Ideology and the Evolution of Vital Institutions

* Article/Book: Ideology and the Evolution of Vital Institutions. A Synopsis. By Earl A. Thompson.

URL = http://www.dklevine.com/archive/jh_et.pdf

A very important interpretation of the evolution of institutions.

Context

It is important to have a concept of society and humanity that honors both the cooperative and the competitive impulse, the inner construction of nations, and their defense capacities against take over. This is the evolutionary point of view taken by this book and summary essay, applied to the welfare of nations and labor, with a view to have democracies that can defend themselves.

Discussion

Michel Bauwens:

This is from a differently ordered synopsis of a book with the same title.

I am largely paraphrasing the text here below.

"The major movements in social and economic history can be separated into

- those concerning the distribution of wealth, and

- those concerning the efficiency of the allocation of resources for a distribution of wealth." (p. 1)

The 1990s Clinton boom was marked by both an expansion of foreign trade and near full-employment, while real hourly wages fell, which constitutes an anomaly in 'modern' history.

This should be explained by an upwards shift in effective foreign labor supplies. This can be largely related to the IMF globalization policies which only became effective after the fall of the Soviet system.

The IMF attempted to:

1) remove barriers to foreign trade

2) increase middle classes at the expense of aid to the poorer sections of society

3) increase funds to combat crime and corruption

The combined effect was to significantly expand the world's literate and stable workforce.

The harsh IMF conditionalities, in the context of a contest to attract the masses in the Global South, would have been impossible before the fall of the Soviet system, which acted as an alternative attractor. The globalization regime imposes uniform tax rates so that states cannot effectively compete for people. After the end of the Cold War, higher productivity no longer led to higher incomes. This is a return to the situation that existed for five millenia under state regimes, until 1820!! It is only after the defeat of Napoleon had instilled fear in the European elites, that a 150-year expansion of wages began, through a five-fold increase from 1825 to 1975. The cost of these wars had signified that warfare had become to costly. This resulted in a nearly hundred-year long peace between European nations. "Western ruling classes began to steadily compete for ordinary people!" (p. 6).

By contrast, after the sudden radical decentralization of the 9-10th cy due to the invasions of the Normans, Saracens and Turks, the European ruling classes had reacted by initiating servitude, to bind the masses to the land. Serfdom declined in the Late Medieval/Early Modern period because of the emergence of people-trapping nation-states. "Thus there was, prior to the 1820s, an 'iron law' of wages." (p. 8). After-tax wages remained at subsistence levels for the centuries before 1820. After the defeat of Napoleon, immigration waves showed the historic increase in wages and income, motivating people to leave. But, "this golden age of populism and technological improvement is coming to an end ... If history is any guide, (this trend) will only end in basically subsistence standards of living for ordinary individuals." (p. 9) .. "The ongoing reductions in wage income will decrease inheritances until the the capita stock inherited will be insignificant." (p. 10). "The Post-Cold-War end to the competition of states for people, has spelled an end to the .. income floors." (p. 10).

A relative measure against this would be to create a world-institutional environment that renders fiscal independence to states. so that they can again effectively compete for ordinary people. Thompson believes that we must add to this the 'anti-aristocratic preference' that is a 'common benevolence' in modern democratic societies and that this could help in maintaining a distribution of income that is more favourable than the pre-1820 norm.

So, if ruling classes can maintain the people within their borders they tend to use taxation to limit wages to subsistence levels, but when states have to compete, workers can escape the iron law of wages.

"A 'popular government' is a govt in which initial strategy selectors allow other members of the ruling class to be approved or appointed by ordinary people, often through pre-set political institutions ... Wealthier members of the ruling class can always combine to buy out the masses by offering them benefits that will come at the cost of their children ... The same re-assertion of aristocracy can be accomplished through sufficiently high levels of deficit-spending." (p 13) ... "Our decreasingly populist election processes all indicate the ease with which these aristocratic buy-outs occur." (p.14)

"States have in them some source of internal degeneration despite their theoretical efficiency, an efficiency that was evidently being displayed in some form during their ascendancy. ... Why would the presumably relatively objective ascending states so quickly lose their objectivity upon reaching a condition of dominance within their civilizations ? The answer can be found in the cartelized nature of free-entry intellectual establishments, whose ideas are biased in a direction that maximizes their own collective return, by artificially increasing the ruling class demand for their teaching and advice. Dominant states are particularly vulnerable to their domestic intellectual cartels." (p. 15)

=> Information made available to the ruling classes are biased by the demand-creating incentives that educate the ruling classes !!

"When a single teacher-cartel gains effective control over the education system, and directly or indirectly, teaches the society to appreciate only one set of exaggerations, then the objective competition among the various teacher cartels to educate leaders is destroyed and an ideology has arisen." (p. 17)

Chapter 3-5 examine the rise and fall of 3 different institutions: guilds, the gold standard, and 20th cy. international institutions. "Section IV will identify a social-evolutionary model from which the entire pattern can be understood.

"A certain type of capital, 'coveted capital', is an attraction to potential aggressors against the state. Its accumulation decreases national security unless there is a suitable increase in national defense expenditures ... An efficient government taxes this capital ... An efficient government must also solve a basic time-inconsistency, in which the state must commit itself to spend more on defense than the defended property is worth. Without such a commitment, some potential aggressor state will make such a commitment, and the property will be theirs." (p 18) "The legislature, ... constrained by narrowly rational voters (is) unwilling to expend more ..' (p. 190The military achieves this over-ride (by) employing conscription, .. expropriations, wartime price controls .., and creating government money." ... When economic intellectuals gain substantial control over the policies of democratic states .. the predictable result is the systematic military failure of the ideologized state." (paraphrase of p. 19)

"Guilds are politically active, entry-restrictive, producer associations .. The first western european guilds arose early in the dissolution of the Carolingian Empire and spred during the ensuing emergence of feudalism as an integral part of the small, investor-democratic, commercial enclaves that arose amid the violent, near-subsistence, living conditions of the 9th-10th cy. While feudal institutions were largely eliminated as a result of the political centralizations of the later Middle Ages, guilds actually strengthened during this period, and did not systematically fall until the 18th and 19th centuries." (p. 20)

"Maximum prices and minimum quality restrictions imposed on the guilds largely eliminated their short-term monopoly power." ... "Royal towns, those organized to serve kings rather than local lords, adopted the same set of entry-restrictive guild regulations." (p. 20)