Thursday, January 23, 2014

The Society of Fallen Men

Occasionally, something not directly related to the topic of the book I’m reading grabs my attention.  It happened the other day while reading Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (2011, p. 10), by Barry Eichengreen.

The topic was money, or, more accurately, currency.
 There was no standard US currency, no US Dollar, until the 19th century.  Before then, colonists bartered and used Spanish gold dollars or certain commodities as legal tender.

A case in point is Virginia, which for a short while adopted tobacco as its legal tender.  What ensued was typical enough of fallen human nature, economic incentives and the person’s relationship to government to make me shake my head.

What would you expect to happen when a dominant crop, tobacco in this instance, is declared to be money?

That’s right: Virginia’s farmers planted more of it. 

You can imagine their individual thought processes.  “If I plant more of it, I’ll have more money.  I’ll be able to buy more things and live better.  I’ll be rich!”  Suspecting that neighbors might do the same thing, perhaps they even thought, “We’ll all be rich!”

Which grade of tobacco would you expect planters to grow, given no distinction between higher and lower grades of tobacco in the currency markets?  You’d be right if you guessed the cheapest, easiest one to cultivate, namely the lowest grade.

The problem was that farmers, thinking and reacting alike, produced more, inferior tobacco in order to reap the rewards of the system’s incentives (n.b., loopholes are incentives).

What do you suppose happened next?

That’s right, inflation!  The supply of money increased, but the supply of goods to buy with it didn’t.  When too much money chases too few goods, the price of those goods rises.  The purchasing power of a given unit of currency—a bushel of tobacco in this case—goes down.  (Not to mention, the joy of settling down with a pipe goes up in smoke!)

A meme I recently saw captured this dynamic simply and succinctly.  Imagine a hypothetical economy of $100 in which a happy meal at McDonald’s costs $1.  If the currency is revalued to $150, the cost of the happy meal at the same level of production will correspondingly rise to $1.50.  The extra $50 of value in the economy is illusory; it will be eaten up (so to speak) by higher prices.

Since tobacco didn’t buy as many goods as before, and the quality of the leaf deteriorated, the value of every farmers’ crops declined.  Farmers complained.  This wasn’t what they’d bargained for!  Each had expected to reap a windfall.  Instead each wound up chasing the wind.

Can you imagine what they did next?  You’d be right if you said they ran to the government to fix the problem, the General Assembly of Burgesses, the representatives of Virginia’s agricultural districts.

That’s what people do, at least those with clout and access, when they want redress, or to ensure monopoly privileges or special treatment.  What better way than to have a law passed, even better if the campaign can be framed in the name of fairness or some high-sounding cause, e.g., The Purchasing Power Protection Act?

In this particular case, the Assembly considered various measures to restrict the cultivation of tobacco.  You can imagine the proposals.  Farmer Jones likely suggested restricting increased output to farmers on Main Street, which he happened to live on.  Farmer Smith likely suggested that only farmers employing a certain type of labor, the type he happened to utilize, should be allowed to grow more tobacco. 

The varieties of a facially neutral, yet discriminatory and self-serving, law are endless.  History is rife with examples.

Probably few, if any, of them arrived with a plan to restrict everyone’s output.  If someone had proposed setting aside an exception to production limits for the most needy, each farmer would have thrown on sackcloth and ashes and brandished a tin cup.

The legislators were themselves agricultural men with their own interests to consider and pursue.  The problems proved to be intractable, the individual interests too widely dispersed.  In the end, no one proposal or block of proponents commanded a majority; the Assemblymen could not agree.  No decision was reached, no legislation passed.

It’s worth considering that enlightened farmers might conclude that the solution, like the problem, lay within their own hands.  Voluntarily restricting and maintaining a steady supply of tobacco, of money, would better serve each farmer’s overall interests than myopically pursuing his first impulse to plant more crops. 

Naturally—given fallen nature, that is—each would prefer for everyone but himself to maintain steady production.  That would give him a private printing press.  Why would others agree to that, though?

Assemblymen, rather than attempting to make and impose a rule, might have brought farmers together and advised, even exhorted, them to work together.  They might have counseled that shortsighted selfishness and greed underlay their problems, and reminded them that pigs get slaughtered.

Unchecked passions being what they are, some farmers likely offered emoluments (e.g., bribes, votes, campaign contributions, election muscle, public support) to shape favorable legislation.  In a world of lawmakers motivated only to serve the common good, that wouldn’t work.  In a world of fallen men (and women)—that is, our world—it too often, not to say always, does.

Expanding and further empowering government to impose solutions, or kicking the dispute up to higher levels further away from the protagonists, exacerbates rather than remedies the problem.  At the end of the day, this course only raises the cost of emoluments.

In this historical instance, no one interest was able to impose its will on others in the name of law, i.e., to meet the price.  What would you expect to happen next? 

You’ll be disappointed if you thought that reasonable men peaceably worked out their problems amongst themselves, or that government shepherded them to a satisfactory resolution.

Farmers rampaged through their neighbors’ fields and destroyed their tobacco plants.  The text prefaces this by saying that they “took matters into their own hands.”  That is, they did what each tried, but failed, to have government do: suppress competition.

Things went from bad to worse, and the government was forced to muster the militia in order to restore order.  That must have been helpful given that rampaging farmers undoubtedly formed part of its corps.

Now that force was deployed, you’d expect the farmers to cease and desist, right?  That’s not what happened.  Rather, they took to wreaking havoc under cover of darkness.

That left the government with little choice but to crack down with police for months on end, until the lawlessness was quelled.  If people can’t control themselves, external forces have to control them.

Ultimately, the minting of the U.S. Dollar solved this type of problem while creating others.  People are still people.

We are fallen creatures.  Our defaults are set to goodness, but our software perpetually malfunctions.  It can be more or less debugged, or patched.  That is, each person can troubleshoot his or her own software.  But, the general condition won’t be permanently fixed anytime in this life.

What’s a society to do in circumstances like these?  How is it to address the fact that each and every one of its citizens, social animals to the last, is fallen?

I don’t puzzle over it much because the Founders of my country were practically minded geniuses.  They devised a political system for fallen men.  It diffused power and kept the government modest, lean and divided.  It separated powers among its federal branches, and reserved powers not specifically enumerated in the Constitution to the various states comprising the union.

They understood that what happened in Virginia happens everywhere that fallen men form community.  It happens in political society at every level of government, from that nearest the people to the furthest heights of Mount Olympus.

They didn’t seek to make men perfect.  That Sisyphean task belongs to families, churches and the other intermediate institutions of civil society.  They sought, rather, to achieve essential, political objectives while limiting the amount of damage that fallen men could inflict upon one another through political power.  They did so by limiting the scope, ambitions and dominion of government.

The system they devised embodied the spirit of the people who adopted it, and shaped the culture and destiny of the nation it constituted.  It is the air we breathe.  It runs through our veins.

Even more comforting, my Church was founded by Jesus Christ, the second person of the Blessed Trinity.  It divinely teaches that society is bound by solidarity (all for one) administered through subsidiarity, as locally as possible (one for all).

Even local politics go bad as this vignette illustrates.  Every system is flawed.  People are people, inside of government and out.  We are all fallen.  Religion, strong families and good will help keep us honest.  So does limited, local government. 

If nothing else, it makes it possible for people to attend the town hall meeting and make their voices heard.  It obviates the need for a lobbyist class to speak for them.  It makes the workings of government more transparent and responsive to the people that politics ostensibly serves.

At the very least, it keeps down the cost of emoluments.

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