5 Scarcity
the economy may collapse from the reduced consumption.
5.1 Forced ‘scarcity’ (sabotage)
Fix
Stagflation as sabotage
Created by political economists Jonathan Nitzan and Shimshon Bichler, the theory of capital as power is decidedly non-mainstream. (It’s about as far from neoclassical economics as you can get.) Whereas mainstream economists look at capitalist society and see ‘productivity’ everywhere, Nitzan and Bichler see business ‘sabotage’.
It’s an idea that at first seems incendiary. But once you think about the behavior of real-world corporations, the notion of business sabotage seems on point. Everywhere we look, we find big corporations behaving badly.
Sci-fi writer Cory Doctorow calls this behavior ‘enshittification’. Looking at social media companies, he notes that what people want from their social-media apps is simple. People want to connect with their friends. And they want a feed that shows them what their friends are up to. That’s it.
The problem is that this simple desire is at odds with making a profit. You see, to make a profit, social media companies need to slam sponsored content down your throat — i.e. fill your feed with ads and clickbait. Because that’s the opposite of what people want, Doctorow notes that social-media apps follow a predictable trend. First, they lure people onto the platform by giving them what they want (a feed filled with their friends’ content). Then, once enough people are locked in, the company flips the money switch and enshittifies its platform with paid junk.
What’s this enshittification got to do with inflation? Everything!
Take Twitter as an example. After Elon Musk bought Twitter, he moved frantically to cut costs and raise prices. Almost immediately, Musk turned on the inflation dial by charging for blue checkmarks.1 Prior to this move, blue checkmarks had been Twitter’s way of authenticating ‘accounts of public interest’. Sure, the authentication was somewhat arbitrary … but at least it was free.
Today, the same blue checkmark will cost you $8 a month. And it’s no longer a marker solely of prestige. No, the blue checkmark is now a pay-to-play system that gives you “priority ranking in search, mentions and replies”. In other words, if you want your followers to see your content (something you previously got for free), you’ve got to hand Mr. Musk $8 a month. That’s business sabotage, plain and simple. It’s inflation through enforced scarcity.
The ‘enforced’ part is key. Yes, we live in a world in which resources are finite, and hence ‘scarce’. But regardless of a resources’ innate abundance, maintaining high prices requires restriction.
Diamonds are a good example. Sure, they are rare. But as my colleague D.T. Cochrane observed in his seminal PhD thesis, diamonds are not rare enough to suit the diamond business. That’s why De Beers (a diamond cartel) spent years buying up diamonds to purposefully keep them off the market. Like all savvy businesses, De Beers knew that enforced scarcity (aka sabotage) was the key to high prices.
Looking at capitalist society, Nitzan and Bichler argue that this enforced scarcity tends to come in waves, largely because it is unstable. For instance, if I bolster prices by restricting access to my property, the risk is that my competitor will undercut me. Conversely, if I undercut my competitor, the risk is that they will respond by cutting there prices in turn, resulting in a price-race to the bottom.
Neoclassical economists look at these dynamics and conclude that they will lead to market equilibrium. But that’s because economists suppose that businesses won’t coordinate. In the real world, though, businesses coordinate all the time. It’s called herd behavior. If everyone else is cutting prices and selling more stuff, I’d better do the same. And if the herd decides to restrict supply and hike prices, I’d best join in. The result will be an oscillation between periods of economic boom with low inflation, and periods of economic bust with high inflation.
As it turns out, this is exactly what happens in the real world. Across countries, economic growth (as measured by energy consumption) tends to be high when inflation is low (and vice versa).
WAR
War is a good example. For mainstream economists, war is simply not part of their theory. But for Nitzan and Bichler, war is the most extreme form of sabotage, frequently associated with price gouging and profiteering. In particular, the (differential) profitability of oil companies seems to be tightly related to war in the Middle East.
5.2 There is no Scarcity
Hickel
When we look at the world in terms of real resources and energy (i.e., the stuff of provisioning), it becomes clear that there is no scarcity at all. The problem isn’t that there’s not enough, the problem, again, is that it is maldistributed. A huge chunk of global commodity production is totally irrelevant to human needs and well-being. Consider all the resources and energy that are mobilized for the sake of fast fashion, throwaway gadgets, single-use stadiums, SUVs, bottled water, cruise ships and the military-industrial complex. Consider the scale of needless consumption that is stimulated by manipulative advertising schemes, or enforced by planned obsolescence. Consider the quantity of private cars that people have been forced to buy because the fossil fuel industry and automobile manufactures have lobbied so aggressively against public transportation. Consider that the beef industry alone uses nearly 60% of the world’s agricultural land, to produce only 2% of global calories.
