Monday, April 16, 2012

397: The Utopia of the Free Market - Subsitence economy

In the previous lecture I told you that Polanyi (1886 - 1964)mentions three different mechanisms that organized historical societies to perform two tasks : reciprocity, redistribution and the common household.

These two tasks were:
1. The community must develop a system to produce goods and services which are needed for its survival.

2. It must organize the distribution of the fruits of its production in such a way that the production process can continue.

To perform these tasks it wasn't done always in the way we are used to with our free market mechanism.

The oldest of these three mechanisms, which the homo sapiens shares with all social animals, is that of a group which produces for its own consumption.

As humans we add to that the production of consumer goods, like clothes and tools, which are necessary for survival.

We do this by living in a common household. Common household can mean a number of things: the family, the clan, the tribe, a convent, a medieval lordship, etc.

For the Ancient Greek, as described by Aristotle, this common household, or "oikos" was the family group, including slaves. Managing this oikos was called "oikonomia".

The main goal of the oikos was to produce and be self-supporting: production for its primary livelihood.

It was characterized by what we now call "subsistence economy" . A subsistence economy only possesses enough goods to be used by a particular oikos, tribe or nation to maintain its existence and provides little to no surplus for other investments.

It is a kind of economy, which is not driven by a constant need for growth. The market was at most a place to obtain some additional consumer goods.

In the Middle Ages we see a same kind of subsistence economy, often restricted to large estates owned by some knight or baron.

There we see the mechanisms of reciprocity and redistribution, where the knight offers protection in exchange of part of the crop of the farmers.

In times of famine in such a lordship the ruler took care of redistribution of food, for instance. Main characteristic of this economy was, that it was an economy without money.

Of course there existed money and you certainly must have greedy people through all history, but here I am talking about how money functioned and was embedded in culture and society.

This subsistence economy has lasted for centuries, but between the beginning of the 16th century and mid-nineteenth century the change took place.

The subsistence economy was gradually replaced by the free market economy. A free market is a market where prices are determined by supply and demand.

The basic conviction is here that in a free market, the system of prices is the emergent result of a vast number of voluntary transactions, rather than of political decrees as in a controlled market.

The freer the market, the more prices will reflect consumer habits and demands, and the more valuable the information in these prices are to all players in the economy.

Through free competition between vendors for the provision of products and services, prices tend to decrease, and quality tends to increase.

Thus ended "the War against subsistence", as Ivan Illich called it in 1981. I'll elaborate on this issue in the next lecture.

