Hannah’s Blog

Chapter IV

Capital Formation in the Household

It used to be that old people, instead of
spending their money at the end of their
life, would be passing that money on to
their children and grandchildren. Now,
we’ve been taught to go ahead and waste it.

Ken Kesey

It obviously doesn’t take an economist to recognize that there has been a change in the relationship between the generations. But, like the majority of economists, Ken Kesey seems content with the traditional definitions and prescriptions for correcting what has gone wrong. On the one hand, he perceives money as something having intrinsic value and which it is good to preserve. On the other, he suggests that its value is defined by the objective characteristics of those (young or old) who put that money to use, or to whom that value accrues. And, having no sense that these definitions conflict, nor any proof that it would be preserved by the children, he arrives at the implicit conclusion that money is wasted when it is spent by those who earned it. Yet he resists making a moral judgment, preferring to blame the experts by whom “we’ve been taught” to do what he really doesn’t approve of. Ken Kesey’s obviously confused.

Ken Kesey is concerned about is capital–the assets we set aside for use in the future. But, largely because “money” is used as a catch©all term for a variety of values–past, present and future–the distinction isn’t readily apparent. Nor, for that matter, is the difference between the physical and intellectual properties we produce, trade and exchange and their symbolic designation in monetary terms. Physical and intellectual assets having been lumped together, the distinction between physical assets, which are in fact diminish or used up over time, and intellectual capital, which isn’t, tends to be over-looked. Not only that, but the centrality of time to the designation of capital, and the very real possibility that intellectual assets may actually increase or, like a good wine, become more valuable with age, are all obscured by the common classification.

If it weren’t, if the nature of capital were properly recognized, then Ken Kesey would know that money is not the problem; that whether the old or the young spend it, which is, after all what money is for (spending), is irrelevant. He would know that what is important is whether or not the next generation knows what money represents–knows how to do things which will enable them to earn and spend more, rather than dissipate an inheritance, as Kesey’s scenario suggests. For, even if inherited assets are real–land, houses, or even a lake full of fish–if the children don’t know how to use them to sustain productivity, then sooner or later the assets are likely to be wasted. While it may be psychologically satisfying to blame old people for spending money, instead of “saving” for the next generation, what the money is spent for is what really counts. If the money is spent on producing healthy, well-educated and competent children, then there isn’t any need to pass money on.

Of course, it could be argued that while rearing the next generation can be accomplished on the cheap, without investing any physical or intellectual capital, inherited capital is necessary to make them really productive. But, given the increasing longevity of the population, it doesn’t seem practical to delay being productive until one generation passes on the requisite money and/or physical capital. Never was, I would be willing to wager. The accumulation of capital to promote production has always involved borrowed or stolen money. Though, the notion that wealth is inherited is a convenient myth to disguise the reluctance to extend credit to certain segments of the population.

In any case, while the accumulation of capital, whether physical or intellectual, depends on the co-operation of others, capital formation occurs primarily in the household, to the extent that that is where intellectual development has its beginning. Whether functional equivalents of the household can do just as well is still open to question since the prerequisite conditions for achieving the best results haven’t even been identified in households, much less anywhere else. Which is why, although the failure to recognize the household as the origin and microcosm of economic behavior may not be critical in theory, except to the extent that it undermines the validity of economic predictions, the failure to accurately represent the relationship between households and capital formation may well be disastrous.

In defining households as consumptive units economic theory posits an antagonistic relationship between households and capital formation. And because what households consume is presumed to detract from capital, to be unavailable to produce more wealth, economic theory not only suggests, but promotes a variety of manipulative strategies (the promise of “interest” and “social security”) to extract household assets before they can be consumed. Then, when these strategies prove unreliable, either because households are reluctant to lend their assets when the increase from interest is absorbed by inflation or the promised security is not realized, the logic of economic theory suggests that the accumulation of assets can be most effectively controlled by discouraging, if not prohibiting, the ownership of the structure in which their assets are accumulated, stored and used–the house.
That is, if people cannot be persuaded to invest their surplus somewhere else, they must be dissuaded from the pursuit of private enterprise by removing their structural supports. In other words, rather than merely suffering from benign neglect, households are liable to be targeted for elimination in order to promote capital formation.

While such a policy obviously conflicts with the fundamental principle of private property, if Professor Edwin S. Mills is to be believed, the elimination of homeownership is a matter of public policy. Or, though it is yet to be achieved, at least it was in 1987. That was when, writing under the aegis of the Federal Reserve Bank of Philadelphia, Professor Mills concluded, based on his analysis of U. S. Department of Commerce data, that “the U. S. has over-invested in housing capital relative to industrial and other kinds of capital.” So, regardless of the miserable and dilapidated housing conditions and the increasing incidence of homelessness, Professor Mills, who makes no claim to being a lone voice in the wilderness, suggested investing even less, even though investment in housing had, by his calculations, been decreasing for the last thirty years. From which I can only conclude that the housing conditions we now decry seem to have been created as much by purpose as by chance.

While the recognition of housing as an object of capital investment might seem to contradict the perception that the household has been left out of economic consideration, since the focus in this instance is limited to its function as a form of shelter, which is productive only in the sense that by being rented it provides a return on the money invested, such investment is only indirectly related to the concept of the household as a productive enterprise. Far from being an advancement in conforming economic calculations to reality, the categorization of housing investment as an alternative to industrial and commercial opportunities merely demonstrates what happens when the allocation of our resources is based on the amount of profit or return the enterprise is expected to produce. Since households generate little or no immediate profit, any investment is theoretically too much. Investment in rental housing is somewhat better. Moreover, the capital invested in households is worth imputing in order to calculate the potential for economic growth which would result if the private ownership of residential property were to disappear entirely. Professor Mills analysis merely indicates that the return on capital invested in housing would be greater if homeowners weren’t skewing the system by keeping more of their gains and assets to themselves. The economy would be much better, and certainly bigger, if it didn’t have to deal with these presumably competing alternatives.

On the other hand, if the profit of rental housing were perceived to flow from the owner’s initiative and foresight in having constructed something useful and made it available for use by others, rather than the mere fact that capital was invested, then there would be no need for the distinction. Then the only difference between homeownership and rental housing would be a matter of time–the residency of owners being less temporary than that of tenants–and the extent to which the productive contribution of the storage/shelter/housing structure is shared. Not only would the productive function of all housing be recognized, but the owners of rental property would have the same incentive as homeowners to maintain their assets and assure that the property’s useful characteristics last longer than the period in which the capital plus interest is expected to be returned. Indeed, rather than expecting the value of capital assets to depreciate or decrease, if the profit or return were perceived to result from having planned well for the future and provided a useful service, then the value of physical properties would increase, not unlike intellectual assets, the longer they last.

Given the principles of economics, both the characteristically shoddy construction of rental housing and the prevalence of uninhabitable and abandoned units, not to mention the host of vacant industrial and commercial structures, are logical results. Professor Mills and his colleagues would have us believe that the deteriorated housing stock is the result of having invested too much, because, from their perspective, new construction enables renters to resist paying rents which are high enough to return the expected profit and to maintain the assets they are perceived to use up. Those who rents, on the other hand, tend to perceive that paying the same amount in rent, even as their enjoyment of the property is reduced by the owner’s failure to keep it up, means, in effect, that they are paying more than they contracted for. Which, of course, they resent. Then, if the rents are increased, as is often the case, in order to retire the larger debt, resulting from refinancing to realize the inflationary increases in the value of the assets, that resentment becomes an incentive to find something better somewhere else. That is, people move, ostensibly because they want lower cost housing or, if not, to “move up,” when in fact want they want is to maintain both the quality and the cost to which they have become accustomed.

Which is not what they get. Not only is the cost of relocating an expense which they cannot expect to recoup, but, given that the problems are systemic, the process of deterioration will be underway even before they move into newly constructed housing. There is no escape because the consequences–increasing vacancies, decreasing income and social revenues (taxes), as well as the eventual default on loans and/or bankruptcy–are all part of the system. Even if, in the interest of “remaining competitive,” the rents in new units are only a little higher, since the profit margin is smaller and less than full occupancy rates spell disaster, increasing rents are inevitable, as the providers of public housing and elderly accommodations, which aren’t even trying to make a profit, have also discovered. So, obviously, the problem isn’t that too much has been invested in new housing, nor the need to make a profit. Rather, the problem is that instead of emphasizing the maintenance of capital assets, economics has focused on producing replacements, much as it has focused on exploiting one natural resource after another, confident that as each is used up another will be found to take its place.

In any case, the recognition that housing represents an investment of capital does not imply any awareness of its role as a contributing factor to household production. Quite the contrary. The effort to impute the productivity of owner-occupied housing by calculating what the return would be, if the housing were rented rather than owned, leads to the conclusion that, since the return on owner-occupied housing decreases the total amount capital invested in housing would earn, if there were no owner-occupied housing, owner-occupied housing is a poor investment. That is, from the economic perspective. For, when Professor Mills observes that “when homeowners receive the same ‘private’ returns on their homes as on other investments, the ’social’ returns on their housing investment will be 15 to 25 percent lower than the social return on those other investments,” what he means is that when households invest in themselves, their assets are not available to be used by government and other corporate entities. From which one can only conclude, since increasing household assets are perceived as a negative, that the economic system has become indifferent, if not antagonistic, towards satisfying individual and household needs.

It almost seems as if private property has become as inimical to the corporate capitalist economy as the socialist. Indeed, perhaps Professor Mills and his colleagues might actually prefer the latter. For, in a socialist economy there is no need to even worry about “social returns.” Socialist economies just skim the surplus off the top, rather than having to extract it via taxation, guaranteed interest on investments, and mandatory savings. Moreover, socialist economies are much more protected from the embarrassment of a “Savings and Loan” debacle. If their investments falter and their resources are squandered, such problems are much more easily corrected by simply replacing the government and revising the currency by edict. Moreover, instead of relying on market forces (antiquated factories, deteriorated infra-structure, uninhabitable housing) to prompt the relocation of the population, the socialist system simply commands it. However, at bottom, both systems are driven by the same engine—economic growth depends on the systematic relocation of large segments of the population.

