Where the Body Is, The Vultures Are Gathered, or, For Whom the Toll Peals Part I

The celebrated British apologist and essayist, G.K. Chesterton, had a good friend, Hilaire Belloc, who is now largely forgotten, but whose fame in his day caused George Bernard Shaw to refer to the pair as the “Chesterbelloc.” Among his many interests (such as writing a Foreword to a collection of P.G. Wodehouse short stories!), Belloc wrote a number of books and articles on the subject of economics. One of his most intriguing works was a book entitled The Servile State. In this book, written before the fall of the Russian Tsar and the rise of the Bolsheviks in Russia, Belloc analyzed the philosophical underpinnings of both Marxism and Capitalism, and predicted that the clash of the two would not result in a victory of either philosophy, but an amalgamation, in which some men would be actively compelled -- though not actually enslaved -- to work for the benefit of others. It was this societal condition which he dubbed The Servile State. And, with the benefit of hindsight, and given the fall of Marxism in Russia, but a roughly contemporary resurgence in socialism in the West, Belloc’s prescience (not to say genius) is obvious. We do live in something of a Servile State; it is the purpose of this essay to consider some of the ideas and conditions in our time which have helped to bring this about.

To begin with, let us recall some of the ideas of classical economics -- the concepts of labor, value, and exchange. A person may, for example, proffer his labour, or his expertise, directly to another, or to create or perfect a product, for exchange to another. A man using his strength to carry buckets of water up a hill; a man using an anvil and the strength of his arms to forge horseshoes. He may then offer his good or service to others at a mutually agreeable price, with either the seller or the buyer negotiating or withdrawing should an agreement on price prove unworkable. This is the kernel of economics, that of free exchange. And, to the unpropagandized western mind, it is self-evident. Two elements come into play: fairness (“I’ll trade you my Peyton Manning card for your Aaron Rodgers card.” “No way! Manning’s hurt this year!”) ; and value as an extensive property related to labor (“by the sweat of your brow you shall earn your bread”) evinced by the physical effort of carrying water up the hill, or pounding on the red hot anvil (“Under the spreading chestnut tree the village smithy stands...”) Such a conception is intuitive, and is all well and good, as far as it goes. But it runs into a number of difficulties, when one gets into more complex societies, whether of size, or of technology. Let us explore each of these in turn.

First, let us consider the problem of size, or, more properly, of scale, since that will act as a segue to the other issues. Take the example of the blacksmith. If there is a village, and it has only one blacksmith, an equilibrium will be reached. There are only so many hours in a day; the blacksmith has to eat, and sleep, and maintain his shop; if he does not have enough business, he can lower the price he charges, or offer additional services (“Mare in labor? Try my new foaling service!”); if he is swamped with business, he can either raise prices, so that his customers self-select, and only the ones with the most important needs pay his price; or he can improve his productivity, so that he can serve more customers at the same price. The most obvious way to do this is to hire an assistant, who can do the less-intensive tasks, freeing up the blacksmith for the hard stuff; or an assistant just as strong or skilled as him, approximately doubling the output. And it is here that the first questions posed by the Marxist labour theory of value raise their ugly head.

