On zero-sum thinking

One reason to welcome Steve Bannon’s departure from the White House is that it represents a setback for zero-sum thinking.

His idea that the US is at “economic war” with China embodies an us vs them mentality: what’s good for China is bad for the US and vice versa. To put it mildly, this is only one way of thinking. We might instead see the rise of China as good for everyone. In the long-run, a billion more prosperous consumers is a big market for the west. And before, then, what’s so bad about a supply of cheap goods? Globalization is not (pdf) to blame for stagnant US wages.

Bannon’s view is, in a sense, atavistic. It harks back to the mercantilist view that trade surpluses and the accumulation of gold were the aim of economic policy. Such a view was zero-sum: more gold for us meant less for them.

It also echoes the view of Thucydides view – reinvented recently as the “Thucydides trap” - that the rise of one state is a threat to another:

What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta.

Bannon, of course, isn’t so exceptional here.  Talk of an economic war appeals to millions of Americans, it chimes with Trump’s view that the world is split into winners and losers, and it perhaps also echoes the mentality that gave us Brexit: the EU is seen as something “they” impose on “us” rather than as a means of cooperating with our neighbours for mutual advantage. One reason, I suspect, for the popularity of Game of Thrones is that its depiction of a brutal zero-sum world speaks to the zeitgeist.

 Such a view was, of course, rejected by Adam Smith, who pointed out that trade was mutually beneficial – a positive-sum game. It probably no accident that it was only after this discovery that mankind escaped the Malthusian trap: for pretty much all of human history until around the 18^th century incomes per head stagnated (pdf), but they have soared since.

Which poses the question. Why have we seen a recrudescence of a discredited and harmful economic ideology? Why have Bannon’s simplistic “us vs them” thoughts been so popular?

The answer, I think, lies in a fact which Marx saw more clearly than most – that capitalism contains both positive- and zero-sum elements. On the one hand, it has given “an immense development to commerce”, but on the other hand it does so by exploiting workers.

When capitalism is growing well the positive-sum elements are most salient and celebrated. When it stagnates, however, the zero-sum aspects become clearer. If the pie isn’t growing, a bigger slice for somebody else means a smaller slice for us. Stagnation thus makes us mean-spirited, regarding others as threats rather than opportunities. And as Phil says, because so many define others through the prism of ethnicity and gender, we get racism and sexism.

It’s surely no accident that the zero-sum mentality has strengthened since the financial crisis. How we live shapes how we think. And we live in zero-sum times.

Most decent people, from across the political spectrum, rightly decry Bannonesque talk of economic war. What many insufficiently appreciate, however, is that the appeal of such talk is rooted in a material failure of capitalism. Until this failure is removed, there’s little hope of more enlightened thinking. Bannon the man might have lost some power, but I fear his baleful influence will continue. 

Comments

[Matthew Moore]

How do you simultaneously maintain the claims that group 'America' trading with group 'China' is clearly positive, but that group 'physical capital owners' trading with group 'human capital owners' is harmful?

Why do you think that Bannon's claim that China is trading on unfair term is less plausible than your claim that physical capital owners are trading on unfair terms?

I get that you think there are institutional biases against workers, but international trade is also mediated through particular institutions (e.g. NAFTA) which Bannon and Trump find biased from their perspective. What are the specific institutional differences that make you right and them wrong?

(I don't mean to draw any kind of moral equivalency between you and them, there is clearly none. But in this case, the logic of the arguments look identical to me)

[Ralph Musgrave]

“Why have we seen a recrudescence of a discredited and harmful economic ideology? H.G.Wells gave the answer: “Civilization is in a race between education and catastrophe.” I.e. we can educate all we like, but there’ll always be a plentiful supply of bores, idiots, etc on both the political left and right itching to scrub all that “education nonsense”. And then there are religions (no names mentioned) which go in for barbaric practices and ideas straight out of the 13th century.

[Peter K.]

"Stagnation thus makes us mean-spirited, regarding others as threats rather than opportunities. "

This a thousand times. Two more pieces on the subject I don't understand in the media.

https://www.vox.com/policy-and-politics/2017/8/16/16153616/trumps-idea-that-jobs-will-solve-racism-is-just-wrong

https://www.nytimes.com/2017/08/18/upshot/trump-says-more-jobs-will-help-race-relations-if-only-it-were-so-simple.html

In my mind it's corporate "agnotology."

About Game of Thrones, one of the reasons I like it and I suspect why others like it as entertainment is that it's set in a pre-capitalist world where honor and loyalty mean something and everything isn't reduced to the "cash nexus" in Marx's words.

People may argue that this is longing for fascism or feudalism but not necessarily. It's being motivated by values and traditions other than how much you get paid.

