|
|
|
|
The
Tale of Two Islands I borrowed heavily from other
authors for this "tale". I am a shameless plagiarizer. "....saving and the resulting accumulation of capital goods are at the beginning of every attempt to improve the material conditions of man; they are the foundation of human civilization. Without saving and capital accumulation there could not be any striving toward non-material ends." Human Action
"The essence of Socialism is this: All the means of production are in the exclusive control of the organized community. This and this alone is Socialism. All other definitions are misleading." Socialism
This is a tale of two islands, one called Calgary, and another called Ottawa. These two islands were identical in all respects except one. The thinking of their people was very different. Both islands had exactly 100 people who were all farmers. They all grew grain on a continues basis and they required 18 ounces of grain a day to survive. It required 1 hour of labour to produce 2 ounces of grain. This means that each person must work 9 hours per day to produce the 18 ounces needed. It was a day to day existence. Complex concepts like savings and investments were not needed and not generally thought about. The population never changed, as one person died another was born. Everyone worked and supported themselves till they passed on. This routine had been going on for generations without change. But now change was coming. The inhabitants of both islands have been learning about new ideas on economics. On one island (Ottawa) the politicians had been reading about a new concept called socialism and how it could improve the lives of all the citizens. On the other island (Calgary) the politicians had been studying socialism as well, but other ideas from a group called "The Austrian School of Economics" had been influencing a few citizens. On the island of Ottawa a meeting was called to discuss the idea of improving the lives of the inhabitants. Some of inhabitants (who called themselves politicians) stood up and said that they had heard of a new thing on some of the other islands called an "old age pension". According to socialism it seemed that seniors "deserved" to have a living provided to them without working, "an old age pension". All the islanders had to do is guarantee that everyone over the age of 65 would receive a pension and all the other citizens of the island would share the workload to supply the pensioners with the needed grain. This seemed like a solution that would work and everyone agreed with it. So the next year when 5 of the island’s citizens turned 65 and quit working, the other citizens picked up the load and provided them with their 18 ounces of grain per day. This meant that each of the 95 producers now had to work 9.5 hours per day. Nine hours to support themselves and .5 hours to contribute to the support of the senior citizens. This was a burden they were willing to bear because it meant that all of them were guaranteed a pension when they turned 65, thus improving their lives. All their problems seemed solved, for now. Mean while the people of Calgary wanted to improve their lives too. A public meeting was called and the politicians of the island stood up and talked about "guaranteeing" all the senior citizens a pension and that this would be a concept that would improve their lives. However there was an actuary living on this island (a sideline to grain farming). This intelligent young man stood up and said "We have 5 people turning 65 within the next two years and maybe we can support them, but I have calculated that within a generation or two we will have 30 or more people over 65 and will we be able to support all of them with this guaranteed pension scheme?" This development caused a great deal of discussion among the people at the meeting. A Greenpeacer stood up and said, "if we all cut back on the amount of grain that we consume and work the extra hours, then we will be able to afford the pensions." This didn’t seem to be a workable solution either. The politicians looked puzzled and asked why they were worried about something that would happen so far into the future. This statement caused even more discussion and it was decided by general agreement not to listen to the politicians or the greenpeacers anymore. This was the beginning of their salvation. "But if the pension scheme won’t work, what will we do?" said one person "we want to improve everyone’s standard of living." An Engineer stood up and said that he had read about a farming system involving something called irrigation and it would double the output of their grain farms, solving the problem of how to improve their standard of living. "How will we implement this irrigation plan?" said another person, "won’t it require a lot of labour to build an irrigation system?" The Engineer said "yes, I have done some calculations and it will require 25 people working for a full year to convert all of our farms to an irrigated system." The question that was then asked was how would they feed 25 people while they built the irrigation system. There was a long silence while no one spoke. Finally one person stood up (a capitalist) and said that he had been reading a book called "Capital and Production" by Richard von Strigl. In this book the author had described how a subsistence fund could be saved up. After saving up this subsistence fund they could invest it in a "capital project" that would increase their production output for the same input of labour. (A return on investment) The capitalist thought they could do this with grain, save up the amount of grain that 25 people would need for a year and then "invest" this grain by using it to feed the labourers while they built the irrigation system. (Remember that the concept of savings, investment and capital were all foreign to the islanders) Some of the islanders were not enthused with this idea, particularly the politicians and Greenpeacers, but most of the islanders felt that at least this was a better sounding solution that the others. The question was asked, "Ok, how do we do this then?" It was agreed that for the next year each islander would work an extra 2.25 hours to produce the extra grain needed for the "subsistence fund". This "subsistence fund" grain would be stored in a warehouse until next year when the project would start. So for the next year all the islanders worked very hard and very long to save up the needed grain. At the end of the year they looked at their accomplishment. The politicians among them said that they could now afford to start the pension scheme because these savings would support the five senior islanders for 5 years and surely they would be able to save up more grain before the end of the five years. Fortunately the islanders stood by their commitment not to listen to the politicians. The islanders chose 25 labours including the engineer and capitalist to build the irrigation system and they went to work. As each month went by the irrigation system took