Finally, Margaret Thatcher just looked so English. To anyone that was born over there, she might be seen behind the counter at one of those old fish and chips shops. One might say "I'll have an order of fish and chips and a cup of tea". She would say, in a very British accent, "That'll be three pounds forty (or whatever price inflation has made it by now)".
The Crusade Theory Of Modern Economics
I believe that a major factor in the weakness of the economy as it is now is the wars of the past. There has been so much warfare over the past century that the economy which has developed operates as if it was "designed" to accommodate and support a war. We can make what we need with fewer workers than we have, the result is often high unemployment if there is no war going on. The lack of a war means nothing to absorb unemployment, such as mass conscription, as well as nothing, such as the demand for war equipment, to create more industrial orders.
Plainly and simply, we have made production so efficient that we must fill the resulting gap in full employment with some type of crusade.
Notice that, in the U.S., there is never a recession when there is a major war in progress. The country was prosperous during the Vietnam War of the 1960s and early 1970s, but entered a recession soon afterward. How can the country be doing so well economically while the war was going on, but then nowhere near as well for the rest of the 1970s? It is because we have an economy that has developed to support the warfare that it requires both to absorb unemployment and for factory orders.
Whether it seems to make sense or not, a major war is the surest way to cure an economic depression. The government programs known as the New Deal of the 1930s certainly helped, but the U.S. did not truly emerge from the Great Depression until the Second World War.
In Germany, there was a democratically-elected government, known as the Weimar Republic, but it could not handle the economic crisis that began in the U.S. with the crash of 1929. A party called the Nazis emerged with the simple-yet-brilliant idea of absorbing unemployment by drastically expanding the military and getting factories back to full production capacity by manufacturing military equipment for them.
In the 1980s, militarism was a central component of Ronald Reagan's economic plan, not only to confront Communism but also to revive the economy. The plans included a possible six hundred ship navy, and the "Star Wars" missile defense shield. Not only would it supposedly create a booming economy, it would also force the Communists into an arms race that they could not afford.
The unprecedented U.S. dominance and prosperity from the mid-forties to the mid-seventies was due to the economic support provided by the Second World War, the Korean War and, the Vietnam War. The more recent wars in Iraq and Afghanistan could not provide anywhere near the same support because of the lack of conscription. The soldiers who served in those wars were volunteers, who were in the military already. In comparison with the size of the U.S. economy, the relatively low-level combat in these wars did not generate any mass manufacturing of military equipment.
The world wars generated economic prosperity not actually during the wars, but afterward. The reason for this is that, in the world wars, conscription was for the duration of the war while in the Vietnam War, tours of duty were for one year. There cannot be maximum prosperity while many millions of soldiers are away and are not engaging in consumer spending, the prosperity generated by the war will come afterward.
World War One was followed by "The Roaring Twenties", which unfortunately crashed in 1929. World War Two was followed by an even greater period of prosperity, the postwar boom of suburbs growing across America and the building of the interstate highway system to connect them. The manufacturing of war equipment switched to cars after the war. The fifties are sometimes known as "The American Decade" when, incredibly, half of the industrial production in the entire world took place in the U.S.
One reason that military production is a reliable way to generate economic demand is that, due to national security concerns, the manufacture of vital military equipment is less likely to be outsourced overseas.
The necessary crusade does not necessarily have to be a war. The U.S. interstate highway construction of the late 1950s bridged the gap between the Korean and Vietnam Wars so that the prosperity was unbroken. Then there was the urban renewal of the sixties and seventies and spin-off products from the Apollo Space Program.
Economics is complex and this is not the only reason for prosperity, or the lack thereof. The recovery from the destruction of the Second World War of other countries, and the progressive modernization of most of the world, all gave America a lot more competition. But I am certain that a primary factor in prosperity is that the economy which has developed is one which is geared to support a war, or other great undertaking that produces millions of jobs and generates a vast demand for equipment or other material, and it suffers when such an undertaking is absent.
Plainly and simply, we have made production so efficient that we must fill the resulting gap in full employment with some type of crusade.
