In an earlier post, I mentioned the argument of Michael Hiscox that whether investment capital is mobile or immobile will play a big role in the way that political conflict over the economy plays out. The truth is, Hiscox argued that the same basic principle applies to all the factors of production.
Human capital too can be of general usefulness, like being able to read, or it can be highly specialized, like knowing how to audit the internal reports of a McDonald’s franchise. Empty land near a city could be used to grow crops or graze cattle, or it could be repurposed for housing or a factory; but land in the middle of a swamp can’t be used for much except fishing or peat harvesting. Even people themselves might be mobile or immobile, depending on how easy transportation is between where they are and where they might want to be. (Hiscox references the Law of One Price in describing this tendency.)
We noted in the earlier post that if capital is inflexible, then it cannot easily shift between industries and people will fight hard to defend their own industry against competitors; politics thus features intense lobbying and narrow sectoral factions, with the bosses and workers largely allied to defend their own niche. By contrast, if capital is flexible, then if one industry is having trouble, investors will simply shift their capital to a more profitable industry with a minimum of fuss. Thus, politics shifts its focus to broad, class-based coalitions (workers versus owners, haves versus have-nots). (Additionally, flexible capital is better able to serve as collateral for lending, while in its absence entrepreneurs are forced to rely on equity finance, which is more difficult to get.)
Essentially the same is true for the other factors of production. Labor and land, too, have different political effects based on how easily they can be repurposed. Ease of transportation plays a particular role in allowing resources to equalize between different regions or different industries. So does the state of technology; if workers can easily adapt to the machinery in different industries, it is much easier to shift people around than if machinery is highly specialized and takes a long time to master.
Hiscox notes that political conflicts over the economy thus follow some consistent patterns based on the level of technological development of a society. In a preindustrial society, the factors of production are relatively immobile: knowledge of a trade doesn’t transfer well, most industrial capital is immobile and difficult to repurpose, and transportation is slow and risky. In particular, money itself (e.g. gold and silver bullion) is tricky to move around, which limits the ability of investment capital to flow into poorer regions where there might have been good uses for it.
As a result, capital and labor do not readily shift between industries or regions, with the result that you often see guild rivalries and conflicts breaking along professional lines, with class conflict as such usually taking second place. (This does not mean that it never happens; for example, the Bauerenkrieg or Peasants’ War of c. 1524 was largely kicked off when German nobility put in place new laws on land ownership to force the free peasants into serfdom.)
Early industrialization, by contrast, makes factors of production much more mobile. Transportation gets much easier, reducing frictions in shifting factors of production between regions or from one use to another. Unskilled people can more easily move between industries, since basic factory work is similar across industries in this stage of industrialization. Similarly, advanced education becomes useful in a wide range of industries, and someone initially educated to be a priest could readily become an engineer, scientist, diplomat, and statesman. Capital likewise becomes much more mobile, as much industrial equipment is relatively multipurpose.
It is no accident, says Hiscox, that mass politics based on class divides becomes much more salient in the period of early industrialization. (For example, Marx’s argument about the role of unemployed workers as the “industrial reserve army” of capital would make no sense in a preindustrial economy; unemployed weavers could not magically become potters or shipbuilders.)
Later industrialization causes factor mobility to decline again in relative terms. Human capital becomes much more specialized (for example, a growing number of Americans today are seeking master’s degrees, professional degrees, and PhDs, finding that a “mere” bachelor’s degree is not enough for their needs). So does productive capital (for example, the cost of building a single semiconductor plant can be as high as $10 billion!). Also, specific forms of human and technological capital can only be used with each other—a computer programmer is useless without a computer, and an astronomer cannot function as such without massive telescopes. So, says Hiscox, class-based political struggles tend to decline, and industry lobbying rears its head again.
(Hiscox notes that government policy can improve factor mobility, as in Sweden, and allow class coalitions to persist—and at the time of his writing, Sweden was able to respond to economic shocks much more rapidly as a result, particularly through wage equalization between industries.)
Since Hiscox wrote, I would argue that we have seen a relatively unbalanced situation develop where parts of the economy are getting more flexible, and other parts of the economy are getting more inflexible. It is far easier today to invest in, say, a broad-based ETF of Chinese companies than it was thirty years ago, and just as easy to yank your money out with a few mouse clicks. But building a factory now requires highly specialized robotic equipment, some of which is impossible to use in any other industry. A general grounding in basic computer use or marketing skill can be applied in many different industries; and at the same time, to be a physicist or biomedical researcher now virtually requires getting a PhD first, where in earlier times you could get started with a bachelor’s degree or even be entirely self-taught.
No surprise that our modern politics feature a weird mixture of class-based politics and sectoral-lobbying politics, in a volatile and high-temperature mix that makes it much harder for any political conflicts to be resolved.
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At any rate, Hiscox’s model gives you a handy lens to think about how factor mobility can affect the politics of your own invented worlds. In particular, if you want to have class conflict in your story, make sure that the economic environment is conducive to such conflict, as opposed to conflict between competing guilds, for example.
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(This post is part of Politics for Worldbuilders, an occasional series. Many of the previous posts in this series eventually became grist for my handbook for authors and game designers, Beyond Kings and Princesses: Governments for Worldbuilders. The topic of this post belongs in the planned second book in this series, working title Wealth [Commerce?] for Worldbuilders. No idea when it will be finished, but it should be fun!)