Category Archives: History

Wealth, Power, and Social Orders

26 Thursday Apr 2018

Posted by in Uncategorized, Writing, Politics, History, Economics, State Formation, Politics for Worldbuilders

≈ Leave a comment

Tags

, , , , ,

Suppose there were two people on a desert island. One owns a crate of food; the other owns a gun. What is going to happen?

Very shortly, the person with the gun is going to also “own” the food; the other person might be dead, or might be reduced to the level of a slave. (In the immortal words of Clint Eastwood, “There are two kinds of people in this world…”)

This illustrates the fundamental problem of property’s relationship to power: if an actor has a lot of power but little wealth, it will often try to gain more wealth through violence. If an actor has much wealth but little power, it will often try to use its wealth to gain power—if only for self-defense! And this dynamic has played out throughout history, leading to endless cycles of bloodshed and misery.

To survive, as North, Wallis, and Weingast (NWW) argue, groups of people need to come up with some solution to this danger—a way to align the interests of those who have wealth and those who have power. This is called a social order.

NWW identify three kinds of social orders: the foraging social order, the limited-access or “natural” social order, and the open-access social order. Foraging bands deal with the problem of wealth and power very simply: group members have roughly equal wealth, physical strength, and social status. There is relatively little incentive to take more with violence, as the other group members will unite to destroy you.

As we will discuss fully at another time, egalitarian bands use several techniques to enforce social equality: malicious gossip, mandatory gift-giving, and the threat of splitting the group if one faction becomes too powerful, to mention a few. However, these methods do not guarantee success; it often happens that a respected chief is able to accumulate enough personal loyalty, wealth, and prestige that he can gain lasting control over the group, which is passed on to his descendants.

That brings us to the limited-access order, which has been the predominant mode of social organization throughout the history of states. In a nutshell, those with power are also given control over wealth as a consequence, in a tacit agreement between elites in order to minimize conflict between them. In the words of NWW, “By manipulating privilege, interests are created that limit violence.” The most obvious example was European feudalism, in which brigands with large armies “went legit” and set themselves up as landed aristocrats, along with supporting networks of bureaucrats and clergy to help them run things. As NWW put it, “In all natural states, economics is politics by other means: economic and political systems are closely enmeshed, along with religious, military, and educational systems.” One could also look at Soviet-style communism, in which wealth flowed to the regime leaders by virtue of their control over the military and police apparatus.

A key aspect of the natural order was that impersonal law and procedural equality did not exist. The regime was not a neutral arbiter of people’s social and commercial disputes; it existed to defend the privileges of the ruling coalition as a class, and thus your treatment by the regime depended on your personal relationship with the ruler or other elites. As NWW put it, “Personal relationships, who one is and who one knows, form the basis for social organization and constitute the arena for individual interaction, particularly personal relationships among powerful individuals.” This limited the ability for people to form complex organizations, in business or society more generally: if they could not settle disputes internally, the state would not do the job for them and the organization would collapse.

Partly, this was by design. Elites protected the value of their “rents” by deliberately restricting the ability of those outside the regime to organize groups of people. It may seem strange to us, in our society of mass organizations, but in the feudal era it was tantamount to treason to organize an independent guild of craftsman outside of the regime-sanctioned guild, or to have a town of people who swore loyalty oaths to each other. That was why English entrepreneurs needed to petition the Crown for the right to form a joint-stock corporation, for example. And in Communist or Fascist regimes, even such mundane organizations as chess clubs needed to be approved by the regime. In this way, a limited-access regime is able to retain control over economic activity and take its cut, and to prevent possible competitors from arising via new organized groups in the populace.

Again, the natural order is the most prevalent throughout history. It is almost inevitable for those with power to demand wealth, for those with wealth to seek access to power, for the two classes of people to become incestuously intertwined and then to use their power to suppress competition. Think of the relationships in many Latin American countries between oligarchs and generals. Think of the paramount business associations and unions found in much of Western Europe, organized and maintained by the state, which have the effect of protecting incumbents and squelching entrepreneurialism.

The biggest problem with the natural order, however, is that it is fundamentally unstable. If someone becomes too powerful or too wealthy too quickly, suddenly there is a mismatch between what he has and what he (or others) might want. This generally leads to a breakdown of the delicate balance of power in the regime, culminating in violence or even civil war. This is why, argue NWW, autocratic regimes tend to underperform democracies in economic growth over time: because their relatively better performance during good times is outweighed by frequent destructive episodes of civil war and social breakdown.

(This is a crucial reason why dictators need to gain control over their countries’ wealth: not merely out of greed, but to protect themselves from rich competitors. Regime outsiders who strike it rich represent a deadly threat to the regime.)

The third form of social order, the open-access order, is a historical anomaly: it first emerged only a few centuries ago in Britain, as elites gradually transformed their particular privileges into general rights (through a long and subtle process that NWW discuss in detail). This does not merely mean democracy, though Britain and the United States are the chief examples. In the open-access order, elites have no special privileges in law, and military power is removed from partisan politics or the extortion of wealth, becoming a neutral enforcer of the political system; it stays neutral because no single political or business leader has the opportunity to bring it under his or her control.

What distinguishes the open-access order, and what makes it work, is that anyone is allowed to enter politics or business, and to organize companies or political parties or activist groups without the permission of the regime. And you need both parts: political freedom is protected by economic dynamism, as new companies challenge the old leaders and displace them before they get too cozy with the government. Economic freedom is protected by electoral competition and turnover in political leadership, which makes policies that benefit the mass populace relatively more attractive to ambitious politicians compared to policies that benefit a handful of powerful companies. (See the post on selectorate theory.) NWW call this the “double balance.”