Notice that, in the U.S., there is never a recession when there is a major war in progress. The country was prosperous during the Vietnam War of the 1960s and early 1970s, but entered a recession soon afterward. How can the country be doing so well economically while the war was going on, but then nowhere near as well for the rest of the 1970s? It is because we have an economy that has developed to support the warfare that it requires both to absorb unemployment and for factory orders.
Whether it seems to make sense or not, a major war is the surest way to cure an economic depression. The government programs known as the New Deal of the 1930s certainly helped, but the U.S. did not truly emerge from the Great Depression until the Second World War.
In Germany, there was a democratically-elected government, known as the Weimar Republic, but it could not handle the economic crisis that began in the U.S. with the crash of 1929. A party called the Nazis emerged with the simple-yet-brilliant idea of absorbing unemployment by drastically expanding the military and getting factories back to full production capacity by manufacturing military equipment for them.
In the 1980s, militarism was a central component of Ronald Reagan's economic plan, not only to confront Communism but also to revive the economy. The plans included a possible six hundred ship navy, and the "Star Wars" missile defense shield. Not only would it supposedly create a booming economy, it would also force the Communists into an arms race that they could not afford.
The unprecedented U.S. dominance and prosperity from the mid-forties to the mid-seventies was due to the economic support provided by the Second World War, the Korean War and, the Vietnam War. The more recent wars in Iraq and Afghanistan could not provide anywhere near the same support because of the lack of conscription. The soldiers who served in those wars were volunteers, who were in the military already. In comparison with the size of the U.S. economy, the relatively low-level combat in these wars did not generate any mass manufacturing of military equipment.
The world wars generated economic prosperity not actually during the wars, but afterward. The reason for this is that, in the world wars, conscription was for the duration of the war while in the Vietnam War, tours of duty were for one year. There cannot be maximum prosperity while many millions of soldiers are away and are not engaging in consumer spending, the prosperity generated by the war will come afterward.
World War One was followed by "The Roaring Twenties", which unfortunately crashed in 1929. World War Two was followed by an even greater period of prosperity, the postwar boom of suburbs growing across America and the building of the interstate highway system to connect them. The manufacturing of war equipment switched to cars after the war. The fifties are sometimes known as "The American Decade" when, incredibly, half of the industrial production in the entire world took place in the U.S.
One reason that military production is a reliable way to generate economic demand is that, due to national security concerns, the manufacture of vital military equipment is less likely to be outsourced overseas.
The necessary crusade does not necessarily have to be a war. The U.S. interstate highway construction of the late 1950s bridged the gap between the Korean and Vietnam Wars so that the prosperity was unbroken. Then there was the urban renewal of the sixties and seventies and spin-off products from the Apollo Space Program.
Economics is complex and this is not the only reason for prosperity, or the lack thereof. The recovery from the destruction of the Second World War of other countries, and the progressive modernization of most of the world, all gave America a lot more competition. But I am certain that a primary factor in prosperity is that the economy which has developed is one which is geared to support a war, or other great undertaking that produces millions of jobs and generates a vast demand for equipment or other material, and it suffers when such an undertaking is absent.
Price Fluidity In Economics
It is easy to see how algebra, the branch of mathematics concerning variables, originated in the long-ago markets of the Middle East. The name was originally an Arabic word, al-jabr.
On one side of a counter is a merchant, and on the other side a potential buyer. The counter represents the equal sign (=) in the equation. On one side of the equals sign is the goods that are bought, on the other side is the money that was paid for those goods. A transaction can take place only when both the buyer and seller are willing to accept the exchange as equal, hence the counter representing the equals sign.
Money is issued to represent all of the goods and services produced in the economy, which brings us again to the equals sign and variables. We could say that money = prices x supply, or in algebraic variables m = ps. It does not matter which numbers are assigned to the variables as long as m = ps.
This simple equation can be rearranged as p = m/s, or prices = money divided by supply. This shows that, while generally money = supply, pricing specifies just how much money equals what in terms of supply.
Supply x prices represents the basic economic rule of supply and demand. It does not matter which one is higher or lower, as long as their product equals the volume of the money supply. When supply is low relative to demand prices will be high, and vice versa.
