Kilkenomics, Slavery & Getting Along
Sunday, 11/17/2013 21:13
Everyone acts in their own best interest. Including drunks who pass out in the street...
"BEHIND every great fortune there is a crime,"
writes Bill Bonner in his Daily Reckoning, quoting Balzac.
Before the age of capitalism – which gave people the means to build their fortunes without taking anything away from others – that was largely true.
So, what lay behind the fortune which Anthony van Sallee used to buy up much of Long Island, New York, in the 17th century: larceny, murder, slavery?
All of the above. This ancestor to the Vanderbilts...to the Whitneys...and through their mother to our own children was, in the language of Baltimore's street life, 'one mean motherf*****'.
What did he do? Where was he from? The name gives us a clue...
The 'van' part is Dutch. Like most of New York's early settlers, he carried the 'van' which means 'of' or 'from' to tell us that he was from Sallee.
But where is that? Ah. Check the map. You will find no Sallee anywhere near Amsterdam or Liege. In fact, it is not to be found anywhere in Europe. Instead, it is a city in North Africa. On what was known as the Barbary Coast, the centre of the white slave trade.
What follows is a discussion of involuntary servitude, capitalism and how to explain it to a hundred or so drunken Irishmen crammed into the back of a Kilkenny bar. Travel does not always take you where you want to go or where you expected to be. But you often end up where you ought to have gone in the first place.
This recent trip took us to Kilkenny, Ireland, where we were to attend an economics festival called Kilkenomics, which can be loosely described as 'Davos with jokes' or, perhaps more pertinently, as 'Davos without the hookers'.
In fact, it was not much like Davos in any way, except that a few people with PhDs in economics tried to tell others what to do.
First, Kilkenny has little in common with Davos. The former is a tiny, quaint, medieval Irish city. The latter is a chic resort in the Swiss Alps.
Second, the focus of the discussion at Kilkenomics was not on how to improve the world, but on how to give the limping Irish economy a boost.
Third, the conference organiser – one of Ireland's best-known and most savvy economists, David McWilliams – did not invite Janet Yellen or Paul Krugman. Instead, he invited your editor. (We took that as a sign of desperation. Or else there is something wrong with him. As a precaution, we avoided the tap water.)
Kilkenny is a charmingly Irish city. There is a pub on every corner and two or three down the street. A man in need of another pint has only to haul himself a few steps in any direction. Even a few steps were too much for a couple of the girls we ran into on Saturday. They were dressed in the latest fashion for fat girls: tight white dresses cut off just below the crotch...and awkwardly balanced on high platform shoes ('arse-raisers' in the vernacular).
It is hard enough to walk on stilts when you are sober. After three hours in Cleere's bar, it is practically impossible. Coming out onto the street, they had scarcely gone three steps before they began listing dangerously. One caught a light-post and steadied herself. The other, no public utility within reach, sank to the street. There she lay, on the cobblestones, as we stepped over her.
We had just come from a discussion with economists. Every economist knows that people always act in their own rational self-interest. Since we couldn't figure out any way in which the girl could benefit from laying in the middle of the street – in the rain...in a party dress hiked up to the very edge of decency – the girl could not exist.
Inside Cleere's, the discussion had been on the nature of capitalism. How could it be kept on the straight and narrow? This was the question we were meant to address. But the crowd had already been drinking for hours before we began. No two people had the same idea about what capitalism actually was. And our opponent was as well prepared as we with persuasive air.
'These dreamers...these idealists...imagine a perfect world of commerce, invention, and freedom,' he began, pointing in our direction.
'But it doesn't work that way. In practice, they get a world where money talks...and it tells us all what to do. They preached deregulation...and brought about the worst financial crisis since the Great Depression.
'They're always complaining about the government, but if it were not for the government this crisis would have turned into another Great Depression. Without the government, we'd all be completely unprotected against these greedy, rapacious rich people.
'Besides, they would be nothing without the government. The government provides the infrastructure. It provides a system of laws and justice that makes it possible for them to earn their fortunes.
'Government is the source of major innovations, too. It wasn't the free market, for example, that developed the internet; it was the government. Private companies were offered the opportunity to develop it themselves. They refused. Because they couldn't figure out how to make a profit on it.
'So I say, stop bellyaching about the government. Stop pretending that the free market is the source of all good things. And sit down and figure out how we can get these banksters off our backs...and make this mixed system, of capitalism with some measure of state control, work better.'