It should be noted, however, that for all its achievements the open-access order is profoundly fragile and in danger of backsliding into a natural regime. This can happen in either of two ways (or both simultaneously). First is for the government to become too powerful relative to the economy, in which case it can throttle free competition. Second is for individual businesses to become too wealthy and influential compared to their competitors or the government, which leads businesses and governments to build corrupt relationships with each other, with businesses gaining special privileges and returning the favor by keeping favored politicians in power. To a degree, such backsliding is always present (the military-industrial complex comes to mind, as does the growing political power of Google, Amazon, and Facebook). And the natural tendency is for such collusion to accumulate like layers of sediment over time.

As Mancur Olson warns in his The Rise and Decline of Nations, it is always easier to organize a small group of powerful actors to lobby government for some subsidy, than it is for the mass of the citizens to organize against them. This is because the average person is barely affected by the average subsidy and won’t bother to get involved, whereas the beneficiaries have a great deal to gain. Over time, this tendency results in a steady calcification of the economy and the government, as interest groups accumulate to feast on the populace’s wealth through direct or indirect means. The only way to prevent such decline, Olson suggests mordantly, is for an invading army to sweep away the existing corrupt relationships.

Fortunately, this invasion can be metaphorical. David P. Goldman (AKA “Spengler”) argues that American corruption declined in the 1980s, as the new tech industry displaced the existing corporate titans despite their close relations with government. The same can happen in the political sphere, if a determined political faction dismantles corrupt bargains and is rewarded electorally for it. That is the strength of the open-access system.

But it remains fragile. In the United States, we ought to be alarmed by the unprecedented decline in new business formation in the past decade, and the manner in today’s tech oligarchy is actively stifling competition—even as they exert themselves in the political sphere.

As authors, how can we use these concepts? Here are some points of conflict: growing power brings the temptation to take the wealth of others. Growing wealth attracts violent vultures, or inspires the wealthy to gain power as well. Sudden shifts in power and wealth will threaten to destabilize the balance of power in a society, with war as a likely result. (A brief glance at the history of the Congo will provide many depressing examples.) These tendencies are rich ore for story conflict, and the thoughtful author can build powerful plots from them.

Advertisements

The Power of Guiding Metaphors

19 Saturday Dec 2015

Posted by in Better Fantasy, Economics, History, Military, Politics, State Formation, War, Writing

≈ Leave a comment

Tags

, , , , , , , ,

I’ve lately been reading The Axis Grand Strategy, a book published in America during World War Two. With only light editorial comments, it presents translated writings from German military theorists and officers about different aspects of warfighting. (The editors are presenting this material, in part, as a demonstration of Nazi perfidy; they highlight passages in which the Germans offhandedly note various breaches of international law—for example, that the invasion of neutral Belgium during WWI was conceived of a decade in advance.) The book is incredibly interesting from many points of view, and even as a historical artifact itself; I did not know, for example, that the Allied powers were calling themselves “The United Nations” even during the war.

One point that the book is reminding me of is the importance of metaphors in structuring thought. Over and over again, the German authors refer to the ideal military enterprise as a well-oiled machine, operating with incredible precision down to the smallest detail. To make such a machine possible took a stupendous level of planning and organization, which had to be carried out years in advance (and which the authors describe in great detail). This was one factor that pushed German doctrine to the conclusion that to have any hope for victory, they needed to decide upon war several years before actually carrying it out, and then to direct all of their government policy and grand strategy to support that decision. That is, once the German decision for war was made, it became largely inevitable that war would result even three or five years later—because German leadership believed that such decisions needed that much lead time for the planning process to be adequate, and victory to be possible.

To be sure, the “well-oiled machine” metaphor was not the only reason that German doctrine came to that conclusion, or even the most important one. But it surely played a role, because it presented an ideal towards which to aspire.

Lewis Mumford, in his Technics and Civilization, presents a similar argument about the development of vast hierarchical bureaucracies. He writes that the age of coal had dramatic impacts not only on our economy, but on the mindset of society’s leaders. Where previously, water-powered manufacture had been relatively decentralized, coal-fired steam power created tremendous economies of scale. The most efficient method would be to tie all of your machines into a massive central boiler; this also meant that they had to be standardized, coordinated, and operated without any sort of individual discretion or initiative.

According to Mumford, the success of centralized manufacture led thinkers to imagine that other centralized projects were ideal as well—massive bureaucracies, mass armies, central planning of the economy, and so on. These people had been conditioned by the guiding metaphor of coal-fired steam boilers, and the resulting hierarchical organization of mass factories. Many would even make the parallel explicit. Individual initiative simply made a mess; better to control everything from the head. The result was the age of totalitarianism.

Economist Richard Bronk, in his The Romantic Economist, makes a similar argument about the development of the idea of equilibrium markets in economics. He says that the guiding metaphor there came from thermodynamics; in an attempt to make economics into a mathematical science akin to physics, champions of quantitative economics proposed simplifying assumptions such as “utility” or “self-interest” that could transform economic behavior into something predictable, something that could be captured in quasi-thermodynamic equations. Bronk argues that such metaphors have been played out, and the further progress in economic thought needs to borrow metaphors from the Romantics—biological processes, or ecosystems, or webs of interdependence.

Today, we netizens are conditioned to think about networks, or crowdfunding, or robots. These new guiding metaphors have in turn produced new ideas of how governments should work, or how organizations should be structured. Some of these new ideas are even useful. But in any event, they are very different from the sorts of ideas that would come from a person accustomed to steam-powered factories.

The concept of a guiding metaphor is important if you are any sort of creative thinker, whether in business or government or the arts. If you write fiction, think about what metaphors influence your characters or even whole societies. If you have a business, think about how new metaphors can suggest new products or services. If you are in government, stop trying to bludgeon your society with models of coercive government that date from nineteenth-century proto-fascism.

If you want to create something new, try applying a different metaphor.

When Do Societies Face Unrest?

