Capitalism’s Last Frontier #3 When did Commercial Agriculture and Capitalism Begin?

From the origins of agriculture itself there has always been a margin of cultivation – the edge of the farmstead, wild nature beyond.

For the purposes of our analysis we are looking at the edge of the margin of commercial agriculture – cash crops – under circumstances where this can lead to capital accumulation.

To move beyond subsistence agriculture, production of the immediate demands of the household, there has to be an agricultural surplus. But this does not automatically translate into immediate trading of crops for cash. Farmsteaders can trade through barter, enabling the formation of settlements where the barter takes place, and where manufactured goods are traded for food and for each other. But this is inefficient and properly requires a means of exchange and a means whereby wealth can be stored, accumulated and invested – money.

The extraction of an agricultural surplus does not even require free trading, it can be done through slave labour, with latifundia owners, as in Ancient Rome, trading the agricultural surplus through merchants for profit and then transported on to cities.

The full fledged adoption of capitalist methods in agriculture required the buying and selling of land, the buying and selling of surplus agricultural products, and the buying and selling of labour, not tied to the land, but able to work in factories with a surplus above subsistence to feed them.

There are therefore social preconditions for the existence of capitalism that relate to the organisation of agriculture. This creates a conundrum and a potential circularity. Capitalism appears to require several social relations to be in place simultaneously to ensure a circulation of goods. The advance of Capitalism appears to drive the adoption of these social relations, but what first sparked the rise of Capitalism in pre-capitalism relations?

This has caused a real problem and much discussion in recent years amongst Marxist historians. Why did not capitalism arise earlier, if capitalism is seen as arising from social relations which are more ‘efficient’ in agriculture (the so called commercial thesis) does this imply that capitalism is natural, or alternatively if raw exercises of power are needed to create the preconditions of capitalism (so called primitive accumulation) does this not fundamentally undermine the Marxist materialist view of history?

The problem becomes one of having a ‘bootstrap’ view of history, where Marxian ideas can explain everything about capitalism, because of its totality, except for how capitalism arose before it became totalistic.

It is perhaps no wonder that thinkers have argued on the origins of capitalism, and their is no consensus on the definition of capitalism in historical writing.

For example Capitalism’ was a word was not used by either Adam Smith or Ricardo, or even the youthful Marx.  Capitalism was a late 19th-century term. The Oxford English Dictionary (Vol II, p 863) locates its first usage in English in 1854 by William Makepeace Thackeray in his novel, The Newcomes.

The shares were at a premium, and gave a good dividend. The Prince de Moncontour took his place with great gravity at the Paris board, whither Barnes made frequent flying visits. The sense of capitalism sobered and dignified Paul de Florac: at the age of five-and-forty he was actually giving up being a young man, and was not ill pleased at having to enlarge his waistcoats, and to show a little grey in his moustache.

For Thackery, as always, Victorian pretentions were a magnificent opportunity to satirise snobbery.  The lack of previous reference, even amongst Ricardian Socialists, may even mean that Thackery used the term as a joke.

Of the word ‘capitalist’, this was first used in English in 1792, byArthur Young (Travels in France) and it was used by Turgot (in French) in his ‘Reflections on the Formation and the Distribution of Riches’ LXIII-IV, 1770.

Marx wrote much on hunger, and on the economics & fertility of land, but wrote little on the issue of increasing the supply of food  That great concern of the 19th century bourgeoisie.

Perhaps his antithesism to Malthus and obsession of the earlier generation of economists with obsessive use of ‘corn models’; turned him against this subject.

In ill health in the last years of his life he did develop an obsession with agricultural economics, gathering cratefuls of data, to the great puzzlement of his executors. He did not live to write significantly on the matter. Perhaps he realised there was a central unresolved issue here.

In 1867 Marx presented his theory on the emergence of capitalism in an essay – ‘The Origins and Development of Capitalism;. He identified the 16th and 17th centuries as being periods of intense capital accumulation as a direct consequence of the discovery, colonisation and exploitation of the Americas, and the development of maritime trade with the East Indies and China. Thus began a process in the development of commercial capitalism, in contrast to the feudal capitalism that preceded it.

