Perhaps the change that has the most impact when moving from a hunter-gatherer existence to one based in agriculture is the simple fact that agriculture generates a surplus. A hunter-gatherer tribe generates roughly the amount of value in a year that they consume, whereas with agriculture a group of farmers can generate much more value than they consume in the same period. Once you move from an agrarian society to an industrial one, the ability to generate such a surplus increases.
From a simplified macro-economic perspective, the reason for this is quite simple. A hunter-gatherer tribe has little left over for positive investment, they create enough value to feed themselves, and cover replacement investment (fixing their weapons, clothing and equipment) but they do not generate enough to improve their ability to produce. An agrarian society generates enough value to feed themselves, clothe themselves and invest in things that expands their capacity to produce. An industrial society generates enough to cover their basic needs and invest greatly in productive capacities with leftover resources for excess consumption.
Utilizing the simplified C-I-S model for a nation, where C stands for consumption, I for Investment and S for Saving, we could argue that theoretically for a hunter-gatherer tribe 90% of their generated value goes to consumption, and 10% to investment. For an agrarian group, perhaps 75% goes to consumption, 15% to investment and 10% to saving, and for an industrial population 50% is consumed, 35% invested and 15% saved. These are not empirical numbers, but serve to symbolize the development of human economics.
Gross investment is composed of net investment which is spending that increases the availability of fixed capital goods, means of production and goods inventories. For instance, buying a new building, new machine or increasing your inventory of products, and replacement investment which is replacement of depreciated capital goods. As an example, buying a new house is increasing the availability of fixed capital goods, maintaining that house over its lifetime is a case of replacement investment, as you are fixing the wear and tear of use.
One of the key elements is that if investment falls below replacement investment levels, then the ability of a group to produce goods and services goes down. Put very simply, if a two man carpentry crew has 2 hammers, and break 1 hammer a year on average, but do not make enough money to replace that hammer, their productivity will decrease.
The Foundation of Modern Life
The main cause of our modern society has been the fact that group structures have enabled a constantly increasing surplus of production that have permitted us all to increase our standard of living. Even the poorest people in modern western countries have a much higher standard of living than even nobility had 500 – 600 years ago. In order to enable such growth, we have all had to learn to cooperate better and to specialize. If we go back a few hundred years, most people were a jack of all trades who could do many different things, because they had to be their own carpenter, seamstress, cook, and many other things. This was one of Adam Smith’s realizations in “Wealth of Nations“, that it would generate greater surpluses if workers were specialists instead of generalists.
A person who is 100% dedicated to being a farmer, blacksmith or seamstress, will over time hone their skills to a point where they can produce both more goods but also better goods than someone who is 50% dedicated to farming and 50% to blacksmithing. Perhaps, even more importantly, if a person is also 100% focused on blacksmithing, his investments will go only towards equipment that makes him better at blacksmithing, not to a mixture of farming equipment and blacksmithing equipment. So instead of having two men half-ass two things, each man whole-asses one thing, and then uses the resources generated from that one thing to buy things from other producers. So the blacksmith sells his goods to the farmer, and the farmer his goods to the blacksmith, overall both parties are better off because each man can produce the goods the other requires at less cost than they could do themselves.
Government taxation then takes a cut out of all production within its borders. The revenue generated by the government is then divided between consumption, investment and savings. Purchases of goods and services to directly satisfy individual or collective needs of the population are classed as consumption expenditures. Acquisition of goods and services intended to create future benefits are classed as government investment. In addition, there are transfer payments which is simply redistribution of income and wealth made without goods or services being received in return.
There are many views on taxation and government spending, and dealing with them exhaustively is beyond the scope of this essay. The purpose of outlining these mechanisms is to show that a modern economy is based on generating surpluses that are then divided among investment, consumption and saving.
A Game Of Economic Chairs
One of the more interesting ideological divides in modern politics is regarding the role of government. In communism, government is ubiquitous, and takes care of the population from the cradle to the grave. The core idea being that if we aggregate the total production on a population level, then divide it back out, we remove differences in outcome. The old Marxist doctrine of “From each according to his ability, to each according to his need” summarizes this perspective, in that everyone produces as much as they are able to, and receive as much as they require. However, this ignores the fact that a great majority of people will always be able to consume more than they produce.
In a modern country, parts of the population will be net-negative, and some net-positive. This simply means that some people are going to produce more value in their life than they get in government goods and services, while others will produce less value than they get in government goods and services. Even within a small tribe of hunter-gatherers this is going to be the case, some hunters will be better hunters than others, some gatherers better gatherers than others. If a tribe over time develops to the point where a majority are producing less than they consume, the tribe will face many hardships and potentially die out because their consumption is greater than production.