02 Thursday May 2013

Posted by in Better Fantasy, Economics, History, Politics, Revolution, Self-Promotion, War, Writing

≈ Leave a comment

Tags

, , , , , , , , , , , , ,

I have just read a recent journal article by the brilliant scholar Peter Turchin, in which he elaborates on his theory of the dynamics of social instability over time and tests it on the United States from 1780 to 2010. Put briefly, his theory holds that one can expect a society to suffer greater social violence (such as riots or lynchings, as opposed to routine crime) in a relatively predictable cycle. The larger “secular” cycle occurs every 150 years; a smaller cycle of violence occurs roughly every 50 years, superimposed on the secular cycle. Thus in the United States, we had peaks of societal violence near the years 1870, 1920, and 1970, with the Civil War being the peak of the secular cycle. Turchin forecasts that the next secular peak should hit sometime around the year 2020. Turchin’s previous work has detected the same sorts of cycles in societies from ancient China to revolutionary France.

Of course, detecting a pattern does not tell you what has caused it. Turchin’s theory for when violence intensifies depends on two major factors. Both of these factors might derive from excessive population growth; in the early version of Turchin’s work, he was focusing on agrarian societies in which population growth leads directly to food shortages. But now that he is considering Industrial societies, Turchin is focusing more on the immediate causes laid out below.

First, whether from excessive population growth or technological disruption or whatever, there emerges a labor glut. The average wage drops in response, leading to diminished standards of living. Thus you see larger segments of the populace who are in a precarious situation, with the potential for violent outbreaks such as labor struggles, or ethnic competition with minorities, or political upheaval.

Second, there emerges “an oversupply of elites.” This can happen for a few reasons, and Turchin focuses on the economic one. The low cost of labor means that it is easier for those on the top to become far wealthier than they might have done in a more normal setting, leading to the accumulation of vast fortunes and a polarization of society. A consequence of this is that there is much more competition for the leadership positions in society, such as control of government offices. Politics becomes more nasty and partisan, leading in extreme cases to violent rivalries between elite factions struggling to secure their hold on power. Such violence is made easier by the larger number of poor, desperate people in society who can serve as a demagogue’s muscle.

In Turchin’s research, he finds that oversupply of elites has the strongest association with societal violence. This is easy to understand when one looks at places like the Philippines, in which politicians routinely employ armed militias to attack competitors (a horrifying example was the Maguindanao Massacre of 2009), or the Congo, which has been wracked with coup after coup. But even in the United States, a surplus of would-be leaders will tend to produce extreme ideologies, such as militant unionism in the 1920s, or the present upsurge in eco-terrorism.

I think many people, writers among them, mistake the relationship between cheap labor and exploitative rich. Often, a super-wealthy class emerges as a result of lots of poor people, who make it easier to be rich—that is, to benefit from the production of lots of other people. This is not to say that an exploitative class won’t try to keep everyone else poor, once it emerges. But the dynamics are complex here, and societal violence is one of the things keeping them in check.

(How might such violence be averted? Full discussion will have to wait for another post, but I find it rather interesting that the Biblical institution of Jubilee, in which land was returned to its ancestral owners and debts forgiven, follows a 50-year cycle.)

(Have I mentioned lately that my new book is available on Amazon Kindle? It’s called The Best Congress Money Can Buy: Stories of Political Possibility. You can read the first story for free here, and then buy it if you like. Enjoy!)

On Sovereignty, Trust, and Protectorates

04 Sunday Nov 2012

Posted by in Better Fantasy, Economics, History, Politics, State Formation, Writing

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , , ,

I recently read a journal article by Peter Haldén titled A Non-Sovereign Modernity: Attempts to Engineer Stability in the Balkans 1820-90. He writes to correct the conventional view that international relations in modernity is all about sovereign, independent states, and that the earlier era of protectorates, vassal states, or other such semi-autonomous regions ended with the arrival of nationalism. Indeed, the rationalist, modern Concert of Europe deliberately used non-sovereign zones several times in the Balkans area in order to control the outbreak of political crises.

The topic remains important for us readers today for a few reasons. First, understanding history is always good (particularly for budding fiction writers, who have a tendency to assume that all stories must be set in modern states or in absolutist monarchies, and thus impoverish their stories.) Second, non-sovereign states never really went away; they were just sleeping. Understanding the dynamics of non-sovereign states gives us a fresh lens to understand places like Kosovo, Chechenya, or even international organizations such as the European Union or the United Nations.

The power politics of the 19th century were marked by several themes, but two of the most important were the decline of the Ottoman Empire as a great power, and the rise of Russia which aspired to take its place. The fundamental problem facing the European powers was how to manage the fragmentation of Ottoman authority, which expressed itself in events like the Greek revolution, without causing a full-blown war between the Great Powers over the spoils.

Briefly, the favored solution was to take outlying provinces of the Empire and turn them into non-sovereign states, under the aegis of the Concert of Europe. These provinces would still nominally be subject to the Turkish Caliph and would pay tribute, and they would be prohibited from having free diplomatic relations with other states as an independent state would, or from having a military. But they would have civil militias and police forces for defense, they would be self-governing, and they could have diplomatic relations with the Concert of Europe as a body. Importantly, the Ottoman Empire would be forbidden to maintain troops in these non-sovereign states.

How does this help? In modern International Relations, states often try to set up buffer zones between them and some potentially hostile neighbor. These zones typically take the form of other, smaller, states. For example, China uses the totalitarian hell state of North Korea as a buffer between it and South Korea, or Japan. The “Low Countries” of Belgium, Netherlands, and Luxembourg were used as a buffer between France and Germany, to their periodic detriment.

The idea is that if you don’t share a border with a potential foe, then there are fewer opportunities for friction that might escalate into a full-blown war. After all, it is hard to distinguish between positioning troops to defend your borders, and positioning troops to attack your neighbor. So the buffer state helps to cool down the temperature. The only problem is that when a buffer state is independent, it can rely only on its own force of arms to maintain itself. The history of the Low Countries graphically demonstrates how easily this can fail; moreover, the potential for a buffer state to become a full-blown military ally of one side or the other ensures that the situation remains tenuous.

