My introduction to the problem
I have had the very good fortune to work at a certain organization that specializes in recycling computers and other home electronics. I would say that over the past few months, I have seen tons of material come through, but in actuality, I have seen tons of material come through during lunch time today. At the same time that I have seen hundreds of computer systems that were worth thousands of dollars three or five years ago given away for free, I have seen hundreds of volunteers come through, working for us because they can not find employment.
In other words...
We have a flood of consumer goods, and a large number of people who need them and need to work for them. Which is exactly how an economy is supposed to work, besides an economy needs money. Whatever the nominal value of money, it should adjust itself in such a way that if there is some transaction of goods and services, there should be money to fill the gap. For some reason, however, this isn't happening.
Capital and commodities
My answer is that there is a growing gap between capital
. This does not take a great deal of observation to detect, but it perhaps has not been seen as the vital issue it is because of people's past experiences. My grandmother, who has done rather well for herself
has told me that she still sometimes has to remind herself not to save pickle jar
s and the like. She grew up in the depression, when even something as trivial as a pickle jar was rare to come by, and had to be saved in case it would be needed. My own story is somewhat less dramatic, but I remember when I was a small child, not owning a camera
or a lawn mower
, watching a small, used Black and White television set
and thinking a VCR
were exotic devices. To people who were raised under such straightened circumstances, it is hard to comprehend the central fact of the 21st century economy
: commodities have next to no actual value
. Commodities are extremely easy to come by, it is the ability to get capital(broadly defined) that is difficult.
Capital and commodities defined
Capital is anything that can be used to produce goods
that is not necessarily used in the process. A commodity is something that can only be used as itself, and is often destroyed in the using. (These distinctions were established by Hannah Arendt
in The Concept of History
). Another distinctive feature is that capital increases in value while commodities tend to decrease in value. This is an example of some capital investments in modern society:
How capital and commodities interact
If you look in the above list, you will notice something obvious: to a large extent, capital expenses are the ones that have been going up, while commodity prices have been staying about the same. The reason that commodity prices have not gone down further is due to the fact that when you buy a commodity, you are actually paying for the capital behind it. For example, say you buy a bag of Sunchip
s for one dollar. Is the corn in the bag worth a dollar? No. Not even after calculating in the price of manufactre and distribution. When you are buying a bag of chips, you are paying the student loan
s of the guy who did the graphic design
of the bags layout. You are paying for the health care
costs of the employees at the plant. You are paying for the floor space at the store where you bought the bag. As long as these capital outlays are covered, the plant could produce 100 bags of chips or 10,000 , since the cost of producing more flattened corn is so marginal.
How the ratio of capital and commodity prices is driven up
There is a limited amount of Little Debbie Nutty Bars that you can eat in a day (two packages, if you are interested in the exact number). This is, thanks to the miracles of production, very cheap. So what does someone do after they have had their share of consumables? start saving their money. They buy a house, or invest in some stocks and bonds, or go back to school. Unfortunatly, everyone else who is smart is having the same idea. People want long term security, so they speculate in such things as the public debt. Currently, the United States has a 6.5 trillion dollar debt, of which about a trillion is held by mutual funds, pension funds and bond holders. People are spending money on these things, because people want more than just to consume for the moment, they want security, the security to know they will still be able to eat when they are seventy. And the easiest way to get security is by making a capital investment, either a real one, or a financial one.
The economic and social effects of this process.
There could be a good deal of economic repercussions of having an economy that is basically two tiered, where a great deal of goods are found profusely, while the few that people need desperatly are being bidded even higher. Eventually the speculation has to burst: for example, if the national debt were ever "payed off", even in a small part, it would lead to a great burst of inflation, as people would be bidding for the same amount of goods with a great deal more money. However, it is impossible to say what the economic effects will be, since the more wild scenarios will probably not come to pass, and subtle economic changes tend to work themselves out. However, the social effect
s of having a system where capital and security are on an entire different plateau as commodity goods are more clear.
The American dream
The American dream was that a piece of capital, a piece of security was open to everyone. A lot of this has to do with the fact that after the wealthy land owners
' lands were redistributed to the peasants
, there was free capital
for everyone. Another point was that while commodities were still hard to come by, it was possible to work hard and produce enough commodity to trade for a piece of capital. At one point, it was probably possible to knit yourself a house
, by knitting scarves, selling them, and buying a house with the profits. I do not know if such a thing is quite as possible today, when such a project would be doomed by having tons (literally) of used clothing
, just floating around], or of having tons of cheap manufactered clothing coming in from overseas
. This is not only true of something as small scale as knitting: even the technical ability to build computers would probably not enable someone to raise a sufficient amounts of money to turn into actual capital.
So what is to be done?
I don't know. There could be plenty of economic arguments made by people of differing viewpoints, with various political clans making these academic views into warcries. It could perhaps be argued that an economic system that would eventually let people own land and capital while others had nothing is not fair. Some would say that the government should stop running a gigantic speculative bubble with the national debt. I don't know enough about economic policy, and I try to not gain strong emotional attachments to any of them.
Is there anything to actually back this up? Or is this just off the top of your head?
, there is a great deal of economic information. This information includes figures on the size and composition of the national debt, the real value of durable goods public and private, the total amount of money that banks own, the size of the GDP, and other such things. I looked through these records, but could find no clear evidence that my theory, or conceptual dichotomy
is true, or even relates to a real pattern. I did not find any statistics that pointed the other way, either. If someone wishes to persue these statistics, please feel free to do so, and tell me of any internal inconsistencies or factual rebuttals to my theory.