For Max Weber the origins of capitalism began with industrialism.

This was criticised by Schumpeter – that it confused industrial capitalism with earlier marcantile capitalism. For him the roots of capitalism lay in 14th century italian cities.

For Sombart Jews were key, that idea makes us sit up in our chair, but for him the key was them not being bound by usury. To him also the rise in ground rents, rural and urban, were critical.

For historians working in the earlier part of the 20th Century the origins of capitalism could be pushed back into ancient times.

In a series of works which were highly influential, but sadly never translated into english, Guiseppi Salvali wrote that capitalist forms existed in the ancient world, including the Roman Empire.  Farmsteaders sold surplus production, merchants traded, people bought and sold land, and manufacturers employed labour: but it was never dominant and systemic because feudalism predominanted and such relations could always be supplanted by conquest.

These ideas were expanded by Henri Sée in ‘Modern Capitalism, Its Origin and Evolution (1923), a strikingly modern work.

In the time of the Empire there were, to be sure, some organizations of artisans in the towns; but their membership (composed of freedmen) found great difficulty in competing against slave labor. Under a system of domestic and servile industry, both economic and social conditions were such that industrial capitalism could not develop.

(pages 12-13)

But why did they find it difficult to compete? If a materialist view is taken then capitalism, as a more productive form, should have predominated. In recent time someone has even won a Nobel prize for suggesting that slavery was rational and productive. This apparently is the ‘new economic history’.

To be sure we will come back to this issue.

The role of money is central to Sees account. It appears on almost every page. For him where there is money there can be capital. For him the key events were the rise in international trade following the crusades.

For Polyani – in ‘the Great Transformation’ the state in early modern England played a key role.

Fernand Braudel – In Capitalism and Civilisation, a work of synthesis rather than theory – posited that capitalism arose and was transmitted in a series of cycles of growth and decline that arose in Europe in the 12th century. With particular cities, and later nation-states, following each other sequentially as the focus of these cycles: Venice and Genoa in 13th through 15th centuries (1250–1510), was followed by Antwerp in 16th century (1500–1569), Amsterdam in 16th through 18th centuries (1570–1733), and London (and England) in 18th and 19th centuries (1733–1896).

For modern historians the critical place and time was the Dutch republic, particularly in the 16th and 17th centuries, its golden age. When the Helvetican republic arose as first capitalist state.

So when did commercial agriculture begin – the answer may surprise you, and well look at it next,Ancient Rome was surrounded by commercial market gardens.

Capitalisms Last Frontier#2 Closing Frontiers, a recurrent theme

The theme of a closing frontier posing economic barriers is a recurrent one.

In a famous/infamous 1893 essay ‘The Significance of the  Frontier in American History’, Frederick Jackson Turner looked at the implications of the closing of the American frontier.  To him as long as there was ample free land, there was unlimited opportunity. Free land was the key to the economic growth of the us. Free land had always acted as an economic safety valve, providing all with a chance to get a living. Free land also meant higher wages, because employers had to induce their workers not to seek better opportunities in the West.

In response historian and later president Theodore Roosevelt thought America had to expand overseas.

Turner’s frontier thesis was further extended by Walter Prescott Webb in 1964 to explain global economic development over the 1500-1900 period of world history

Webb suggested that exploitation of the world’s “Great Frontier”, North and South America,
Australia, New Zealand and South Africa, was instrumental to the “economic boom” experienced in
modern Europe:

“This boom began when Columbus returned from his first voyage, rose slowly, and continued at an ever-accelerating pace until the frontier which fed it was no more. Assuming that the frontier closed in 1890 or 1900, it may be said that the boom lasted about four hundred years”

In this vein a frontier area has been defined as “a geographic region adjacent to the unsettled portions of the continent in which a low man-land ratio and unusually abundant, unexploited, natural resources provide an exceptional opportunity for social and economic betterment to the small-propertied individual” (Billington 1966, p. 25)

But Webb also understood that where the environmental conditions of the frontier were different from that of the settlers they had to make radical social changes to success – the ‘Great Plains Thesis’ .  For example the semi-arid Great Plains forced social changes that broke down inherited European approach to agriculture and society.  Webb thought the national policy of trying to convert the South West to croplands was folly because of lack of water.