A demilitarized nonsovereign territory, on the other hand, is not guaranteed by force of arms, but by the cooperation of the potential rivals under color of an international agreement. There is less likelihood of miscalculation or escalating tensions, and more opportunity for creative institutional design (read the article for some great examples); not all peoples are ready for statehood, after all, even aside from the objections of their current rulers. And there would be less competition between rivals such as Britain and Russia as there would be (and were) over who would dominate the policy of newly independent states, if the territories could only have relations with the international body as a unit and not with other states bilaterally.

For a modern parallel, we can look to the European Union, which began as the European Coal and Steel Community—a project to strip West Germany’s ability to produce war armaments without the cooperation of France, and vice versa. By effectively tying their own hands, the member states hoped to foreclose on the possibility of war between them, so they could focus on the vital task of withstanding the Soviet Bloc. Henceforth, relations between member countries would be based on partnership and negotiation, not power politics.

However, in the case of the Balkans, the stability of the protectorate arrangements for Greece and elsewhere depended crucially on the degree to which the Great Powers trusted each other. In the three cases that Haldén considers, the initial attempts to institute a nonsovereign territory broke down once Russia violated the terms of the agreement, and Britain could no longer trust the Russians to play nice. (I am oversimplifying grossly.) Indeed, the creation of new independent states from the former provinces of the Ottoman Empire was, in Haldén’s telling, a suboptimal outcome, forced on the Great Powers by the breakdown of cooperation and the increasing worry over Russia’s growing power. The independent states would have to fend for themselves, without the aegis of a Concert of Europe which was growing ever-less-concerted over time. No surprise that World War I kicked off in the Balkans; Serbia was one of these formerly nonsovereign states.

Similarly, arrangements such as the EU or the UN are hampered by the lack of trust between member states. Many predict that the current economic crisis may spell the end of the Euro currency, or of the EU altogether, because Germany will grow tired of footing the bill for its more spendthrift neighbors forever. Early aspirations for the UN to become a true world government, meanwhile, have run aground on the cold reality that Americans do not trust a body made up mostly of dictatorships to act with the public interest in mind.

Haldén also draws a fascinating parallel with the old free-markets/interventionism debate in economics. He writes that creating new independent states who would rely on their own armies for defense, and hoping that they can contribute to international stability, is comparable to the intent of the free market. Conversely, a managed protectorate under the oversight of an international body is similar to government control of the economy, under the theory that such control will lead to more manageable outcomes. Whether or not you believe that government control can lead to better outcomes in the abstract, it is clear that you will not desire actual government control unless you trust the government to play nice. If you do not trust the government, you will accept even the putatively suboptimal outcomes of the free market in exchange for keeping a measure of control over your own destiny.

Haldén apparently wrote a book exploring some of these themes, which I may want to read. For our purposes, we should remember that what we are familiar with is not everything that is possible. As well, if we want to build a new world, it is crucial that we trust the main players; otherwise, the world may turn out to be not what we expected.

On The Proper Design of Monuments

07 Friday Sep 2012

Posted by in Education, History

≈ Leave a comment

Tags

, , ,

Earlier today, I visited the new memorial to Martin Luther King, Jr. in Washington DC. I had previously read descriptions of the memorial, focusing on the Chinese designer, the resulting resemblance between King’s statue and a statue of Chairman Mao, and so on; so I was prepared to not like elements of the design. However, even beyond what I already had known, I was very disappointed with the memorial. It seems to me that it failed to accomplish the point of having a memorial in the first place.

Back of the envelope, monuments could have three general purposes, which could and should overlap. First, a monument can be intended to teach the viewer about the significance of the subject of the monument. Second, a monument can be meant to honor the subject for the subject’s achievements (particularly in the case of casualties of war; in the ancient world, honoring dead soldiers was a crucial task of such monuments, in part to offer soldiers the chance of eternal glory should they die in battle). Third, a monument can be meant to teach new things to the viewer, perhaps by using symbolism to suggest new meanings or understandings of familiar elements.

An excellent example of a monument that accomplishes all three would be the one to President Thomas Jefferson. Beneath the monument is an underground passage, full of educational murals and videos that discuss the history of President Jefferson. (Admittedly, they downplay the really interesting bits, but such displays can’t get into the juicy details, I suppose.) The monument itself contains a statue of Jefferson, and the walls are carved out with quotes from his writings, which capture the essence of who Jefferson was, what he believed, and his significance for the history of our country and the world in general. (Some other time I might write about how the Declaration of Independence had effects that reverberated throughout South America as well as North.)

The choice of quotes is also meant to impart a lesson to the viewer; I am particularly fond of Jefferson’s statement, “I have sworn upon the altar of God, eternal hostility against every form of tyranny over the mind of man.” This statement is inscribed around the rotunda, giving it pride of place, and indicating to the viewer that this is the key lesson of President Jefferson, something that we too can learn from and put into practice. But all of the quotes are variations on the same theme: liberty, freedom, justice in society. Among these is an extract from the Declaration of Independence: the viewer cannot forget that Jefferson is its author, and a crucial figure in the Revolution.

Compare the foregoing to the MLK memorial. In form it is a massive block of stone, out of which is carved King’s likeness. Flanking it on both sides is a curving wall, which bears several quotes from King’s writings and speeches. I shall ignore the demerits of the statue itself, and focus on the quotes. None of them, none of them at all, indicate to the viewer that King’s life work was fighting against the segregation of blacks from whites in America. None of them indicate that King was a religious figure, or anything about his life history, or that he was assassinated as a martyr to the cause of racial equality. In fact, if you knew nothing at all about the man before visiting the memorial, you would leave it knowing nothing still.

