In their wishful belief that there is really no longer an economic problem people have been confirmed by irresponsible talk about “potential plenty” -which, if it were a fact, would mean that there is no economic problem which makes the choice inevitable. But although this snare has served socialist propaganda under various names as long as socialism has existed, it is still as palpably untrue as when it was first used over a hundred years ago. In all this time not one of the many people who have used it has produced a workable plan of how production could be increased so as to abolish even in Western Europe what we regard as poverty -not to speak of the world as a whole. The reader may take it that whoever talks of potential plenty is either dishonest or does not know what he is talking about…” (Friederich A Hayek, The Road to Serfdom 1944)

An assertion by the supposed grandfather of Neo-liberalism. We shall start by asserting the exact opposite:

(I) Since:

(i) It is the case that science and technology long ago made the general abundance of goods and services both possible and actual, potentially solving the economic needs of all people everywhere on Planet Earth, but that:

(ii) The vast majority of human beings live in conditions of utter misery and starvation, lacking any positive future, either in terms of life expectancy or quality,

(iii) It is, therefore, necessary to explain this contradiction, which has now grown to the scale of a global obscenity, an insult against the human race, not in terms of the “economic scarcity” (absolute or relative, objective or subjective) of conventional wisdom and orthodox economics, but in terms of the Power that is derived from Capitalist Property.

1. As early as 1802, in his Dictionnaire de Mots Nouveaux, Sébastien Mercier branded the Capitalist as follows: “Capitaliste –this word is well-nigh unknown out of Paris. It designates a monster of wealth, a man who has a heart of iron, and no affections save metallic ones. Talk to him of the land tax -and he laughs at you; he does not own an inch of land, [so] how should you tax him? Like the Arabs of the desert who have plundered a caravan, and who bury their gold out of fear of other brigands, the capitalists have hidden away our money.”
Adam Smith was no kinder to them: “To widen the market and to narrow the competition, is always the interest of the dealers …[which] can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy for their own benefit, an absurd tax upon the rest of their fellow citizens…an order of men whose interest is never exactly the same as that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.” (Adam Smith, The Wealth of Nations, Volume I, at the end of Chapter XI, 1776)

Robert Minor, Daily Worker, December 22, 1924

(II) Capitalist power has not simply involved an unequal distribution of wealth and income, but also the restriction of production, hence depriving people of the potential wealth and income that could feed, house, nurture and care for human beings everywhere, regardless of whether or not they “belong” to the industrially “advanced” regions.

Thus, on the one hand, productive and personal income and wealth have been concentrated into proportionally fewer hands –new techniques have been set upon and devoured parasitically, the infrastructure of financial rivalry has grown, as has the State’s military and bureaucratic machinery whose purpose is to limit human horizons, while all production that feeds into and out of an increasingly polarized society has proliferated, especially since World War II.

2. The study, Por Esto Somos Tan Pobres (Rudolf H. Strahm and Ursula Oswald Spring, UNAM, Mexico, 1990) is crammed with examples of income and wealth inequality. On page 26, they note, for example, that instead of purchasing one combat aircraft (valued at US$ 130 million), the money could be used to build 40,000 rural pharmacies; while US$ 525 per inhabitant was spent on health in the industrialized countries in 1987, these same countries spent US$ 612 per inhabitant on armaments (page 24), between 1970 and 1989, the richest 20% in Mexico consumed 29 times more than the poorest 20% -in Brazil the figure was 41 times (page 30).

(III) On the other hand, the natural growth of potential output is significantly curbed in order to hold this polarization in place, i.e. contrary to the protestations of multi-millionaire predators (whether or not they come in the guise of bankers and corporate chiefs, “philanthropists”, political leaders, etc.) and their agencies (World Bank, IMF, FAO, UN, etc.), poverty is not the result of any natural scarcity (or the disproportionate growth of population) but has been artificially created, deliberately perpetrated and perpetuated, and intensified to maintain political power where it currently resides. The specific causes and situations are clearly different, but what the young Karl Marx perceived in Germany in 1844 may shed some light on what is happening today:

The proletariat is only beginning to form itself in Germany as a result of the industrial movement. For what constitutes the proletariat is not naturally existing poverty, but poverty artificially produced, is not the mass of people mechanically oppressed by the weight of society but the mass resulting from the disintegration of society, and above all from the disintegration of the middle class… (February 1844 edition of the Deutsche-Französische Jahrbücher, my emphasis)

Karl Marx in 1839

(IV) This restriction of production is evident in several ways:

a) Monopolistic activities

Economic theory’s much-heralded “monopoly” company –typically, company output does not conform to market demand, but is artificially restricted to maximize profit, a fact that was evident to Adam Smith more than 200 years ago.

