Saturday 13 August 2011

"From egalitarianism to kleptocracy"

There's a fine Chapter in Guns, Germs And Steel which sketches out how and why we developed from smaller bands of hunter-gatherers, via tribes and chiefdoms to large, modern states. Everybody will have his own thoughts on the hows and whys, but his are more coherent than most, to pick a few key paragraphs:

Over the past 13,000 years, the predominant trend in human society has been the replacement of smaller, less complex units by larger, more complex ones... By now, it should be obvious that chiefdoms introduced the dilemma fundamental to all centrally governed non-egalitarian societies [what to do with the surplus they generate]. At best, they do good by providing expensive services impossible to contract for on an individual basis [his examples are irrigation ditches, in the modern context this is motorways, sewers, the national grid etc]. At worst, they function unabashedly as kleptocracies, transferring net wealth from commoners to upper classes.

These noble and selfish functions are inextricably linked, although some governments emphasise much more of one function that of the other. The difference between a kleptocrat and a wise statesman, between a robber baron and a public benefactor, is merely one of degree: a matter of just how large a percentage of the tribute [his term for rents and taxes] extracted from producers is retained by the elite, and how much the commoners like the public uses to which the redistributed tribute is put.

We consider President Mobutu of Zaire a kleptocrat because he keeps too much tribute (the equivalent of billions of dollars) and redistributes too little (no functioning telephone system in Zaire). We consider George Washington a statesman because he spent tax money on widely admired programs and did not enrich himself as president. Nevertheless, George Washington was born into wealth, which is much more unequally distributed in the United States than in New Guinea.

For any ranked society, whether chiefdom or state, one has this to ask: why do the commoners tolerate the transfer of their hard labor to kleptocrats? This question, raised by political theorists from Plato to Marx, is raised anew by voters in every modern election...

What should an elite do to gain popular support while still maintaining a more comfortable lifestyle than commoners? Kleptocrats throughout the ages have resorted to a mixture of four solutions:

1. Disarm the populace, and arm the elite. That's much easier in these days of high-tech weaponry, produced only in industrial plants and easily monopolized by an elite, than in ancient times of spears and clubs easily made at home.

2. Make the masses happy by redistributing much of the tribute received, in popular ways. The principle was as valid for Hawaiian chiefs as it is for American politicians today.

3. Use monopoly of force to promote happiness, by maintaining public order and curbing violence. This is potentially a big and under-appreciated advantage of centralized societies over non-centralized ones... Much more extensive long-term information about band and tribal societies reveals that murder is a leading cause of death [gives examples] Such biographies prove common for so-called gentle tribespeople and contributed to the acceptance of of centralized authority as tribal societies grew larger.

4. The remaining way for kleptocrats to gain public support is to construct an ideology or religion justifying kleptocracy. Bands and tribes already had supernatural beliefs, just as do modern established religions. But the supernatural beliefs of bands and tribes did not serve to justify central authority, justify transfer of wealth, or maintain peace between unrelated individuals. When supernatural beliefs became institutionalized, they were thereby transformed into what we term a religion [For these purposes, Nazism in Germany or Communism in the USSR were religions in exactly the same way as Christianity or Islam were to mediæval states - most Islamic states are still mediæval for these purposes]


Other points that he makes is that hunter-gatherer tribes have no concept of land ownership or rents; or that more complex societies enable more wealth to be created, partly because of 3. above, but also because more complex societies with more people allow more specialisation and more complex societies with more people need to form themselves into states, it's all very chicken-and-egg.
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What he doesn't say expressly, so I'll say it myself, is that states and land ownership go hand in hand; economies organised within the framework of states tend to create a bigger surplus than smaller, less organised ones (and bureaucracies and national armies are only affordable IF the underlying economy produces a surplus); and to the extent that the surplus is not collected in (public) taxes, it is collected in (private) rents instead.

Perhaps this is how the misunderstanding arose, the entirely erroneous belief that the land 'owners' themselves created and hence deserve to collect privately such a large part of the surplus? It is of course the concept of 'exclusive possession of land under the protective hand of the state or society as a whole' which is important and not land 'ownership' in the modern sense; and it is certainly not the actual individuals benefitting from such exclusive possession from time to time who matter. If those particular individuals hadn't benefitted, then somebody else, somebody who lost out would have benefitted.