To be sure, the sentiments expressed in the inscriptions are often lofty. But they are too lofty—so lofty that the quotes are entirely metaphorical (for example discussing light driving out darkness), or discussing the universal brotherhood of humanity (rather than the concrete struggle for black freedom). Other quotes seem non-sequitors, particularly the one about people deserving three meals a day. It has significance only if you already know who King was, why he was important, and the stature he has within the American consciousness. So the quotes end up seeming banal and trite, because we do not know why they mattered.

In short, this memorial utterly fails to teach the viewer about who King was. It honors King himself, but only in a general sense; the task that he dedicated his life to is not made explicit, and so is cheapened by omission. Similarly, his assassination is not acknowledged or honored. And finally, because none of the groundwork is there, there is no sense that the arrangement of the memorial can convey any new meanings, in metaphor or imagery.

Why am I discussing this on a blog devoted to structuring our environments? (Aside from my not posting anything for the last month…) Because really, anything we do can be a memorial in the sense discussed above. Much of how we arrange our environments is meant to guide our behavior, either by explicit teaching and direction, or by implicit metaphor and influence on the mind. Knowing the principles of a good monument can be useful in many areas of life, I suspect. And the more people who can tell good monuments from bad ones, I hope, the better constructed our public spaces will be.

The Social Effects of Weapon Technology (and How to Use in Writing)

22 Friday Jun 2012

Posted by in Better Fantasy, History, Military, Politics, State Formation, War, Weapons, Writing

≈ 1 Comment

Tags

, , , , , , , , , , , , ,

Mao said that power flows from the barrel of a gun.  He also said (and this is less remembered) that therefore, the Party must control the gun, and the gun must not control the Party. In other words, the brute facts of violence are important, but so are the social arrangements that control them.

This has been true throughout most of history. Whoever has control of violence will tend to gain political power. In several times and places, the military did not actually rule, but submitted to a legitimate authority—the United States is a decent example of this, or most the the European powers in the last few decades. But more frequently, those with the means of violence make the rules. Recent events in Egypt and elsewhere bear this out, as if we needed more examples.

That said, it makes a huge difference what the state of military technology is. For that will determine if weapons are available to the mass of people, or if they are restricted to only an elite few. Samuel Finer argued that his monumental History of Government (now out of print, and sadly hard to get—inexcusable on the part of Oxford Press in this time of print-on-demand!) that when weapons were widely available, politics tended to feature mass participation and broad egalitarianism, if not outright democracy as in the case of ancient Greek city-states and their hoplites. (Or, one might add, early America.)

On the other hand, when specialized weapons gave advantages to those wealthy enough to afford them, power tended to be concentrated in the hands of a few. For example, the rise of powerful kings in Europe had much to do with the advent of cannon—fantastically expensive to make, requiring a large specialized infrastructure of foundries. Furthermore, with cannon French kings were able to reduce the fortresses of their rebellious nobles, consolidating their own power.

In an earlier age, the armored knight was the undisputed master of the battleground, able to crush unarmored opponents with ease. Thus, power tended to be held by the armored warlords of the feudal era, whose rule depended on their use of naked force. Then the free Swiss militias developed their famous style of pike warfare, which completely nullified the advantages of the knight.

So weapons technology played a large role in politics. When considering a given era, we must ask: how common are weapons? Are they easy to use, or do they require specialized training? Do the wealthy gain any particular advantage from their wealth, or can mass armies defeat them?

This line of argument is one of the bases of the American gun-rights movement (examples can be found here, here, or here, but there are many others). It was also argued by Max Weber that the rise of the Israelite kings (over a previously egalitarian society) was the result of advanced armor, which gave a significant battlefield advantage to those wealthy enough to buy such armor.

This reasoning can also help explain the rise of child soldiers. P.W. Singer argues that child soldiers are now more feasible because small arms are becoming more advanced and lighter. Children can now use weapons effectively on the battlefield in spite of their small size and physical weakness, which has not been true for hundreds of years if ever. As a result, child soldiers are becoming a frequent sight in war-torn areas, since it is relatively easy for a brutal would-be warlord to coerce children into fighting for him (or her, I suppose).

Similar issues are beginning to arise because of drone technology. Robots have often been used for fun by hobbyists; but it is only a matter of time before these can be weaponized, and made available off the shelf. Governments will be unable to stop the spread of drone weapons into the general populace, and the social effects of this shift are likely to be extreme.

******

So as a writer, how do you use this?

First of all, when you are world-building, be careful to compare the state of weapons technology with the social system. Kings and castles are unlikely when no one wears armor or carries swords, or if everyone does. Magic can also be a weapon, in this sense, so if powerful magic is rare, it should generally translate into considerable power (unless there are social reasons otherwise).

You can write an interesting story about social upheavals caused by changing technology. For example, I’m presently messing around with a story where magic previously relied on using decades-long mental training to draw sigils of power in your mind; but then someone figured out how to get the same effects with sigils carved into physical media, such as discs of wood, and then everything collapsed into chaos as weapons technology exploded into the populace.

A great example of this concept is in the early installments of the excellent webcomic Schlock Mercenary. A new means of transport allowing for functional teleportation is rapidly weaponized, and bombs are teleported into government offices across the galaxy. Chaos and war break out on hundreds of planets, and things only die down when scientists figure out how to block teleportation into protected areas.

I hope this piece proves useful. At any rate, it should be food for thought.

Tax Farming

17 Sunday Jun 2012

Posted by in Better Fantasy, Economics, Finance, History, Politics, State Formation, Writing

≈ 2 Comments

Tags

, , , , , , , , , , , , , ,

April 15th is a date seared into the brains of most Americans—being the due date for us to turn in our tax returns to the Internal Revenue Service. In the modern era, most governments have wide-ranging powers to tax their populaces. Yes, you have problems with tax evasion here and there, but most urban dwellers are used to paying taxes as a matter of course (though we certainly aren’t happy about it).