There are still many such areas on the earth today, though getting much fewer, as we listed in the last essay.

If these ideas are correct then if then there is a global closing of the frontier over the next few decades then it would indicate a slowing of growth.

The link between ‘frontier’ and ‘growth’ though has very controversial.

Before we look at the arguments the next sections will look at the origins of the economic big bang which led to the expansion of the margin of cultivation.

National Planning Policy Framework Forensics #10 Housing Site Assessment, Allocation and Management

The NPPF requires LPAs to

prepare a Strategic Housing Land Availability Assessment to establish realistic assumptions about the availability, suitability and the likely economic viability of land to meet the identified requirement for housing over the plan period.

The role of SHLAAs is essentially the same as current PPS3 where the treatment of the subject is somewhat scattered, but there is a subtle change in terminology. Para 54. defined deliverability in terms of availability, suitability and acheivabiliy. Which was confusingly different from the availability, suitability, viabiliy troica of PPS6, and had a confusing definition of achievability – when it really meant availble within 5 years.

Added reference to viability, puzzling ommitted before, is welcome as and ties into the ‘developability’ definition in footnote 21. It would be onerous however to expect local planning authorities to examine the viability of sites in the 10-15 year slot, especially as sites may not be known for that period, they might not yet have been released. Clarification that the test applies differently for the deliverable, developable and 10-15 year periods is needed. The current draft oddly includes a reference to viability in the 5-10 year period but not the 0-5 year period.

Ill compare the relevant sections of PPS3 and the draft NPPG side by side.

NPPF	PPG3
use an evidence-base to ensure that their Local Plan meets the full requirements for market and affordable housing in the housing market area, including identifying key sites which are critical to the delivery of the housing strategy over the plan period;	set out in Local Development Documents their policies and strategies for delivering the level of housing provision, including identifying broad locations and specific sites that will enable continuous delivery of housing for at least 15 years from the date of adoption [refs to RSS]–Identify those strategic sites which are critical to the delivery of the housing strategy over the plan period.– Show broad locations on a key diagram and locations of specific sites on a proposals map.
identify and maintain a rolling supply of specific deliverable sites sufficient to provide five years worth of housing against their housing requirements. The supply should include an additional allowance of 20 per cent to ensure choice and competition in the market for land;	Drawing on information from the Strategic Housing Land Availability Assessment andor other relevant evidence, Local Planning Authorities should identify sufficient specific deliverable sites to deliver housing in the first five years
identify a further supply of specific, developable sites or broad locations for growth, for years 6-10 and, where possible, for years 11-15;	Identify a further supply of specific, developable sites for years 6-10 and, where possible,For years 11-15. Where it is not possible to identify specific sites for years 11-15, broad locations for future growth should be indicated.
not include windfall sites in the first 10 years of supply, or in the rolling five-year supply, unless they can provide compelling evidence of genuine local circumstances that prevent specific sites being identified. Any allowance should be realistic having regard to the Strategic Housing Land Availability Assessment, historic windfall delivery rates and expected future trends	In determining how much land is required, Local Planning Authorities should not include sites for which they have granted planning permission unless they can demonstrate, based upon robust evidence, that the sites are developable and are likely to contribute to housing delivery at the point envisaged.Allowances for windfalls  should not be included in the first 10 years of land supply unless  Local Planning Authorities can provide robust evidence of genuine local circumstances that prevent specific sites being identified. In these circumstances, an allowance should be included but should be realistic having regard to the Strategic Housing Land Availability Assessment, historic windfall delivery rates and expected future trends.
To be considered developable, sites should be in a suitable location for housing development and there should be a reasonable prospect that the site is available for, and could be viably developed at the point envisaged.	To be considered developable, sites should be in a suitable location for housing development and there should be a reasonable prospect that the site is available for, and could be developed at the point envisaged.Once identified, the supply of land should be managed in a way that ensures that a continuous five year supply of deliverable sites is maintained i.e. at least enough sites to deliver the housing requirements over the next five years of the housing trajectory
Illustrate the expected rate of housing delivery through a housing trajectory for the plan period. Paras 60-67 of PPG3 entirely missing.	illustrate the expected rate of housing delivery through a housing trajectory for the plan period and, for market housing,  set out a housing implementation strategy describing how they will maintain delivery of a 5 year supply of housing land to meet their housing target; Paras 60-67 of PPG3 elaborate