When someone buys something, the buyer stands to the left of the equals sign, usually represented by a counter in a store, putting money over the counter so that a matching portion of the supply of goods goes in the opposite direction over the counter to the buyer, and the equation is maintained.
If we reverse this equation, when a worker increases the supply of goods by working, the equation is balanced by money in the form of wages moving across the equals sign to the worker. These two equations are joined together by the fact that the prices exchanged for goods are largely the same money that the workers who produced those goods are given as wages. So, in a static economy all variables remain constant.
However, in the real world, an economy is almost never static. In a way similar to the law of supply and demand if the supply of money available to purchase goods increases, without a corresponding increase in the supply of goods, then the prices of those goods must increase as well in order to keep the algebraic equation in balance. Remember the basic rule of algebra that we can do whatever we want to an algebraic equation and it will remain an equation as long as we do the same thing, such as divide by five, to both sides of the equation.
This approach to economics as an algebraic equation sheds some light on another rule that we can observe in order to create the most efficient possible economy. We have seen two such rules in other postings on economics. In one rule, I maintain that both right and left or both seller and buyer, are of equal importance in each economic transaction and thus in the economy as a whole. Based on this rule then, the best economy is not one which is either rightward (focused on the supply side) or leftward (focused on the demand side), but one which most successfully weaves left and right together.
In another rule, I notice that all workers can be broken down into four broad categories, and these categories are not created equal. They are: 1) Those who make things 2) Those who fix things 3) Those who move things and, 4) Those who run things. The goal should be to have as many workers as possible as high on the scale as possible, in other words as many workers as possible actually making things. This does not mean that we do not need workers who move things and who run things, but should aim to need as few as possible so that we can have more actually making things.
(Note- I have decided to define knowledge as wealth so that imparting knowledge falls under making things, the medical field falls under fixing things, selling is included with moving things, emergency services and the military is under fixing things and all administrative and legal positions are under running things).
We can also think of the economy as a pyramid. The broader the base relative to the height, the more stable the pyramid. Those who make things are at the base of the pyramid and all other workers are based upon them. The wealth structure is also a pyramid with more stability, although less incentive, when there is more wealth at the lower levels. Communism is represented by a low pyramid which never climbs very high, while capitalism is a much more vertical pyramid but one which is wealth is concentrated higher and is vulnerable to leaning or collapsing.
Another rule for the creation of the most efficient possibly economy becomes apparent when we consider economics as being based on algebraic equations. The best economy is one in which prices are as fluid as possible. The trouble is that economics cannot operate exactly like the algebraic equations which define it because it involves real-world movements and materials and changes.
The function of prices in an economy is to act as the change element to keep the equation in balance when there are changes in demand or the supply of goods or money. If, for some reason, prices are unable to change or to change quickly enough, then the change must come from another element in the equation. As we know only too well, this can be destructive if it results in a cutback in production which gets an inflationary spiral under way.
This can happen if buying decreases, but pricing is not fluid enough to maintain the equation. It is far better to let pricing act as the change element. Trouble often begins when workers are being paid too little, decreasing money available to buy on one side of the equation, with sellers reluctant to lower prices, and especially to sell below cost, on the other side of the equation in order to keep the equation in balance.
A true market is haggling for food. Buyers must have regular meals, buying food is not something that can be put off for another day, and merchants cannot hold out long for a higher price because they must sell the food before it spoils. The two must quickly agree on a price. But the more advanced an economy becomes, the more difficult is can be to keep prices fluid so that they always act as the change element in the economic equation.
The conclusion is that the best economy is the one in which the prices are the most fluid. On this blog is a posting "The Concept Of Fluid Pricing", in which I propose the use of computer technology to bring about more fluid pricing.
On one side of a counter is a merchant, and on the other side a potential buyer. The counter represents the equal sign (=) in the equation. On one side of the equals sign is the goods that are bought, on the other side is the money that was paid for those goods. A transaction can take place only when both the buyer and seller are willing to accept the exchange as equal, hence the counter representing the equals sign.
Money is issued to represent all of the goods and services produced in the economy, which brings us again to the equals sign and variables. We could say that money = prices x supply, or in algebraic variables m = ps. It does not matter which numbers are assigned to the variables as long as m = ps.
