Growing Pains

It's said that the value in studying history is in being able to avoid mistakes of the past - but that never seems to happen. Instead, we end up recognizing that people in the past made the exact same mistakes we are making today, and at least find some consolation in the fact that we are not the only ones to have been so painfully stupid.

Case in point, I've been reading David Ricardo's Principles of Political Economy, which was written in 1821, and have recognized that much of the turmoil of the modern economy derives from the same sources that caused problems in another land, two centuries ago. They probably happened well before that, but no-one thought to write it down for future generations ... or perhaps they merely had the wisdom to recognize that there was little point in writing it down, because future generations wouldn't accept the fact that their "new" ideas were really just a rehash of old ideas, and that the old ideas didn't work out so well the first time.

As an example, take Ricardo's chapter on Machinery. At the time Ricardo was writing, the industrial revolution was gathering steam - in some cases, literally gathering steam, in the boilers of steam engines that mechanized industrial production. This meant that a greater quantity of goods could be produced by a smaller number of workers, and that the net result would mean that goods were available in greater supply and cheaper prices.

How can that not be good for everyone? Quite simply: if producers need fewer laborers, it creates widespread unemployment; so while there is the capacity to produce a greater number of goods, there were less people who were able to purchase those goods once they have been purchased.

When technology is introduced in broad manner, it creates unemployment in a broad manner, and sends the economy into a tailspin: producers implement technology that requires fewer workers, people whose jobs have been eliminated lose their income and cannot purchase the products, producers (even those who have not benefitted from technology) need to produce fewer products, so they lay off more workers, even more people no longer have income to purchase products, even fewer products are purchased, and so on.

Since Ricardo's book is about political economy, he goes into detail about the ways in which the State panics and attempts to legislate itself out of the problem - with tariffs, subsidies, price controls, wage controls, and all manner of "cures" that only serve to prevent the economic system from making the natural adjustment to restore stability. I don't see going into that here, as I'd like to keep this notebook clear of political topics, and Ricardo does a good enough job of explaining them in the original manuscript.

The point I'm reaching for is that the economic troubles of the present age are merely echoes of the past, lessons that should have been learned but have instead been ignored, and as such, the ideas of "old" economists still have value centuries later, thousands of miles away, and in an economy people claim to be so different that the lessons of the past no longer apply.

And to compound the irony, Ricardo made the very same observation of the panic in his own age. Long before industrial machinery put many craftsmen out of work, the use of horses and oxen put many agricultural laborers out of work. Ultimately, the result was beneficial, and the welfare of society as a whole was greatly improved, but there were decades during which many felt the growing pains of technological advancement.