Look at the situation of the blacksmith contracting with a customer for his services, and then the case of the blacksmith with an assistant contracting with a customer. In the first case, it is more or less an even exchange: both parties are agreeing directly with one another, and either one is more or less free to walk away at any time. (There is an exception, of course, for emergencies, in which case the price goes up: but that is not intrinsically because of “gouging” as such, but it is also due to the fact that the perceived value of the service to the buyer *has* gone up: he NEEDS the horseshoe NOW, dammit! A similar situation is seen today when looking at the price of gasoline at the station right before the “last services for 120 miles” sign. People are willing to pay for for the “just in case” factor.) But with the apprentice added in, the situation becomes immensely more complicated. It is true, at first glance, that nothing of importance has really changed. A person comes up to the smithy, offers to pay for a horseshoe, and is quoted a price. But in fact, a lot more than that is going on “under the hood.” For instead of having a single transaction, there are now at least two transactions going on. The first is, as before, between the blacksmith and the customer, for the horseshoe. The second is new. It is between the blacksmith, and the assistant, for his wages. But what makes the problem really tricky is that the two transactions are coupled. That is, we have already seen that the blacksmith and the customer agree on a price per horseshoe. That is, the price for each horseshoe bought by the customer: and when the blacksmith has only himself to consider, he knows the cost for food, for upkeep, for hammers, fuel, and all the rest. But with the addition of the assistant, there is a brand-new market, with its own price and service schedule. What do I mean? A rhetorical question will suffice. Who would you pay more to have as an assistant blacksmith? Woody Allen or Arnold Schwarzenegger? In other words, all horseshoes are equal, but all assistants are not.(*) And now the shopkeeper has to consider how much assistant he can afford, and include that in the price he quotes to the customer. But that’s not all: there are still two more complications, which we consider next.

Remember a couple of paragraphs ago, where I introduced the idea of one blacksmith in a town, with either too little to do or too much to do? Clearly, if he wants to provide horseshoes for everyone in town, he will do well to hire an assistant. If he does not, he can either leave people unsatisfied, by turning them away altogether, or raise prices, letting them decided for themselves if they wish to turn away. But if he does this, and enough people *still* decide they want or need horseshoes, there is a chance that they will take matters into their own hands. No, not “Occupy the Anvil” -- but not too far away. They may decide to learn blacksmithing on their own, and go into competition against the original blacksmith. And now see how complicated things get: if there is only one supplier, he pretty much has sole veto power over supply: “This is my price, this is my schedule, take it or leave it.” But if there is more than one blacksmith, all of a sudden everything becomes *more* complex. After all, if a horseshoe is a horseshoe, and both blacksmiths want to keep busy, how are they going to persuade people to visit THEIR smithy, and not the other one? Well, they could compete on price: “Come to me, and I’ll give you the fourth horseshoe FREE.” Or, they could compete on speed: “No waiting, same day shoeing, and that’s no bull.” Or, they could introduce the idea of popularity -- telling people about their blacksmith shop, so that people think of them first, instead of the other guy. (“Endorsed by the Budweiser Clydesdales.”) And of course, each of these approaches affects the price charged -- and therefore, the amount of money they have left over after selling the horseshoe to pay their assistant. We have gone from a simple one-on-one exchange, to two coupled transactions, to pairs of linked transactions each in equilibrium -- one, between a blacksmith being chosen by a multitude of buyers, and the other, the same blacksmith himself choosing among a multitude of assistants. (And as hinted, marketing associates, and then lawyers, MBAs, and other parasites. But I’m getting ahead of myself here.)

(*) It’s actually a little more complicated than this, for most real products, because there is not just a single fungible, commodity product: there are product lines of different weight, size, purpose or quality; and it may be you don’t want a Schwarzenegger hammering the deluxe ruby-encrusted horseshoes for Cinderelle’s pumpkin carriage: you’d rather have Woody Allen quietly polishing them (and in either case, you'd want them in the back room, too, where they won’t hit on the female customers).

why grey, up late and, like james bond, strolling around old .su (soviet union) websites...

It is fascinating, the voices on the internet. Great post.

Now let me give this a read and let’s see what kind of “russian opinion” we have cooking here...

Thanks for the undertaking.

ping to self to grey_whiskers serial postings-—keyword: vulturesgather

G.K. Chesterton; Hilaire Belloc

George Bernard Shaw to refer to the pair as the “Chesterbelloc.”

In this book, written before the fall of the Russian Tsar and the rise of the Bolsheviks in Russia, Belloc analyzed the philosophical underpinnings of both Marxism and Capitalism, and predicted that the clash of the two would not result in a victory of either philosophy, but an amalgamation, in which some men would be actively compelled — though not actually enslaved — to work for the benefit of others.

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