This simple equation can be rearranged as p = m/s, or prices = money divided by supply. This shows that, while generally money = supply, pricing specifies just how much money equals what in terms of supply.
Supply x prices represents the basic economic rule of supply and demand. It does not matter which one is higher or lower, as long as their product equals the volume of the money supply. When supply is low relative to demand prices will be high, and vice versa.
When someone buys something, the buyer stands to the left of the equals sign, usually represented by a counter in a store, putting money over the counter so that a matching portion of the supply of goods goes in the opposite direction over the counter to the buyer, and the equation is maintained.
If we reverse this equation, when a worker increases the supply of goods by working, the equation is balanced by money in the form of wages moving across the equals sign to the worker. These two equations are joined together by the fact that the prices exchanged for goods are largely the same money that the workers who produced those goods are given as wages. So, in a static economy all variables remain constant.
However, in the real world, an economy is almost never static. In a way similar to the law of supply and demand if the supply of money available to purchase goods increases, without a corresponding increase in the supply of goods, then the prices of those goods must increase as well in order to keep the algebraic equation in balance. Remember the basic rule of algebra that we can do whatever we want to an algebraic equation and it will remain an equation as long as we do the same thing, such as divide by five, to both sides of the equation.
This approach to economics as an algebraic equation sheds some light on another rule that we can observe in order to create the most efficient possible economy. We have seen two such rules in other postings on economics. In one rule, I maintain that both right and left or both seller and buyer, are of equal importance in each economic transaction and thus in the economy as a whole. Based on this rule then, the best economy is not one which is either rightward (focused on the supply side) or leftward (focused on the demand side), but one which most successfully weaves left and right together.
In another rule, I notice that all workers can be broken down into four broad categories, and these categories are not created equal. They are: 1) Those who make things 2) Those who fix things 3) Those who move things and, 4) Those who run things. The goal should be to have as many workers as possible as high on the scale as possible, in other words as many workers as possible actually making things. This does not mean that we do not need workers who move things and who run things, but should aim to need as few as possible so that we can have more actually making things.
(Note- I have decided to define knowledge as wealth so that imparting knowledge falls under making things, the medical field falls under fixing things, selling is included with moving things, emergency services and the military is under fixing things and all administrative and legal positions are under running things).
We can also think of the economy as a pyramid. The broader the base relative to the height, the more stable the pyramid. Those who make things are at the base of the pyramid and all other workers are based upon them. The wealth structure is also a pyramid with more stability, although less incentive, when there is more wealth at the lower levels. Communism is represented by a low pyramid which never climbs very high, while capitalism is a much more vertical pyramid but one which is wealth is concentrated higher and is vulnerable to leaning or collapsing.
Another rule for the creation of the most efficient possibly economy becomes apparent when we consider economics as being based on algebraic equations. The best economy is one in which prices are as fluid as possible. The trouble is that economics cannot operate exactly like the algebraic equations which define it because it involves real-world movements and materials and changes.
The function of prices in an economy is to act as the change element to keep the equation in balance when there are changes in demand or the supply of goods or money. If, for some reason, prices are unable to change or to change quickly enough, then the change must come from another element in the equation. As we know only too well, this can be destructive if it results in a cutback in production which gets an inflationary spiral under way.
This can happen if buying decreases, but pricing is not fluid enough to maintain the equation. It is far better to let pricing act as the change element. Trouble often begins when workers are being paid too little, decreasing money available to buy on one side of the equation, with sellers reluctant to lower prices, and especially to sell below cost, on the other side of the equation in order to keep the equation in balance.
A true market is haggling for food. Buyers must have regular meals, buying food is not something that can be put off for another day, and merchants cannot hold out long for a higher price because they must sell the food before it spoils. The two must quickly agree on a price. But the more advanced an economy becomes, the more difficult is can be to keep prices fluid so that they always act as the change element in the economic equation.
The conclusion is that the best economy is the one in which the prices are the most fluid. On this blog is a posting "The Concept Of Fluid Pricing", in which I propose the use of computer technology to bring about more fluid pricing.
The Cycle Of Repetition
Has there ever been a story that you have truly never read?
