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Actions, as we know, depend on judgments, and these are formulated on the basis of their own philosophical principles. This is why the ideas put into circulation sooner or later take root, until a real or perceived crisis – as Friedman said – makes them operational. In my previous article “The roots of evil”, I showed how the seed of contemporary economic policies was sown in the seventies with the studies commissioned by the Club of Rome, whose founders, worried about the future of humanity, did their utmost to slow down its growth by any means possible. But where does this concern come from? Why on earth has there been an effort to combat population growth and not, for example, to increase systemic productivity?

MALTHUS AND THE ESSAY ON THE PRINCIPLE OF POPULATION

  • Thomas Robert Malthus

In 1798, in his anonymous publication entitled An essay of the principle of the population as it affects the future improvement of society (Essay on the population principle and its effects on the future development of society), the Anglican Reverend Thomas Robert Malthus asserted with all frankness “that the population, when not stopped by any obstacle, doubles every 25-year period, thus growing in geometric progression”, while “considering the present state of the earth, the means of subsistence, in the most propitious circumstances for human industry, could only grow in arithmetic proportion ”.[1] The difference in the two growth rates, according to the illustrious English economist and philosopher, would have led humanity towards famines and epidemics. Hence the need for a living wage, that is, a wage that would allow the worker and his family to survive. Without this salary it would not have been possible (for the people) to marry or have children. If the living conditions of the population had improved, the demand for foodstuffs would have increased and with this the prices of the same foodstuffs, which would have reduced the purchasing power of monetary wages, decreasing the real wage, that is, the wage in terms of of goods.

In addition to this mechanism of economic feedback, which would have brought the population back to its original level, Malthus believed it necessary to intervene directly on the married life of the population, instilling chastity for the most virtuous and contraception for the vicious. For Malthus, any attempt to improve the social situation of workers was doomed to failure, since mankind is not perfectible. Malthusian pessimism clashed with the more optimistic positions of William Godwin and William Thomson, who believed, instead, that it was possible to improve the social conditions of humanity through the redistribution of income in favor of the poorer classes and through the emancipation of women. . Political economy, however, succumbed to Malthusian pessimism and became the “sad science,” kept alive and available, until it was politically inevitable.

RICARDO AND DECREASING PERFORMANCES

In 1815, before the commission appointed by the two chambers of lords and communes, the increase in grain prices, increased by high land rents, was discussed. In fact, since England was an island, an increase in production meant first of all cultivating high-yielding lands (therefore with a higher land rent) and enclosing low-yielding ones, in order to increase their fertility. This process of improving less fertile soils involved capital investments that were offset by high grain prices. According to the landowners, an import of grain from abroad would have brought down grain prices and, therefore, affected British agricultural development. And it is here that David Ricardo enters the scene, who, knowing full well that the high prices of wheat would have crushed the profits of the capitalists, strongly influenced by the theories of Malthus, proposed an economic “law” which, cloaked in scientific rigor, could influence the commission and, therefore, induce the Chambers to opt for the importation of foreign wheat (which then happened). This is the law of diminishing returns, which became the basis of classical economics and, above all, of Austrian marginalist (or neoliberal) thought. Although each worker has two arms and one mouth, as the number of workers increases, given the land, the productivity of the marginal (additional) worker is less than proportional. This means that as the population grows, production grows at less than proportional rates.

For Ricardo, the increase in grain prices meant a decrease in real wages and, therefore, a fall in profits, since the subsistence wage, that is, the capitalists having to guarantee the worker and his family the same quantity of grain but higher prices. Starting from the Malthusian assumptions, Ricardo showed that to maintain social equilibrium it was necessary to liberalize the grain trade. Now let’s ask ourselves: what would happen if we applied the law of diminishing returns on a global scale? If we looked at the world system as a closed system, without any exchange with the outside world, according to Ricardo’s model, what solution would we have available to combat the scarcity of resources if not the control of population growth theorized by Malthus and proposed by the liberalists neomalthusians? It is precisely from here that today’s policies of direct and indirect containment of world population growth derive (sterilization, contraception, abortion, euthanasia, depopulation; deflation, deindustrialization, lockdown, etc.). But at present, is the Malthus-Ricardo model really an appropriate tool for making long-term forecasts and implementing economic policies? Is the population really growing at such a rate as to generate scarcity of resources worldwide?