This opening salvo drew a warm applause. He had scored a direct hit amidships. He had the drunks on his side. We hadn't said a word and we were already taking on water. Our opponent was already way ahead. He had won over the audience with a well-argued series of blasts.
We charged our guns...making notes on the back of an envelope. We prepared to fire back. But our opponent had also laid a thick smokescreen over the whole area. So many misconceptions...so many bad ideas:
- ...that capitalism has anything to do with the system of crony banks, managed economies and zombie regulators...
- ...that the regulators protect average people...rather than the industries they regulate...
- ...that deregulation is what caused the crisis of 2008...
- ...that you can't have law without having government (what legislature wrote the Ten Commandments, for Pete's sake?)
- ...that the government is the source of all substantial innovation...
Good God, they think Al Gore invented the internet!
We tacked hard to the right. We aimed our cannon. There was no point in asking for quarter or seeking safe harbour somewhere in the middle. This was going to be a bloodbath. Better to aim high and hit hard.
But there was fog everywhere. The audience was already deep into their pints even before the show began. We had raised a pint, too, leaning on the bar and talking with our Bonner & Partners Family Office investment director Chris Hunter and
Telegraph columnist Liam Halligan.
And now, with the smoke pumped out by the other side, the battle was going to be pure chaos.
How could we keep people listening for long enough to blow away the confusion? We could think of only one thing that might hold their attention:
'Look, let's start at the beginning. There are only two ways to get what you want in this life. You take it by force and violence. Or you get it peacefully...by making, trading, and cooperating with others.
'That's true of material wealth. It's true of stuff. It's true of power and status. And it's as true of sex as it is of everything else. You can get it by negotiation...or you can get it by brute force.
'So, let's try to agree on the basics. Wouldn't you all agree that we're better off generally if stick with consensual, peaceful, cooperative ways to get what we want in life?
The audience was quiet.
'OK...well, you're all hopeless. Girls, don't let a stranger walk you home in this town!
'Seriously, I'm not saying that there aren't plenty of cads and gigolos in what we call the 'free market.' But it's still not like the government, which is full of rapists! Whatever it wants, it can get it by holding a gun to your head. Every law and regulation – no matter how silly or how stupid – is backed by the threat of violence.
'That is, of course, why people like it so much. It's the fastest and easiest way to get what you want. No persuasion necessary. No seduction involved. You don't have to buy dinner and a few drinks.
'Plus, it's the oldest and surest way. Humans have been around for about 200,000 years. And for the first 190,000 years...not to mention the millions of years that came before...force was about the only game in town.
'The supply of edible animals...and more importantly, women...was limited. It was a zero-sum game. If you wanted to get ahead, you had to be prepared to take something away from someone else. Otherwise, it was likely that someone would take something away from you.
'And look at it from the woman's point of view. You were going to live to be 40 years old if you were lucky. You were going to have a few children, few of whom would live to adulthood. Who would you want to be the father of those children, someone who was capable of defending you and your children...or someone who would be killed or pushed aside?
'Note, also, that when a new man took over...he would likely kill any infant children you had so that you would be ready to bear his child as soon as possible.
'Yes, we are programmed by millions of years of evolution to use force and violence to get what we want. But it is a win-lose game. You only get more power, more status or more wealth by taking it away from other people.'
At this point, a clarification: Although some of this economics jamboree takes place in pubs and taverns around the charming city of Kilkenny...and although audiences enjoy the mix of the dismal science and comic relief washed down with pints of Guinness...most of the real drinking goes on outside the event.
The event itself draws an impressive list of the 'who's who' of economics. Some of whom were quick to get on your editor's case...
'I can't believe you compared government employees to rapists!' one of the speakers – a former Goldman Sachs stockbroker – began.
'That's ridiculous. They're there to protect people. What about policemen? Firemen? Not to mention the people who saved the economy from another depression?'
'Well, stick with us a minute,' we enjoined. 'We're just trying to understand the real nature of government regulation.
'Is it something where you can 'just say NO'? Or is it something where you're gonna get...(we hesitated a moment....the sentence we were about to complete required the f-word...the audience would get it...but we're not an f-word kind of guy)...where you're gonna get screwed, whether you like it or not?'
The Irish women bought on the slave market after Dutch pirate Morat Rais's raid on the town of Baltimore were taken into Ottoman harems, either as concubines or servants. There they were protected – by guards, eunuchs, regulators – and ultimately, by the Ottoman army.
But what kind of protection was it? Could they 'just say NO'?
They were not even asked. They had been bought for the pleasure of their owners. As far as we know from first-hand accounts, they didn't have to be forced to submit.
