Politics “a strife of interests.” And how mobile capital hurts the little guy.

According to http://www.brainyquote.com/quotes/a/ambrosebie107323.html, Ambrose Bierce in his Devil’s Dictionary gave the definition of politics as follows: “politics: a strife of interests masquerading as a contest of principles. The conduct of public affairs for private advantage.”

On the other hand, some people like to imagine a world where there’s no government and therefore no politics, but it seems like the action arena of politics springs out of our sociability. People act both within groups and as individuals. Maybe it’s likely that people would be working towards a common political goal by associating.  But does the U.S. really have a common political goal right now? How many disparate factions (lobbies, think tanks, PACS) stake out territory in Washington? Is the sum of their activities leading us toward any kind of common goal?

If our political strivings are only the incoherent sum of factional wrangling, how might we as a nation be missing out? When the U.S. Constitution was devised it created political interests in common by recognizing natural rights and limiting the power of government.  When certain political groups try ignoring the U.S. Constitution, that decision creates political strife.  Haven’t Washington’s factions watered down political power by creating a constantly bickering political mayhem? What political goal do you think is worthwhile to the U.S. body politic? What could the three branches of the U.S. government do in the current bickering environment to establish more areas of common ground politically? Would you like to hear policies discussed when politicians address the public?

But the politic is a three-dimensional puzzle happening over time. There’s bound to be many points of view and creating common ground may challenge Americans to examine more carefully where our politics came from and where our policies have been leading us. History and economic policies provide further insights into the American political experiment. Political Catsup with Economy Fries can help you re-explore the American body politic.

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New topic: How free is “free trade”? Reference: A History of Thought on Economic Integration, by Fritz Machlup, (Columbia Press, NY, and MacMillan Press, Ltd, printed in Great Britain, 1977, 219)

Many economists and people who trade in global markets have been interested in the question of whether parties who trade with each other benefit equally. James Mill (the father of J.S. Mill) thought that by increasing the efficiency of markets both parties would benefit equally in global trade. This was proved later, by J.S. Mill to be inaccurate. J.S. Mill formulated the principle of reciprocal demand. Under this principle, the gains from trade are seen to be unequal.

If vendors/producers in a small market trade with a bigger market, the demand for goods in the smaller market will increase and the small market can raise prices and therefore benefit more from the trade. Also as another benefit, the smaller  market expands. And that observation makes it seem that the little guy gets to win. But that only works out for the little guy in a sound money system like that sponsored by Great Britain under the strict gold standard. The strict gold standard was the global monetary system in play during the period from the end of the Napoleonic Wars until about the end of WWI. J. S. Mill lived from 1806-1873, during the period of the strict gold standard. And under sound money the little guy could gain from trade in terms of gaining a higher demand for their product.

But what happens under today’s fiat money with mobile capital? In this case, parties with the largest capital can influence the price and value of currencies and commodities more than the little guy can. Periodic instabilities in markets due to hot money coming into and leaving the marketplace can create conditions that favor the acquisition of the little guy’s hard-won gains by the big capital holder. So under this kind of system the big guy with more capital wins. The lesson here is that the global monetary system matters in determining who benefits more from global trade.

All text on this blog is copyrighted to Mel Scanlan Stahl. If you should refer to my blog posts or blog pages please acknowledge me as the source.