The Birth of Politics

There are really only two ways to get wealth and power...

WE'RE NOW in September, writes Bill Bonner, reporting from his ranch in Salta Province, Argentina, in his Diary of a Rogue Economist – historically the worst month for stocks.

Financial markets have been in a slumber all summer. They should begin to wake up soon.

This month already brings a G20 meeting, new jobs numbers, announcements from major central banks. The first presidential debate is coming up.

No one will want to rock the boat. But boats rock anyway.

Investors, for example, may all rush to one side at once. The next thing you know...the boat is taking on water.

As for us, we're bearish on the stock market...skittish on bonds...and peevish on the election. But we're keeping an open mind and open eyes, wondering what will happen next.

There are really only two ways to get wealth and power: You can offer goods and services to others...at a profit. Or you can steal.

The voluntary exchange of goods and services for money has always been the honest and productive way of getting ahead. But for most of human history, there was not much opportunity for it.

People lived in small tribes with little commerce between them.

Anthropologists and archeologists believe that tribe members cooperated internally, but were often in a state of perpetual warfare with other groups.

The idea of a win-win trade was still inchoate. There were few ways to add to your wealth by providing better goods or new services to your neighbors.

Instead, it was a static society with virtually no economic surplus and dominated by "politics". The only way to make a substantial increase in your wealth or power was to take it from someone else.

We don't know much about the cultures and organizations that existed before history began to be recorded. But reading between the lines of pre-history, we see a world where killing someone from a different tribe, and taking his possessions, his women, and his territory, was probably regarded favorably.

In some primitive tribes, even today, a young man doesn't achieve full manhood status until he has killed someone.

There was no such thing as "murder" where an outsider was concerned. The idea that you should "love thy neighbor" or that you should "do unto him as you would have him do unto you" did not yet exist.

And there was no "money". This made it difficult to store wealth or to trade with people you didn't know.

Civilization – with its rules against theft and murder, its money, its businesses and institutions – evolved slowly.

But the primitive instincts are still there. And they find expression, today, through government.

Only government (or quasi-government groups, such as the Mafia) still claims the right to kill people and take their property.

Generally, this right is restricted. Conditions apply. There may be a "due process" of law requirement, for example. Important elites – the aristocracy, the church, or the landowners – may have to be consulted. The US used to require a declaration of war by Congress...and so forth.

But over time, people always find ways to harness the police power of government for their own purposes. They use it to get subsidies, special treatment, privileges...and rents!

They twist it around, too...so that it is no longer used to protect individuals' property, but to take it away from them.

They are the "foxes," as Italian economist Vilfredo Pareto called them – the smart people who figure out how to make the system pay.

How do they do it? Just read this quote from Donald Trump:

"When they call, I give. And you know what? When I need something from them two years later, three years later, I call them, they are there for me. With Hillary Clinton, I said be at my wedding, and she came to my wedding."
– Donald Trump on why he gave more than $100,000 to the Clinton Foundation

The temptation to "govern" is almost irresistible.

It is as though you had a gun and everyone was unarmed: Sooner or later, you'd want to pull the trigger.

Besides...gaining substantial wealth or power honestly is hard. You have to serve customers. You have to come up with something new. You have to work with others, put in long days, save your money, focus on the long term, and – importantly – get lucky.

No one knows which investment or innovation will succeed.

And if you are fortunate enough to gain wealth, along comes the future with its inevitable "creative destruction," and there goes your fortune!

Better to turn to politics. If you can get the favor of government, you can shift money and power in your direction.

Then you can use it to try to prevent the future from happening.

Here in Gualfin, we have poor people who live in the mountains – mostly subsistence farmers who also get checks from the government.

We have a middle class, too – people who work for the ranch and get a salary.

And there is a very small class of rich people – your editor, the guy who was dim enough to buy the ranch imagining how happy everyone would be to see him try to improve it.

For the middle class, the route forward is simple. A day laborer hopes to get full-time employment. Then his earnings rise as he gains experience.

If he learns to drive the tractor or the backhoe, for example, he gets a pay increase. If he is ambitious, he can hope to become the capataz, the foreman, who gets a fairly modern house (by local standards) as well as greater pay.

But for the poor, there is no way to make headway. A young man not employed by the ranch typically leaves; there is nothing else for him to do.

Then he has to master the rigors of the modern workaday world...with its unfamiliar codes and daunting challenges.

So, when political activists come on the scene and get him to understand that he may be able to get ahead in a simpler, faster way, he is all ears.

He won't have to learn new skills, they tell him. He won't have to move to the city. He won't have to provide goods or services to demanding customers. Instead, he will be able to live in a "traditional way" on land that belongs to his "tribe"...

...and he can count on the government to support him.