The Discussion

[13:22] herman Bergson: Thank you....
[13:22] Haresaaiemeid Beer (beertje.beaumont): pfew...
[13:23] Bijou Krokus: clap clap Herman!!!!!
[13:23] Haresaaiemeid Beer (beertje.beaumont): that is a lot to think about
[13:23] herman Bergson: if you have any questions or remarks...the floor is yours
[13:23] bombay1: thanks Herman for the nice reading
[13:23] Haresaaiemeid Beer (beertje.beaumont): politicians still want the free market?..they see with their own eyes that it doesn't work
[13:23] bombay1: I didn't know I was so greedy!
[13:23] herman Bergson: the main point is the shift from a subsuistence economy into a free market economy....
[13:24] Haresaaiemeid Beer (beertje.beaumont): lol Bombay
[13:24] Bejiita Imako: cause they are also greedy the politicans
[13:24] Bejiita Imako: want more and more money, look at their payouts
[13:24] herman Bergson: it is more complex than that Beertje....
[13:24] herman Bergson: in the first place we have to find the reasons for this shift...
[13:25] Bejiita Imako: they have something between 30000 to 60000 sek / month
[13:25] Bejiita Imako: that's almost one years payout for a normal worker
[13:25] herman Bergson: I think one big reason is the change of methods of production
[13:25] Bejiita Imako: sure they have an important job but that amount of money hmm
[13:25] herman Bergson: To give you a historic example....
[13:25] Bejiita Imako: and then here in sweden i think they dont do their job properly at all
[13:26] Haresaaiemeid Beer (beertje.beaumont): by putting robots instead of eorkers?
[13:26] Haresaaiemeid Beer (beertje.beaumont): workers
[13:26] herman Bergson: in 1733 the Flying Shuttle was patented.....
[13:26] herman Bergson: this shuttle was the thing that shoots the thread in a loom from left to right....
[13:26] Bejiita Imako: aaa yes, for making fabric
[13:27] Haresaaiemeid Beer (beertje.beaumont): Leonardo DaVinci invented the helicopter
[13:27] herman Bergson: where you needed 2 men before now you needed one and the cloth could be much wider too...
[13:27] Haresaaiemeid Beer (beertje.beaumont): did he had a patent on it?
[13:27] bombay1: and now we think all is normal
[13:27] Haresaaiemeid Beer (beertje.beaumont): ahhhhh
[13:27] Haresaaiemeid Beer (beertje.beaumont): i see
[13:27] herman Bergson: this means that the production of textiles increased enormously....
[13:27] Haresaaiemeid Beer (beertje.beaumont): ah yes
[13:28] bombay1: and still does
[13:28] Bejiita Imako: aaa and the steam engine made everything power driven and started huge textile factories
[13:28] herman Bergson: the weaver didnt produce for his own household or group only....but produced a lot more...
[13:28] herman Bergson: Yes Bejiita....
[13:28] Bejiita Imako: and we need clothing for sure
[13:28] Bejiita Imako: so we dont freeze
[13:29] herman Bergson: another thing is that men became laborers earning wages....
[13:29] bombay1: hihihi you for sure Bejiita !!
[13:29] Haresaaiemeid Beer (beertje.beaumont): but in those days woman wore the cloths much longer that we do now
[13:29] Bejiita Imako: hehe well then there is this moral panic about being naked also today
[13:29] Bejiita Imako: hehe
[13:29] herman Bergson: I'll elaborate on these developments in the next lecture...
[13:29] Bejiita Imako: ㋡
[13:29] herman Bergson: but one thing is clear....
[13:29] Bijou Krokus: and now we wear less and less ;-)))
[13:29] Caresse (caresse.czeret): I need a lot of fabric :))))
[13:30] Caresse (caresse.czeret): even for a bikini:))grins
[13:30] Bijou Krokus: not me caresse hihi
[13:30] herman Bergson: it is nearly impossible to return to the old form of economy...
[13:30] Bijou Krokus: I even knit it myself!
[13:30] Bejiita Imako: yes the system we have today is basically welded in like a physical law or something
[13:31] Bejiita Imako: unchangeable
[13:31] Haresaaiemeid Beer (beertje.beaumont): i think they don't want to change
[13:31] herman Bergson: Maybe you remember the 60s where communes were formed based on a subsistence economy idea
[13:31] Haresaaiemeid Beer (beertje.beaumont): too much profit for them
[13:31] bombay1: they are satisfied with this
[13:31] herman Bergson: protest against consumerism...
[13:31] Bejiita Imako: ths system we use however have many problems
[13:31] Haresaaiemeid Beer (beertje.beaumont): yes
[13:32] Bejiita Imako: greedy people only wanting more and more for themselves while the rest is starving cayse cant afford buying food ect
[13:32] Haresaaiemeid Beer (beertje.beaumont): remembering the 60...we must be old..
[13:32] Bejiita Imako: thats tragic for sure
[13:32] herman Bergson: Well Bejiita...
[13:32] herman Bergson: one of the fundamental problems of today is redistribution of goods
[13:32] Bejiita Imako: ah
[13:32] herman Bergson: as is reciprocity....
[13:33] herman Bergson: the banker squeezes all money out of us but does nothing in return in a social sense
[13:33] Bejiita Imako: nope