This overlaps with 4. above, of course. In the UK, land owners are afforded semi-divine status, the typical tourist guide for a country house or castle will say, in suitably reverent and hushed tones that "The land has been in the family for ... generations" as if somehow the longer that a family has been collecting rents from the same location makes them higher beings than the grubby factory owner or film star who has snapped up a few acres with his own hard earned money and built his own castle, or the grubby investment fund which buys up land and buildings, or Heaven forfend, builds new buildings.

And in the UK context, he misses off method 5.

In some states they have "bread and circuses" but in a Home-Owner-Ist society, all the landed kleptocracy needs to do to co-opt the support of the masses is to generously allow a majority of them to buy tiny plots of land at inflated prices and then to trick them into believing that they too belong to The Hallowed Land Owning Class, all of which merely shoves the burden elsewhere - it pits owner-occupiers against tenants and would be first time buyer (i.e. NIMBYism) and in any event, most owner-occupiers are being robbed of far more via their taxes and the inflated land prices they have to pay off than they can ever earn back as rent.

25 comments:

dearieme said...

"We consider George Washington a statesman because he .... did not enrich himself as president." Bah humbug. He'd claimed a lot of land in the Ohio valley and then faced being deprived of it when the government in London said that it would honour its treaties with the Indians, and restrict British settlement from crossing the watershed and pushing west. So victory in the War of Independence made him a good deal richer. I'm sure you, Mark, would have backed the Red Indians on this sensitive issue.

Mark Wadsworth said...

D, ta for extra info.

Maybe I would have sided with the Red Indians, but the book is written by an American who appears to subscribe to their own national religion - we say that Jesus was born in a manger and they say that George Washington was born in a log cabin, and all that.

Pavlov's Cat said...

in suitably reverent and hushed tones that "The land has been in the family for ... generations"

Also neglecting to mention that it was normally 'gifted' to the original for service to the state

Mark Wadsworth said...

PC, excellent point. If we're talking land given to e.g. Wellington, fair play, he did a good job for England (notwithstanding that his ancestors in turn had been gifted land for their 'Passive acceptance of the Norman conquest of England of 1066' according to Wiki).

What's worse is the warlords who came over with the Normans - the 'state' to whom they provided service was not exactly a benevolent one, from our point of view.

DBC Reed said...

dearieme has got Washington well and truly skewered.Not only was W sending out surveyors disguised as hunting parties to mark out Imperial government -protected Indian territory for future land grabs ,he participated in the whole Colonial revolt against paying tax to pay for redcoats to fight the Indians people like him had angered.
His "stand " against taxation as an exaction by overbearing government remains as questionable now as then:people agree to pay for an army to protect them because they can't be arsed to drill and go on annual manoeuvres themselves; similarly they don't want to mend the road outside their house; heaven help the children if home-schooling became the norm.Since tax is apportioned to ability to pay and there are economies/savings of scale,it is a good business-like arrangement.But not if you are a ghastly ,hypocrite land grabber.

Ian B said...

I read GG&S when it first came out and it's a good book, but you have to remember that Diamond is a romantic communist, so his economics is poor.

There is no such thing as a "surplus". Societies don't generate "surpluses". So the question of what to do with the "surplus" doesn't arise. What kleptocrats steal isn't a "surplus"; it is just however much they can get away with stealing, which is some proportion of production against bare subsistence. Normally not all of it.

You could call everything above bare subsistence a "surplus" but that is simply misleading terminology. Even Ricardo had to admit he couldn't define subsistence; which is one reason his silly rentier theory doesn't actually work.

The kleptocrat's calculation comes down more to "steal as much as I can without getting overthrown"; that is testing the tolerance of the population. But it's nothing to do with surpluses, because nobody produces surpluses.

A surplus would be something literally useless that you have to get rid of, and while you might accidentally grow more grain than can be eaten or sold one year, it's not something you consistently do, since it's a waste of labour.

Mark Wadsworth said...

ianB: "A surplus would be something literally useless that you have to get rid of,"

I hope that you never become managing director of an important company! The whole point of running a business is to create a surplus, i.e. a profit, i.e. the value of all the outputs is greater than the value of all the inputs. If you were a managing director would you say that the value of the profits can be flushed down the toilet, simply because it can be so flushed, without endangering the continuing existence of the business?

Now of course, these profits can be competed away, and once all businesses have caught up with the level of efficiency of the best, that is the 'new normal' and somebody has to think up something even newer and better, but that's progress.

I'm puzzled why you are so down on Ricardo's law of rent, seeing as this is borne out in practice, year in year out, and regardless of increases in complexity of society.

