Friday, September 25, 2015

Imperialism and World War I

I ended my Summer readings with Dominic Lieven’s new book “The end of Tsarist Russia: The march toward World War I and Revolution” (Viking, 2015, 430 pages). It was a good decision. As the weather gradually became cooler, bright colors lost their shine, climatic changes reflected the gloom  which everyone who reads good books about the origins of World War I must feel. Perhaps it would have been even better to have read it in late November.
The book gives not only the story of the slide into the War from the Russian perspective (and using new Russian archival sources), which as Lieven writes, is often overlooked in English-language historiography, but presents a more general  discussion of the causes that led to the War. It is that second part which interests me in this blog, although I would strongly recommend the book to those who are interested in the first part too (that is, in the world as seen from  St Petersburg after the humiliations of Tsushima and Bosnian annexation).
The fundamental reason for the outbreak of the War was, according to Lieven, imperialism. In the early 20th century world, a country could not be a great power if it did not control vast areas with their resources and  people. To be an Empire was to be glorious, and to sit among the first rank of peoples. Lieven reminds us that this "disease" was not limited to European powers but inflicted also the United States, whose conquests of the Philippines and Cuba at the turn of the century, and brutal handling of Colombia in order to build the Panama canal, are often treated lightly.
The problem with the Central Powers (Germany and Austria-Hungary) was that their  imperialism could only be exercised in Europe, because they were continental powers and came late to the scramble for colonies when most of the “unoccupied” land was already taken. But the problem with being imperialist in Europe was that one unavoidably had to clash against another great power. As Lieven writes, so long as great powers were in conflict in Africa (the two Moroccan crises),  global war was unlikely: Africa and even Asia, were not sufficiently important to the Europeans to risk a general war. A compromise could be found (after all it was other people’s land anyway).  Only Europe could produce a world war.  
This continental imperialism  was even more perilous for the world peace when practiced by Austria that exhibited two features shared by no other great power. It was a multinational empire with constant conflicts between its nationalities and in a permanent search of a constitutional solution to this aporia (a feature which it shared with Russia), but it was also an empire in decline (a feature which it did not share with Russia), and was perceived as such by itself and by the others. It thus needed splendid external conquests to convince itself and the world that this perception was false. So in order to “box” in the top league the Habsburgs had to show muscle. This led to the paranoia and the overstretch, and  ultimately to the Great War.
Now, what I find most interesting is Lieven's unambiguous singling out of imperialism as the culprit.  (Towards the end of the book, p. 339,  Lieven writes that one cannot but be  surprised that the world war had not broken out before 1914). This  dovetails nicely with the theory  of imperialism as proposed by Hobson, and then expanded by Rosa Luxemburg and Lenin to explain the outbreak of the War (even if Lieven in Chapter 1 dismisses this view--to endorse it implicitly only a few pages later  when discussing the retreat from the free trade of all powers save England).  
I use this late Marxist view on the origin of the war to explain in my forthcoming book (“Global inequality: A new approach for the age of globalization”, Harvard University Press, April 2016)  how the Kuznets cycle of increased inequality was broken by the malign forces of the Great War. Lieven’s definition of imperialism is about power:  “…empire is first and foremost about power. Unless a state is…a great power, it cannot be a true empire. But empires are great powers with specific characteristics. These include rule over huge territories and many peoples without the latter’s explicit consent” (p. 4). This “power-political” theory of imperialism somehow hangs in the air: it does not explain why being an Empire was important to the ruling classes nor what tangible benefits (in addition to the mostly symbolic) they derived from it.
What Marxist theories of imperialism have on top of what Lieven proposes is that they firmly account for imperialism as the product of domestic economic conditions, and especially the insufficient aggregate demand which is, in turn, the result  of inequality in the distribution of income and wealth. To any visitor of (say) Bath in England, where I was recently, that power conferred by imperialism is very visible, and it is economic. It is from the money made from conquests and slave-cultivated sugar plantations that many of the beautiful summer houses in Bath and elsewhere in Europe were built.  So to be an “empire” provided manifest and numerous  economic advantages.
This is a review, done from this particular, economist’s angle. But if I were to write a more general review, I would have also discussed other aspects of Lieven’s book. Let me conclude by very briefly mentioning  a couple, mostly for those who may be interested to read the book as a more conventional narrative of the origin of the World War I. (By the way, Lieven’s book is, in my opinion, vastly superior to the recent centenary harvest of World War I bestsellers. It is a very good complement to Ferguson’s 1999 Pity of War about which I wrote here and which hardly mentions Russia and the Eastern front at all.)
In the beginning of the book, Lieven argues that the war was, at the origin, a war over the control of Eastern Europe (Russia vs. Germany) and that Ukraine played a key role on that battlefield.  He is aware that it might lead to the accusations of unabashed “presentism” (back-casting the present into the past) and defends himself from it. But in reality, he never takes up this thread seriously, and although we learn of Ukrainian Galician nationalism and how it was stoked by the Austrians (as a counterweight to the Russian support of pan-Slavic movements within the Habsburg Empire), the importance of Ukraine just fades. Paradoxically, at the end of the book Lieven explicitly discounts it himself (p. 387).
Lieven is right in his critique of the Versailles peace agreement (Chapter 8) as having excluded the two preeminent European powers (Germany and Russia). Once America withdrew beyond the Ocean and England was too busy with her colonial possessions, the maintenance of the entire arrangement fell on to France, much too weak for that role.
The narrative of the slide into the war, which covers the period from the Berlin Congress in 1878 to August 1914, has, as all such narratives, strong elements of a Greek drama. The sense of hopelessness is heightened by the realization that although we know today the huge destruction that the War visited upon Europe and its civilization, if we were in the shoes of the key policy makers of the time, with their visions of the world, it was preciously little--close to nothing--that we would have changed to the course of  events. So even the knowledge of how catastrophic the war was for all the sides would not have been sufficient, if history were somehow to be replayed today, to avoid bringing us back to this melancholy moment of July 28, 1914. This is the most depressing part of Lieven’s book, and he was, I think, right to end it on a very pessimistic note where today yet an even greater, nuclear, calamity that might end the entire civilization cannot be excluded.