There isn’t any question that homeownership is a problem for economists. Since capital invested in homes tends to disappear for long periods of time, it complicates their short©term calculations. Not to mention that the physical capital tied up in households represents, regardless of the extent to which it is recognized, an alternative to economic domination. However, since there is nothing to be gained by asserting that if homeownership didn’t provide an alternative store for household savings, more capital would be available for productive enterprise (renting shelter) and since it would be impolitic to attack homeownership head©on, the argument is couched in the positive terms of promoting “social returns” and equalizing (”equality” being always desirable) investments. Which, in addition, serves to obscure the underlying conviction that the accumulation of capital by individual
households must be wrong because it conflicts with the assumed “natural” tendency of material wealth to concentrate—a particularly attractive notion because when this “natural” process seems to be impeded by the contrary behavior of individuals, it justifies the imposition of social regulation to help it along. In other words, it obscures that the logic of economics is much like that which assumes that all organisms are naturally inclined to reproduce and multiply and that, in order to promote the reproduction of those organisms of which man approves, all man has to do is to eliminate or destroy those which are presumed to conflict. As a result, having been obscured, it isn’t much noticed that in practice the logic of this argument has proven to be false.

As I have already indicated, assuming that things are in conflict justifies man’s interposing himself and, if it seems convenient, supporting one side and/or wiping the other out. Moreover, while it is undoubtedly easier to bring in the harvest when there are no “competing” weeds in a field of corn and as a result less is left behind, making the field appear to be more productive, the elimination of weeds and pests does not necessarily increase, nor even maintain the level of productivity. Indeed, if the benefits of water and soil retention which weeds naturally provide are lost, one consequence of their eradication may even be no productivity at all. In assuming that organic existence is based on conflict, instead of a series of symbiotic relationships, such as, for example, between corn and “weeds,” and then presuming to regulate or moderate the conflicting forces of nature, man runs the risk of destroying the very things he intends to preserve.

Which, I suggest, applies to the basic unit of economic behavior, the household, as well. Whatever the reason, whether because the accumulation of capital by individual households makes the economy as a whole difficult to quantify, or because household behavior is perceived to conflict with the “natural” tendency of capital to concentrate, or because the persistence of households as economic units conflicts with the political interest in controlling their behavior by restricting the means of existence, rather than existence itself, the effort to regulate household behavior, especially in regards to the formation and preservation of capital, may well jeopardize capital formation itself. At least, I think there needs to be some consideration whether the social prerequisites for capital formation can be abstracted from the household setting and developed with greater success somewhere else. If not, if like tomatoes, which aren’t any better or cheaper grown in a greenhouse than those we import from where they can grow outside year-round, the principles of capital formation develop best on the household level, then experimenting with other systems may, at best, be a wasted effort, and, at worst, a self-destructive enterprise. Hot-house tomatoes, after all, don’t do very well in a diverse environment.

* * * *

Having already made the distinction between physical and intellectual capital, it seems appropriate to make the point that both the tangible resources we set aside to be used in the future and the intellectual faculties on which the very concept of the future, as well as the capacity to realize that use, relies, are primarily figments of the imagination. Which is not to say that they are not real. They certainly are; the ability to track and replicate the physical properties and processes of nature, no less than the materials and processes themselves. But their temporal designation–specifically, of some change to occur in the future–is an act of the intellect, the result of the ability to project an image from the present into the future and then determine to act on that plan or blue©print to create or recreate it. However, the evidence that capital is a figment of the imagination is not in the things we have created. Rather, that capital is a figment of the imagination is most easily deduced from its propensity to disappear, almost in the twinkling of an eye, without leaving any physically identifiable change. So, for example, the steel mills in Pittsburg, just like the cotton mills in Lawrence and Lowell and the automotive plants General Motors abandoned in l992, went from being capital assets to worthless hulks almost overnight. While the steel mills have been sitting and deteriorating for so many decades that they have become increasing liabilities for the community in which they sit and, as in Lowell, the exact moment when the capital value of these facilities disappeared has been lost from memory, there can be no doubt that there was such a moment when somebody decided that their usefulness had come to an end. And then, much later in the case of Lowell, somebody else decided that something useful might yet be produced in structures that had withstood the “ravages” of nature, and the destructive impulse of man. All of a sudden, they had capital value again.

Now, it may be argued that the increase in value merely reflects the investment or new money being paid out to renovate and fix the structures up. But, even as the new entrepreneurs begin to depreciate their investment as soon as the project is complete, any inclination to put it up for sale would almost certainly depend on being able to take out more than they put in. That is, by virtue of having produced a structure or facility that looks and functions as good, if not better than new, they expect to realize a capital gain. If they can’t get it, if, like the developers in Arizona, Texas, and California, they have to settle for less than they spent, then, even though what they spent bought real things—bricks and mortar and glass and electrical systems–the capital they invested is effectively lost. Not because they spent too much or engaged in fraud, but because no-one else shares their vision of how what they have put together will be useful in the future. In other words, capital isn’t just a figment of an individual’s imagination; it is an image that is shared and in being shared the image is made real.

It isn’t enough for a man to look at a bowl of porridge and decide that instead of eating it today, when he’s already had enough and eating more will just make him fat and feel sluggish, he’ll save it for tomorrow when he’ll need the energy it provides to be creative. Aside from the fact that day-old porridge isn’t likely to taste very good and may well have been spoiled or contaminated by flies, to get the full value of that porridge, or more, he would do better to sell or trade it to a hungry brother for whatever will buy him another bowl when he wants it, tomorrow or later. So, the essence of capital is an image of the future which is reinforced or made real by completing a trade or exchange of some substance with another person. Just as an individual can not be an economic actor by himself, capital is a shared concept that cannot stand by itself.

Which is why change is so important. While economic stability may be touted as a virtue, in order for capital value (the expectation of greater benefit from future use) to be realized, the physical assets in which it is incorporated have to change hands. It makes little difference whether the increase in value is the result of physical improvements, invention, or the favorable intervention of the power structure via selective regulation and/or specific zoning designations, in order for that value to be realized, it has to be validated by a transaction. Moreover, since such transactions also justify increasing assessments for purposes of taxation, in addition to providing the primary focus for generating governmental revenues, the economic impetus towards change is not only supported, but promoted by political interests. Not a stable economy, but an increasing volume of trade and exchange is what government needs in order to guarantee the steady stream of revenues it requires to maintain political stability, i.e. a compliant subject population.

Given this perspective, the seemingly illogical shifts of industry, commerce, and population from the countryside to the inner city and then back again (to the suburbs) are revealed as an integral component of corporate capitalism, not unlike, though on a much larger scale, the daily transactions on the stock market. However, just as the practice of “churning”–buying and selling financial assets at a frenzied pace, regardless of the their actual value or usefulness to their owner, in order to generate revenues for the brokers– is of doubtful merit, if not downright dishonest, the dislocation and relocation of large segments of the population for the purpose of generating an increasing volume of trade and exchange are bound to be ultimately counterproductive. Not in the sense of productivity being reduced–there isn’t any question that more things (more factories, more shopping centers, more schools, more temporary shelters, and more houses) are turned out, ostensibly to “accommodate” the shifting population–but in the sense that the more we produce, the more assets are wasted by being left behind. The whole country, not just our dumps, is littered with unused products, abandoned structures, and surplus, albeit deteriorating infrastructure. And, if all the relevant indicators are to be believed, in spite of this increased production, the population is no better off.

The argument that the continuous dislocation and relocation of what has come to be characterized as our “mobile” population, even after the impetus to settle the continent from coast to coast was satisfied, is the result of individual choice in the pursuit of success, has to be suspect. Given that relocating a household three or four times is the equivalent of having its assets wiped out completely by fire and the majority of our population has not in fact achieved material success, or even security, if people are moving of their own volition, then there are only two logical explanations. Either the majority of the American people are too stupid to learn from experience, or they have no interest in material success, or in even sustaining themselves. Which suggests, since both are unlikely, that their mobility is opportunistic in that it represents an “opportunity” to those who would exploit them (like bears plucking salmon from the stream in which they struggle against the current to reach their spawning ground), not to themselves.

Indeed, Nevil Shute’s observation that “to travel hopefully is better than to arrive,” applies equally to the migrants to the Sun Belt and the salmon. While the latter, if they escape being caught by the bears, expire soon after they get “home,” the migrants to the Sun Belt, like their westward antecedents, whose relocation was promoted by the promise of cheaper living, haven’t found quite what they might have expected. For them, “opportunity” is a matter of less–less-cost housing and lower taxes and a feeling that their survival isn’t quite as threatened –while the developer’s perception of the “opportunities” of immigration are quite different. The proponents of migration expect to make more profit by paying less for labor, as a result of an increasing population, and by saving the expense of the public services and facilities (streets and sidewalks, sewers, trolleys, libraries and hospitals), which had already been paid for, but poorly maintained, in the communities from which the immigrants are lured. Which is not to suggest that the proponents of migration are in any way deceptive. Since the public facilities and assets hadn’t been kept up and were falling apart, the failure to provide them in the new location is a wash and tends not to be noticed until the increasing size of the population generates health, sanitation, and transportation problems so large they can’t be ignored and it is up to the next generation to clean up or flee the mess left by the old.