We can see there are some subtle but major changes here:

• No reference to 15 years from date of adoption, would be a helpful clarification
• The addition of reference to rolling supply is helpful, was only implicit before.
• A 15% extra rule – rather than 20%, has been applied informally by government regional offices for some time.  To ensure flexibility.  This is the key issue that sites might not come forward and need to be replaced.  You get some choice and competition at 75% and lots more at 5,000%, not a good justification.
• Inspectors typically ask for ‘1 or 2 years spare supply’ which is about 14%.  However this tended to apply to the whole 15 years.  It only here refers to the first 5, and by implication it will apply to the developable tranche when it slides forward, but what about the third?  Very confusing why not just apply it to the whole 15 year supply.
• Key sites which are strategic is better English than strategic sites which are strategic.
• You can now include broad locations in years 6-10, and not just 10-15.  How curious.  This could mean lpas only having a 5 year supply on a proposals map.  This rapidly dates and is a retrograde step.   Sites for housing could shrink.  I remember from Jersey which only had a 5 year supply (outside the uk system) it had a 10 year plan with a 5 year supply, used in in three and adopted 2 years after its base date.  5 year supplies and not 15 year plans mean that arguments about housing becomes a 100% full time obsession with the local authority, with endless short term choices and compromises and no long term strategy.  Being cynical is the intention for LPAs to identify too little land so the ‘presumption in favour’ comes into play – i.e. a planning free for all?
• The reference to sites granted PP was helpful and should be maintained, otherwise it will be argued a lot on appeal.
• On windfall ‘robust’ is replaced by ‘compelling’.  Maintaining the non-inclusion of windfalls is a good thing.  Windfall inclusion creates insuperable double counting problems.

Managed Release?
No reference to ‘plan, monitor, manage’ in the draft.

Only to a ‘housing implementation strategy’ and only then to market homes, how curious.  Should early phases not expect affordable then?  Is this a cover for cuts?  Developers will interpret this to mean it is acceptable to push back – for them hopefully forever -affordable phases and units.

No reference to the need for actions to be taken if delivery doesn’t work out – a plan b.  This was important in PPS3 and should be maintained.  It only needs a sentence.  Is the assumption that the reponses to a shortfall will be appeal led?

No reference to previously developed land trajectories, a silly idea at the best of times and only relevent to a small minority of authorities than in the main have developed there own ways of dealing with this issue.

No reference to PDL at all or a preference to developing it.  Well as almost the only PDL left with the redefinition is industrial which will soon all go for housing – often without the need for PP, the implication that a priority for PDL isnt needed and the only housing land left will all be greenfield.  Im sure the CPRE will have a field day with this.

Amended PPS3 out – revised affordability definition.

Here and responses to consultation.

New definition of affordable housing

Affordable rented housing is:
Rented housing let by registered providers of social housing to households who are eligible
for social rented housing. Affordable Rent is not subject to the national rent regime but
is subject to other rent controls that require a rent of no more than 80 per cent of the local
market rent.

Should push out other forms of affordable housing and raise land prices considerably.

Affordability is a continuum, some affordable housing is more affordable than others, such a definition fails to account for that.

Why couldn’t they keep the cross references and references to ‘forthcoming’ PPSs up to date

China Sneezes and World Could Catch a Cold – Double Dip accelerating

Telegraph today

indicators of industrial activity have weakened in recent months as Beijing tightened credit and investment curbs to cool the economy and fight inflation, prompting forecasts of a decline in Chinese demand for oil, iron ore and other imports…
Chinese factories expanded in May at their slowest pace in at least nine months, two purchasing managers’ indexes showed, reinforcing evidence of a slowing economy.

…import strength could help to ease concern that the world’s second-largest economy might be headed for a hard landing.