Friday, September 4, 2015

99 percent Utopia and money

My good friend and co-author Leif Wenar, in his first tweet, asked this question: “Friends, a utopia query. Keep human nature fixed. Imagine the best possible world. Does money exist?”  I could not sleep last night so I decided to give it a thought.

Let’s start with money. What is its central function? To coordinate plans of individuals and companies and to pull resources in the “right” direction. When I go to Starbucks to buy coffee, and have money to pay for it, I know that  there will  be a person willing to make that coffee for me, and there would be companies delivering coffee grains because they all expect to get money from me. So money enables us to make our plans consistent, starting from the coffee growers all the way to the final consumer.  

Who is then  going to do the coordination in Utopia if there is no money? But, before we answer that question,  let’s go back and look at what is Utopia. I will use Marx’s definition given in  the “Critique of the Gotha program”: Communism is the situation where “the productive forces have increased with the all-around development of the individual, and all the springs of co-operative wealth flow…abundantly—[so that]…the narrow horizon of bourgeois right [can] be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!”. Utopia is thus a situation where goods and services are absolutely plentiful, there is no scarcity, and we can take as much of them as we like.

Now, some may stop me right there: this will never happen, they will say. But let’s not go that fast. Notice that when I go to my local Starbucks I have already entered a bit the “coast of Utopia”. I can get there an unlimited quantity of water, ice cubs, water cups, paper napkins, honey and milk, all for free. They are all laid out for all customers (and even for those who are not customers but just walk in) to take in unlimited amounts.  There are other goods that have almost entered this cornucopia in our lifetimes: water, electricity. When I need to recharge my laptop I can count on getting free electricity from practically every store, train, or airport. There are of course other services like museums and open-air concerts that  one can enjoy for free but they are a bit different because somebody else has paid for them. But I want to mention it here because we shall find them useful in a moment.