When you think about it, though, the smooth collection of taxes requires a vast infrastructure of information processing, bureaucracy, and coercive enforcement if necessary. All of that came about very late in historical terms. In the United States, tax withholding from our salaries was only instituted during World War II, for example. (In a delicious bit of historical irony, the concept was developed in part by famed free-market economist Milton Friedman, when he worked for the Treasury in the early days of the war. For the rest of his life, he hoped that tax withholding would eventually be abolished.) The first income tax in the United States was a temporary measure enacted during the Civil War.

In other countries, the story was similar. The seminal work on this subject, at least in comparative politics, is Margaret Levi’s Of Rule and Revenue, a study of taxation systems throughout history. Levi’s basic argument is that rulers are constrained in how they can tax populations by their ability to coerce the people, the ease with which money can be hidden, and limitations in measuring technology. (I previously wrote of similar concerns behind the institution of English nobility.) In short, early rulers had a very hard time raising taxes directly, simply because it was next to impossible to extend their control over the populace.

So what did they do? The strategies of rulers were many, but in this piece I want to focus on a particular practice called “tax farming.” In its basic form, the ruler created some sort of tax or tariff—a 10% tax on salt, for example—but rather than collecting the taxes itself, the ruler would sell off the right to collect the tax to some private party. This was the tax farmer. The tax farmer would pay a large sum up front to the government, and in exchange would gain the right to ruthlessly apply the salt tax to anyone within his jurisdiction and pocket the proceeds.

This is not the same as modern privatized tax collection, where the private party must transmit collected taxes to the government. Here, the tax farmer is the direct beneficiary of tax revenue. In general, tax farming was incredibly lucrative for the farmer, while the state was forced to sell the future revenues at discount prices, simply because it lacked the capacity to collect taxes itself. (Here, we see another example of a principal-agent problem.)

A nice (free!) overview of tax farming in the 18th century can be found here, by the eminent scholar Eugene White. The French monarchy, for one, was heavily dependent on tax farming for revenue. This dependence was a major contributor to the French Revolution, for two reasons. First, royal revenues were always rather stunted because the tax farmers absorbed much of the take, weakening state power. Second, the tax farmers of France were notorious for harshly oppressing the populace in order to squeeze every last sou that they could. (Similar concerns were at play with the Publicans of ancient Rome; a nice overview can be found here.)

This is all very interesting, but why is it worth knowing? In fact, it is surprising just how relevant the principle of tax farming can be, even in modern society. Take casinos, for example. They pay a large sum of money to local and state governments, and in return gain the right to siphon vast amounts of money from willing gamblers. The voluntary nature of the transaction makes it more palatable, of course, but even then the addictive nature of gambling muddles things.

Even more striking is the history of the banking system. That subject is so fascinating that it deserves its own post, but for now, suffice it to say that for decades, many U.S. states raised nearly half of their revenue by selling monopoly banking charters. In return, a particular bank would be given exclusive control of its town, free to earn considerable profits from its residents.

Neither casinos nor early banks are really the same as tax farming, of course. But they are both indirect means of collecting revenue, in which private parties gain outsized profits compared to the government’s take. Other examples can be seen with only a little effort, and the idea of tax farming is a useful lens for viewing much government policy.

Aside from that, this is another opportunity to bang my hobby horse of more realistic fantasy writing. As noted, tax farming was often the cause of massive oppression of the people, and resulting political unrest. I’d bet my last cent that some budding fantasy author could spin a much more interesting story using tax farming as an ingredient, than the typical “Evil Overlord wants to oppress the peasants for the lulz.”

The key thing to remember is that a king turns to tax farming when he needs more money that he can easily extract with his own efforts. It is the hallmark of lands with difficult travel, poor communication, and weak and divided political loyalties. In time, the tax farmers can become extremely powerful in their own right, perhaps even rivaling the established authority in the same way that Italian mercenaries would often overthrow their employers. If that isn’t fertile soil for a good story, I don’t know what is.

Bills of Exchange, Banking, and the Little Things

05 Tuesday Jun 2012

Posted by in Credit, Economics, Finance, History

≈ Leave a comment

Tags

, , , , , , ,

Jared Rubin writes about the diverging history of the Christian and Muslim systems of finance back in the Middle Ages. At the time, both Christianity and Islam was enforcing restrictions on lending at interest; Islam also had a ban on financial speculation in general. At the same time, the Islamic world had a financial tool called the bill of exchange, which was meant to facilitate the movement of money between cities. When this tool spread into the Christian world, it became the basis for an explosion of international banking unlike anything seen in the world before then. Why? And why did it not have this effect in the Islamic world?

Bills of exchange worked like this.  Suppose you were a merchant traveling from Baghdad to Basra, to buy trade goods there. However, you don’t want to carry a great deal of money with you; to do so, you would need to hire bodyguards, not to mention the pack animals necessary to carry the precious metal itself (remember, silver and gold are quite heavy). This could be quite expensive; for example, the cost of moving gold bullion from Rome to Naples in this period has been estimated at between 8% and 12% of its value. So you deposit your money with an associate in Baghdad, and receive a bill of exchange for its value. This you must present to your Baghdad associate’s business partner in Basra, who will then give you cash. In this way, you don’t need to physically transport cash. And later, the business partners in Baghdad and Basra can settle their own balance, perhaps with a similar bill of exchange going the opposite direction.

Now, one can think of this transaction in two ways, which are not mutually exclusive. First, the business partners in Baghdad and Basra are clearly providing a service to you, the merchant, who can avoid the danger and expense of transporting your money. But remember too that you are fronting money to the issuer of the bill of exchange. Looked at this way, the bill issuer is borrowing your money.

Islamic law came down firmly on the side of the first understanding. The law required the merchant to pay a fee to the bill issuer—that is, the bill issuer is effectively being paid to borrow money. Furthermore, bills of exchange were dated, and needed to be redeemed by the specified date. If a bill were redeemed late, the merchant would be forced to pay a cumulative penalty. Unscrupulous businessmen sometimes exploited this by refusing to redeem bills of exchange on time, inflicting the penalty on the hapless merchant.