So, in fact, it is possible to put off maintenance indefinitely and, on the basis that it is demonstrably cheaper to build new than to renovate, justify the practice of allowing both public and private assets to deteriorate. For, once a significant percentage of a community has fled or been induced to remove itself because the deteriorating natural and/or man-made environment has become a threat to their ability to survive, then those who are left, being fewer in number, not only expect to have more, but to be paid a higher wage. Which would make renovation more expensive, just as the theory suggests. However, the reality is that while the shrinking population does have more, what it has more of is what nobody wants and while an increasing population tends to experience a decrease in what labor is paid, a decrease in the population does not have the opposite effect. When there are fewer people to pay anything at all, then labor, being local and more easily affected, is almost certain to be paid less. Not to mention that those who have not been induced to remove themselves, either by bribes or the perception of threat, are very likely to be either minimally skilled or dense and, therefore, their labor is actually worth less. None of which means that the economy is in any sense more efficient or effective. Quite the opposite. Not only is renovation more expensive; the only way to be truly efficient is to avoid the waste of allowing our assets to deteriorate. “A stitch in time saves nine.”

It may be that the capitalist system of accounting, rather than exploitive human nature, is to blame. Perhaps because there can be no gain once the scheduled depreciation has reduced the value of capital assets to nothing, the only logical course is to cut one’s losses and start over from scratch somewhere else. In any case, there can be little doubt that the relocation of vast numbers of people followed upon a widespread and systematic process of private and public corporate disinvestment, which, given its dimensions, can hardly be considered to have been accidental. Which is not to say that the relocation was intended. Since it proved advantageous, there just wasn’t any incentive to prevent it.

If we consider just two areas, education and transportation, it is hard to imagine a more effective strategy or combination of decisions to induce migration in the population, whether or not it was intended. While the mythology of the rural childhood portrays children as trudging five miles to school each day, the fact is, as a whole generation still recalls, that there used to be one-room school houses spread all over the land, where the children learned all the elementary skills they required to sustain themselves or were prepared for the more specialized instruction available to them as boarders in the larger towns. It wasn’t until those schools were consolidated in the name of increased efficiency and, no doubt, more direct control by those in authority, that the distance from home to school became a much more significant factor. While those children which were provided with transportation got
less physical exercise and, because of the hours spent on the bus, less time to study and learn, others were given the choice of getting no schooling or abandoning rural isolation and moving into town.

Then, when the countryside had been just about emptied of the independent and self-sustaining, so-called “family farm,” population, the process of school consolidation was, in a sense, reversed. Once most of the population had been concentrated in or near urban centers, neighborhood schools within walking distance of both homes and stores were systematically closed in order to consolidated the school-age population and disperse them from the urban center to more spacious grounds in the suburbs. This served a number of purposes, none of which served to improve the education or socialization of the children. What it did do and this was intended, at least in Ithaca, New York in the early 1970’s, was to isolate the students from their surroundings, especially the merchants who considered young people shopping and asking a questions on their way to and from school a real nuisance. In addition, both the transportation schedule and the cost of moving the children to the edge of town leave neither time nor money for physical education instruction, including the visual arts and music, or even the free play children used to enjoy during twice-a-day recesses and lunch time.

From the community perspective, the benefits of removing the schools to the urban fringe were almost too numerous to mention. Isolating the children in their own compounds not only relieved the community from having to be concerned about their education and socialization until the experts had presumably prepared them to behave as they ought, but it provided the basis for a system of social control from which, if education failed and the children weren’t disciplined enough, it was easy enough to go on and try again by confining them in jails and prisons until the primary lesson (to do what they are told) is learned. In addition, of course, segregating the children generated profits and jobs in the transportation and building construction industries. First, the new schools had to be built; then, the abandoned sites, having been found worthless as public facilities, were suddenly transformed into valuable commercial assets, if only as parking lots to accommodate the vehicles of the people who could afford to follow their children and moved to new neighborhoods. Which, of course, meant an increase in housing construction and more room to expand commercial facilities in the center, until, ostensibly because there wasn’t enough room for the population which had relocated to the suburbs to park and shop downtown, the merchants removed themselves to shopping malls on the urban fringe. So, in a sense, we ended where we started–with the merchants and the children, each isolated in their own space, next to each other on the urban fringe of a hollow center.

However, there is a big difference between these new cities on the fringe and the traditional American town. Although the distances are not much greater, the transportation system which connects residential, commercial, educational, recreational and industrial segments virtually prohibits going anywhere on foot. From the speed of the traffic, to the timing of the signals and the lack of sidewalks, everything conspires to discourage pedestrians from traveling without an automotive shield. So, since there’s no point in building something that no-one will use, there are no pedestrian facilities in the suburbs and no random locomotion. Which makes it fairly easy to identify people without vehicles who don’t belong there, even as it makes a sense of community or belonging almost impossible to achieve. The suburbs are exclusive in more than one sense.

In any case, though there has been some effort on the part of social scientists to explain these migrations as the result of the “natural” process of urban decay, death and rebirth as something else–an entertainment district, government center, or financial hub–it seems quite obvious by now that the process has been driven by the interests of those who benefit from making changes for their own sake. That is, the American economy has been kept in a state of agitation, which the proponents consider progress, by those who thrive on buying and selling both the things others make and real estate, without the real assets of the nation having been increased by one iota. Which should not be at all surprising, considering that the emphasis has been almost entirely on the process and the concept of progress has been reduced to simply moving forward, like a cat chasing its tail. In fact, no matter how slow or how fast, when they are going around in circles, neither the cat nor the economy are really going anywhere.

I know that I have been distracted by the neat dichotomy of producers and consumers from the fact that the market in which they interact is not just a place or an abstraction, but a host of factors, traders, merchants, and salesmen–the middle-men, who have no loyalties to either side of the transactions they facilitate. Like the lawyers, who thrive on the verbal fracas of their clients, the commercial fraternity has little interest in the outcome of transactions and much in seeing the volume, on which their profit depends, increase. Moreover, also like lawyers, the number of commercial actors in a particular transaction can increase almost indefinitely without improving either the product or the level of satisfaction on the part of the producer or the consumer at all. Which explains, on the one hand, the proliferation of the advertising industry and, on the other, the prevalence of fraud. For, if the buyer, in addition to being unsure about the usefulness of what he buys, has been led to believe he’s getting something that he’s not, then he is almost certain to buy something else. So, while the producer of a good or service has an interest in the buyer’s satisfaction to assure a return, dissatisfaction better
serves the interests of the middleman. Indeed, if the buyer is dissatisfied, that’s yet another commercial opportunity–to make a profit on the useless stuff by selling it to someone else, instead of sending it to the dump. It also explains, albeit indirectly, the equanimity with which the commercial sector views the demise of retail establishments and, more recently, whole shopping centers, even as they argue for a similar developments just around the corner. And finally, it explains the move of our manufacturer’s abroad. The commercial sector has no interest in who makes things; only in who makes them cheaper. Moreover, the more opportunities for buying and selling there are between the maker and user, the better.

If the nature of the salesman’s role escaped my attention, it was probably because my father was a salesman and he took his mission very seriously. In fact, that was probably his major flaw, as far as my mother was concerned; he was much more interested in his customer’s satisfaction than in how much he earned. Making a sale and then making it again is what counted with him. Perhaps as a result, while his credibility rating was obviously high, since he remained the top-ranked umbrella salesman in his firm for twenty years, he was almost always in debt, having spent his commissions before they were earned. In any case, as a salesman’s daughter, I not only enjoyed my stint at Macy’s during the Christmas rush, but I always assumed that disinterested salespeople just hadn’t learned how to do a good job. I forgot what I’d seen when my mother was still designing ready-to-wear women’s sportswear for a New York firm trying to do business with J. C. Penny and other volume merchandisers. Even then, when the manufacturing operations were still located in places like Rhode Island and western Pennsylvania rather than South Korea and Taiwan, the merchandiser’s squeeze on the manufacturer was pernicious. For, in exchange for volume orders, they demanded a lower price and compliance with their own specifications, so that, even with the same mark-up as their smaller competitors, they could undersell them and claim better quality. But, since the volume wasn’t guaranteed from season to season, nor even month to month, it had to be produced by the available workers working over-time and, of course, being paid extra according to law. So, in order to come out ahead, the only lee-way was in the materials and the manufacturer, or rather my mother, as the designer, was reduced to negotiating down to a penny on a gross of buttons or zippers. Which accounts, in large part, for the temporary popularity of nylon zippers; they were lighter and therefor cost less to ship. That they melted when they were ironed was another matter, which wasn’t covered by the merchandiser’s standard of “buyer beware.” Besides, the zippers were being used in garments made of “no-iron” fabrics. If people insisted on doing what they’d been told not to do, then they deserved to have to go out and buy something new to replace what they’d ruined.

When that didn’t happen, when sales declined, then the merchandisers decided that the price would have to be reduced and the only way that could be accomplished was to contract for the manufacture overseas, where the cost of labor would be, at least temporarily, less. That, of course, had the ultimate benefit, once the number of American manufacturing jobs had been significantly reduced, of depressing the wages American employees could expect to be paid and justified returning the manufacturing process back home. At the same time, of course, it provided an opportunity to replace the old manufacturing facilities with new buildings in new locations, and the need to induce at least some portion of the workforce to move.

In theory, capital is an object of accumulation used to provide more benefits in the future; in reality, capital assets are like the pea in a shell game–”now you see it, now you don’t.” And, to a certain extent, keeping capital in motion is, like keeping the population in motion, a matter of political strategy, growing out of the conviction that, in addition to being a more effective way to control the population than the use of physical force, controlling the economy, via the system of taxation, is all it takes to satisfy the governmental mandate to promote the welfare of the citizenry. Given this assumption, instead of collecting revenues in order to perform those tasks which the citizens expect to carry out more efficiently and effectively as a shared, social responsibility (providing transportation facilities, mitigating the effects of environmental change, defending against hostile behavior, and educating the next generation, for example), government levies taxes primarily in order to regulate and promote the economy. Which accounts, in large measure, for the almost continual manipulation of the tax code, including adjustments to the capital gains tax to increase or reduce the volume of transactions. Moreover, assuming that a well-functioning economy and the welfare of the population are synonymous, how the proceeds are spent is equally determined by the desire to either promote the economy or make up for any defect that keeps it from performing as it ought.