If you have read any story, the writer of that story had previously read stories that you have never read, and the writers of those stories had read other stories that you have never read, and so on. The concepts and patterns of those stories found their way into the stories that you did read.
There are a limited number of patterns, concepts and, details that can go in stories. This means that there are only a finite number of possible stories, and so after reading a certain number of stories you can say with at least some truth that you have read all possible stories.
In fact, all designs from buildings to houses to cars are affected, to some degree, by the stories that the designer has read. This includes television, the themes of Shakespeare are to be found all over modern television. It is true that there are a vast number of stories, but also true that there is a vast amount of similarity between the stories.
There is practically nothing that is completely unfamiliar, just rearrangements of all possible themes, settings, concepts and, details. Every time you read an article, get to know someone, are taught by someone, or look at a product that was designed by someone, you are in some way affected by the stories which that person has read or the movies that they have seen.
For example, in every corner of western society you can see the patterns found in the Bible. So many scenes in stories resemble scenes in the Bible. Have you ever noticed the resemblance between a psalm in the Bible and a modern song, except that the psalms are about God and the songs are usually about romance?
Western legal systems and constitutions resemble the detailed lists of commands and procedures in the Torah, the first five books of the Old Testament. The legal descriptions of properties, for mortgage and tax purposes, closely resembles the parceling out of well-defined territories after the Israelites had settled their promised land.
The sites of modern capital cities of settled lands, such as Washington, Ottawa and, Canberra, were selected due to their central locations between colonies or settlements in the same way as the Israelites chose Jerusalem as a central capital. Notice how the U.S. Civil War resembles the split into the rival kingdoms of Judah and Israel after the death of King Solomon.
The journeys of explorers from Europe to all parts of the world very much resemble St. Paul's three missionary voyages in the New Testament. The taming of the U.S. and Canadian west, and the parceling into states and provinces, seems like something right out of the Book of Joshua. Even the lengthy lists of screen credits at the end of movies is very much like Paul's list of credits at the end of the Book of Romans.
Many western historical events look very much like scenes out of the Bible. When power was being sorted out in 1930s Germany, the Nazis invited the leaders of the Brownshirts (Storm Troopers) to a meeting and then slaughtered them exactly like Jehu did with the prophets of Baal.
The unfortunate glamorization of violence on modern television also has some roots in the Bible, with the recounting of the exploits of the mightiest of King David's warriors in the Second Book of Samuel.
Both sides of the economic spectrum today can be seen in the Bible. The adoration of wealth in the glories of King Solomon's Temple, in the First Book of the Kings, as well as capitalism in the harsh parable of the talents (or pounds) used by Jesus. The support of workers and opposition to exploitation by the wealthy in the Book of James, the parable of the rich young man in the Gospels and Jesus overturning the tables of the money changers in the Temple.
Repetition of patterns can be seen in a nation's history. The 2013 removal of Egyptian president Morsi, after the 2011 overthrow of long-time leader Mubarak, is actually a throwback to ancient times.
In ancient times, the Old Kingdom of ancient Egypt, when the pyramids and Sphinx were constructed, deteriorated and lost control until order was restored by force. This brought in the Middle Kingdom. The country was eventually ruled by Semitic foreigners, known as the Hyksos, until their expulsion brought in the New Kingdom.
In modern times, the army restoring order by force, after both the Mubarak and Morsi overthrows, reflects back to order being restored after the end of the Old Kingdom. The bringing in of the elected Morsi government, after the overthrow of Mubarak, but then it's removal in a coup by the military, represents the rebellion that removed the Hyksos.
The same pattern can be seen in Iran. I have always thought that the overthrow of the Shah in 1979, to form an Islamic republic led by Ayatollah Khomeini, is a throwback to the country's original conquest after the advent of Islam. The shah represented pre-Islamic Persia, in fact he held a lavish 1971 anniversary celebration of it in the ruins of Persepolis. The 1979 revolution was reenacting the coming of Islam to the country.
This concept is similar to what we saw in "The Cardinal Rule Of Military Strategy", on the world and economics blog www.markmeekeconomics.blogspot.com . Always expect the enemy to do whatever he has done before.
The cycle of patterns keeps going around and around.