What this meant was that it was extremely risky to deal with bills of exchange from people you didn’t trust. Furthermore, you had little incentive to expand the network of people whose bills you used, since you were being forced to pay for the privilege. So bills of exchange, while useful in certain circumstances, did not stimulate the creation of the sprawling banking networks that grew in Europe later.

To understand the effect of the bill of exchange in Europe, we must understand the difference in conditions.

European trade was made particularly difficult because the different lands each had their own currencies. Furthermore, kings and princes often imposed bans on importing foreign coins into their lands. These bans existed for the good of the ruler alone: when the ruler issues his own currency, he earns seigniorage, the difference between the value of the silver or gold in a coin and its face value. So the more of his coins a ruler can impose on a captive populace, the more money he makes. (Worse, it was a depressingly common practice for rulers in need of cash to debase their currency, reducing its silver content so that each coin was worth less in reality.)

So to trade across lands, a European merchant needed a way to convert currencies—without paying the massive fees that local princes usually demanded. The bill of exchange answered the need. A merchant would deposit money with a banker in Florence, let’s say, and receive a bill of exchange payable in Lyons. The difference was that the bill of exchange was for a different currency than was deposited.

This was prohibited in Islamic lands, where currency swaps of this kind were viewed as speculation. But speculation was not banned in Christianity. So merchants were able to evade capital controls by creative use of debt contracts. Even better, merchants could take advantage of the predictable shifts of currency rates so that they would be repaid in more valuable money than they had lent out, effectively earning “stealth” interest and evading the Christian prohibition on usury.

Thus, Christian merchants and bankers had a huge incentive to expand their ties with other cities, since every additional city offered more opportunities to issue bills of exchange and therefore to lend money profitably. This is how the fabled Medici banking network was built up, for example: by establishing subsidiaries in cities across Europe and transacting bills of exchange between them, at considerable profit.

The upshot was that the creative use of bills of exchange supercharged international trade in Europe (while stunting intra-national trade, since there was no profit to be made in exchanging currencies), where its effects in Islamic lands had been more modest. And in Europe it led to the creation of the first international banking empires, where it did nothing of the sort in Islamic lands. All because of a few seemingly minor details: the Muslim prohibition of speculating in currencies, and Islamic law allowing the bill issuer to charge the lender instead of the other way around.

What lessons can we take away from this? First of all, the little things can have big effects. Second, there’s no way to predict the systemic outcome of a given tool, once human ingenuity gets turned loose to play. Third, the history of finance is pretty cool.

On Revolutions in (Some) Fantasy Fiction

03 Sunday Jun 2012

Posted by in Better Fantasy, History, Politics, Revolution, State Formation, War, Writing

≈ 5 Comments

Tags

, , , , ,

Traditionally, fantasy has lent itself to stories of heroic uprisings or revolutions, as the Evil Overlord is swept out of power by the brave protagonists and their loyal army of oppressed commoners. That can be a good story, and sometimes the stories are indeed quite good. It feeds directly into some of our cultural loves: rooting for the underdog, the reestablishment of justice and defeat of evil, and so on.

But what makes this literature trying for a student of comparative politics is how infrequently revolutions are handled with any degree of realism. Not that I demand absolute realism in all books touching on politics—far from it. Often we simplify the mechanics of a story to distill its essence. Still, what annoys me is that people end up telling the same bloody story over and over and over again. And this is so, I think, because the mental model most fantasy authors have of revolutions is so impoverished.

From what I’ve read, most fantasy authors have two archetypes for how a revolution goes off: Robin Hood (as refracted through Sir Walter Scott’s Ivanhoe), or the French Revolution and the various other Parisian dustups. Egregiously, I haven’t read any fantasy modeled after the American Revolution,* and only a single work of science fiction (Heinlein’s The Moon is a Harsh Mistress, a fun read). And most published fantasy writers live in the United States, for Heaven’s sake! And of course, the American Revolution is by no means the only other model you could look to.

The example that spawned this post is Steven Brust’s novel Teckla. (This is not, I hasten to add, because I have anything against Brust in particular, but only because it’s the book I happened to read.) In the book, an oppressed, illiterate underclass is being organized by a group of revolutionaries with the goal of blocking commerce into the capital city, in order to force reforms. To do so, the revolutionaries first endeavor to teach everyone how to read, so that they could then publish propaganda in newspapers.

This was the first point where I was tempted to throw the book across the room. In a real illiterate society, no one would have had the daft idea to publish a mass-market newspaper in the first place. It’s a bit like writing and selling manuals on how to use an iPod in the 1960s. Worse, written material would not be the most effective way to organize untutored masses anyway. Far more effective would have been using actual people to spread the message and organize more revolutionaries where they went, as was done by revolutionaries from Spartacus to Mao.

It got worse. The favored tactic of the revolutionaries was to build Paris-style barricades across the main road into the capital city. All well and good, except that a major mechanic of Brust’s entire series is that the ruling class knows how to teleport with magic. Barricades, or any static defense not augmented with its own magic, would be worse than useless.

So why did Brust rely on such tired tropes, even when they went counter to the very logic of his fantasy world? I suspect that the only model he had for how revolutions work was revolutionary France. And because he had no other mental model to work with, Brust did not have the building blocks that would have fit his story better.

And this is my point. When you study real historical revolutions with an eye toward fiction writing, you quickly find the potential for all sorts of stories that have rarely been told in Western fantasy. More realistic treatment of revolutions can be used to explore themes of divided loyalty, or how governments structure their environment to better exert their power, or how revolutionaries end up doing the same thing, or—and this is particularly fascinating—how civilians will often exploit the conflict between government and rebel, by extorting aid from both sides, or by denouncing resented neighbors as traitors to the cause (so that they will be executed and you can take their stuff).