It is a simple, observed fact, which even the Daily Mail doesn't deny, that if you deduct housing costs from net incomes, net incomes are pretty much the same in all regions of the UK. And even the Home-Owner-ists waffle on about "Location, location, location", which is merely another manifestation of Ricardo's Law.

Simply wishing that something weren't true isn't quite the same as presenting even the slightest shred of evidence that it isn't, and so far you have not done so.

If all your theories were correct, how do you explain that land prices and rents are far, far higher in some areas than others? Or do you even deny that land prices and rents are far higher in some areas than others?

Ian B said...

You can't say that all production is surplus. That is silly. The word surplus means something "extra". Like, my trousers are two inches too long; that fabric is surplus.

People produce whatever they desire. Clever people produce in order to trade for what they desire. But none of it is "surplus".

Ricardo claimed that the Rentiers would extract all income above "subsistence" as rent. This is clearly not true, since we're all living well above subsistence. He then tried to fudge it by saying that "subsistence" is whatever you think it is, but that turns the "law" into something totally meaningless- "rentiers will extract whatever rent you let them extract".

IOW, rentiers are merely one of many classes trying to extract money from you for goods and services, and competing with all the others. Class analysis is rarely useful in economics, not least because the classes are rather arbitrary. Is the capitalist extracting a "profit" or is he "renting" his factory to you? Hard to tell, isn't it?

As such Georgism is one of a class of Class Theories that pick on one particular class and declare them to be skimming everyone down to penury. Marxism of course is the other (bigger) such theory, but it has the capitalist class instead of the rentier class. They all make the same error, which is to presume absolute power to set prices to soem class- rentiers, capitalists- when in fact prices are set by negotiation. So, the theories are just "not even wrong". They can't be disproved as such- very few theories like this can. But logic shows them to be based on incorrect analysis, and that's good enough.

Remember, Ricardo was a believer in Labour Value Theory. He didn't know where prices come from. That's why he was so horribly wrong.

Mark Wadsworth said...

IanB, change the record.

"You can't say that all production is surplus."

I never said that, did I? I said that if the value of the output exceeds the inputs there is a surplus or profit. Clearly, looking at the value of the production or output alone is meaningless. WIndmills clearly do produce some electricity, but the value of that electricity is lower than the value of all the inputs, ergo they destroy value.

" "subsistence" is whatever you think it is"

Correct. Each time the economy and society advances, subsistence moves to a new level, the 'new normal'.

"IOW, rentiers are merely one of many classes trying to extract money from you for goods and services, "

Nope. You have to distinguish between people creating new value with their own skills and labour or risking their own money to try and squeeze out an even higher value of output (good) for each unit of input and people benefitting from a monopoly position (bad).

"They all make the same error, which is to presume absolute power to set prices to some class- rentiers, capitalists- when in fact prices are set by negotiation."

Again, nope. It depends on how rigged the negotiating positions are. With monopolies (which includes land), clearly the prices are dictated by the maximum that purchasers are willing to pay and the monopolists just hold out for the highest price, but by definition there is no competition between the suppliers, this is why purchasers end up overpaying.

"the theories are just "not even wrong". They can't be disproved as such- very few theories like this can. But logic shows them to be based on incorrect analysis, and that's good enough."

OK, I will now ask you a question: can you please name a few factors why phsyically identical houses in different parts of the UK sell or rent for such wildly different prices? If there were such a thing as competition in land, then wouldn't prices equalise over time, in the same way as the price of freely traded goods in shops cost pretty much the same anywhere in the UK?

And please stop waffling on about Ricardo, we know that you think he was a crypt-communist and the enemy of all that is righteous and good. He was for example opposed to protectionism, so presumably that makes protectionism something righteous and good in your book.

Deniro said...

if you think taxes and banking interest are a hinderance on human endevours, you will like this rant http://www.youtube.com/watch?v=2Z1XOBDbIy0&feature=player_embedded#t=4m15s

Robin Smith said...

He is dreaming about the general trend of civilisations.

The biggest tendency has been for collapse. Not progression.

Western oligarchy of the past 1000 years has progressed further than others because of better equality and association.

But even this is on the brink as equality is lost. We all know why. Same as the others before.

Robin Smith said...

Please can you try to answer the following questions?

1 What is loaction value?
2 Who creates it and how exactly?
3 Who does it belong to, by natural right?

Not a trick. Just trying to use observed fact and self evident truth to help get to the bottom of the question.

Remembering that economic value is easy to determine like you say. Its the least amount of work you are prepared to give in exchange for something and no more.

Over to you.

That's fair isnt it?