Which makes sense, in theory. If the economy is all-inclusive and comprises the whole spectrum of functions by which humans provide for their sustenance, then there isn’t any question that a well-functioning economy is conducive to the well-being of the population. The reality, however, is different. For, while economists divide all the participants into two categories–producers and consumers–what government seems intent on supporting and protecting is just one segment, the commercial sector, the nexus of trade and exchange. As a result, while the speculators have flourished, producers and consumers, having been largely ignored, have gone into decline. If not, if production had been equally protected, then the natural resources would not have been allowed to be depleted and destroyed, nor would the man-made environment, the infra-structure, have been allowed to deteriorate as it has.

In a sense, the recent history of the capital gains tax is indicative of the narrow governmental focus on supporting and promoting exchange and trade, or commerce, including the ancillary functions such as advertising and insurance. For, given that capital is assumed to be used up or consumed in production, the rate of the tax on capital gains is almost entirely irrelevant to the manufacturing sector. While the notion that if the taxes on the profit from investments are less than on what people earn from their own enterprise, those who have surplus resources to lend will be more likely to invest, rather than consume or use themselves, seems to make sense, it is merely consistent with the belief that it is better to let someone else use one’s assets than to engage in private enterprise. For, if directing more resources into productive assets were the real purpose, then the manufacturers, or, for that matter, agricultural producers, could accomplish that much more efficiently by charging higher prices to earn a sufficient surplus to replace and increase their capital assets on their own. But, of course, such behavior would eventually leave all the investors and speculators, whose participation in the economy adds no real value to the production and distribution of goods and services, out of the loop. Not only would they no longer benefit from the enterprise of others, but their ability to control that enterprise would be reduced.

Control is, again, the primary issue. As is evidenced by the fact that when capital is lost, even though there is no lessening, if not an increase, in the provision of social services, the obligation to pay for them is diminished. In effect, success is punished and failure is rewarded. Which no doubt explains why even taxing just half of any capital gains is perceived as unjust. Taxing capital gains at all represents a reduction of influence and power; a taking-back with one hand what the other had just given. Since in many instances, if not all, capital gains are largely the result of inflation or an artificial increase as a result of some favorable governmental act or restriction, when, for example, the gain, which is realized by designating an acre of land for residential, rather than agricultural uses, is taxed, then the power inherent in getting the revised designation is reduced. And while it might seem entirely appropriate that the body politic should at least share in any additional benefit which results from the re-designation of the use of a parcel of land (that we “give unto Caesar that which is Caesar’s”), the capital gains tax is resented as an unjustified claim on the entrepreneurial spirit.

For those who are trying to make a living from agriculture, especially on a small scale, there’s another reason to resent both capital gains and the tax. At least in Florida, the availability of credit to farmers in order to finance planting or just survive a poor harvest has been tied to the potential for using the land for some other purpose. That is, in order to get a loan, the farmer’s land has to be designated for residential or other commercial uses, whether or not the land is appropriate for other than agricultural uses. In addition, in order for the value of those other uses to be certified, the farmers are pressured to put some land on the market in order to register the value of their capital assets with an actual sale. Then, if they are “lucky” and sell off a parcel for more than they paid, there’s not only the capital gains tax to be paid but the very real risk that the assessment on the land that is left will be increased by the local authorities to reflect the new values. Not to mention that the sale, which the farmer didn’t really want to make, sets what has come to be known as “leap©frog” development in motion and the almost inevitable increase in the need for public services is sure to raise taxes on adjacent property even more. So that, in retrospect, having borrowed resources or working capital for expansion or to counteract the vagaries of nature, as well as the modest capital gain on a sale, signal the beginning of the individual farmer’s failure.

Indeed, the system which has evolved to direct the allocation of capital assets almost seems designed to produce failure. Perhaps that’s because individual, as well as corporate failures are a prerequisite. Perhaps failure is necessary to counteract the tendency of capital to accumulate by keeping it moving. In any case, although the ostensible purpose of capitalist enterprise is to make a profit and success in doing just that is almost universally lauded, what is actually rewarded, at least by the system of taxation, is loss. Not only is corporate self-interest reinforced, as I already noted above, when it fails to earn a profit, by being relieved of the obligation to pay its fair share of the cost of community services, but those organizations which don’t even aim to produce a surplus, the not-for-profits, are
permanently exempt from the obligation to pay taxes by declaring themselves to be directed by an unselfish or charitable purpose. That is, by abjuring the profit motive they get to do only what they want to, rather than what the populace through its duly and democratically elected representatives has found appropriate. Likewise, donating corporate profits to charitable foundations seems to be increasingly favored, probably because the donors, not the beneficiaries, determine what and under what condition the services provided by foundations are dispensed.

So, it isn’t at all surprising that as revisions in the tax code have reduced the opportunity for categorizing the surplus or profits of an enterprise as an expense, corporate profits have been decreased by first taking on more debt than the enterprise can repay and then escaping into bankruptcy. Nor is it surprising that there is agitation to exempt the gain on those debts from taxation since that is the only place left, other than wages, where there is no escape from the government’s claim on profits and the opportunities for losses are becoming exhausted.

“Opportunities for losses” seems like a strange notion, but I don’t know how else to categorize what the Georgia Pacific Corp. tried to accomplish by buying, for two million dollars, a major portion of the Santa Fe swamp and then, after donating it to an agency of the State of Florida, claiming a twenty-four million dollar deduction or loss for income tax purposes. While the dis-allowance of that deduction by the IRS was finally upheld after seven years of litigation, the purpose of the original purchase can hardly have been as stated–to mine the underlying peat for fuel in an electric generating plant–because there was almost no potential for profit. Even though it might have been technologically feasible, to anyone bothering to look beyond the flashy proposal and barrage of experts that Georgia Pacific sent around to agitate the citizenry, it obviously wasn’t worth the cost of draining the swamp, building roads, and then clearing a mature forest and an overburden of roots to reach an unknown quantity of peat.

Moreover, since most of the information Georgia Pacific so eagerly provided was about peat mining in Europe, where the mining operation involves scooping away hillsides with bulldozers, and was almost totally irrelevant to a swamp on the edge of a lake and a river which couldn’t be disturbed, it seemed much more likely that the real intent of the proposal was to generate credibility from the inevitable barrage of negative response and publicity in order to enhance the value of what Georgia Pacific would be giving up by failing to mine the it. To me, as a member of one of the environmental groups who were lobbied on behalf of the project, it didn’t seem serious at the time and the ultimate donation to the State seemed like a hollow victory–until the IRS action came to light. Now it makes sense. Georgia Pacific invested two million to save eight million in taxes and even if they now have to pay them, after seven years, if those eight million earned ten percent a year (perhaps from tax-exempt bonds), the original amount has doubled and Georgia Pacific still comes out ahead, as do the lawyers who managed the law suit. The United States, on the other hand, is eight million further in debt and the judgment against Georgia Pacific may not even cover the interest.

For all I know, the peat under the Santa Fe swamp, as well as the twenty-four million Georgia Pacific claimed for that asset, might even have been figments of the imagination. Not so the oil which Aristotle Oasis proposed to transport from the Middle East and to refine in the world’s largest refinery to be built on the New Hampshire coast. The oil was quite real, as were the supertankers Oasis had acquired and for which he was eager to develop a permanent use. But that was about all. Long before the Arab boycott caused the disappearance of cheap oil, the proposal for the oil refinery evaporated in the reality of the salt water which his engineers had mistaken for fresh and the insistence of the inhabitants that any new industry should at least share in the cost of the required improvements to the infrastructure, as well as their maintenance, as a result of the enterprise. Given the millions of barrels Oasis proposed to ship in, five cents a barrel seemed like a fair tax. But, that turned out to be the proverbial straw, or at least the reason Oasis and company abandoned their options and left, saving themselves and the New Hampshire seacoast the financial and environmental problems of bankrupt oil refineries.

The purpose of this recitation of failed enterprise is to make the point that while capital is a figment of the imagination, there also has to be something real involved, if only to serve as a check to assure that what is imagined has at least the potential of being achieved. That’s what that five cents on the barrel provided. While the revenues might not have been enough to pay for all the roads, bridges, sewers, and schools needed to serve the development and the increased population, if the projected profit margin, before any development was even begun, was already so tight that it couldn’t accommodate a five cent tax, then it obviously wasn’t an economically feasible project and shouldn’t have been undertaken, as it wasn’t. Moreover, if the same kinds of calculations had been applied before nuclear generating facilities were designed, then most of those wouldn’t have been built either–at least not with the huge cost over-runs and before the problem of what to do with the nuclear wastes had been resolved.

But, in addition to being a figment of the imagination, capital is an intellectual creation that is shared. This makes the process of capital formation particularly attractive. A shared intellectual creation or vision, unlike a material creation, isn’t made less by being shared. Rather, a shared vision implies that the intellect has succeeded in convincing another to see things the same way, which not only makes its own perception more certain but represents an expression of power. So, even when the vision conflicts with reality, it is hard to resist it. And when that conflict is conscious, when, for example, assets are sold back and forth between friends or associates, often without any money changing hands, in order to inflate the value and establish a bench-mark for selling similar assets to someone else, then that capital creation constitutes fraud.

So, while capital, being a figment of the imagination, is unlimited in theory, it is constrained by reality, as well as the need to be confirmed by agreement or consensus. Capital is created by individuals, but it depends on being recognized in a social context. Which may also explain why certain segments of the population have traditionally been precluded from access to capital. If capital is a matter of consensus, then those whose thought processes are perceived to be different or a barrier to common understanding–women and foreigners, for instance–are automatically excluded. That the real assets of women, for example, have often been greater than those of men is largely irrelevant since capital is based on a common agreement of what to do with those assets in the future and, also by common agreement, men presume women to have no business concerning themselves about the future. Men, no doubt, have found it particularly convenient for women to dispose of the resources at hand while men plan for their disposition in the future.