So, there is, I think, already now a limited, but growing, number of goods and services whose marginal cost of production is so low that they are practically free. (The average cost of production is not zero, but to an individual consumer these goods appear as free.)  Consider now the behavior of people. Do they go to Starbucks stores and fill  their pockets with free paper napkins or grab free ice cubes? No. Do they go to free open-air concerts day after day and fight for the spots? No.  Once you know that such goods will be plentiful and free, you do not keep an unreasonable stock of them, nor do you fight to get them. You know they will be around when you need them.

So far we have I  think made two important conclusions: there are goods that fall into the category of “Utopian goods” and behavior that people exhibit towards these goods does not include hoarding, wanton destruction or wastefulness.

Can we imagine that with economic progress more and more goods begin to fulfil this condition of Utopian goods? I think we can. Surely 40 or 50 years ago, you had to pay for the smallest piece of paper or paper napkin, not get it for free as now. (There is still a difference between the US and Europe in this: European Starbucks stores make it more difficult to get  free paper napkins.)  You even had to pay for a cup of water in an inn on a dirt road. Not today. So perhaps one day we shall walk into a Starbucks store and be given as much coffee for free as we like in the expectation that we shall buy some other, new fanciful product. But notice that when this happens, coffee will have joined paper napkins and ice cubes on our list of Utopian goods. So the list will be growing.

Extend this many years forward and assume that lots of the goods that we consume today eventually become Utopian. But who is going to produce them? Will not people have to be given some money-like coupons showing how many hours of work they did, coupons that would entitle them to goods and services? This does not make sense however because all goods, in any quantity, will be free to all, so coupon or no coupon you can get as much as you like. This then means that labor has to be entirely voluntary and free, not “paid” in any form. That too is not impossible to imagine. I am writing this blog for free. Of course, I hope to enhance my reputation (or to drive into the ground) but there is not a single good or service that I will get from this writing. You will also read it out of interest, not for any pecuniary reason. Many activities can be done for free, simply because people like to do them. Many other boring, repetitive or hard jobs  that people do today will be done by robots. Controlling robots will require a minimum of work—perhaps writing a software code about how they (the robots) should do certain tasks, a thing, which I am sure, thousands of smart young people will compete to do for free.

When I go to a restaurant, who is going to make the food or serve me?  Partly robots, and partly people who like to be chefs or to provide good service. Actually, the quality of some goods and services may go up compared to what it is today simply because people do a better job at something which they like rather than at something they are (merely) paid to do.

But here I think we run into our first problem. There will be always better and worse restaurants simply because the chefs will not be the same. But since the price paid at every restaurant is the same (zero), there will  be no mechanism to distribute customers between better and worse restaurants except through queues. So we shall have shortages for certain goods and services. The shortages will be, like in a centrally-planned economy, “solved” through queueing..

The second problem appears at the level of jobs. We may be able to fill 90% of jobs by robots, 9% of jobs by people  who simply like to do these jobs, but 1% of jobs that are hard or done under unpleasant conditions and cannot be mechanized  will be always difficult to fill. So, we shall have to give something to people who do these jobs: we shall have to attract them to do the work. But how to attract them if everything is free anyway? So, money under the guise of some special coupons would reappear. Perhaps we could give these latter-day Stakhanovites coupons which would allow them to jump the queue in the restaurants. Perhaps something else. But whatever we do, a rationing mechanism, implied by money, will be back in that segment of the system.  

Finally, technological progress. If we assume that technological progress has stopped, I think the idea of moneyless Utopia is ultimately, at least conceptually, almost possible. But if technological progress continues with people inventing new things simply out of curiosity, that is without any material interest, these new goods, always  scarce in the beginning, will have to be rationed. So to ration them, we shall need money or quasi money too.

In a stationary economy, the range of goods that are available for free and in unlimited quantities, and the range of jobs that are performed for free can be very high. We may have a 99% Utopia. But not a hundred percent Utopia.

But in a growing economy, Utopia becomes much less realistic. The faster we grow the greater the number of Utopian goods and closer we seem to be coming to Utopia; but also, the faster we grow the more we invent new goods that are necessarily short in supply, and simultaneously the further we get from Utopia. Thus the fundamental nature of economic progress reveals itself in Leif’s question: economic progress is making us richer daily, but leaves us equally unsatisfied. For full happiness is possible only in stagnation.