Charlie B. said...

1. As always, comments on USA history are self-serving and lacking detailed knowledge - otherwise known as prejudice.
2. How do we direct action to create wealth? Some ways create more than others. Power and ideology are not just about defending ill-gotten gains.
3. Taking the book as it stands (and I always like the sweep of such efforts - better by far than niggling about Washington) what would one do? Tend one's garden. Fight to get to the top?

Mark Wadsworth said...

RS, if the question was directed at me, I'd probably give the same answers as you.

If it was directed at IanB, you are struggling, I refer you to Killer Arguments Episode 42.

He's responded to Question 3 before, and IIRC, he claims not only that

a) "the £-s-d economic value" of anything can only be determined at the time of a transaction in which one party pays in £-s-d (and not beforehand or afterwards), but

b) that in the absence of a transaction in that commodity by that party on that particular day, that there is no economic value of anything to any party, and so nothing which can possibly be taxed.

So he's not just saying that "the economic value of things to people is difficult to determine" but that "there is no economic value unless a party chooses to buy or sell something on that particular day".

Mark Wadsworth said...

CB, the answer must be "fight to get to the top".

DNAse said...

He's responded to Question 3 before, and IIRC, he claims not only that

a) "the £-s-d economic value" of anything can only be determined at the time of a transaction in which one party pays in £-s-d (and not beforehand or afterwards), but

b) that in the absence of a transaction in that commodity by that party on that particular day, that there is no economic value of anything to any party, and so nothing which can possibly be taxed.

So he's not just saying that "the economic value of things to people is difficult to determine" but that "there is no economic value unless a party chooses to buy or sell something on that particular day".



I missed out on the previous riot of a debate but I what I would have written was that given it is "impossible" to calculate imputed rent (and thus impossible to tax) it is better to think of LVT as a usage levy rather than a tax,
so like a parking charge.

Currently there is debate in my local rag about the council introducing a charge for parking at the park-and-ride (currently free). How do the council calculate the parking charge? They cannot calculate the intrinsic "value" of a parking space on an individual driver basis, so instead they make a realistic estimate based on charges in other similar car parks in the locale. If after a time they find that the car park is mostly half empty then they can deduce the charge is too high. If the car park is full most of the time they can consider raising the charge (or building more spaces). We can clearly see that car parking spaces vary from location to location based on the popularity of that spot and we can also concede that individual car park users may derive different "values" (perhaps dependent on their income) from their use of the space, however drivers are free to go elsewhere to park or car-share perhaps to derive better "value".

Now imagine, in its wisdom, the council some time in the past had sold off all the spaces in the car park to private hands. The council now decides (for whatever reason) it wants to raise revenue with an annual levy on private owners of spaces in the car park. How do they decide at what level they set the tax? They cannot calculate the intrinsic value of a given space to a given owner but they can make an overall estimate based on what owners may be subletting spaces for and what spaces are being traded for. Initially the council can monitor how efficiently the spaces are used (this will likely increase as spaces are traded) but watch out for abandoned spaces - a sign the tax it too high. So after a period we are pretty much back at the situation of a fully council owned car park. Save for the fact that the spaces are still in private hands and owners are free to stone-clad their spaces or put up net curtains etc.

DBC Reed said...

Do not really understand why comments about American history are "self serving".Do you mean people put any spin on the facts they like?
A proper historian , Tristram Hunt,recently attacked the Tea Party in its original Bostonian form and showed it to be the creature then, as now, of corporate and special interests.The article is on the Net "The Tea party:lofty ideals,grubby facts".He is developing the same line of argument advanced here but with an infinitely surer grasp of the facts.
Hunt also wrote the best historical account of Land Value Tax in Britain for the New Statesman that looked at land reform in 2003 or 4 .

Bayard said...

Mark, re your method No 5: I think Home-Ownerism counts as a religion by your definition and by it's ability to suspend reason, viz some of the commenters on this blog. So method 5 is really a version of method 4.

Mark Wadsworth said...

DNA, exactly, the correct LVT rates for any area would be established in the same way as any business sets its prices, i.e. by some system of trial and error. With an official tax, there has to be some verifiable mechanism based on actual market value transactions, is all.

As it happens, car parking charges are a reliable guide to site-only land values in any area, see here. The easiest way of getting money from any site is to tarmac it over, paint white lines and call it a car park, all other land uses ought to raise at least as much as this.

Or, if you think about it, Council Tax is far, far too low. If it exceeded the value of 'local services' (however defined) then land values would be zero or negative, wouldn't they? Nobody would want to own land in the UK if the user charge alone exceeded the value of the benefits.