* * * *

So far, in categorizing capital as a figment of the imagination, I have assumed the standard definition of capital as material wealth used or available to produce more wealth, which is accumulated by the individual, or the household as an extension of his person, and extracted to be used by someone else. The reason for the extraction seems two©fold. Since wealth and capital, a functional designation which implies the future, are social concepts, their reality depends on liberating the material assets from the individual whose enterprise led to their accumulation and storage. For, it isn’t just any accumulation, as untold collectors of sea shells and buttons have discovered, that merits the designation of wealth. Somebody else has to want it. And since material entities cannot be in two places at once, being material necessitates that capital assets be moved to demonstrate the change in possession. Moreover, in addition to validating their value, moving material assets has a practical benefit; it reduces the probability that their value will deteriorate, as it well might if the alternative strategy, storage, is employed. For, the fortuitous combination of fruit and honey, left sitting half™forgotten in a jug in the sun, fermenting into a tasty and stable concoction (wine), is generally less probable than their succumbing to the rat or rot.

Which, no doubt, is the basis for the assumption that the interests of the individual household (holding on to assets in the house) and capital formation conflict. However, although it may not be preferred, the extraction of assets for capital formation–allowing someone else to use them, instead of letting them go to waste–does not necessarily conflict. It may be either a lesser negative, neutral, or even a marginal benefit. Indeed, actual conflict between the household and capital formation only occurs when, in the interest of the latter, more than the surplus is extracted and the household is deprived of what it requires to be sustained. Presuming the existence of a conflict merely provides a convenient justification for the extraction of all assets, not just what the household designates as surplus. By rationalizing that since the household’s assets are bound to go to waste (either because of “natural” deterioration or because the household doesn’t appreciate their best use), it is possible to conclude in good conscience that extracting the assets for use by those who know better, is a higher good.

But, it isn’t necessarily so. Capital formation does not necessarily depend on extracting more and leaving less than the household requires to be sustained. The process does not have to be exploitive. Capital formation can result just as well when the household itself determines what it doesn’t need or want to use or consume at present and makes that surplus available for other purposes by the use of others. Moreover, unless one assumes that the desire for immediate consumption is unlimited, which, unlimited consumption being impracticable, is unrealistic, the creation of a surplus and the creation of capital are almost inevitable. Not only is an increase in benefits, or wealth, implicit in the concept of capital, but the determination of usefulness, together with the deferral of that use to some other person, at some other time and place, is in and of itself a benefit. Once the determination of usefulness has been made, it does not have to be made again and can be applied to another, without any loss to the first. Moreover, future benefits are presumably always greater than present benefits; otherwise there would be no point in deferring their use until later. While the specific limits of material assets at any particular point in time are fixed, the benefits they provide are neither fixed, nor subject to being simply divided and spread around, unchanged, now or later. Rather, the benefits are derived from the fact that the interests served are diverse as to individual taste, time, and place. Which is why capital formation depends not on reduced use in the present, but on what is not used in the present being saved, moved, and used in the future.

Though capital is formed as a result of assets being moved, just moving assets around will not necessarily result in the formation of capital. Nor is it enough to have the intent. Just as there have to be assets to begin with, the ability as well as the intention to use the assets later, rather than sooner, has to be present. Because if what is saved and moved around is ultimately not used or unusable, then it is wasted. While it is hard to say which is more important, the assets or the ability to anticipate and plan for their disposition in the future, the ability to conceptualize and realize the utilization of present resources in the future, albeit central to the process of capital formation, is probably less important to human survival. Given that humans are omnivorous creatures and therefore quite easily able to sustain themselves with a strategy of predation, responding to immediate sensations of physical satisfaction or deprivation, capital formation is only important if the intellectual pursuits, which not having to be on the move and constant look-out for food promotes, are perceived as definitive of human behavior. In other words, the primary function of capital formation, an intellectual creation or figment of the imagination, is self-reinforcing—to promote the creativity of the brain, intellectual or, if you will, spiritual well-being.

In that sense, capital hardly seems material at all. While the designation is applied to tangible objects, much as “chair” designates a movable object appropriately used to provide seating at some distance from the floor, the designation or naming has no effect on the nature of the objects themselves; nor does it make any difference whether the designation is expressed as “Stuhl” or “chaise,” or, in the case of currencies, as dollars, marks, or francs. Regardless of the particular symbol, the concept of the designated object remains the same. Which is not to say that symbols are entirely irrelevant. While there may be no direct relationship, for example, between the ascendant popularity of the Japanese currency, the yen, and the evocative appeal of that symbol for speakers of English, signifying a desire that is yet to be satisfied, one might well speculate whether the status of Japanese currency would be quite the same if, instead of the yen, they traded in “crocks” or “pee.” Similarly, the significance of the relationship between the designation of “capital” and the general appreciation for being on top, at least in Western cultures, can’t be discounted entirely. Indeed, the emphasis on matters of the mind (located at the top in the head) may well be directly related to the flowering of capitalism.

On the other hand, a symbol may be misleading. Since the underlying concept may be quite different or even missing, taking a symbol at face value may contribute to misunderstanding. So, for example, it might be worthwhile to recollect, in considering chairs, that the Japanese, who appear to be so very Western and still so very different, traditionally relied on mats for sitting and reclining on the floor, rather than the elevation of chairs. Consequently, the introduction of the use of chairs, especially for sitting around a table, may well represent a stressful accommodation on their part or represent a strain in that it conflicts with the traditional concept of social intercourse and negotiation. For, when the participants in a social activity, whether it be a meal or a trade negotiation, are reclining, seated on the floor, or standing up, all parts of the body are totally visible to everyone and the body language can be read, even as the spoken word is heard, to confirm or refute what is being said. That isn’t possible when people are sitting around a table and more than half of the body is obscured. So, sitting around a table requires and implies a greater degree of trust since it is almost impossible to determine whether a shift in posture represents some physical discomfort or represents a negation, contradiction, or amplification of what is being communicated “above board.” Which, no doubt, explains the frequently arduous negotiations in the international arena about the size and configuration of negotiating tables before the presumably substantive matters are addressed.

In any case, the concept is of primary importance. So, when we focus on either the symbolic representation of the concept (in the previous example, the table, rather than the establishment of trust without which negotiations can’t proceed) or its material expression (in the case of capital, the assets we designate as such), our perception is liable to be distracted, if not distorted. When it comes to capital formation, there are at least three aspects or components which we tend to overlook. First of all, and this is perhaps ironic, the failure to recognize capital as primarily a figment of the imagination has the effect of restricting the designation to material assets whose value is already known, even as those whose capital value is as yet unproven are excluded from consideration. So, for example, the tropical
rain forests, not unlike other natural resources before them, including oil or “black gold,” are exploited and largely wasted, from a practical and economic perspective, because their capital potential is as yet uncertain. On the other hand, the failure to appreciate that the creation of wealth is primarily a function of the intellect, interacting with and directing the transformational processes of nature, seems to have created the impression that the depletion of natural resources, like the depreciation of capital, is a linear process which can go on ad infinitum, without any need to restore or reinvest in the assets to keep them productive. In other words, the definition of capital as material has created expectations about the future which can, in fact, only be realized by the immaterial intellect. The material assets we designate as capital are, by definition, finite; only intellectual capital and the ability devise a temporal designation are potentially unending.

Thus, the second aspect of capital formation which tends to be overlooked when capital is considered as being essentially material, is the importance of knowledge and information about how the world works. Capital formation depends not only on the ability to recognize and designate material assets to create wealth or well-being in the future, but on the ability to realize the potential usefulness of the resources of nature to their fullest and actually create wealth. Put simply, the creation of wealth depends on the ability to do things. And, while the ability to do things is theoretically both unending and incremental, by virtue of being transmitted from individual to individual and from generation to generation, in order for that potential to be realized, the transmission actually has to occur. If the value of assets is to be maintained and wealth is to be created and increased, then there has to be an investment of the knowledge of how to do things. And that investment has to be in the next generation because the present generation, like the past, is certain not to last. Moreover, since it is practically impossible to predict which individual is physically and mentally best equipped to maximize that investment of knowledge, or education, it seems best to invest broadly, if not universally, in order to lessen the potential for loss.

Perhaps the best evidence that capital is a figment of the imagination is to be found in the fact that material wealth, including capital, as well as the wealth of information, has a tendency to disappear with great rapidity, not just because it is used up or lost, but also because humans have a tendency to change their minds. What is considered to be of great value one day is considered worthless the next. And while some of this change in perception may be accounted for by new information, as seems to have been the case in regards to the evaporation of capital in the Savings and Loan collapse of the late 1980’s, some assets just aren’t worth the effort it takes to keep them up.

In this regard, the potlatch societies seem to have developed a more practical and realistic mechanism for getting rid of assets without having them go to waste. By distributing their accumulated assets in a ceremonial feast, they effectively transform it into a social debt. This debt is then gradually repaid as the other members of the clan, whose participation in the feast created an obligation to engage in accumulative behavior themselves, reciprocate with distributive feasts of their own. But the ultimate result is a system of serial accumulation and dispersion which, because some accumulation is always on-going, assures the availability of a surplus in the event of some catastrophe, even as it prevents excess accumulations from going to waste though spoilage and rot.

Although the potlatch system has been categorized by some anthropologists as a primitive form of conspicuous consumption intended to enhance social status, that interpretation doesn’t make much sense. Wealth doesn’t have to be given away to demonstrate possession, nor is it characteristic of conspicuous consumption that the consumption be shared. For consumption to be conspicuous it needs merely to be witnessed. In fact, the consumption may be limited to feasting with the eyes. In which case, of course, consumption increases the value of the asset, without having any material effect what-so-ever. Therefor, it seem much more likely that giving things away in a potlatch is a mechanism for
establishing credit, much like putting money in a bank, which serves the additional purpose of relieving one of the chore of preserving them from being stolen or lost. The definition of potlatch as a peculiar or primitive practice motivated by the desire for social status is based on the superficial assumption that the concept of obligation can only be realized when it is formalized on paper. Moreover, it presumes that obligations or debts are negatives, undertaken involuntarily when, in fact, an obligation is merely a promise to do something for someone later in exchange for a benefit that has already been received. It only becomes a negative if the trust of the initial giver or creditor is deceived and the debtor does not return the gift.

Potlatch, it would seem, is capitalism, pure and simple, without the mediation of money. Like capitalism, potlatch is a system which assures that accumulated assets are moved around to be used by someone else, creating a network of credits and debts, in order to prevent the assets from going to waste and to avoid their having to be stored for overly©long periods of time. And, although the system involves an intricate network of relationships, the relationship between giver and taker is direct; not like charity where the donor is rewarded by a third party (status) and the only acceptable return from the recipient is subservience. Rather, potlatch is a voluntary distributive system which, recognizing the transitory nature of material things and the difficulty of keeping them intact, solves the dual problems of storage and waste.

Storage is always a problem, even when the material is a relatively indestructible substance such as gold©©a lesson I learned as a child from the ritual meal served once a year on gold luncheon plates at the home of some old family friends. The explanation for this strange event, when there was even less food on the plates than the usual meager fare set out in accordance with what these elderly people obviously perceived as appropriate portions, was that the plates had to be brought out of the bank vault at least once a year in order to justify the expense of keeping them safe. Which only added to my confusion since eating from gold plates didn’t make me any less hungry and it wasn’t until much later that I came to understand that the purpose of the ritual had almost nothing to do with eating; that the purpose of the ritual was to handle the plates and reaffirm the sense of security they provided. Taking the plates out of the vault was an exercise of verification, by a family whose confidence in society had been repeatedly shaken by a history of pogroms and their need to take flight, that, at least for that year, their trust had not been misplaced, even as returning the gold plates to the vault testified to their conviction that household security was inadequate.

In economic terms those gold plates made almost no sense. Though, since at that time individuals weren’t allowed to one gold bars and gold coins no longer served as currency, there was some logic to storing one’s wealth in the form of gold plates as a hedge against political and social disruption, their exchange value was very likely much less than their cost. Indeed, though the prospect of being able to purchase safe passage in the event of yet another forced migration was probably comforting– and certainly less painful than remembering that the worst fears of their people had been realized more than once–those gold plates couldn’t even qualify as poor investments. As savings they were dubious and since it wasn’t available to increase wealth, being hoarded instead in the vault at some expense, the gold certainly wasn’t capital. Though it could have been. If the owners had been more optimistic, the gold could have been used in trade as a symbol of confidence and trust that the benefits received would be returned, rather than as a hedge against a potentially disastrous turn of events. Which, when you think of it is, isn’t very different from the traditional accumulation of gold in the artifacts and decoration of churches where, as objects of conspicuous consumption par excellence, to be looked at rather than used, they serve to impede the natural cycle of economic activity.

As it turns out, savings for a rainy day, as those plates were no doubt considered to be, aren’t really conducive to economic activity, unless what is being set aside is turned over to be used by someone else in the interim. Indeed, ownership, in the sense of holding on to things or maintaining physical control of one’s assets, conflicts with the principle of capital formation. As a result, while corporate capitalism presumably relies on a commitment to the principle of private property, that is all it is– commitment to the principle. The individual’s claim of ownership is recognized, but the property itself is in somebody else’s hands.

Which, as I indicated previously, effectively means that although the benefits, or profits, of ownership may be shared, there is some compensation in the fact that no-one can be held responsible for maintaining productivity. So, when the usefulness of an asset is all used up, it can just be left behind and the proliferation of abandoned property, which many interpret as an indicator of an economy in distress, is actually a sign of success–the success of corporate capitalists in getting rid of property they no longer want by moving on to something else, and the success of individuals in ridding themselves of the responsibilities of owning private property, including the obligation of making an equitable contribution to sustaining the communal infrastructure and the services provided for its support. Which suggests that if the revenues from the taxes on private property are no longer adequate to the task, it isn’t because infrastructure improvements and social services cost too much, but because the ownership of private property, in the sense of exercising responsibility, hasn’t kept up.

On the whole, individual interest in owning property is not as great as one might expect. Perhaps that is because most seem increasingly unable to realize the benefits they anticipate. Which is not to suggest that people are greedy. Rather, there’s a good reason why owning property hardly seems worth while; it isn’t. Having been exploited and despoiled so long by previous generations, without any reinvestment to maintain its productive capacity, both the land and man-made fixtures aren’t worth having. Moreover, because there has been a failure to invest in the development of the intellectual capacity of the future population, as a result of this self-same exploitive attitude, a substantial portion of the population isn’t physically or intellectually prepared to do anything with any property they might own, regardless of the property’s condition or productive capacity. They don’t know how to make the land productive, much less how to produce a surplus for the future.

This is not just a matter of a failure to educate or a flaw in the system of education. Rather, perhaps as a direct result of the segmentation of the productive effort, which, of course, is the very basis of increased production, the primary goal of industrialization, that very principle–the breaking down of a process into its component parts and then carrying them out in the proper sequence–seems to have gotten lost. For whatever reason, perhaps because of the conviction that increased productivity was primarily achieved by breaking up or dividing the components of the production process, so that each part or segment is performed with increased rapidity by specialists, the intellectual and physical components of the production process were also divided and assigned to separate individuals. Then, as the “how to do’ and the “what to do” became discrete areas of responsibility, those who knew how–the supervisors or engineers–were neither required nor able to actually do anything, but to tell others what to do; those who were told what to do–the workers–were supposed to know neither how nor why, except that their supervisors told them so. Which, perhaps, accounts for the increasing emphasis on discipline in the general education curriculum–students learning to do what they are told, rather than how or why, in order to prepare them to be productive in the industrial sector.

Which, strange as it might seem, brings me to the third aspect or component of capital formation which tends to be overlooked when capital is defined in strictly material terms. That is, the function of time as a contributing factor, if not the very foundation on which capital formation, as well as industrial production and technological innovation are based. For, the underlying assumption of industrial production that the increase is almost entirely a consequence of the production process being broken down into such simple operations, requiring little skill, so that no conscious thought need interfere with the maximizing effect of the force of habit on physical exertion, and time functions as little more than a regulating and controlling factor, is much like the assumption that capital is a linear consequence which results from the product not being entirely consumed, but set aside for future use, like a portion of dough for leavening the next batch. In both, time serves to define a linear process or progress, as a unit of measure, whose objective representation, the clock, merely serves as a mechanism to direct and control the production line or track the accumulation of capital. On the other hand, the more significant aspect of time as a matter of sequence, without which the concept of the future, and therefor the concept of capital, is impossible, is given short shrift, as is the dependence of innovation on the reversible and interchangeable nature of sequential behavior.

The mind-set is similar. So, both the decrease in industrial production and the decline in capital formation are not unexpected. Since the expenditure of physical energy, whether by humans or machines, is definitely limited, the increase in productivity which can be achieved by increasing the speed and reducing the amount of time given to rest, repair and redirection is ultimately limited,
if only because there are only twenty-four hours in a day. Not to mention that, even if there is no constraint, once humans achieve the maximum physical effort and excellence of which they are capable, boredom sets in and productivity declines. When their behavior is constrained, when humans are forced to perform, a combination of boredom and resentment virtually guarantee that maximum productivity is never achieved. Which suggests that if productivity is to be maintained, never mind increased, in the long term, people have to be able to “work smarter,” i.e. utilize their intellectual capital. Otherwise, productivity and, of course, capital formation inevitably declines.

That this eventuality did not become apparent sooner in the evolution of industrialization is probably accounted for by the fact that although industrial production promoted segmented behavior and the linear perspective of time, and the system of education reinforced it, as long as the household remained at least minimally productive, the fundamental concepts of intellect, especially the concept of time, continued to be transmitted almost automatically. And, indeed, the household had some help. For, in addition to the obvious cycles of night and day, which generated a need for reassurance and demanded to be explained, and the variation in the seasons, whose effect on the availability of resources was made obvious by being retained in conscious memory, a variety of ritual social behaviors served to monitor the passage of time and regularize events. Long before the proliferation of mechanical clocks, so obviously indispensable to the implementation of the industrial process, individual behavior was, in effect, synchronized by the tolling of bells on a regular schedule. That is, the call to prayer, characteristic of both the Christian and Moslem cultures, intentionally or not, directs the productive
behavior of the population. Indeed, bringing productive enterprise to a halt in order to contemplate the significance of what one is about may actually serve to reinvigorate and renew the productive effort which would otherwise flag as a consequence of boredom or physical exhaustion.

While it is generally recognized that an awareness of time is a common characteristic of civilization, as evidenced by the development of calendars, monumental architecture and a flowering of the abstract and martial arts, I would argue that an awareness of time is a prerequisite, not just an expression of civilization–that in order to construct a city, which is, after all, nothing but a material expression of a state a mind dedicated to permanence and intended to last long after the builder’s generation is gone, the builder first has to be able to conceive of a future time. Which, given the brain’s capacity to store experience in memory and then consciously compare present with past events, probably doesn’t involve an evolutionary leap. After all, in retrospect, the present is merely the future of the past and looking forward from the present merely extends the continuum. However, it may well be that the ability to conceptionalize these distinctions and then utilize them to direct behavior is a cultural artifact, especially when a review of past experience or behavior and the consequences in the present leads to a change in behavior, in order to avoid a repetition of the same consequences in the future.

Since the concept of time as a matter of sequence–of past, present and future–whose influence varies, depending on whether it extends forwards, backwards, or turns back on itself, is a cultural attribute, that it is able to be imparted in an institutional setting–an orphanage, for example–is to be expected, though not necessarily so. However, given that patterns of behavior are the result of repetition, including the repetition of “mistakes” in the process of learning to avoid them as a matter of habit, the household, where mistakes tend to be on a small scale, would seem to be the most appropriate environment for developing an awareness of the future and the concept of usefulness in the future, or capital.