I have written elsewhere on here the real reasons China has been tightening Credit, even though growth has been slowing. It faces a huge property bubble pop, with the risks of a meltdown of its overextended banks. China has in the last few months embarked on the largest exercise in QE in history to ensure its banks remain capitalised – it is hoping for a soft landing induced by interest rate rises.

A soft landing would ease asset price pressures for the rest of the world. It would not be an unmitigated bad thing. But if Chinese consumer spending is curbed by a sharp downturn, and the need to squeeze savers to rebuild bank balance sheets, then imports may fall.

This is not going to help those countries hoping for export led recoveries.

Today Robert Schiller joined the notable band of economists warning of a US double dip

the world’s biggest economy is at a tipping point, warned Robert Shiller. “Whether we call it a double-dip or not, I think there is a risk,” he told Reuters.
A further fall in prices of up to 25pc in the next five years “wouldn’t surprise me at all”, Mr Shiller said, given the amount of unsold homes in the US and the thousands of people who are behind with their mortgages. Japan saw prices fall for 15 years, he noted.

Whilst more bad news in the UK showed evidence of a ‘savage retrenchment in consumer spending‘

People are expecting spending cuts and economic decline, and although incomes have fallen debts have not been cleared and remain to be paid, at the same time key costs such as energy and VAT have risen.

The Big Money Index from AXA also showed a dramatic fall in financial confidence over the past 12 months. One in five Britons have admitted to regretting some of their pre-recession financial decisions, while 25pc of people have been forced to dip into their savings and investments, particularly among the older population.
Eric Lhomond, the chief investment officer at AXA, said: “Confidence in the economy and people’s personal financial optimism have fallen dramatically over the last year. Paying off debt and reining in unnecessary spending continues to be a priority for Britain.”

As Jeremy Warner writes

Western policymakers are at a loss. In textbook Keynesian fashion, they’ve chucked everything up to and including the kitchen sink at the economic crisis, but, beyond a little pain relief, it’s failed to work as prescribed. With their actions fast running up against the limits of political and economic acceptability, is there anything more they can do?…
As in Japan, in its two “lost decades”, policymakers are powerless against the flood of debt. The adjustment still has a long way to go.

At the times Keynes wrote his textbooks national debts were owned within the nation, hence selling a debt created high powered money to circulate through the economy, compensating for the liquidity shortage of banks. Today it is bought by countries with savings surpluses as Ben Bernake has said:

Effectively, governments have acted as financial intermediaries, channeling domestic saving away from local uses and into international capital markets.

If you want to see good video projecting what might happen over the next 18 months see here.

Who owns the national debt?

Some useful tables from the BBC showing how different the UK is from many other countries.

 

Note the huge upturn in gilt holdings by banks since 2008.  The reason is the Bank of England using QE to buy Gilts.

Note the centrality of pension funds who make use of the regular payments of gilt annuities to meet their commitments.

Foreign ownership of the national debt is not as high in some other countries.

When a countries foreign debt is predominantly owned by overseas investors a country gets into trouble.  That is because payments don’t get recirculated depressing domestic aggregate demand and slowing the ‘multiplier’.

It also explains a key flaw in the MMT (Modern Monetary Theory) concept that the debt doesn’t matter because ‘The bank in Monopoly cant go bankrupt’ well if you are throwing monopoly money out of the window you can.  The concept, even in its own terms, would only work in a country which acts as the worlds reserve with absolute confidence in debt repayments.  A congress inspired default later this year could shatter that confidence.

Countries that have negative balances of trade must import capital to pay for the goods, which they can do through borrowing from abroad to expand the national debt.

This feature of the Greek economy is also shared by the US with its majors debtors being China, and Japan, with their major savings gluts and, surprisingly in third place, the UK.

If exchange rate conditions are favourable it can be more beneficial for UK pension funds to buy US securities than UK Gilts.

Decision Theory for Planners #106 Push and Pull – Spanners in the Works

If the last section was a bit theoretical its time to get very practical.

For most of the last 10 years planning has been obsessed with process. About getting a ‘product’ – be it a planning application, or a development plan, from step a to step b as smoothly as possible.

Yet despite this focus on the production line of bureaucracy there has been increasing problems of the production lines crashing to a halt – of a ‘spanner in the works’.

