Lets have another image. What’s this? I know. This is another economic concept: ‘market equilibrium’. This concept has its root in a myth. It too grew up during the English Enclosures. (Oh, the English again!)

Equilibrium is achieved when one force equals that of another. Market equilibrium is the idea that, at some point, all the forces of supply and demand within a market will equal out. At that point, all competing forces and tensions are neutralised, everybody is satisfied, and nobody has disproportionate power. The first mathematical models of market equilibrium were produced in the 1870s – in France (phew!). The idea of market equilirium, and general equilibrium for the whole economy, has been convincing to many great economists from Leon Walras to John Maynard Keynes, and continues to the present day. However, they have argued incessantly about what it means and how you there. Many say that the point is theoretical, that is it is never likely to exist in practice, but the job of economists and policy makers is to get as close at possible to it.

To do that it is necessary for the state to ‘intervene’ in markets to help them work towards everyone’s advantage. Many others suggest that equilibrium is a ‘natural’ phenomenon. If policy makers stopped meddling with the economy, a ‘natural equilibrium’ would assert itself. If we thought less, and tried less, nature’s own equilibrium would be revealed. But where did we get the idea of general equilibrium?

Like our other stories, it starts with the Enclosures. As we said in Panel 2, the enclosure of common land was at its height in the 18th and 19th centuries. A great many people were stripped of their rights of access. As a result, the problem of ‘paupers’ – people unable to feed themselves – or ‘vagrants’ – people who moved from place to place seeking work – became acute. The concept of equilibrium developed from debates about what to do with those poor people.

In 1786, Joseph Townsend published a small book called Dissertation on the Poor Laws. The ‘Dissertation’ was responded to the ongoing debate about what to do with the poor. Should you house and feed them? Who should be responsible – the local community, the church, the state? Townsend regarded the poor as lazy, not as dispossessed. And he had a simple solution. Remove all provision. Do not intervene in any way to help them. Hunger will then drive them to seek work. This brutal attitude was justified by a story Townsend told about the island of Juan Fernandez.

‘Juan Fernandez’ lies off the coast of Chile. It took its name from a famous Spanish admiral. According to Townsend’s legend, the admiral let a number of goats loose on the island in order to provide a source of fresh meat for future visits to the area. There were no predators on the island, and the goats bred and quickly multiplied. The goats then became an important source of food for English pirates operating in the area.

(Arh, the English again!) The pirates were there to raid Spanish ships. So, in order to starve the pirates out, the Spanish then released vicious dogs on to the island in order that they should eat the goats and thus starve the pirates.

According to legend, the dogs ate some of the goats. And they also bred. Eventually, according to Townsend, a “natural equilibrium” established itself betweendogs and goats. In his words, “the weakest of both species were among the first to pay the debt to nature; the most active and vigorous preserved their lives”. From this Townsend drew a simple inference that could be applied to human society. The quantity of food “regulates the number of the human species”. He then applied this lesson from ‘nature’ to the problem of the poor. “Hunger”, he suggested, “will tame the fiercest animals, it will teach civility, obedience and subjection. Only the “silent, unremitting pressure” of hunger “can spur and goad the poor to labour”. Laws that intervened to prevent hunger and starvation were wrong. A fundamental ‘natural law’ existed quite apart from social customs and government laws. Humans are animals. Take away the false laws of man, and ‘natural law’ asserts itself. On Juan Fernandez there was no government, no law, no social do-gooders, and nature’s fundamental law had established a “natural equilibrium” between the supply of goats and the demands of dogs. The law of hunger was absurdly simple; it presented the most ‘efficient’ method of organising human life, far better than anything that could be conceived by a lawyer, economist or politician.

Though the story of dogs and goats was a myth, it was convincing. It influenced many. Charles Darwin’s theory of natural selection was partially built on Townsend’s myth, as was Malthus’s famous population theory. Most influentially, Herbert Spencer’s evolution-inspired political theory – the concept of ‘survival of the fittest’ - came straight from Townsend’s myth. (Without that we may never have had ‘eugenics’ and Hitler’s ‘final solution’.) In the 19th century, many ‘free trade’ businessmen, economists and politicians took inspiration from the myth. Where government is absent, ‘natural laws’ assert themselves that are superior to any that humans can design for themselves. Therefore, ‘interventions’ by governments, such as the demand that we pay taxes or import and export duties, were deemed to be wrong because they ‘distorted’ the ‘natural laws’ of the market. If only we refrained from interfering with markets, they suggested, ‘natural equilibrium’ would assert itself in the economy, just as it did in nature.