Moreover, in the productive household that transmission is apt to occur almost automatically, in the sense that the perspective on the future informs the activities of the household even before the developing individual is even consciously aware of the distinction. In a particularly supportive household, where there is a conscious effort to educate, the distinction is likely to be more obvious. So, for example, though an infant may not recognize that the food which has been set aside for him on his plate also represents a commitment by others in the household not to consume it, their intent is made evident when the family pet, if it violates that determination by attempting to “share” it, is removed. If, on the other hand, the child tries to eat from someone else’s plate and is rebuffed with an assertion of the right to private property, then he not only becomes aware that his own situation has changed, but that the household perceives a difference between himself and the pet.

Though, once is probably not enough. Most experiences seem to require repetition for the relationship between cause and effect to be remembered, and especially to change it. Perhaps the repetition is necessary because there’s often more than one lesson to be learned from each experience. So, for example, when an infant plays “drop the spoon and see who picks it up,” which most seem to learn spontaneously long before they learn to talk, much less differentiate between the names of things and their properties, that he’s already learned about the sequence of events is obvious from the fact that he cries if he doesn’t get it back. Then, if that spoon he drops to the floor is exchanged for a “clean” one that’s demonstrably different, he may well be upset until he’s convinced that the new one can be dropped just as well and begins to learn about the principle of exchange, which means that things are both the same and different. And, when his “playmates” tire of the game and the “give and take” comes to a sudden halt, contrary to what he expects, he may well be shocked into conscious awareness of the difference between expectation and experience.

Which comes first and which comes second? It seems obvious that the expectation of getting the spoon back follows on the experience of having dropped it and gotten in back before. However, with memory intervening, what seems obvious may be deceptive. Memory makes both experience and expectation persistent so that the normal sequence need not be contiguous. That is, the memory of a spoon dropped yesterday, rekindled by the sight of it still lying there, can recreate the expectation that it will be picked up, and not necessarily by the same “player” who gave up on the game previously. In which case, if the player is different, getting the spoon is made a lot easier by being able to indicate with signs and/or sounds(grunts) what is wanted. And, for this process to go forward, it helps if the spoon was left lying where the infant dropped it. So, it would seem that what some would consider a “sloppy” household is actually conducive to learning, as is a certain reluctance on the part of adults to be constantly responsive to an infant’s needs. Having to wait may actually contribute to developing memory by providing opportunities for using it. In which case “teaching patience” isn’t just good for the soul; it’s good for the brain.

By the way, muskrats and beavers probably wouldn’t be helped by such a strategy at all. Muskrats, in particular, when they are startled while nibbling out in the open (an almost constant condition since even the sound of another muskrat plopping into the water or a bird chirping in a bush scares them into running for cover), drop what they’ve started eating and obviously forget it. For, even when they return to the same spot later, they only consume vegetation that’s still standing, not what they harvested just a few minutes before their scare. Muskrats, it seems, have no capacity for memory. In their case its “out of sight, out of mind,” or rather, since their behavior seems to be directed by smell and sound, they take no notice of things that don’t make noise or have an odor. Which probably explains why humans find muskrats so easy to trap and why, like the beaver, they leave such a mess behind.

In any case, as has been demonstrated by Jean Piaget and others, human learning takes place in sequence and in discrete stages, just as the spoon has to be dropped before it can be picked up. But, trying to direct that process by consciously introducing information as a series of abstractions, rather than promoting its absorption from experience, and in whatever sequence is suited to an individual’s inclinations and talents, may be as ineffective, if not self-defeating, as trying to induce learning from experience in a creature that is directed entirely by instinct. If that has escaped our notice, it may be because as long as the household was exempt, so to speak, from the rigid, segmented, and specialized
routine characteristic of industrialization, the fundamental principles of knowledge and understanding continued to be acquired from random experiences in the productively structured household. Even such a simple and seemingly frivolous activity as baking a cake promotes learning. While a cake may be an example of conspicuous consumption at its worst, since it looks good, but its nutritive value is minimal, if not negative, and the useful life of the ingredients is shortened, not lengthened, by being incorporated in a cake, the production process is, nevertheless, instructive. First of all, it demonstrates the importance of sequence: eggs have to be extracted from their shells before they are combined with the flour (unless, of course, it is being baked by Russians for Easter and the eggs, hard boiled and colored, are to decorate the loaf); the ingredients have to be combined before they are put in the oven; and, of course, the oven has to be turned on, or the fire started, before the cake can be baked. In addition to being part of the sequence of baking a cake, the oven is just one source for the energy it takes to complete this transformation of inert ingredients into a redolent and even springy confection or cake. And, while beating the batter by hand provides first-hand experience of muscle power, as well as increasing manual dexterity (a long-term benefit), using an electric beater can be just as instructive, especially about the proper disposition of power—that it is best to confine it within a bowl, not discharged at random in the air. Which, like the separation of mixing and baking into different containers in order to insure easy separation of the cake from the pan, provides information about space, the relationship between process and place, as expressed in the traditional saying, “A place for everything, and everything in its place.”

Finally, of course, baking a cake means being aware of both time and temperature. Even when all of the preliminary steps have been industrialized and all that is left to do is to combine the packaged ingredients with a little liquid, pour the mixture in a pan and place it in a self©regulating oven to bake, the specifications of time and temperature still need to be observed. Indeed, although it is abbreviated, the proper sequence still needs to be observed, unless the purpose is not to produce a cake but to discover how much time it takes a packet of cake mix in a hot oven to ignite and whether or not the water called for in the instructions is enough to put the fire out. Then, if it isn’t a mistake, the exercise can be considered a scientific experiment. Which demonstrates, if nothing else, that there’s a fine line between science and waste.

On the other hand, perhaps because the natural sequence of the learning process starts, as any moderately permissive parent knows, with an initial destructive phase and only evolves with proper guidance into deconstruction, where it languishes before ultimately flowering as the constructive or re-constructive behavior characteristic of productive enterprise, the small scale of the household may make it not only the most appropriate, but the only place where the earliest stages of the learning process can be successfully completed. The industrialized education system, on the other hand, is almost compelled to rely on inculcating abstract principles, rather than learning by experience from practical experimentation because the potential for disaster from both destruction and deconstruction increases exponentially with the size of the system. Consequently, learned in the abstract, the lessons of destruction, that what is destroyed is unlikely to be put back together quite as it was, and of deconstruction, that what is taken apart with care and attention can, are almost certain to be less real. Moreover, without practical experience in deconstruction, the opportunity to develop manual dexterity, as well as to recognize the importance of sequence and the proper application of physical force, is significantly reduced. Taking things apart often demands more skill and patience than putting them together, even as it teaches the proper use of tools, and making the mistakes from which learning is derived can be encouraged, since they are much less critical to the process of deconstruction than they are in working with new materials.

Whether it is because they themselves have left it behind, or because deconstruction is more difficult, the adult response to the deconstructive phase in others, seems to be one of considerable frustration. Which may explain, in part, why it has seemed appropriate to focus industrialized education on the successful completion of tasks, simplifying the formal curriculum in the process to minimize mistakes and ignoring that reducing the potential for making mistakes reduces the ability to learn the correct procedure. As a parent of three children, I well remember myself almost despairing that deconstruction would turn out to be a permanent condition, never to be replaced by construction, and having to resist the urge to put things back together myself. But, perhaps because I was prepared by my experience in Germany after the war, when all sorts of wonders were created out of the rubble and detritus, resist I did. I managed to shut my eyes or close the door on the children’s mess.

The urban landscape is different. While the litter of partially disassembled vehicles may be just a macro-cosmic variant of what goes on in the suburban garage or rural barn, the process of urban deconstruction, of both vehicles and structures, has gone on so long and is never complete, nor even goes much beyond the removal of wheels and the trim, that it barely qualifies as deconstruction. Reconstruction seems out of the picture entirely. So, it may well be that the sociologists and criminologists are correct in identifying the rusting hulks in our cities as nothing more than the evidence of a need to sell something quick for the next illegal drug fix. On the other hand, stripping bumpers and wheels from cars–not to mention plumbing fixtures, windows and doors from buildings–is hard work. If the reports about the speed with which such deconstruction occurs are accurate, then perhaps those remains are evidence of more than vandalism and drug use. Perhaps what they indicate is that manual dexterity and skill having been arrested by a lack of direction and opportunity to develop them properly, the deconstruction is incomplete and there is no reconstruction because there are no tools (material or intellectual) to finish the job.

Urban vandalism may just be a crude attempt to interact with the material world. When the same behavior occurs in a suburban garage, where the hours of deconstruction and reconstruction of junk cars are socially approved, in spite of the fact that the resulting contraptions are potentially much more destructive, the criteria on which that approval or disapproval is based need to be questioned. Since the availability of money and tools obviously doesn’t guarantee that the reconstructed cars will be any good, nor that they will be used responsibly, the judgment seems to have little to do with the results. Indeed, society seems to view the loss of life and limb in the vehicular “accidents” associated with flawed adolescent re-constructive endeavors with somewhat greater equanimity, than the urban detritus. Perhaps that’s because these accidental remains are neatly carted away to the “appropriate” place for wrecks, while the rusting hulks serve as daily reminders that something is wrong. As long as the mess is quickly removed from view, it seems hardly anyone really cares if there’s one teenager more or less, or what they do. Nor does there seem to be much difference between those who drop out and anesthetize themselves with illegal drugs and those who, lacking initiative and/or autonomous direction, resign themselves to a marginal existence of redundant physical exertion. That is, their situation is much the same. The latter just happen to be socially preferred because the use of drugs conflicts with the demand for a steady supply of mindless human labor for industrial production. But,
while both drain the productive capacity of society, only the resources expended on protecting itself from the overtly “maladjusted” are really noticed. That the productivity of those who are well adjusted to the demands of industrial production is decreasing is hardly recognized, mainly because the importance of creating and maintaining intellectual capital by investing in the education of the next generation has been overlooked.

