Commentary - 02/02/2009

How We Keep Each Other Alive!

It should be fairly obvious to most folks that the occupations in which men and women engage have now become infinitely specialized. It is the outstanding characteristic of our modern social environment. This is distinct from both our ancient history and our natural one. Each child that now enters our world quickly adjusts themselves to this highly-specialized modern social environment.

Thus, in today's world, people can only keep each other alive and fairly happy by continuously exchanging their goods and their labor. In many of these exchanges, a small number are immediately completed. These are merely swaps. But in most exchanges, the second half is deferred. A lapse of time occurs before the person who first gave up one form of wealth gets the other form of wealth he expects in the last half of the exchange.

Because of this lapse of time, almost all the endless exchanges that take place involve promises. But promises cannot be believed unless they are infallibly performed. Therefore, the ultimate reliance of this present universal system of deferred exchanges rests upon two things; first, the honesty of the promisors; and the second, an accurate estimate of the resources they will have when the second half of the exchange has to be completed.

These economic promises, so far as fulfillment is concerned, are inter-dependent. By an almost inconceivably intricate honeycombing of promises, the ultimate performance of every promise is affected -- sometimes slightly, sometimes wholly, by the completion of others.

My point is that as our highly-specialized modern social environment is now structured, the degree of well-being of all its members in theory would be, and in fact is, determined principally by the volume of exchanges, of property and of labor, which goes on within it.

If you are a merchant with a stock of goods and you cannot exchange them--for money--then you're in big trouble. If you are a laborer and cannot exchange your work for money--which you are compelled to do by the very nature of our society--you are perhaps in even worse trouble.

What is true of these tiny parts is true of the whole. What is true of a single merchant, a single manufacturer, a single laborer, is true of all the hundreds of millions of us. The total volume of exchanges that goes on in our society is both the explanation and the measure of the degree of well-being which our society enjoys.

These deferred exchanges take place ONLY because of the virtual certainty that they will be completed. Whenever any question arises as to this fact, these deferred exchanges are simply not entered into: that is, the total volume of exchanges is thereby diminished.

Therefore, there is no single fact more important for people to recognize, with all its implications, than this simple one--that their individual well-being, as well as that of the whole society, is determined by the volume of exchanges going on within the whole society.

This is why we are in economic decline--certain people have NOT kept their promises, and we now see others not wanting to enter into exchanges which their deferred promises may not be kept. This accounts for massive layoffs and loss of savings.

People like Madoff must lie in order to steal. People entered into deferred promises because he had established a reputation for completing the deferred exchange. When the deferred exchanges were NOT completed, folks immediately stopped entering into more exchanges. Madoff collapsed, and so did most of his related enterprises. Folks do not knowingly enter into deferred exchanges that will NOT be completed.

Usually in the case of labor, the deferred exchange is money. Labor gets paid in money, which we can call promise money, which the laborer later exchanges at least for food, clothing and shelter. When the value of this promise money is altered, the laborer is cheated out of the profits of their labor. That this is done knowingly means that others had to lie in order to steal. Unfortunately for the laborer, it becomes murder when necessities for survival can no longer acquired.

This is the problem of promise money becoming worth less, and eventually worthless. It is this fear of losing the profits of their labor that causes people to exchange their promise money for gold and silver. These metals make it harder for the knowledgeable to steal profits from those who labored. But by manipulating the prices of gold and silver, knowledgeable graduates of Harvard, Yale, Princeton, Oxford, etc, have found another way to steal from others. They too have not kept the promises they made to become "public servants."

That's why today's bailouts are so galling. More promises are being made, in order to replace promises that have not been kept. The problem is that the same folks, to whom these earlier promises have not been kept, are actually the ones that will have to keep the new promises of the deferred exchange. These bailouts do not make sense except to keep those, who lied in order to steal, from having to pay bail.

I acknowledge borrowing heavily from Chapter 20 -- The Heart of the Mystery of Business Cycles (pages 390-393) of the book "The Promises That Men Live By," authored by Harry Scherman and published in 1938.

Sometimes The Dragon Wins, but it's everyone else that suffers.

2009 by Edward Ulysses Cate
Help Support This Site
Commentary Index: