Tuesday, July 3, 2012

Corrupting risk at the top of the surplus pyramid

Chairman exiting his bank
In a real sense, human history starts with the creation of a social surplus, a surplus beyond simple subsistence. Such a surplus could be used for--indeed, was required to--build more complex societies. This included the literal building of the monumental architecture, the most striking creations from the existence of such surpluses.

More food, more babies
Merely increasing production does not mean there will be a social surplus. The normal tendency has been for population growth to increase to consume the food production available; given that the best way to manage farming and ageing was to have children. This Malthusian constraint continued to operate in human societies until quite recently--the history of China from 1700-1850 is a classic example of increased food production leading to population increasing faster than food production leading to a massive breakdown in social order (one of the deadlier such in history) with the loss of state revenue and diversion of resources to warfare undermining basic management of resources.

As I noted in a previous post, it is highly plausible that expropriating elites were what originally created the social surpluses enabling the building of more complex societies. For much of human history, it was obvious what was the dominant way to get access to social surplus: political power—either having it or serving it. Control of the means of coercion provided the dominant source of wealth. (And having the backing of the dominant coercive apparatus is still pretty useful.) With considerable amounts of said surplus being invested in the priests who helped manage both social complexity and expropriation by providing rituals of belonging; norm-advocacy; narratives of meaning, explanation and rationalisation; various services (calendar management, doctors of body and mind, teachers, engineers, scribes, mediators); plus formalised signals of commitment to the expropriating rulers and their social order.

To be sure, there was plenty of trade (and wealth from trade). Nevertheless, extracting surplus from peasants or controlling trade routes (and particularly trade nodes) was much the dominant source of wealth: especially inheritable wealth. In many early civilisations, the ruler was the dominant trader. If trade collapsed, that tended to both increase the dominance of wealth-through-violence while making it harder for any particular ruler to (re)establish control over a wide area—due to a lack of sustaining surplus to pay for the necessary extensive control. Collapse of an extensive, trade-managing (and so protecting) rulership often being the main cause of the collapse of trade in the first place.

The more centralised and territorial the generation of surplus is, the more it will attract attempts to seize it (hence the long history of territorial wars). This extends to our own period: having export wealth dominated by easily controlled primary production encourages both autocracy and civil conflict (pdf). Living in a society where wealth-through-the-means-of-violence, where centralised control of surplus, is not dominant is both historically rare and desirable.

It is impossible to achieve mass prosperity without getting out of the Malthusian constraint wherein increased food output merely leads to, and is consumed by, increased population. To put it another way, to evade the Malthusian constraint, the social niches people occupy have to be larger than subsistence. The more such social niches spread down the social scale, the more general prosperity becomes.

Ever since the rise of hierarchical societies, there have been social niches which were larger than subsistence; they were the niches of elites. Indeed, as Peter Turchin points out, one of the perennial problems of hierarchical societies is precisely the size of elite niches. If the elite increases in size faster than output, then competition for elite niches will ensue. That process has been one of the great drivers of history. (For example, the tendency for the ruling clan of pastoralist empires to breed enthusiastically likely helps explain the tendency of such empires to break up after a few generations as too large an elite fights over too few elite niches.)

For elite niches to occur in a society within the Malthusian constraint, a surplus has to be extracted from those lower in the social pyramid. To be on top of a social pyramid is to be on top of a process of surplus extraction. A process which continues in post-Malthusian societies. This is obvious enough in developing world kleptocracies (pdf), but is hardly unknown in developed democracies.  Jon Corzine (CEO of MF Global, which has just gone bust in one of the largest bankruptcies in US corporate history) is an excellent example of someone living on top of the surplus pyramid:
based on his long years in the financial business, from CEO of Goldman Sachs to his current job as chief executive of the failing MF Global, Corzine is proof positive that on Wall Street you don’t have to be very good at your job to get paid a lot of money, which is why hatred of fat cats remains a bipartisan pastime—and will for the foreseeable future.
Pushing risk downwards
A standard way to live on top of the surplus pyramid is to push risk down the social pyramid. At its most brutal, it involves pushing the risk of starving downwards. But it can happen even in societies which have escaped the Malthusian trap. Consider this comment by the Rt Hon. Vince Cable MP, UK Secretary of State for Business, Innovation and Skills in a generally excellent speech about parallels from the 1930s for our times:

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