At any rate, new stories, with new possibilities. This doesn’t mean that the old classics need to be chucked out; Robin Hood will always be a good story. But a creative author can take the old building blocks and mix in a few new things from real life, to make something original. A good place to start (not least because it’s free) is the 1970 classic by Leites and Wolf, Rebellion and Authority (PDF). It’s a study they carried out in the middle of the Vietnam War for the RAND Corporation, and has details from the history of Western counterinsurgency. Much recommended.

Oh, and if there is actually good fantasy or sci-fi out there that handles rebellions well, please let me know in the comments. I’d like to read it.

_______

* Which was not technically a revolution in the political-science sense, since the American social structure and forms of government remained more or less intact, and no one tried to extend the revolution to Great Britain. Really, you could best describe the colonial uprising as a war of secession from Britain.

What’s the Point of English Aristocrats, You Ask?

01 Friday Jun 2012

Posted by in Economics, History, Politics, State Formation

≈ 3 Comments

Tags

,

I was reading an article the other day by Douglas Allen (abstract here)* attempting to explain the bizarre institution of the English aristocracy, between about 1600 and 1900. I say bizarre because to be an aristocrat at that time was to accept on yourself a large list of restrictions that seem utterly mad to the modern ear.

Readers of Jane Austen or other Victoriana will tend to have a fuzzy image of the nobility. They clearly had a lot of money, but it wasn’t clear how. They had a lot of land, but a nobleman’s land holdings were as frequently a source of expense as they were a profit center. They had large estates away from the cities; why? Our wealthy class today typically likes to cluster around cities, not to build manor houses out in the middle of nowhere. What made the English different?

Aristocrats were expected to take large tracts of their land out of production and turn them into public walks. They were also expected to build massive homes which were open to visiting aristocrats at all times, and these homes were not merely away from the cities but even away from the local village. Why?

We see that noblemen were expected to go to the right schools. Less obvious was that these schools were remarkable in deliberately avoiding “practical” learning. Nobility were taught Latin, Greek, literature, and a whole host of topics which were utterly useless at making money. Furthermore, if a would-be aristocrat had made enough money to buy land and aspire to respectability, he was expected to immediately stop practicing his profession. For an aristocrat to engage in business was considered terribly shameful.

Allen’s paper goes on to list several other practices such as dueling or the encumbrance of land, all of them seeming to keep the noble class isolated from the larger society and totally unable to support itself commercially. Allen then proposes that all of this was by design. English nobles, he argues, deliberately made themselves hostages to a particular code of honor and class behavior, in order to transform themselves into the perfect servants of the king.

This takes some explanation. We are used to a world in which things can be measured and monitored. We buy rolls of toilet paper in the store secure in the expectation that they are all the same size and weight. We have soldiers in the battlefield equipped with cameras and radios so that their every move can be tracked. In short, it is very easy to monitor someone’s performance on the job, simply by monitoring the products of the work. The epitome of this is the bureaucracy, where everything is regimented and predictable.

But before the Industrial Revolution, it was hard or impossible to monitor anything. Bureaucracies did not exist. When you sent a ship across the world with trade goods, or when you sent an army of soldiers to the Continent, you had no control over what it did, and no way to be sure that your subordinates would actually work for your interests. In short, the pre-modern world was beset with vicious principal-agent problems.

In such a world, the most valuable resource is trust. You need to know that your subordinates are reliable. But how can you ensure such reliability? Economists will tell you to create a relationship framework in which your agent finds it far more valuable to stay in your good graces, than to betray your trust and profit in the short term. This can be done in a few ways. When possible, you can harshly punish offenders. Additionally, you can use repeated interactions to offer the lucrative carrot of future rewards to those who perform well now.

Allen argues that the nobility was a classic example of such a system. The important thing to know was that nobles made nearly all of their money from salaries, by serving as royal officials—which could earn them ten times as much as the most successful businessman, at the time. They served at the king’s pleasure, and could be dismissed for any reason. To give the threat of such dismissal teeth, noblemen were expected to dissipate their wealth through lavish social events and opulent dwellings. They were also expected to cut off all ties with the non-aristocratic world; that way, if you disgraced yourself and were shunned by “gentlemanly” society, you would be utterly alone.

The expensive educations in impractical subjects, the large homes away from the rest of society, all of these were “hostage capital” that displayed your willingness to play by the rules, because breaking the rules would be so very painful. Knowing Greek would be useless in commerce; it only had value within aristocratic society, so you needed to be sure to fit in.

The upshot was that the kings of England had access to a class of loyal servants—of uncertain ability at times, true, but whose dedication was nearly unquestioned. And it was this class of nobles that won England and Britain its empire.

What made the system of nobility break down? Indeed, at the end the aristocrats gave up power willingly, by passing laws allowing the common people to vote and hold offices, and by breaking up the aristocratic barriers to selling their ancestral lands. Allen argues that not only did the Industrial Revolution make the old problem of trust less of a problem, but it also made membership in the aristocracy less valuable. Now, instead of aristocrats earning far higher salaries than businessmen, it was the reverse; corporate titans bestrode the world, not the nobility. Given that, all the trouble of keeping up appearances simply wasn’t worth it. Far better to jump the aristocratic ship and become an industrialist.

So what’s the point of spending a thousand words talking about English toffs? First, I think it’s cool. Second, the whole episode illustrates the limitless ability of people to come up with social organizations to solve their problems. Third, it also illustrates how everything is dependent on context. Once the context shifts, old institutions become less relevant.

At the same time, though, the example of the English nobility remains for us to learn from. And who knows? There may come a time when the old problems become new again, and old wine can be poured into new glasses.

*Allen, Douglas. 2009. “A Theory of the Pre-Modern British Aristocracy.” Explorations in Economic History, Vol. 46: 299-313.