There is no scarcity. Rather, the world’s resources and energy are appropriated (disproportionately from the global South) in order to service the interests of capital and affluent consumers (disproportionately in the global North). We can state it more clearly: our economic system is not designed to meet human needs; it is designed to facilitate capital accumulation. And in order to do so, it imposes brutal scarcity on the majority of people, and cheapens human and nonhuman life. It is irrational to believe that simply “growing” such an economy, in aggregate, will somehow magically achieve the social outcomes we want.
5.3 How There’s More to Economics Than the Science of Scarcity
Gruen
One way economists describe their discipline to themselves has proven beguilingly seductive since it was codified by Lionel Robbins 90 years ago — that economics is the science of scarcity and that it is, therefore, paradigmatically about trade-offs.
This approach has become a kind of counterfeit metaphysics — a means by which practice becomes increasingly thoughtless and alienated from economic reality whilst practitioners affect rigor and insightfulness.
Trade-offs As a Paradigm
The reason for the tradeoff relationship between equality and efficiency is the empty one that equality is not efficiency.
This structuring of entire bodies of thought around the empty observation that one thing is not another thing is replicated endlessly.
Humans’ extraordinary and unique capacity for shared intentionality is the foundation of our astounding productivity. The most fundamental means by which this is done is via what I have called generative orders — language and culture being preeminent examples, though markets and money are others. Within these generative orders, our cognition of the world, our intentions, and our mutual expectations of each other are entangled. This foundation enables us to build other special-purpose institutions.
My point has simply been to show one theoretical framing of the relationship between efficiency and equality that proceeds from careful, critical observation of and abstraction from reality. If this is well-judged, our understanding of reality improves as do our prospects of improving it. The textbook approach couldn’t be more different. Turns out that it is metaphysical fairy-floss. The “efficiency-equality” trade-off exists as a particular case of the general one that if you wish to achieve one thing, doing something else could get in your way.
Gruen (2022) How There’s More to Economics Than the Science of Scarcity
5.4 The Case against Civilization
Lanchester
John Maynard Keynes’s famous 1930 essay “The Economic Possibilities for Our Grandchildren.” Keynes speculated that if the world continued to get richer we would naturally end up enjoying a high standard of living while doing much less work. He thought that “the economic problem” of having enough to live on would be solved, and “the struggle for subsistence” would be over:
When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession—as distinguished from the love of money as a means to the enjoyments and realities of life—will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.
The world has indeed got richer, but any such shift in morals and values is hard to detect. Money and the value system around its acquisition are fully intact. Greed is still good.
The study of hunter-gatherers, who live for the day and do not accumulate surpluses, shows that humanity can live more or less as Keynes suggests. It’s just that we’re choosing not to. A key to that lost or forsworn ability, Suzman suggests, lies in the ferocious egalitarianism of hunter-gatherers. For example, the most valuable thing a hunter can do is come back with meat. Unlike gathered plants, whose proceeds are “not subject to any strict conventions on sharing,” hunted meat is very carefully distributed according to protocol, and the people who eat the meat that is given to them go to great trouble to be rude about it. This ritual is called “insulting the meat,” and it is designed to make sure the hunter doesn’t get above himself and start thinking that he’s better than anyone else. “When a young man kills much meat,” a Bushman told the anthropologist Richard B. Lee, “he comes to think of himself as a chief or a big man, and he thinks of the rest of us as his servants or inferiors. . . . We can’t accept this.” The insults are designed to “cool his heart and make him gentle.” For these hunter-gatherers, Suzman writes, “the sum of individual self-interest and the jealousy that policed it was a fiercely egalitarian society where profitable exchange, hierarchy, and significant material inequality were not tolerated.”
This egalitarian impulse, Suzman suggests, is central to the hunter-gatherer’s ability to live a life that is, on its own terms, affluent, but without abundance, without excess, and without competitive acquisition. The secret ingredient seems to be the positive harnessing of the general human impulse to envy. As he says, “If this kind of egalitarianism is a precondition for us to embrace a post-labor world, then I suspect it may prove a very hard nut to crack.” There’s a lot that we could learn from the oldest extant branch of humanity, but that doesn’t mean we’re going to put the knowledge into effect. A socially positive use of envy—now, that would be a technology almost as useful as fire.