In 1968 Garrett Hardin, a biologist, wrote a seminal paper
in the journal Science entitled “The Tragedy
of the Commons”. The “commons” in the title referred to the English village
common land on which all village inhabitants could graze their cattle and sheep
in common. The point of the paper was to
point out that the commons tended to get overgrazed because for any individual
farmer, the entire profit from grazing one more cow or sheep went to that farmer,
while the cost of overgrazing was spread among everyone in the village. So there
was a clear incentive to overgraze. This
paper established the general principle of “privatizing the gains” while “socializing
the losses”. A factory owner, for example, who spews waste products into the
water or air, is privatizing his gains (by not spending potential profits on
cleanup gear) while socializing his losses (spreading the contamination costs
across everyone in the neighborhood).
Why do I bring this up?
Because at root the worldwide unrest reflected in this unusual election is
driven by just this effect, and the political parties need to come to grips
with it if they are to remain in power.
When a factory automates or moves production offshore to a
lower wage market, it is privatizing the gains (It lowers production costs, so the
shareholders and executives make more money) while socializing the losses (the
whole community and all the taxpayers bear the costs of all the unemployed and
displaced workers who lost their jobs).
In the American tradition of laissez-faire
capitalism, the company can do as it pleases, and its only obligation is to
its owners and shareholders.
What clearly has to change is that – probably by law, because
what company would do this voluntarily – when a company automates or moves
production offshore, some of the additional profit it makes from this change
needs to be funneled back into effective help for those workers displaced (“made redundant” as the English say) by the
change.
This is more than just a moral argument, though it is that
too. It is a practical and pragmatic argument
for three clear reasons:
1) Our
capitalist economy depends on having markets to sell products to. Unemployed people with no income provide no
market for goods. It is in the interests of everyone, but especially the
businesses that produce goods, to have as large and as wealthy a potential
market as possible for their goods.
2) Americans
can tolerate a fairly large disparity between those who are rich and those who
are not, but there is a limit, and I think we are reaching it. Stability in any nation depends on not having
too large a proportion of disgruntled people. This election is showing that that proportion
is getting fairly large in this country, perhaps even large enough to elect a demagogue
like Donald Trump.
3) Unemployed
people are wasted productivity and talent.
Economists have long pointed out that an hour of work lost can never be
recovered – it is economic waste, and in an increasingly competitive world
economy any nation that wastes talent by keeping some of its workers unemployed
is reducing its competitiveness.
However this strange election ends, both political parties
need to come to grips with this fundamental problem if they are to retain any long-term
political leverage in the nation.
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