If you have read any story, the writer of that story had previously read stories that you have never read, and the writers of those stories had read other stories that you have never read, and so on. The concepts and patterns of those stories found their way into the stories that you did read.
There are a limited number of patterns, concepts and, details that can go in stories. This means that there are only a finite number of possible stories, and so after reading a certain number of stories you can say with at least some truth that you have read all possible stories.
In fact, all designs from buildings to houses to cars are affected, to some degree, by the stories that the designer has read. This includes television, the themes of Shakespeare are to be found all over modern television. It is true that there are a vast number of stories, but also true that there is a vast amount of similarity between the stories.
There is practically nothing that is completely unfamiliar, just rearrangements of all possible themes, settings, concepts and, details. Every time you read an article, get to know someone, are taught by someone, or look at a product that was designed by someone, you are in some way affected by the stories which that person has read or the movies that they have seen.
For example, in every corner of western society you can see the patterns found in the Bible. So many scenes in stories resemble scenes in the Bible. Have you ever noticed the resemblance between a psalm in the Bible and a modern song, except that the psalms are about God and the songs are usually about romance?
Western legal systems and constitutions resemble the detailed lists of commands and procedures in the Torah, the first five books of the Old Testament. The legal descriptions of properties, for mortgage and tax purposes, closely resembles the parceling out of well-defined territories after the Israelites had settled their promised land.
The sites of modern capital cities of settled lands, such as Washington, Ottawa and, Canberra, were selected due to their central locations between colonies or settlements in the same way as the Israelites chose Jerusalem as a central capital. Notice how the U.S. Civil War resembles the split into the rival kingdoms of Judah and Israel after the death of King Solomon.
The journeys of explorers from Europe to all parts of the world very much resemble St. Paul's three missionary voyages in the New Testament. The taming of the U.S. and Canadian west, and the parceling into states and provinces, seems like something right out of the Book of Joshua. Even the lengthy lists of screen credits at the end of movies is very much like Paul's list of credits at the end of the Book of Romans.
Many western historical events look very much like scenes out of the Bible. When power was being sorted out in 1930s Germany, the Nazis invited the leaders of the Brownshirts (Storm Troopers) to a meeting and then slaughtered them exactly like Jehu did with the prophets of Baal.
The unfortunate glamorization of violence on modern television also has some roots in the Bible, with the recounting of the exploits of the mightiest of King David's warriors in the Second Book of Samuel.
Both sides of the economic spectrum today can be seen in the Bible. The adoration of wealth in the glories of King Solomon's Temple, in the First Book of the Kings, as well as capitalism in the harsh parable of the talents (or pounds) used by Jesus. The support of workers and opposition to exploitation by the wealthy in the Book of James, the parable of the rich young man in the Gospels and Jesus overturning the tables of the money changers in the Temple.
Repetition of patterns can be seen in a nation's history. The 2013 removal of Egyptian president Morsi, after the 2011 overthrow of long-time leader Mubarak, is actually a throwback to ancient times.
In ancient times, the Old Kingdom of ancient Egypt, when the pyramids and Sphinx were constructed, deteriorated and lost control until order was restored by force. This brought in the Middle Kingdom. The country was eventually ruled by Semitic foreigners, known as the Hyksos, until their expulsion brought in the New Kingdom.
In modern times, the army restoring order by force, after both the Mubarak and Morsi overthrows, reflects back to order being restored after the end of the Old Kingdom. The bringing in of the elected Morsi government, after the overthrow of Mubarak, but then it's removal in a coup by the military, represents the rebellion that removed the Hyksos.
The same pattern can be seen in Iran. I have always thought that the overthrow of the Shah in 1979, to form an Islamic republic led by Ayatollah Khomeini, is a throwback to the country's original conquest after the advent of Islam. The shah represented pre-Islamic Persia, in fact he held a lavish 1971 anniversary celebration of it in the ruins of Persepolis. The 1979 revolution was reenacting the coming of Islam to the country.
This concept is similar to what we saw in "The Cardinal Rule Of Military Strategy", on the world and economics blog www.markmeekeconomics.blogspot.com . Always expect the enemy to do whatever he has done before.
The cycle of patterns keeps going around and around.
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