It should be no surprise either that the concept of a Market Society we talked about in Panel 2 was derived from this myth. In our own time this idea has re-emerged in the political theories of ‘neo-liberalism’.



Panel 5: Globalisation (Deregulating Markets and Commodifying Knowledge)

Some more images please.





Economic descriptions of land, economy and markets are not as rational and scientific as we think. When we talk about being ‘modern’ and privatising public assets, we use 19th century English arguments designed to excuse the dispossession of the poor. When we say it is better to “leave it to the market”, we repeat an 18th century English myth about the dangers of ‘intervention’ by the state designed to justify a policy of letting the poor starve. While we believe we are in the midst of a rational mechanism – the Market Society – we are, in fact, ruled by customs, superstitions and myths. We should all be aware that toads can bring about the collapse of banks. But, in fact, idea of society and culture reduced to a rational mechanism is itself a myth. Nevertheless these concepts and myths are believed, and, internalised, they influence the way we think about economic globalisation. Let’s talk about globalisation.

The economic globalisation of the last forty years has been driven by two sets of ideas that developed in the wake of the Enclosures. One set of ideas in based on the idea of natural balances between dogs and goats. That strand, which has been a central organising myth of ‘neo-liberalism’, believes in the sanctity of the pure free market. Its organised around a fear of ‘intervention’, in any form – social, cultural or economic – by states, groups or individuals that might distort or impede the progress of free market. In its most idealistic form, the rejection of intervention is about the development of the Market Society, that entails as a consequence, the destruction of the state. The other set of ideas have developed from the ‘tragedy of the commons’ narrative. That strand has been central to the development of what is known as ‘knowledge economics’. In this strand, intervention is central. Here the intervention by governments aims to privatise or ‘enclose’ common assets.

It is often said that politicians give with one hand and take away with another. This is a good way to see these two strands of globalisation. With one hand intervention is treated with fear and derision, because it can be used to prevent the accumulation of private wealth. With the other it is welcomed as the means to create private wealth. It depends on whether a politician is thinking about dogs and goats or about enclosures and the ‘tragedy of the commons’.

Economic globalisation began in the early 1970s with a series of economic crisis that affected developed industrial economies. The crises coincided with the end of old style colonialist economies, where rich countries bought cheap imports of raw materials from poor countries and turned them into manufactured goods, which were often sold back to the developing world. But, the biggest motor for change was financial not industrial. Currency crises in the early 70s led to the abandonment of the ‘Bretton Woods’ agreement that fixed exchange rates between nations. Foreign exchange controls were progressively removed, and other aspects of the financial markets were deregulated. At the same time an oil crisis put huge pressure on the older, oil hungry industrialised countries.

The major consequence of these developments was what became known as the ‘flight of capital’. In the Bretton Woods era, capital largely stayed put. But in the era of so-called ‘hot capital’, money was free to travel the world and to settle temporarily in places where there was a supply of cheap, unregulated labour and raw materials. The sites of industrial activity moved. Older industrialised countries saw jobs rapidly disappear. As their economies failed, they developed two responses to the crisis. The ‘neo-liberal’ response was rooted in ‘classical economics’ that in turn drew many of its concepts from the debates about the Enclosures and the Poor Laws. ‘Knowledge economics’ developed from the same Anglo-centric history, but from the debates about the ‘tragedy of the commons’.

The neo-liberal strategy was to go with the flow of events. Governmental controls on the economy were cracking. Governments should let them go. The ‘natural law’ of the market was asserting itself. That was a good thing. Since the 19th century advocates of ‘free trade’ had developed the basic principle of natural equilibrium laid out in the dogs and goats myth. They argued that each individual had natural competitive advantage over another. Each person should therefore specialise it what was most economically advantageous for them to do. Scaled up to the level of states, this doctrine became known as ‘comparative economic advantage’. In a national economy, a natural balance would assert itself if governments refrained from artificial interventions that distorted the free market – such as paying benefits to the unemployed or to the old and sick. Where international trade was concerned, import and export taxes should be abolished. All interventions, it was believed, were misguided attempts to rig the market. If only governments would become smaller, and do less, natural competitive advantages would come to the fore, and eventually a harmonious balance between all the forces in the world economy would asset itself.