* * * *

While the household unit is probably the most efficient and most appropriate venue for laying the foundations of capital formation, especially by elaborating and transmitting the concept of the future from one generation to the next, it doesn’t necessarily happen; and not just because instructive capacity of the household has been diminished as the industrialization of its productive functions has left nothing behind but a protective shelter for non-productive consumers. Rather, the prevalence of
mythic and religious codifications and renditions suggests that the conscious awareness of the future is a matter which the individual household has never been relied on to transmit on its own. Whether it is expressed as the belief that each new generation represents the rebirth of those who went before, in which case the present is, in effect, the future of the remembered past, or is identified with an existence which lies beyond and outside of individual experience, the concept of the future is a social issue which seems to depend on being transmitted systematically. Which is to be expected, considering that the future, embodied in the next generation, specifically children, represents, if anything, a drain on the present resources of the household. Children consume the resources which might otherwise be saved for future use and even when average life expectancy is such that parents can reasonably expect to benefit from their children’s productivity in the future, there is no guarantee that the next generation will, in fact, provide a return on the parental investment. Indeed, even if they survive and are inclined to do so, repayment isn’t certain.

On the other hand, the social group of which the household is a part almost certainly does. Unlike the parents, who only benefit, and then only potentially, if they survive beyond their off-springs’ maturity, society benefits from the next generation, regardless of what it does, because the next generation guarantees that society survives, just by being. So, although the purpose of mythic representations of reality might seem to be to instill a commitment to society in the next generation, what they actually do by providing a rationale for the next generation is to insure the sustenance of the young. In other words, the ideology makes up for the fact that having children isn’t immediately beneficial to the individual by providing a psychological benefit in the form of social approbation. In societies where the new generation represents a rebirth of ancestors who have died and whose care for the present generation deserves to be repaid, this mythic perspective effects parental care of the young as a repayment of a debt, a socially valued behavior, irrespective of the characteristics of a particular child.

In societies where the ideology revolves around the promise of rewards in an after-life for adhering to socially prescribed behavior, the consequences are similar, but the process is somewhat different in that the appropriate behavior aims to promote the production of a surplus (more than the individual needs to sustain himself), which is then available to sustain the next generation. The motivation, lying outside or beyond the individual’s experience in the social directive, rather than in the individual’s memory of the benefits he experienced from those who have gone before, is different, but the effect is much the same–behavior which is not immediately beneficial to the individual and which is not contingent on the behavior of the recipients. Indeed, when the behavior is motivated by the expectation of future rewards, providing for the next generation is unrelated to whether or not a particular individual or household has children.

Obviously, when behavior is motivated by the prospect of rewards in the future or an after©life, the potential for generating a larger surplus is greater because, though the future is unknown, as is the size of the reward, it seems logical to presume that present efforts and future rewards will be directly related. On the other hand, being focused on replacing ancestors and “repaying” their contribution to the present generation in like measure to the next is more likely to produce both a stable population and a stable transfer of resources from one generation to the next, which, however advantageous a stable population might seem, makes such societies particularly vulnerable to extinction in the event of any sudden changes in the environmental resource base. For, if the ability to sustain the population decreases precipitously and more people die young, then the imperative to replace those that have been lost tends to produce a large immature population, which is even less likely to be able to sustain itself. Because, even if the environmental catastrophe is reversed, the requisite knowledge and skills have already been lost. Consequently, as we see in much of Africa, whole cultures are on the verge of extinction, even as the populations are increasing.

Of course, the survival of future-orientated societies is not entirely secure either. While there doesn’t seem to be any question that the accumulation of surplus resources provides greater protection from catastrophic environmental disruption, being focused on the distant future gives rise to another problem: that the immediate future, the next generation, will be over-looked. The availability of a surplus does not guarantee that it will be invested in the next generation. Indeed, given that the surplus productivity of a childless population is potentially more immediately beneficial to society as a whole, unless society makes a conscious effort to promote and invest in the production of the next generation, the disinclination to reproduce will tend to deplete the population and/or reduce the diversity on which survival depends–a tendency that is only exacerbated if, in addition to a personal disinclination towards having children, individuals are antagonistic towards other people’s children.

That attitude, I suppose, is what the Christian amendment to the mythology of Western civilization attempted to correct. But, while the New Testament designated all children, not just the sons of the “chosen people,” as the off-spring of the Supreme Being, the injunction to “suffer the little children” has only been selectively honored. More often, the allocation of resources to the nurture and care of children has been subordinate to the interests of both secular and religious authorities in maintaining power by generating a sense of fear and dread with mythic threats of eternal damnation and then providing “protection.” Which, like the regime of the Mafia don, conveniently obscures that the real threat to survival is more immediate, arising from the fact that, contrary to what the off-spring might like to think, and in spite of being able to recognize their individual interest, neither the male nor the female of the human species has any interest in the preservation of others, unless it is perceived as physically or psychologically beneficial to self-interest.

While the female, if she recognizes her physical connectedness and considers the well-being of her young as an extension of her own, may be inclined to be protective of her off-spring, the male, who has no such obvious physical connection towards them, is naturally disinterested, if not antagonistic. Moreover, while the antagonism of the male in other species no doubt promotes their dispersion and prevents inbreeding and, except in relatively rare instances, does not result in the destruction of the young, in humans, who are more focused and able to identify the object of their ire, antagonism tends to result in extermination. That is, humans, being able to distinguish between life and death, are also able to impose death–a capacity which, expressed to its ultimate, could lead to the self-extinction of the species. So, if the species is to persist, the natural antagonisms must be held in
check or restricted by qualifications and conditions to define who is to be protected and who is fair game for man’s murderous inclinations. Which may, indeed, be the basis for the assumption that the purpose of society is to regulate individual behavior.

However, while the primary myth of Western civilization in particular is quite specific about man’s murderous inclinations, only the descendants of Cain, those who wander the earth, or foreigners, are presumptively and overtly targeted for destruction, unless, of course, they are appropriately subservient. Which, in turn, explains why the young of the infidel tend not to be spared; the young, as is well known from experience with their own, cannot be trusted. As likely as not, the next generation fails to perform as the parents expected. Nevertheless, admitting as much would be counterproductive, if only because the perception that the individual exists in a state of conflict with his progenitor would tend to depress most behavior. So, the myth of a superior authority, whether it be a deity or society, serves a dual purpose. On the one hand, it motivates the immediate social group to be supportive of the young in compliance with ulterior directives. On the other, regardless of how harsh or negligent the behavior of their parents, the treatment of the children is benevolent in comparison with what happens to those not protected by the hierarchy.

Conversely, hierarchical societies are maintained by the social regulation of the disposition of children. While those who are born without prior sanction, i.e. “illegitimately,” have been ipso facto traditionally excluded from society, if they then survive the rigors of private or institutional foster care, thereby demonstrating either a particularly strong constitution or a submissive attitude, or both, and proving themselves obviously worth “saving,” they become available, along with the off-spring of individuals who perceive no social, political, economic, or psychological benefit from rearing their own children, to serve as certified replacements, as well as a supply of menial labor, for those who are either unable or choose not to reproduce themselves. Which means, in effect, that society assumes authority by relieving individual households of the obligation to rear unwanted children and of having to decide whether or not they should survive. In addition, social authority is enhanced by being able to control not only the effective size of the population, but its resource utilization. While that may not be the initial intent, having assumed the responsibility of providing for the welfare of the population justifies the social extraction of rents, taxes, and tithes. In other words, because humans are not inclined to bear and rear children but, being self-aware, recognize that the species cannot survive without them, the immediately affected group asserts the right to determine who lives and who doesn’t and extracts the resources necessary to enforce that decision, i.e. to sustain the children.

However, that’s generally not where it stops. The authoritarian mission to “provide and protect” knows few limitations. Indeed, even the increasing poverty of the population, caused by the excessive demands from the hierarchy, can be turned around to justify the perpetuation of authoritarian rule. Not only is it difficult to refute the claim that the population would be even worse off, were it not for the leadership of those who protect and provide for their welfare; it is impossible to prove that the failure of individual households to increase their assets or accumulate capital isn’t evidence that they just don’t know how. Especially since households habituated to dependency, whether as serfs, slaves, or consumers, and having neither experience nor expertise in managing and saving resources on their own, are very likely to see their entrepreneurial efforts fail. In failing they reaffirm the authoritarian claim to know better and the need to direct their behavior.

Of course, like capital, authority isn’t necessarily extracted. Just as capital arises out of the surplus created by expertise and saved from going to waste, rather than out of the deprivation of those who labor harder and longer for less, authority can be, as it is in the case of most women, a matter of recognized expertise and creative enterprise. It isn’t necessary to use force. And, while the reality that bearing and rearing the next generation is not immediately beneficial or serve parental self-interest is not likely to change, the intellectual capacity which enables humans to identify and distinguish each other, as well as remember the past and anticipate the future, should be more than adequate to motivate a supportive attitude. After all, given that every individual is bound to die, the only potential for immortality lies in the transfer of the accumulated intellectual assets from each generation to the next.

But, in order to accomplish that there has to be an intergenerational nexus or connection, the opposite of the primary characteristic of industrialization/segmentation. If the productive household unit in which that intergenerational connection occurs naturally is not to be maintained, then some functional equivalent, in which individual talents and interests are actively developed at an early age, needs to be created. Just as it is becoming increasingly obvious to the industrial and scientific community that high quality production and creative invention are individual accomplishments, it seems important to recognize not only that the development of intellect depends on investment, but that intellectual capital cannot be industrialized–produced en masse. It need not be relegated to the household, but it should be a small-scale enterprise where the inevitable mistakes are of less consequence and experience can be tailored to individual talents and capabilities.