For instance, if a single hunter in a tribe that has 10 hunters, has to produce 90% of the meat by himself, the tribe is incredibly fragile due to that dependence. It would be in the best interest of the tribe to retain that hunter at any cost, at the same time, should he get sick, have an accident or decide that he’s better off by himself, then the tribe would lose 90% of its food supply.
This is no different than a situation where large portion of the population of a modern industrial state produce less than they receive. In this case, government generates no surplus, and in the worst case scenario end up spending more than it takes in. In such a situation the government has to find a way to finance the goods and services the people want, which is when they start taking out major loans, or they have to cut back on goods and services. This was the situation that manifested in 2008, when many countries had been financing increasingly extravagant government consumption through borrowing money.
A private person, business or government that uses Mastercard to pay off Amex, and Amex to pay off Visa, is playing a game of economic chairs where someone ends up not getting paid. This is what happened in 2008, and previous bubbles. One of my mentors once made the statement “Size matters, if you owe the bank $10,000 that you can’t pay, you have a problem, if you owe the bank $100,000,000 that you can’t pay the bank has a problem“.
Beasts of Burden
When one looks at the data from the New Zealand study I cited in an earlier essay, which showed that men have a positive net impact (they pay more in taxes than they get in benefits) and women have a net negative impact (they pay less in taxes than they collect in benefits) over a lifetime, if this data is also representative for other western nations, one understands why retaining men in a nation is important. Men create the surplus, without men the nation is running a constant deficit. While it’s possible to do this for a short time, we’ve all observed the result of uncontrolled deficit spending in countries such as Greece and Venezuela.
The old books of social rules that govern intersexual dynamics and society at-large, are constructed to ensure stability and survival for the group. For instance, when a majority of the adult population are living in long-term committed monogamous relationships with children, this has a series of positive economic effects. The first, and perhaps most important effect is that it ties the men to a country to a much higher degree.
A second effect is that it forces a man to become more productive, because he also has to finance the raising of his children. The combination of being tied to the country and having a family to feed, means the man must work more, something that statistics support. Married men do earn more than unmarried men [1, 2]. A third factor, is that it privatizes the costs of raising the next generation of worker bees, but makes the income public.
A man’s income after taxes, is spent on raising his children, which gives rise to a new generation of taxable persons. If the government has to finance the raising of children, that means less money left over for other things, and/or a higher tax rate to cover the costs. This also makes it quite obvious why the state wants women to work, a stay at home mom produces services that have value, but they are not taxable by the government. If women work full-time, and instead hire other women to do the tasks traditionally done by a stay at home mother, then the government gets a cut from every link in the chain.
Summary and Conclusions
I’ve spent quite a lot of time asking myself how certain social structures come into existence. Reproductive communism becomes a norm when you want men to be invested and dedicated to produce resources for their family, with the side-effect that they also produce taxable income that can then be utilized for the benefit of the group. Each individual man doesn’t matter, what matters is what he is able to produce for the group. In this sense, for the social machine to work, it requires a certain level of cogs depending on complexity and desired volume.
Our modern economy is reliant on a remarkable number of cogs in a grand machine. On the top level, this means that GDP must always be growing in order to finance an increasing amount of public expenditures and debts, which translates into a need for ensuring that enough worker bees are created with every generation. Government at large does not care about the fates of individual men, what they care about is their future tax revenue and GDP. On more pragmatic levels, real value must be created on some levels in order to finance the circulation of money that forms GDP. You could theoretically pay a surgeon $3 million a year to paint your portrait instead of doing $3 million to perform surgery, and the effect on GDP would be minimal. However, much more real value would be created if he performed surgery instead of painting your portrait.
The reason why politicians are so worried about the aging population, and the dwindling population in western countries is simply that production and thus tax revenue will drop. If one adds the increasing number of men who are “dropping out” of school and work, the population of dwindling worker ants is quite substantial. The hope of government was that women in the workforce would provide a competitive advantage, an increase in GDP, and thus an increase in the taxable population and for a short while it did.
However, modern western governments find themselves in a self-created catch 22. Women in the workforce increases the taxable population, thus enabling more public spending, it also increases the workforce quite a lot in the short term. However, women that are in school until they are about 25, then spend 3 – 5 years in the workforce, and only start to marry and settle down in their early thirties means a short reproductive window. This combined with the simple fact that the cost of having children has increased, requiring people to work more hours in order to finance the children, means that fewer children are born, and less parental time is invested in children. Fewer children, means a smaller workforce to finance public expenditures in the next round. Thus, one must ask if like many companies have done, government has created a great surplus in the short-term that undermines long term stability and prosperity.