They went along with the program, like travellers in a TSA line...or taxpayers enduring an audit. When the feds tell you bend over...you have no choice. That is very different from a market economy – where you might be compelled by necessity or by desire, but not by naked force.
Surrounded by the silks and sunshine of Algiers, the Baltimore women may have looked on the bright side. Rather than contemplate a lifetime of sex-slavery, they may have thought they had gotten a reprieve from the prison of hard work and the relentless cold, dark and damp of Ireland.
Besides, getting to share the pasha's bed was an honour. If it brought children, the children might inherit the pasha's money and his position; and their mother might become ruler of the harem.
Many European women made what must have been happy marriages in the Islamic system. Many became rich and powerful. Many felt their new masters treated them better than their husbands back home. And when, 14 years later, a warship from Britain arrived in Algiers and negotiated the Baltimore slaves' release, only two women – out of an original 34 – wanted to go back.
For men, if they weren't sold off into hard labour, slavery in North Africa could be similarly supple.
Slaves could practice their own religions. They spoke their own languages. They were free to operate their own businesses. They could make money. They could learn skills and fill important roles in almost all industries.
Some became slavers – like Jan Jensen, who became Morat Rais, whose son Anthony used the family name Van Salee and moved to New York. With the profits of the white slave trade, he was able to buy a substantial part of what is today Brooklyn.
Some slaves became traders and financiers, buying and selling goods from all over the Mediterranean. At least one amassed a fortune while still a slave. Some, like Miguel de Cervantes and Captain John Smith of the Virginia colony, got away.
Others didn't want to get away.
Algiers was an advanced economy with a standard of living considerably higher than in London or Paris – unless you were a slave. Part of the reason for its prosperity was probably the relative freedom it allowed its slaves.
Slavery came with many contradictions and nuances. In North Africa as well as North America, it prospered in what were otherwise successful market economies. And in both places, it was reinforced, regulated and subsidized by the government.
Poor whites in Alabama paid (modest) taxes to help support the government, whose main challenge was to control slave labour. Few poor whites probably realized it, but they were victims of involuntary servitude, too – forced to subsidise the slaveholders by paying some of the costs of policing their slaves.
Likewise, on the Barbary Coast a vast and confusing web of levies, fees, commissions and taxes was used to maintain the garrisons that kept slaves from escaping.
Do we have to spell it out?
In every industry, in every epoch, the regulators and the regulated – the parasite and the host – share the same goal: to connive against the public interest. Armed with the police power of the state, they don't take no for an answer.
Government was complicit in the slave trade at every level. How slaves were to be marketed, employed and disposed of was typically codified by the legislature and enforced by the police.
Runaways were captured at taxpayer expense. Punishments were established by government employees...and often administered by them. Most important, government bore much of the cost of policing slavery, making it a viable institution long after it should have disappeared.
But today, slavery has been abolished in most of the world. We still have wage slaves...and tax slaves. But chattel slavery has largely disappeared. Progress has been made. It is not an eternal cycle of cooperation followed by violence, after all. Over time, cooperation increases.
Why is that? Because cooperation pays. And the more civilised a society becomes the more essential it is to cooperate.
By contrast, violence pays badly. You might be able to whip a group of field hands to keep them on the job, but their output would be minimal.
Only at the most rote tasks is slave labour a practical alternative. In modern industries it is not competitive. Imagine slaves coming up with a marketing strategy. Imagine slaves driving trucks.
Imagine slaves in the accounting department. Imagine slaves in Hollywood, rewriting scripts. Imagine them in the pharmaceutical industry, conducting double-blind tests. Imagine them with chain saws clearing power lines.
Compared to properly incentivised free workers, with stock options and healthcare plans, equipped with the latest machinery and trained to use it, slaves can't compete.
Several inconclusive experiments have been conducted on the issue. Germany ran much of its industry on slave labour during the Second World War. The Soviet Union operated a quasi-slave economy for decades. The Japanese used prisoners of war on various projects. And Napoleon tried to reintroduce slavery to French possessions so he could use forced labour on sugar plantations. This effort failed so miserably that France not only abandoned the whole project, it sold Louisiana to the United States.
Slavery didn't pay. By the end of the 19th century, it had been abandoned almost everywhere. This makes us wonder about our modern form of government. Does it pay? Is it transitional too? Will it, too, disappear, like slavery?
Maybe.
But wait. Who won the argument back in Cleere's bar in Kilkenny?
'You think regulators are going to keep capitalism on the straight and narrow? Ha ha ha...' we said.
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