"It has pitilessly torn asunder the motley feudal ties that bound man to his “natural superiors”, and has left remaining no other nexus between man and man than naked self-interest, than callous “cash payment”. It has drowned the most heavenly ecstasies of religious fervour, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom — Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation."

Instead of being a drone in a cubicle where the centrists insist politics is dead and everything is technocratic management, Brienne and Catelyn Tully swear loyalty to one another in way that has deep meaning (the show and explores many of the problematic ideas of feudalism).

The New Yorker recently had a cartoon about a job interview where the interviewer says something like "we don't promise any loyalty but then we don't expect any from you."

[Arthur Murray]

Ralph Musgrave: "civilisation is in a race between education and catastrophe".
H. G. Wells put it beautifully.
Yes, homo sapiens is just Mother Nature's latest attempt to fit a human species into today's environment of the Earth. She's had a number of goes at "homos" in the past---neanderthal, habilis, erectus, australopithecus for example---and they are all no longer around.
I occasionally imagine the last Neanderthal tribe on the Earth being lead by a chief who, interested in keeping up his standard of living, leads his people into a valley overlooked by unstable slopes. He picks out a nice spot for himself and his family. "Don't worry about mudslides," he tells the moaners, "we'll be okay here...."

[Daniel]

For all practical purposes, we (the Earth inhabitants) live in a closed system regarding mineral resources, although we receive plenty of external energy in the form of solar radiation, even the amount of energy we can use is limited, as that energy has to be radiated back to space in form of heat to avoid becoming a boiling planet Venus style.

So I can't see how we can indefinitely grow our material and energy compsumtion, and therefore, it doesn't seem that we are living in a positive sum world. I think the right knows this and that is why protectionism is back.

Of course, classical zero sum strategies won't work either, as they will bring us to all kinds of resource wars. But in the left we have to acknowledge this, in order to prepare for a "fair degrowth".

[reason]

The story you eloquently lay out above is why I think that a UBI should be called a "national dividend". Everybody needs to have a stake in the collective success of society. The problem in my view is not capitalism (the private ownership of the means of production) as such, the problem is deeper (and more pernicious) than that, the problem is specialization itself. Most people have all their eggs in one basket, and can't afford change.

[reason]

Daniel,
I agree 100% and when thinking about the effect of specialization, it helps to explain why I think we cannot possibly move towards sustainability without a national dividend. (And the best way to start the process of introducing the national dividend is to distribute the proceeds of a carbon tax and other resource taxes).

[Spencer]

"Stagnation thus makes us mean-spirited, regarding others as threats rather than opportunities."

I predicted the higher murder rates in June 2015 as a direct consequence of the Fed's inadvertent money tightening.

Murder rates will continue to rise unless the Fed ends the remuneration of IBDDs.

[Blissex]

«When capitalism is growing wellx

Usual remark: this is a laughable confusion between "capitalism", a political system that narrowly defined existed for a few decades in the 19th century, and the "industrial mode of production", which has existed since the late 18th century, and has exited under a number of political systems (most derived from capitalism, yet not the same thing).

«the positive-sum elements are most salient and celebrated. When it stagnates, however, the zero-sum aspects become clearer.»

Suppose that for the past 2 centuries the overwhelmingly majority of the "positive-sum elements" of the industrial mode of production have come from the diffusion of mineral wood (coal) and oil, which have a cost much lower than live wood and oil, while being at the same time much lighter and more energy dense.
Put another way, suppose that the enormous "positive-sum elements" of the past 2 centuries have been mostly due to the discovery and cultivation of the most fertile land ever found, enabling a fantastically large primary surplus.

Furthermore suppose that no new mineral food better than mineral wood and oil have been discovered, and the diffusion of coal and oil based technologies has become complete in the "first world".

In other words, that the primary surplus has stopped growing around 1970, and the surplus now will grow at the very slow pace of pure technical progress, like in the 10,000 year before the 18th century.
Wouldn't that be nearly a zero-sum environment?

[Arthur Murray]

Ralph Musgrave:

According to the Oxford Dictionary of Quotations, H. G. Wells's quote is: "Human history becomes more and more a race between education and catastrophe."

The Outline of History, chapter 40

[Blissex]

«the primary surplus has stopped growing»

I just remembered an amusing point by some clever Economists: that the tertiary surplus can grow without limit, and thus so can GDP. As J Stiglitz wrote, «quality improvements – better cars rather than just more cars – account for much of the increase in GDP nowadays».
Because the price we put on services, like watching a theatre play or eating a gourmet meal, can grow without bounds, we could eventually have an economy based on ten million pounds meals paid for with the sale of two five million pounds theatre tickets.
Or more appositely, based on ten million pounds bankers fees to arrange a one million pound PFI "deal", and the like.
That might be very much zero-sum still, however. :-)