We're in for a wild ride. Exponentially accelerating technological, cultural, and socioeconomic evolution means that every year will see more developments than the previous one. More change will happen between now and 2050 than during all of humanity's past. Let's explore the 21st century and ride this historic wave of planetary transition with a confident open mind.

Tuesday, December 8, 2009

Heavy Industry Requires Direct State Control

Demand for big capital intensive consumer products like hospitals, trains, spacecraft, schools, bridges can only be adequately provided by the state

The sight of former textile and paper factories being turned into overpriced lofts in many Western cities shows how light industry can pick up its belongings and leave the country at a moment's notice. Competition in manufacture of small relatively portable consumer goods (anything smaller than a civilian car) has produced an enormous jump in technological evolution of gadgets. These are the glaring successes of capitalism that cannot be ignored. Thomas Friedman and Karl Marx have spent half of their famous books describing these efficiency victories of the market. The breakneck pace of progress in small consumer goods has made declining economic/social power (of most of the world's population) more tolerable by negating some of the suffering. Although proletariat of the world (99% of world's people who don't purely live off capital investment such as neurosurgeons, 80 grand a year white collar workers, McDonalds staff, etc) have been becoming increasingly impoverished from mechanization, light industry provided some relief. Shiny televisions, increasingly powerful computers, and Wi-Fi cellphones have masked the decline somewhat. After all, a dollar in 2009 buys exponentially more computing power than a dollar in 1999 or 1989 so small electronics are seeing a form of mind blowing deflation.

The capital intensive products of heavy industry have lagged behind pathetically however. A dollar in 2009 doesn't make you travel substantially faster around the world than a dollar in 1989. Neither does it give you a lot more quantitatively and qualitatively better education or health. Space progress is not the only macro technological arena that has stagnated. What happened to the space shuttle is happening in virtually every macro heavy industry reliant area of planetary activity. The major lag in development of HI products versus LI products deserves major international attention.

What are HI products? Let's name some:

1) aircraft, trains, spaceships, bridges, tunnels, mines, deep sea oil platforms, heavy transport ships, submarine habitats, deep space habitats, power plants, large farms

2) machines that create the parts for the value added products above and machines that create these machines, factories where these machines are located and that have the personnel that is employed to run the factories

3) supporting infrastructure to items in 1) and 2) such as transport infrastructure linking the extraction of raw materials to the processing plants to the assembly plants to the distribution plants (vertical downstream and upstream chains)

60 year old bridges are being driven on by 3 year old cars. A person from 1840s would easily recognize the trains of today when it comes to their function and utility. This person would not undergo the same awe as a horse riding mail courier would at the sight of video conferencing from laptops and such.

What people forget is that bridges, spaceships, and factories full of cutting edge robotics are just large value added products. Sure, a factory that makes engines for spaceships may have more moving parts within it than a cellphone but when it comes to the totality of a particular assembly line's singular functioning, it is but a product that is in demand for a buyer. An iron ore extraction plant is also a product with multitudes of customers (large scale consumers). So why is it that the market has consistently failed to produce evolutionary leaps in HI consumer products as breathtaking as the ones in LI consumer products?

Well, the common reply is that because these big consumer products are capital intensive, it's hard to get investment for really exotic large scale experiments in new means of large scale production and extraction. The argument goes on to point out that due to the long term nature of these difficult projects, it's hard to get enough investors with the patience and vision to really stick around.

The problem in a nutshell boils down to insufficient capital, insufficient patience (especially in an era of quarterly results and fast paced financial sector gambling with quick returns), and insufficient appetite for risk as is common in companies controlled by shareholders rather than singular ego driven 19th century style oligarchs. To be fair, often governments put too much restriction on really revolutionary projects such as private space exploration. However, at the end of the day, the global stagnation in high macro technology and infrastructure is the result of capitalism fundamentally failing at meeting peoples demand for complex value added HI consumer products.

Do people want to fly from London to Tokyo in half the time in safe hypersonic craft? Yes they do. Do they want their drinkable water to be cleaner, cheaper, and more available? Of course. Lets not even get into the desire for modes of transport that aren't powered by small explosions of hydrocarbons. Since demand is not being met, the only solution to start meeting it is direct total state control of strategic heavy industry products. Control can include or exclude outright ownership but it has to be total (total control without direct ownership is not a contradiction from the standpoint of state capitalism and there are plenty of examples of it). The state has the patience, the vision, and the capital to really start making the same leaps in progress as are occurring in cellphones for instance.

