Tuesday, June 01, 2004

Economic Theory: Stirling's puts the Political back in Political-Economy

This is a brilliant piece Sterling (mispelling intended)! (BOP-news: Newberry)

Each Republic has three important pillars - a monetary basis, a system of power arrangements to negotiate the working of that monetary basis in social and economic power, and a lens which ties the government to the fiscal discipline needed for maintaining the relationship between the two. When the monetary basis becomes unworkable, there is a economic crisis, as political arrangements are unable to cope with the tension between what must be done and what can be done. The crisis is only resolved after there is over-reaching attempt which destroys the previous currency basis.

For America, the basis of money, is the explosive engine of economic growth, which the constitutional order must regulate, as a carburator governs the explosive force of gasoline.

Each Republic must, in turn, create a sink for rent - a property basis which is given special privilege. It must also, inevitably, create a currency to measure speculative growth, which is outside of the monetary discipline. The triangle of forces then, in each republic, is the interest of the liquid money system, in a dance with the rental property system, and the speculative investment system.

A republic is born imposing discipline, and dies when there is no longer the ability to price its speculative and rental money systems in terms of its monetary basis.

This should not be seen as saying that contending social issues are not unimportant, nor mere stand ins for monetary issues - indeed, quite the reverse, monetary systems are often means of systematizing preferred social arrangments. Political conflict over the money system is often a conflict over competing ways of life, each seeking to perpetuate and expand its political and economic sphere.

Polishing upon it we come to two unescapable conclusions. The first is that wealth accumulation is empowered in order to generate greater productivity. Note that this does not imply any superiority given parity. A system of wealth does not work because it induces greater production between two people given equal resources, but only as long as one actor is more productive than another actor even if the second actor would be more productive given the same resources as the first.

Second that too large a social inequity produces social unrest irregardless of absolute level of prosperity. A country is born as a socio-economic unit using a monetizing system in order to further various ways of life. The greater the social inequity (typically in the name of wealth creation) advances the more politically unstable the country becomes as a socio-economic unit.

Hence redistribution and regulation are the country's manner of braking capitalism and investment which if it were perfectly efficient in its marketplace activities would produce perfect instability in its politics. The balancing act between the increase of production and the social instability of social inequity is a tension whose equation is at best an idealized balancing act.

Its envelope of possible solutions is then further limited by two factors. The first is the absolute efficiency of the allocation of wealth, and the second is the strength of the consensus of the perceived efficiency of that allocation within the system of politics. These two strictures further limit the potential solutions that any socio-economic political order will be able to find stable or equilibrium solutions.

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