DBC, yes, the original Tea Party are now part of the American Religion, the popularised version of events has absolutely nothing to do with actual events.

In the same way, English people are taught that "Winston Churchill won the Second World War". It is part of our national religion. Truth is, Germany was always going to lose and all we had to do was play for time - Churchill may have speeded up the end by a few months or a year, but that's all. Had Neville Chamberlain stayed on, Germany would still have lost. Maybe fewer of our people would have been killed but it would have taken longer, so what?

Mark Wadsworth said...

B, by my definition yes :-)

But out of interest, would you count HO-ism as a religion?

Charlie B. said...

DBCR. Tristram Hunt is an academic historian. Unfortunately, not of the USA. On checking it out, I find the "article" on Tea Party referred to is actially an opinion piece in the Gaurdian (many of the the comments following berate it for factual error or almost complete lack of factual support). I would suggest all of the leaders of the American Revolutionary era were complex and very self-aware thinkers, in a world which it takes some effort for us to understand. For those interested, I would commend the work of Gordon S. Wood and Bernard Bailyn.

Charlie B. said...

Mark

"the original Tea Party are now part of the American Religion, the popularised version of events has absolutely nothing to do with actual events." I agree, but this is no reason to replace it with another fiction.

For once I cannot agree with you - in respect of WWII. I think counter-factual argumentation at this level is impossible (unless you are a Marxist). You could also say that even if the War was going to be won, someone had to lead the UK (and thereby "win" it), so it's not inaccurate to say WC won it. But the detailed histories (some of which are quite superb in their use of detail based on massive archival research) DO show just how much Churchill himself was responsible for and how much not; how much other UK and US military commanders were determinats; the interaction of grand strategy and operational command; where and how WC prevailed in strategy and operations (with the USA and other allies) and where he did not, with what specific consequences. Unless you think all of this is irrelevant, in which case just about everything we do is irrelevant and the current outcome of land value issus is pre-determined and trying to influence it is a waste of time.

Mark Wadsworth said...

CB, I don't dispute for one second that WC had the skills and ability to speed up the inevitable end of WW2 by several months or even a year or two, at an unknown additional cost in terms of English lives lost.

That is quite different to saying "If WC had never been born, then the UK would have been invaded by Germany in 1940 and would have been occupied by them ever since".

"just about everything we do is irrelevant and the current outcome of land value issues is pre-determined and trying to influence it is a waste of time."

By and large it is a waste of time, but so what? For every one of Us there is a million of Them trying to swing things the other way. But some people collect stamps, other people enjoy campaign for tax simplification. However little I achieve (i.e. nothing, if truth be told), when I'm on my death bed, I doubt I'll be saying "I wish I'd collected stamps instead".

Charlie B. said...

Of course, Mark, I don't agree. sociologists and theologians see only inevitabilities and forces in which individuals count for little. Historians ask, why then (not another time), why them (not others) - and the answer (if properly presented) makes clear the consequences of choice. This has nothing to do with "if x [great man] had never been born", but the specific ways in which given humans interact in time with other humnans and their environment. Thus it matters that understanidng of the past be factually correct.

on WWII I simply do not agree that German defeat in the same military configuration was inevitable, nor that the way victory was achieved was not massively important in ways that go far beyond the ending of German military action. In all of this Churchill played a pivotal role, with a combination of deep understanding and political and personal stamina. His contribution was as well appreciated (and controversial) *at the time* as later. The evidence is that at certain crucial points German advances were holding firm and divisions in allied command could have lost much that was subsequently held.

DBC Reed said...

@CB
I have waded through the comments under Hunt's article.Your opinion that many contributors berate Hunt for "almost complete lack of factual support" for his argument is simply not true.Most comments are supportive of the tenor of Hunt's argument, adding new angles e.g that pro-slavery colonists were organising against the Imperial government. Perhaps this is an example of the self-serving history you complained of at the outset.
Hunt would not have needed to be a historian of the USA to discuss the first Tea Party ,as you insist, since the USA had not come into existence by then.The problems were still a British responsibility and can justifiably be studied as part of British history.
The events of WW2 are still shrouded in mystery.Since the last paralysing night of the London Blitz coincided with Hess's journey to Scotland with some kind of peace deal,after which Hitler invaded Russia and the Brits waited for years to open a seond front and attack Germany across the Channel,there is bound to be some kind of nasty surprse when the Hess archive is opened in a few years time.