For example: the next generation airplanes shouldn't just be more bloated whales with tiny wings.
They should be substantially faster (hypersonic or even scram jet), cheaper to fly (or free depending on how far the government subsidizes them or decides if ability for travel is an inalienable right), and of course constantly safer and more comfortable.

The simple demand above that we come to expect from LI consumer products (with every new generation laptop, fridge, or lawnmower) may evoke laughter. This laughter is deserved as the current capitalist mode of delivering improvements in HI goods involves is inefficient by its very nature. Even when state governments work hand in hand with large corporate actors to say, build a new high speed railroad, the profit motive keeps the whole enterprise at a very cautious, very expensive, inefficient snails pace. One has to just look at the empty lot where Freedom Tower should have been a few years ago. The shareholders (citizens) of large capable states deserve better for their involuntary investment.

That is why direct control by the state of key strategic HI sectors of the economy is a must. People would not even notice the change as this action would take some key industry from mid-level state capitalism as practiced now to maximum level state capitalism as was practiced under Lenin's New Economic Policy. Soviet success of industrialization within one generation (replacing horses with tractors, bringing electricity to areas previously without it, large scale construction of colleges and universities, etc.) found a worthy successor in modern China. Chinese leadership has built incredible gleaming infrastructure within a generation while allowing light industry capitalism to provide things that capitalism is good at providing (hats, shoes, tables, flashlights, DVD players). Things like bridges and new airports however were provided by the state corporations after careful planning with long term future in mind. Chinese have avoided disasters like the Big Dig due to more direct control over all the players throughout the entire vertical business chain. One does not even need to mention the success of Singapore in providing ever improving quality housing (most people there live in public housing).

Of course there is the argument that the state may have the same deficiency at raising capital for these megaprojects. Not every country has a billion tax payers and a large land area. This is not a problem at all as it invites real productive international cooperation in tangible improvement in people's lives. European citizens would jump on board immediately if they knew how much cheaper (if not free) their train rides would be if EU owned enough mines, raw material processing centers, and train assembly lines. When 20-50 countries put their capital together they can reap the benefits of mass production in HI sector. Hypersonic 21st century aircraft, spaceships, small nuclear power plants, floating desalination plants can be stamped out cheaply (with excess remainder bartered with other societies in exchange for anything from coffee to sugar to titanium).

The limit of course would be cooperation at international UN level involving vast majority of the world's actors. That will have to wait a while as the world is undergoing consolidation of regional economic blocks.

The regional economic block that will deliver the best HI goods will eventually become the spine of the first global government. Although it would be preferable if humanity immediately jumped towards global cooperation in management and production of HI consumer goods, the regional block formation seems like a safer way of going about it. Nothing would be more productive for the world (in comparison to the current US dominated vampiric free trade blood draining) than gentle competition between European Union, North American Union, China, South American Union, etc  in who can build better tunnels, mines, spacecraft, etc. It is already happening in a way between large multinationals backed from either Washington DC or Brussels but there are still insufficient political controls. It will be interesting to see the business strategy behind HI products emerging from USAN since this block is being driven in part from resentment from Western economics.

(sidenote: this article is not an argument for more state control but more of an analysis of a process already happening and dissection of fundamental reasons for it. As head of the US democratic party, Howard Dean, recently mentioned, the silly ridiculous argument between socialism and capitalism is finished. It never made sense and only served as a pretext to continue the feud between Eastern and Western planetary elites. It makes more sense to have more state control on international level from the perspective of many rich people and it will thus be done. EU's model of regional integration is now copied by entire continents and the process of continental integration will happen a lot more rapidly now. Unfortunately, the profit motive [now bumped to a higher level and driving gaggles of state heads] and the difficulties listed earlier in the article continue in this process until eventual integration of key economic blocks into a system of world governance and more centralized HI decision making. The alternatives to global integration via non-EU models [Anglo-American led corporate globalization] involve too many risks of violence and unimaginable horrors.)

As for today, with 1 in 6 of Americans having had insufficient food in 2008, the least the state can do is take direct control of middlemen distributors (like Wall Mart and Costco) to better negotiate for and coordinate food supplies to the major urban hubs where people have less access to cars. For the price of 1 week in Iraq and Afghanistan, the authorities can operate hundreds of such distribution points in strategic areas to prevent social unrest.

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