Wednesday, October 14, 2009

This year's Nobel Prize for Economics

From the SPGB blog, Socialism Or Your Money Back:

Every year the Bank of Sweden awards a prize to some economist, often called the Nobel Prize for Economics even though it wasn’t established by the old merchant of death himself. It has in fact only been going since 1968. Usually the prize goes to some obscure economist for work on some obscure aspect of the market economy. Sometimes it goes to a big name such as the Keynesian Paul Samuelson (1970) or the Monetarist Milton Friedman (1976). Even the mad marketeer Baron von Hayek got one, in 1974.

Very occasionally it goes to someone who has done some interesting work, as when in 1998 it went to Amartya Sen who had shown that famines were caused by a collapse in legal access to food (via money or direct production) and not by any actual shortage of food or overpopulation. This year, too, it has gone to someone whose work sounds interesting – Elinor Ostrom whose 1990 book Governing the Commons: The Evolution of Institutions for Collective Action refuted the so-called “Tragedy of the Commons” parable that is often used to try to show that socialism wouldn’t work.

In 1968 an American biologist Garrett Hardin conceived of a parable to explain why, in his view, common ownership was no solution to the environmental crisis and why in fact it would only make matters worse. Called “The Tragedy of the Commons”, his parable went like this: assume a pasture to which all herdsmen have free access to graze their cattle; in these circumstances each herdsman would try to keep as many cattle as possible on the commons and, in the end, its carrying capacity would be exceeded, resulting in environmental degradation.

Hardin’s parable was completely unhistorical. Wherever commons existed there also existed rules governing their use, sometimes in the form of traditions, sometimes in the form of arrangements for decision-making in common, which precluded such overgrazing and other threats to the long-term sustainability of the system.

One of the conclusions that governments drew from Hardin’s armchair theorising was that existing cases where producers had rights of access to a “common-pool resource” the solution was either to privatise the resource or to subject the producers to outside control via quotas, fines and other restrictions. Ostrom took the trouble to study various common property arrangements some of which had lasted for centuries, including grazing pastures in Switzerland, forests in Japan, and irrigation systems in Spain and the Philippines.

According to The London Times (13 October),

“Based on numerous studies of user-managed fish stocks, pastures, woods, lakes and groundwater basins, she asserts that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest”.

In other words, common ownership did not necessarily have to lead to resource depletion as predicted by Hardin and trumpeted by opponents of socialism. The cases Ostrom examined were not socialism as the common owners were private producers. In socialism the producers, the immediate users of the common resources, would not be trying to make an independent living for themselves but would be carrying out a particular function on behalf of the community in a social context where the aim of production would be to satisfy needs on a sustainable basis. But the rules they would draw up for the use of the grazing land, forests, fishing grounds and the like would be similar to those in the cases she studied.

Adam Buick

New roots of conflict

From the October 2009 issue of the Socialist Standard

We have had two world wars and countless local conflicts over the struggle for raw materials, trade routes and spheres of influence. Capitalism is a competitive society and the logical outcome of the resultant conflict is military violence.

The first world war was based on the struggle for colonies as well as access to the coal, iron and steel of Europe. It led to the collapse of governments, thrones and empires, and the redrawing of national borders. More importantly to the world's working class it led to mass destruction, death and injury. It was depicted in this country as a war against militarism and in defence of freedom. Shortly after the cessation of that war the British working class was to enjoy the freedom of the labour exchange and slum housing. The "war to end all wars" saved the British capitalist class from the encroachment on its markets and empire by its German rivals.

The second world war with its advanced armaments was to bring the horror of war home to the civilian population as never before, with cities wiped out and whole countries razed to the ground. Again this was depicted as a war against the evils of dictatorship and in defence of democracy and freedom. The fact that Britain was united with the dictatorship of Stalin's Russia against the dictatorship of Hitler's Germany was conveniently overlooked. This war like the previous one was fought for economic reasons not ideological ones.

Ever since 1945 the world has experienced local conflicts. Korea, Suez, Vietnam, India/Pakistan – the list is endless. There has not been a day since 1945 when the British army has not been engaged in some sort of conflict, and every one of them has been depicted as something to do with freedom, democracy or some such laudable purpose. The present tensions in the Middle East, however, with its struggles for access to oil so nakedly obvious it has become increasingly difficult for governments to disguise the economic basis of the disputes.

Capitalism is a dynamic system and yesterdays struggle for coal and steel may have been somewhat overshadowed by the conflicts over oil. This in its turn may give way to another source of military dispute – lanthanide metals. "Global supply of the rare-earth metals, which are vital to the mechanisms of hybrid cars, wind turbines, iPods, lasers, super-efficient light bulbs and radar systems is 95 per cent controlled by China. The country's dominance of the market is the result of a deliberate 20-year bid by Beijing to cast itself as the ‘Opec of rare earth metals’." (London Times, 28 August)

One of the countries that has a supply of lanthanide is Australia and they are at present considering an offer from China to buy a 51 per cent share of their source. This has caused real concern to the Japanese capitalist class who have threatened to take up the matter with the World Trade Organisation. "Chinese export quotas of rare earth metals fall below Japan's demands, forcing even the largest consumers there to rely on smuggled materials to meet about a quarter of their annual needs. A draft of the Chinese plan has been seen by senior executives at several of Japan's largest trading houses and has sparked fears that China is aiming to step up dramatically its programme of quota reductions. Beijing has cut exports by about 6 per cent annually over the past decade." (London Times, 28 August)

It is impossible to foretell how capitalist rivalries will develop but the growing monopoly of the rare metals market by China is a potential source of economic conflict that could lead to a future military struggle. Capitalism by its very nature breeds competition between nations over such sources of raw materials. This produces threats and counter-threats which leads to ultimatums, trade boycotts and eventually to military action. The awful truth is that it is members of the working class who own no part of these resources who take part in the resultant conflicts and suffer the resultant tragedies of war.