3. “The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above their natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate.” Adam Smith, The Wealth of Nations, Volume 1, Chapter VII.

Adam Smith

Concern with monopoly seems to have waned after Adam Smith, although it is still present in the work of David Ricardo (_The Principles of Political Economy and Taxation_, 3rd edition, 1821); he set the theoretical question of value at center stage in Political Economy. What looks today like a strange exception was the work of the French Economist, Auguste Cournot, who developed a mathematical theory of competition, monopoly and duopoly in 1838 in his Recherches sur les principes mathématiques de la théorie des richesses. Certainly, John Stuart Mill, and the other post-Ricardian economists made mention of monopoly, but (in J. S. Mill’s case) the moral content is more striking than the theoretical.

4. “But while I agree and sympathize with Socialists in this practical portion of their aims, I utterly dissent from the most conspicuous and vehement part of their teaching, their declamations against competition. With moral conceptions in many respects far ahead of the existing arrangements of society, they have in general very confused and erroneous notions of its actual working; and one of their greatest errors, as I conceive, is to charge upon competition all the economical evils which at present exist. They forget that wherever competition is not, monopoly is; and that monopoly, in all its forms, is the taxation of the industrious for the support of indolence, if not of plunder…” (See: John Stuart Mill, The Principles of Political Economy, Book 4, Chapter 7: “On the Probable Futurity of the Labouring Classes”, 1848.)
“Competition” has been the watchword of monetarists and neo-conservatives (such as the Chicago Economist, Milton Friedman, and former British Prime Minister, Mrs. Thatcher) since the 1970s. In the same way that monopolies grew under anti-monopoly legislation at the beginning of the 20th century (See, for example: Frank Pearce, Crimes of the Powerful, 1976), so monopoly (in all its varieties) has grown splendidly under neo-liberal vaunting of “Competition”.

Margaret Thatcher

The interplay between the ideas of English, French and other (mainly European) Economists eventually led to the “marginalist revolution”, i.e. the rebellion against English Political Economy. England (where Marx found the roots for Capital) was recognized as the heartland of the labor theory of value, thanks to Ricardo and his followers, whereas it was in France (home of Saint-Simon, Pierre Leroux, and Proudhon) where this marginalist revolution first took root.

5. “The conclusion to which I am ever more clearly coming is that the only hope of attaining a true system of Economics is to fling aside, once and for ever, the mazy and preposterous assumptions of the Ricardian School. Our English Economists have been living in a fool’s paradise. The truth is with the French School, and the sooner we recognize this fact, the better it will be for the world.” See: William Stanley Jevons, Theory of Political Economy, 1871: p.xliv-xlv.)

William Stanley Jevons

Apart from the direct object of attack (i.e., the labor theory of value), monopoly theories, which spell disequilibrium (and imply indeterminacy for market equilibrium theory), tended to fall out of favor. Despite his mathematical debt to Cournot, Leon Walrás (also French, although he worked at Lausanne University in Switzerland) sought a general equilibrium theory based on marginal utility in his Elements d’Économie politique pure (1874, 1876). Although he had developed a theory of monopoly, he considered it beyond his powers to incorporate this into his general theory, also believing that a high degree of competition was “almost universal” and deserved to be treated as the general case. Academic economics (unlike some sociologists living in France at around the same time –e.g. Emile Durkheim, whose study of suicide in 1897 pointed to social disequilibrium) from the latter part of the 19th century until the crises of the 1920s and 1930s seem to have become increasingly hermetic. The 1920s confronted the marginalists with the reality of market breakdown. Thus arose the 20th century theories of monopoly and oligopoly, which show, in terms of marginal theory, how large companies do exactly what Adam Smith had talked about in the 1770s.

6. Interest in imperfect competition, monopolistic competition, monopoly, and oligopoly developed in the late 1920s/30s when it became evident that the “Marshallian” model of “perfect competition” could not explain what was going on in the real world. Hence, we have: Edward H. Chamberlin: The Theory of Monopolistic Competition, 1933 and Joan Robinson: The Economics of Imperfect Competition, 1933.