shape and with it the future of Calgary. As the end of the year approached "The Great Project", as it was now known as, came to completion, on time and on budget. Every farm on the island was now irrigated and the water began to flow. As each islander went back to work they found that they only had to work 4.5 hours per day to earn enough to survive, but now that they knew about savings, investment and productivity improvements, mere survival was not enough. Each farmer began to work as many hours as he wanted, some more, some less, but it seemed the average was 8 hours, thus producing 32 oz. of grain per day. As each farmer only needed 18 oz., this left 14 oz. per day to invest. And invest they did! Of the 25 labours who built the irrigation system, 5 including the engineer and capitalist said that they much preferred this line of work to farming. So they formed an investment/construction company. This company would borrow grain from the other islanders and invest it in other profitable ventures. One of the first ventures they invested in was the building of a small fertilizer plant. With this fertilizer plant they hired one of the islanders to run it and then sell the product to the farmers. It turned into a very profitable business. Soon everyone wanted to lend grain for interest or invest directly with the new company. As the years went by fewer and fewer of the islanders were actually farming and more of them were working in other lines of work. The productivity of farming was such that one farmer could supply enough food for 20 people. The number of farmers dropped to very low levels. Other things began to happen. It was discovered that grain could be turned into a beer that everyone could enjoy, and some of the farmers began using their grain to feed and raise chickens, which would in turn supply the islanders with eggs and meat. Other islanders turned to arts and sciences, providing their fellow citizens with a richer and more diversified life. The division of labour continued. Other developments occurred, such as the population began to increase. The island was now so productive that it could support a larger population. This caused a greater division of labour and an increase in internal trade and business. After about a generation or so, a strange thing occurred. A few of the more senior islanders "retired" on their own savings and investments. These retirees stopped producing and began to do only what they liked, living off of the interest and dividends of their investments. The islanders now had "pensioners". But not by having the pensioners living a parasitic existence off their fellow islanders, but by saving, investing and improving the productivity of their businesses. They had discovered the secret of "Capital Accumulation", and were now benefiting from it. Meanwhile back on Ottawa the years went by as well. As they did the number of "pensioners" grew from 5 to 15 with no increase in farm output to compensate. There was no "Capital Accumulation" at work here. Some of the pensioners complained that the other islanders seemed reluctant to deliver their grain to the pensioners and they were often late with the deliveries. The politicians said that this wouldn’t do, that it jeopardized the guaranteed pension system and a solution was needed. They decided to hire grain collectors and distributors and they would be paid the same way that the pensioners were, by the farmers working longer hours. This caused a great deal of grumbling among the grain producers. As time went by the politicians increased the reasons why a person should be allowed to go onto the government pay and be guaranteed a living. This eventually spawned a culture among the islanders of trying to fit their lives to meet the criteria setout by the politicians and to get out of being a grain producer and becoming a receiver of government largesse. After about a generation or so there was more than 40 people who were not producers but were still consumers. The workload on the remaining producers was becoming increasingly unbearable. Retiring to a pension or finding your way onto the government payroll or dole was akin to winning the lottery. Some of the producers began to short the grain collectors and more collectors and distributors were hired to counter the cheating. Protests by the remaining producers became common place but the politician always countered their complaints by pointing out that all of this had been decided in a democratic way and besides it was part of the "values system" that all citizens of Ottawa cherished. It was a sacred pact that all the citizens had with each other, it could not, would not be broken. The 60 producers were now supporting 40 non-producers as well as themselves. The producers had to work 15 hours per day to produce the needed 1800 oz. of grain. (The grain collector/distributors would protest and say that they too were producers, but they did not produce anything that anyone was willing to buy so they were actually destroyers of wealth). Although they worked 6 more hours per day than their ancestors did they were no better off, indeed by the very fact that they had to work so many more hours to have the same living was an indication that they were worse off. Unless you were on the government dole of course, then you were far better off. One day a ship arrived on the shores of Ottawa, flying the flag of Calgary. The traders/explorers disembarked and came ashore. They looked around at the islanders of Ottawa. All they saw were some primitive grain farms similar to the ones that use to exist on Calgary many many years ago. They stopped at one of the farms to ask the farmer questions. "Tell us about your island and civilization" they said. "What kind of goods do you produce here, what foods do you grow here?" "Goods?", the farmer said, "what are goods?" "We only grow grain here, what other kind of food is there?" "I don’t know about goods and such, but I can tell you about our civilization, we are very civilized and compassionate, we have many seniors on pension and other non-producers (40 all totaled) and we have something called a "government" that ensures everyone and everything is equal." "Your farms and businesses must be very productive to support that many people with just their investment income," said the explorers. "Why yes our productivity is just as good as it was one hundred years ago" said the farmer, "two oz per hour of labour is what we produce, quite an accomplishment we believe". "Now if you will excuse me I must be back to work to put in my 15 hours of labour before it gets too dark. I am looking forward to my own retirement in 5 years time. It will be nice to shed this yoke for good." The trader/explorers wandered about the island talking to the inhabitants. They noticed some major differences between their island and this island.
The trader/explorers finally decided to return to their boats, for the primitive people of Ottawa had little to offer them in the way of trade or ideas. Editor |
|
|
