Economics in One Lesson {Week Two}

Before I start with quotes and commentary, allow me to first link to Cindy’s post, where you will find interesting commentary and links to other people with interesting commentary on this book. I completely forgot to link to the post last week, and for that I apologize, especially if it means you missed out on reading more about this book.

Secondly, I must admit I read Rick Saenz’s post last night. Is this cheating? Not necessarily, but sometimes it isn’t a good idea if one is seeking to be original. Thankfully, everything worth thinking has already been thought and we here at Afterthoughts specialize in thinking the same thing, just afterwards.

On to the book!

AMONG THE MOST viable of all economic delusions is the belief that machines on net balance create unemployment.

Mr. Saenz, I thought, dealt with this most interestingly, and I highly suggest you click the link above.

Arkwright invented his cotton-spinning machinery in 1760. At that time it was estimated that there were in England 5,200 spinners using spinning wheels, and 2,700 weavers—in all, 7,900 persons engaged in the production of cotton textiles. The introduction of Arkwright’s invention was opposed on the ground that it threatened the livelihood of the workers, and the opposition had to be put down by force. Yet in 1787—twenty-seven years after the invention appeared—a parliamentary inquiry showed that the number of persons actually engaged in the spinning and weaving of cotton had risen from 7,900 to 320,000, an increase of 4,400 percent.

A couple thoughts here. First, Hazlitt is speaking of total employment, or persons employed by the industry rather than performing a craft. There is a definite difference, and though I can’t seem to think it fully through right now, something tells me its important.

Secondly, an “increase of 4400%” might be explained a couple ways. First, there was surely population growth, both from immigration and through the natural course of {uninterrupted} human events. But, secondly, there was surely an increase of consumption. Whenever we begin to do things “more efficiently,” an interesting thing seems to happen. We buy more of it. Whereas children used to have one to two sets of play clothes, one pair of pajamas, and one nice outfit for church, and one pair of shoes, they now have closets packed full of clothes for every occasion, very often double what they truly need, and a minimum of two or three pairs of shoes.

Something here tells me that we are not truly efficient. I have written about this before in regards to meal preparation, but I am determined to think this thought again. True efficiency would be doing more in less time and then moving on to do something else. When I think of it this way, it necessitates contentment. If it used to take me twelve hours to make my one church dress and a machine is invented that allows me to make it in three, efficiency is making one dress in three hours. It is not making four dresses. That is materialism or perhaps greed.

We can’t look at technology honestly until we address its impact on the heart and soul of a man. Man is a spiritual being, and so a spiritual analysis is necessary.

By 1961 there was no sign that the fallacy had died. Not only union leaders but government officials talked solemnly of “automation” as a major cause of unemployment. Automation was discussed as if it were something entirely new in the world. It was in fact merely a new name for continued technological advance and further progress in labor-saving equipment.

We had a family friend who owned a small, family-run pharmacy. He needed a new pharmacist to keep up with demand. What he ended up with was a robot. In one sense, it is true that someone might have gotten a job {but didn’t} because a robot was in existence that could perform the tasks. But what is nearer to the truth is that a robot existed that allowed the business to remain within the family. The robot, by the way, didn’t belong to a union, demand triple-time holiday pay, or complain that the boss hurt its feelings. I think we forget that some people hire robots because it has become practically impossible to hire a real person without great difficulty.

In brief, on net balance machines, technological improvements, automation, economies and efficiency do not throw men out of work.

Mr. Saenz pointed this out, but I feel compelled to echo: on net balance is the key phrase here. However, if you were raised to be a weaver and weaving is all you know, being replaced by a weaving machine might do irreparable damage to you, especially if you are older. Machinery often encourages businesses to become big. Although this is not immoral in and of itself, an institution, and organization does not have a soul. By definition it cannot exercise true compassion.

[Machines] are likely to bring more unemployment {but this time I am speaking of voluntary and not involuntary unemployment} because people can now afford to work fewer hours, while children and the overaged no longer need to work.

I disagree. Man was created to work. Work existed before the Fall of Man in Genesis, and it has served him well in his fallen state also. All men, regardless of their age, need meaningful work to do. To the extent that machines allow us to dismiss this fact, to the extent that they encourage us to make childhood and old age a time of selfish pursuit, they are of a negative impact on the soul of our society.

This error lies behind the minute subdivision of labor upon which unions insist. In the building trades in large cities the subdivision is notorious. Bricklayers are not allowed to use stones for a chimney: that is the special work of stonemasons. An electrician cannot rip out a board to fix a connection and put it back again: that is the special job, no matter how simple it may be, of the carpenters. A plumber will not remove or put back a tile incident to fixing a leak in the shower: that is the job of a tile-setter.

Unions drive me crazy, and this is no exception. We accept this sort of nonsense partly because we have already accepted the idea of extreme specialization. Give me a Renaissance man any day, people!

Total national production, the wealth of everybody…

Hazlitt keeps defining wealth in terms of stuff. This seems to me to be a very narrow view. If I defined wealth in these terms, then I would have to look at our society and say it is very, very rich. After all, I have never seen so much stuff as I see being sold today. But my heart aches for the people, who have no depth and often seem incapable of thinking. Choosing a color for their iPod is the big decision for the day? Our country has forgotten what true wealth is and has given it up in pursuit of what moth and rust destroys.

The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers.

That was Hazlitt quoting Adam Smith’s The Wealth of Nations. I have never read the work, but I would say that this quote manifests a purely materialistic view of the world. Because life is spiritual, I can say with confidence that there is an intangible benefit to knowing how to do many various things for oneself. This is especially true if we begin with the family as the primary economic unit rather than the business. The second Si and I don’t know how to fix something ourselves, it costs us money. But knowing how to do something oneself doesn’t stop with monetary benefit. The soul of the man is expanded in the process. This is something specialization can never duplicate.

By buying English sweaters they furnish the English with dollars to buy American goods here. This, in fact {if I may here disregard such complications as fluctuating exchange rates, loans, credits, etc.} is the only way in which the British can eventually make use of these dollars. Because we have permitted the British to sell more to us, they are now able to buy more from us. They are, in fact, eventually forced to buy more from us if their dollar balances are not to remain perpetually unused.

So what happens when it isn’t the English anymore, but the Chinese and the Middle East. What happens when we send money overseas to those who consider themselves our enemies, and that money comes back to our shores and doesn’t buy a sweater but rather real estate? What now, Mr. Hazlitt? Or what happens when something can be purchased cheaper because the company is not employing machines, but rather slaves? Mr. Hazlitt is oversimplifying the idea of buying foreign goods.

Yet among the arguments put forward in favor of huge foreign lending one fallacy is always sure to occupy a prominent place. It runs like this. Even if half {or all} the loans we make to foreign countries turn sour and are not repaid, this nation will still be better off for having made them, because they will give an enormous impetus to our exports.

It should be immediately obvious that if the loans we make to foreign countries to enable them to buy our goods are not repaid, then we are giving the goods away. A nation cannot grow rich by giving goods away. It can only make itself poorer.

I thought Hazlitt did a great job with the issue of foreign aid and I would suggest reading the whole section. As an aside, I feel compelled to mention all this “giving to Africa” going on. People are starving there and so we sit and watch as our government {with the encouragement of Bono, of course} throws money at the poor country. The problems in Africa are primarily caused by poor economic policy, and pouring American dollars into the country does not help the problem. Especially when those dollars are placed into the hands of the same evil dictators that steal from their own people. I doubt the people will ever see those funds, and I wonder at our government’s willingness to waste our own money.

If you want to help Africa, I suggest sponsoring a Compassion Child, which is a post I hope to write someday soon.