In response to the crises of the 1970s, this narrative, with deep roots in the problems caused by English land Enclosures, was reinvented. The neo-liberal political paradigm put forward a set of policy prescriptions aimed at eventually eliminating all interventionary practices. Natural market forces should be allowed to let rip. Refrain from any behaviour that ‘distorts’ the natural equilibrium of the market. The policy rules were simple: cut government borrowing and public expenditure; let the international money markets work out currency exchange rates; open your markets - lower or abolish taxes and remove barriers to trade, such as import and export tariffs; end all state subsidies, whether to businesses or to the unemployed and sick; cut all regulations that impede businesses. Most importantly, privatise common or public assets and leave every area of society to market forces and allow prices find their natural level.

The myth of dogs and goats was intended to prove that governments should never intervene in the market, not even to prevent the starvation. It is better to let the poor starve and the natural equilibrium between people and food to assert itself. Neo-liberal developed from that line of anti-interventionary thinking. It has been central to the way many politicians and economists have attempted to ‘structure’ – or indeed un-structure – economic globalisation.

The alternative reaction by industrialised countries in North America, Europe and Japan to the 70s crises developed from the ‘tragedy of the commons’. While neo-liberalism demanded an end to intervention; ‘knowledge economics’ derived from the opposite impulse – to intervene regularly in order to create new properties to trade with.

The difficulty of competing with low cost, developing economies led the leadership of the older industrialised states to the conclusion that, if they could not compete in terms of price, they would have to compete in terms of innovation. They therefore decided to focus on their supposed ‘competitive economic advantages’ in terms of education, research & development and creativity. In practice, this has meant the reinforcement and expansion of the intellectual property system.

The system of copyrights, patents and trademarks (intellectual properties or IP) developed gradually over hundreds of years in European countries to encourage investment in specific kinds of cultural and technological product. The original concept is simple. The state intervenes in the market place to create a temporary private property for those who create new cultural or technological works. These forms of property can then be bought and sold. Granting a private property right that lasted for twenty years for a patent and the life span of the author plus another seventy years for a copyright, is supposed to give an incentive to inventors and authors to produce new knowledge.

Unfortunately, the actual use of the IP system has changed in the era of globalisation. In trade terms, the system can be seen as trade protectionism. The system has increasingly been deployed as a means of protecting industries and jobs in older developed economies from the ravages unleashed by neo-liberal policies – the deregulation of markets and removal of other protectionist measures. Rather than encouraging the development of new knowledge, IP has come to be used as a method of enclosing existing knowledge.

State policies have focussed on helping businesses close off as much knowledge as possible, securing it within the IP system. Once fenced off as private property, knowledge can then be traded on international markets. Typically this allows large companies to own IP rights that are created in wealthy countries and use the knowledge to manufacture goods in poorer countries, where costs are cheaper.

Thus, the neo-liberalism’s response to globalisation has focussed on one kind of privatisation: the selling off of public assets (such as land and state owned industries) to private companies. In doing so, it fiercely rejects any interventions in the market. In contrast ‘knowledge economy’ policy has sought to do the opposite. It has massively expanded the market intervention, using the intellectual property system to enclose knowledge and protect national economies. Thus, it is a different kind of privatisation. It is an enclosure system. As currently deployed, it has much in common with the land Enclosure system. Some have even called it the “Second Great Enclosure Movement”.

> Next page

PDF for Learning Book #003, [Poster Dwelling; Land, Market and Economy], Delhi, 2008

Texts: From Corporate Land Grab To Land Sovereignty (Bhu Swaraj), Charter for Land Sovereignty (Bhu Swaraj) - From Corporate Hijak of Land, INDIA DIVIDED Vs INDIVISIBLE INDIA: DEFENDING DIVERSITY AND DEMOCRACY IN TIMES OF VIOLENCE, FEAR AND TERROR by Vandana Shiva

Delhi’s Urban Dilemma by Arunava Dasgupta



[index]