Before this unbalancing theoretical advance was made, however, it had occurred to others that “competition” was rather the exception than the rule. An early example of this understanding from within the academia of economics was provided by Piero Sraffa, who pointed out in a paper in 1926 that most companies look for market niches, and exploit captive markets.

7. “When each of the firms producing a commodity is in such a position the general market for the commodity is subdivided into a series of distinct markets. Any firm which endeavours to extend beyond its own market by invading those of its competitors must incur heavy marketing expenses in order to surmount the barriers by which they are surrounded; but, on the other hand, within its own market and under the protection of its own barrier, each enjoys a privileged position whereby it obtains advantages which –if not in extent, at least in their nature –are equal to those enjoyed by the ordinary monopolist.” See: The Laws of Returns Under Competitive Conditions, The Economic Journal, December, 1926.

Piero Sraffa

And Sraffa concluded: “It is necessary, therefore, to abandon the path of free competition and turn in the opposite direction, namely, towards monopoly.” Meanwhile, Hayek tried to turn the analysis of monopoly into a crusade against the totalitarian State:

8. “The problem of monopoly would not be so difficult as it is if it were only the capitalist monopolist whom we have to fight. But, as has already been said, monopoly has become the danger that it is, not through the efforts of a few interested capitalists, but through the support they have obtained from those whom they have let share in their gains*, and from the many more whom they have persuaded that in supporting monopoly they assist in the creation of a more just and orderly society.” (F.A. Hayek, ibid., Chapter XIII, The Totalitarians in our midst.) In fact, Hayek does not appear to have set much store on the power of privately controlled monopolies, and reserved most of his criticism for state monopolies, i.e. socialism and fascism.
N.B. John Moody’s remark in 1904: “The modern Trust is the natural outcome or evolution of societary conditions and ethical standards which are recognized and established among men to-day as being necessary elements in the development of civilization.” (_The Truth about the Trusts_)

Since then, however, economic theories dealing with monopoly have again disappeared from the center stage. Moreover, the economic theory of monopolistic competition was displaced some time ago by game theory, which right from the start linked economic problem-solving with military strategy.

9. French mathematician Emile Borel wrote a series of papers on game theory (1921-27) and became the first to define games of strategy. He envisioned game theory as having economic and military applications. After 1924, Borel became active in the French government serving in the French Chamber of Deputies (1924-36) and as Minister of the Navy (1925-40). After his arrest and brief imprisonment under the Vichy regime he worked for the Resistance. Although John Von Neumann, the person who developed game theory, is said to have originally considered it as a tool for economists, he was most interested in applying his methods to politics and warfare. At the outbreak of World War II, Von Neumann was convinced the Allies would win and sketched out a mathematical model of how, using game theory. In 1943, he joined the U.S. Manhattan Project and played a key role in making the nuclear bomb (later used at Hiroshima and Nagasaki) a more efficient and more deadly weapon. Von Neumann’s mathematical models were also used to plan out the path the bombers carrying the bombs would take to minimize their chances of being shot down. The mathematician helped select the location to bomb Japan. Among the potential targets he examined was Kyoto, Yokohama, and Kokura. After the war, he played a key role in the development of computers and worked for the RAND Corporation, which was set up by U.S. defense contractors and the military. Their main focus was how a nuclear war might be launched against the Soviet Union. Von Neumann advocated a “preventive” war, urging the U.S. to bomb Moscow before the Soviet Union got hold of the atom bomb.

Hiroshima

Thus, rather than monopoly being treated as an integral part of the “economy as a whole”, the task which Walrás avoided, it is treated as a “special subject”.

b) The Law

Before industrial capitalism had really established itself, Mercantilism achieved monopolistic economic power basically through the State, using laws to restrict output and, hence, prevent competition from less powerful regions.

10. Late 20th century U.S. capitalism has been likened to Mercantilism, due to an “exhaustion of technological opportunities”. See: Robert Gilpin: US Power and the Multinational Corporations, 1975, and The Political Economy of International Relations, 1987)

If this is the case, it should not therefore be surprising to find that International Laws are aimed at restricting competition: “The idea of the invisible hand of the spontaneous market is a myth. What really exist are always forces that organize it. The market, the larger it grows the more this is necessary, has a legal order that announces power.” Interview with Toni Negri (La Jornada, Mexico City, July 12, 2001.

Britain’s colonies were thus prevented (under the so-called Navigation Acts) from producing woolen cloth for export (the Wool Act of 1699) and likewise for hats (1732). In 1750, an Iron Act prevented the colonies from competing with the colonial center by outlawing the construction of new rolling and slitting mills in the American colonies. Trade with the imperial center was controlled in such a way that prices always favored the center and disfavored the colonies.