World GDP per capita from the 1960s to 2017 is growing and the% changes in world population growth are less than the% changes in world GDP. Source: data adaptation from https://www.worldometers.info/gdp/#gdpyear

MOORE, METCALFE AND COMPLEXITY

The Ricardian model, despite being a paradigm that has exerted an irresistible influence on many refined minds, has some not inconsiderable limitations, especially in today’s world, where technology plays a fundamental role. A first limitation of the Ricardian model is the absence of technological development, capable of increasing productivity for the same amount of work employed (see the article Depopulate and deindustrialize to save Gnostic capitalism?). Secondly, Ricardo’s model is based on an agriculturally driven economy, where land is the factor of production par excellence and is scarce. Another noteworthy element is that wages are negatively correlated with employment. Starting with a living wage, if capitalists require more labor in the first stage, wages tend to rise, exceeding the living wage and reducing profit margins. The liberalization of the wheat market, by lowering its prices, causes the Malthusian retroactive mechanism to stop, that is, that the population, instead of seeing its well-being reduced, continues to demand wheat and to grow. Since returns are decreasing, as employment and organization of workers increase, the profit margin decreases. Hence the need for international trade, through which it is possible to acquire from the outside goods produced at lower costs, to guarantee the accumulation of capital. Ricardo had well understood that, in the face of population and wage growth, the only way to guarantee the accumulation of capital was the internationalization of the economy, which, today, we call globalization. But, as Garbage sang, The World Is Not Enough, and once the markets of others are also saturated, the rate of profit will be positive only if productivity returns to being higher than wages. This is why marginalist (or neoliberal) economists, in their obsession politically correct, they are keen to clarify that for them the real wage must be equal to the (marginal) productivity, so that there is not even the suspicion that capitalism can exploit labor! If we take into account, however, that they always assume an economy with diminishing returns, it is clear that the profit still resides in the productivity surplus. How, you say? Simple: the wage of each worker must be equal to the marginal productivity, that is, to the productivity of the last worker employed, which is lower than that of the first worker. The difference is the rate of profit.

Paradoxically, Keynesian theory has shown that production also increases as wages increase. Higher wages translate into higher consumption and, therefore, investments, which, thanks to the multiplier, bring more than proportional growth in production. Finally, important studies conducted by some economists (eg WB ​​Arthur) in the light of the theory of complexity, have highlighted how in a highly complex society, in addition to decreasing returns, there are also increasing returns and that it is the latter that characterize economies modern, focused on the production of high-tech goods and, therefore, on the laws of Mooore and Metcalfe. Moore’s law states that every 18 months the processing power of a microprocessor tends to double at constant (or in some cases decreasing) costs, while Metcalfe’s law expresses an exponential function between the utility and value of the technology and the its potential customer base, stating, that is, that “the utility and value of a network are proportional to the square of the number of users”. This means that in addition to a certain critical threshold, as the interactions increase, productivity increases at exponential rates. The interaction between Moore’s law and Metcalfe’s law triggers the law of disruption. This break consists in the gap between the exponential growth of technology and the incremental growth of social systems, each time calling into question the organization of production. Finally, it must be borne in mind that, according to the theory of complexity, a system can evolve along an infinite and open trajectory but confined to a finite region, without going over the points already occupied (i.e. past events never repeat themselves). But this is a whole other worldview, which surpasses minds possessed by the linear spirit.

Source: https://www.krit.com/blog/network-effects-defensible-product

[1] Malthus, Essay on the Population Principle, in Economist’s Library, Second Series – Special Treatises, Vol. XI-XIII, Printing House of the Unione Tipografico-Editrice, Turin, 1868, pp. 5-7.

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