[13:33] Haresaaiemeid Beer (beertje.beaumont): oh very true
[13:33] Bejiita Imako: as i said before
[13:33] Bejiita Imako: before in tome banks were for us
[13:33] Bejiita Imako: now we are for the banks
[13:34] Bejiita Imako: sort of
[13:34] herman Bergson: yes...they call us MUPPETS....
[13:34] Haresaaiemeid Beer (beertje.beaumont): question will we survife this?
[13:34] herman Bergson: That is how top bankers refer to their customers....
[13:34] herman Bergson: we will Beertje
[13:34] Haresaaiemeid Beer (beertje.beaumont): i'm not that sure anymore
[13:35] Bejiita Imako: hmm that's not too nice name to put on your customers
[13:35] bombay1: we showed that befor
[13:35] Bejiita Imako: muppets
[13:35] Bejiita Imako: like something you just use as you wish for yourself
[13:35] herman Bergson: Indeed Bombay...we survived all kinds of crises....
[13:35] bombay1: and we will do more
[13:35] bombay1: we are made for that
[13:35] herman Bergson: I think that eventually it will boil down to a better redistribution of the goods of this earth....
[13:35] Haresaaiemeid Beer (beertje.beaumont): 60.000 people are depending on foodbanks now
[13:36] Haresaaiemeid Beer (beertje.beaumont): here in the netherlands
[13:36] Bejiita Imako: ok
[13:36] Bijou Krokus: and even growing indeed Beertje
[13:36] herman Bergson: foodbanks is a way of redistribution of goods.....
[13:36] herman Bergson: not one I find elegant..but it is
[13:36] Haresaaiemeid Beer (beertje.beaumont): it depresses me
[13:37] herman Bergson: smile
[13:37] Bijou Krokus: it is a sad idea yes
[13:37] herman Bergson: me too Beertje...
[13:37] Bejiita Imako: hmm not good for sure this development
[13:37] Bejiita Imako: gets me worried
[13:37] Caresse (caresse.czeret): i promiss not to eat that much anymore..
[13:37] Bijou Krokus: not only for the best of many people
[13:37] herman Bergson: But it is only a symptom which shows that there is something wrong with the overall system
[13:37] Bijou Krokus: only for the rich ones
[13:37] Bejiita Imako: yes indeed
[13:38] Bejiita Imako: a clear indicator for sure
[13:38] Bijou Krokus: the riches get richer.. the poor people more poor
[13:38] Bejiita Imako: that something isnt right at all
[13:38] Bejiita Imako: yes
[13:38] bombay1: it is terribl to hear that yes....
[13:38] Caresse (caresse.czeret): it makes me angry
[13:39] herman Bergson: well...I'll spend some more lectures on this subject....we are not finished yet...:)
[13:39] Caresse (caresse.czeret): and a lot of other people too
[13:39] Bejiita Imako: we need a new robin hood
[13:39] Bejiita Imako: ㋡
[13:39] Haresaaiemeid Beer (beertje.beaumont): a task for you Bejiita..
[13:39] Bejiita Imako: turn everything in right direction again, and distribute resources evenly so everyone can have a good life
[13:39] Bejiita Imako: life
[13:39] Bejiita Imako: not just afew
[13:40] Haresaaiemeid Beer (beertje.beaumont): i thinkit needs a war
[13:40] herman Bergson: this earth is rich enough to offer everybody a good life....
[13:40] bombay1: a sad idea.. but it would work
[13:40] Bejiita Imako: war dont solve problems only kill innocent people in lots
[13:40] Haresaaiemeid Beer (beertje.beaumont): yes..but the system doesn't listen to that
[13:40] herman Bergson: dont be that pessimistic Beertje....
[13:41] Haresaaiemeid Beer (beertje.beaumont): sorry
[13:41] Haresaaiemeid Beer (beertje.beaumont): but after these lessons i feel that way
[13:41] Bijou Krokus: I can understand Beertje.. you will be reminded on what is going on
[13:41] herman Bergson: But we are only halfway Beertje....
[13:41] Haresaaiemeid Beer (beertje.beaumont): i don't see any solution
[13:42] herman Bergson: We have tried to achieve insight in how things work...
[13:42] Bijou Krokus: still more to go
[13:42] herman Bergson: now we are climbing up again from a historical perspective to see what is good and what is wrong with the system
[13:42] Haresaaiemeid Beer (beertje.beaumont): I want to listen to the rest of your lectures Herman
[13:43] herman Bergson: Basically I may be critical, but I am still optimistic about the homo sapiens and its ability to adapt to new situations
[13:43] Bijou Krokus: I hope you can make us feel that way too Herman
[13:43] Caresse (caresse.czeret): I have to go..can I come again to listen Herman?
[13:44] herman Bergson: So...thank you all for your attention and participation today again....
[13:44] Bijou Krokus: thansk so much for the lesson Herman
[13:44] herman Bergson: Every Tuesday and Thursday Caresse
[13:44] Bejiita Imako: interesting as always
[13:44] Bejiita Imako: ㋡
[13:44] Bijou Krokus: bye bye caresse!
[13:44] herman Bergson: 1 PM SL time
[13:44] Caresse (caresse.czeret): bye :))
[13:44] Bejiita Imako: makes you think a lot about stuff for sure
[13:44] bombay1: thanks Herman!!! bye caresse...
[13:44] Bejiita Imako: ㋡
[13:44] herman Bergson: class dismissed... ^_^

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