11. Regarding the exclusive colonial companies, Adam Smith writes that the colonists “were obliged to buy all such European goods as they wanted, and … sell the whole of their own surplus produce” to them. The company sold its own goods dear, and restricted the colonial surplus, which it bought cheap and then sold dear in Europe. (_The Wealth of Nations_, Volume II, Chapter VII, “Of Colonies”)

It should be noted that America’s iron industry developed nevertheless, although under these colonial laws it was steered in a dependent direction. Today, laws are similarly framed –both on an international and national basis – to limit output and hence competition.

12. For example, US transnational pharmaceuticals companies seek to impose US international law on countries to prevent them copying their formulas.
“According to the U.S. Trade Representative, Argentina’s patent regime denies adequate and effective protection to U.S. right holders, particularly in the pharmaceutical industry. As a result, in 1997 President Clinton decided to withdraw benefits for approximately fifty percent of Argentina’s exports under the Generalized System of Preferences (GSP) program. Argentina’s patent law contains onerous compulsory licensing provisions and pharmaceutical patent protection will not become available until November 2000.” (International Strategies, Inc., 1998)

In May, 1998 a Priority Watch List was published which stated the following: “The Administration is placing 15 countries on the Priority Watch List because of the lack of adequate and effective intellectual property protection or [because] market access in these countries is particularly troublesome to U.S. interests.” The countries already listed were: Argentina, the Dominican Republic, Ecuador, Egypt, India, Israel, and Kuwait. These were joined by Australia, Bahrain, Chile, Colombia, Costa Rica, Guatemala, Honduras, Jordan, Korea, Pakistan, Qatar, South Africa, Thailand, the United Arab Emirates and Vietnam. Others to be watched were Hungary, Lebanon, the Netherlands, Nicaragua, Romania and Tunisia. For example, in the last-named, “the lack of patent protection for pharmaceutical products means that dozens of unauthorized copies of top-selling medicines are in the market. Once a medicine is manufactured in Tunisia, its importation is restricted, hindering access to the market for U.S. firms…We look to Tunisia to…move toward providing patent protection for pharmaceutical products.”

Moreover, the powerful States attempt to block the free spread of science and technology, use their power to undermine such developments outside their own domains, spy on each other (can spying really be considered as “competition”?) and on the peripheral regions,

13. See: Echelon: World Under watch, an Introduction, Duncan Campbell in ZDNet News, June 29, 2000.
See: Duncan Campbell’s Report to the Director General for Research of the European Parliament: Interception Capabilities 2000, 7 May 1999: “In 1994, NSA intercepted phone calls between Thomson-CSF and Brazil concerning SIVAM, a $1.3 billion surveillance system for the Amazon rain forest. The company was alleged to have bribed members of the Brazilian government selection panel. The contract was awarded to the US Raytheon Corporation – who announced afterwards that ‘the Department of Commerce worked very hard in support of U.S. industry on this project’. Raytheon also provide maintenance and engineering services to NSA’s ECHELON satellite interception station at Sugar Grove.”
See: Echelon, the French Fight Back, ZDNet UK News, June 29, 2000: “A seven-month investigation by the French parliament concludes that Echelon is routinely used to gather economic information and warns that it is open to abuse. The report says that the system may well be used by the nations that operate it to gain political and economic advantage over other nations.”
See: Frenchelon –France has nothing to envy in Echelon, ZDNet UK, News, June 30, 2000.
See also Multinationals build their own Echelons, from the same site, which describes how transnationals are building their own satellite systems to spy on their customers.
N.B. Intelsat is in the process of privatizing itself (Intelsat press release, Washington, D.C., March 2, 2000).

carry out clandestine operations for predatory reasons in other, less powerful, States, and prevent them developing their own independent technology, financing, etc., up to and including war.

14. Note that the United States has been privatizing its armed forces, its prisons and its intelligence operations. Dyncorp, which occupies land, ostensibly set aside for Raytheon Corp., on Patrick Air Force Base in Florida, engages in clandestine military activities in Peru, Colombia and Bolivia. See: Jason Vest, State Outsources Secret War, The Nation, 2001.

Human resources in orbit

Meanwhile, national States, under the guise of “regulation” restrict the entry of new companies via legal and financial means, while parastate repressive methods are employed by interested parties, with or without the cooperation of the official State machinery.