A development plan might be found unsound. An unexpected issue might arise with an application, such as the finding of a ‘rare’ newt, the shifting sands of national policy and process might create new grounds for judicial review.

There has been view that problems come from complexity. That we are living in a more complex world. The issues we have to deal with are increasing. The public is becoming more aware of these, and of bureaucractic processes and know just when and how to throw spanners in the works when they want to stop things.

All of this is true, but it is all controllable if anticipatable.

Every process will smoothly run forwards as long as information smoothly runs backwards.

This is the push and pull concept, if kept in balance then a business process is in balance.

In economics there have been push schools and pull schools.

The push school has focussed on production – the classic example being Ricardo, and his influence on Marx. The emphasis is on costs and on stocks. From this view you can focus on the producer rather than the consumer because in the ‘long run’ a process of competition will weed out those that dont meet requirements.

The opposite school is focussed on consumption – on demand. The classic examples being Jevons and the Austrian Wieser. The focus in on consumer demand and flows. Wieser used the concept of ‘imputation’, you can focus on the end demand and not production because every aspect of production ‘in the long run’ will have to meet the wants of consumers, and prices of production can be ‘imputed back’ to those wants.

You will notice of course that both are making exactly the same ‘long run’ assumption – that economic balance will be achieved if a process is allowed to run its course. Success will be achieved if their is sufficient failure. The signals of success will be picked up by others who will adjust. The economy as a process of gathering and diffusing information.

What then if you can anticipate what is working, or what will work, if you can increase the flow of information.

A body – whether a firm or public sector body – has to supply its products and services to its customers. Markets are just one of many ways of diffusing information and supplying economic resources to keep products and services moving. There are underlying laws that apply to all production processes in any economic system.

Business processes run forward in time, but information runs backwards.

Imagine a one step process. With one consumer and one producer. The producer creates a process output, the consumer can say yes or no. Every output is matched by a piece of information. Yes or no in its simplest form. If the answer is yes then the producer will produce a second output and so on.

From then on you can add additional steps, although the ‘consumer’ in these intermediate steps might be an internal one within a body. For example a shop, or a one-stop-shop.

After the second world war Japan enormously in creased its comparative advantages as a nation through revolutionising its production. The rest of the world, especially now China, has copied those ideas, and that advantage is now eroded.

One of the key ideas it introduced, more specifically in Toyota and then more widely, was Kanban – which literally means ‘signboard’. Kanban is a ‘pull’ system of manufacturing.

In the late 1940s, Toyota began studying supermarkets.

Supermarkets were developing store and shelf-stocking techniques, only stocking what it believes it will sell, and customers will tend to only take what they need because future supply is assured.

Toyota figered that if in a in a supermarket customers get what they need, at the needed time, and in the needed amount why not on the factory floor.

As in supermarkets, originally, signboards and now computerised signboards were used to guide customers to specific restocking locations.

“Kanban” uses the rate of demand to control the rate of production, rather than guessing it and using signals from competition in output, and possible firm failure, to supply that information. You dont need to fail if you plan to succeed.

Flexibility also reduces costs wasted in overproduction through reducing inventory – the ‘just in time‘ concept.

Demand signals immediately propagate through the supply chain. A risk though is that supply shocks (such as those caused by natural disasters) propagate forward much more quickly because of low inventories.

If information on a potential spanner in the works can be propagated backwards through business processes it can be anticipated and avoided. Planning backwards.

Ill give several examples.

If you are in an area where protected species are common (such an irony) then you should not be surprised if a process is halted because of a failure to consider the impacts and evidence earlier. Hence if proper screening processes are in place at pre-application and application stage the chances of a future JR can be avoided.

A second example is the soundness and lawfulness tests for a development plan. What will an inspector want to see. You need to think about that from the outset and plan your programme backwards from the anticipated point of a plan being found sound, and not just leave the checking to a long pre-submission list. For example if the inspector wants to see examples of alternatives being tested, test early on those alternatives. If an inspector will dismiss an alternative for not being reasonable then that can be dismissed early on, providing the reason is explained.

Following Stafford and Lichfield I recommended to the dept that rather than waiting a year for unsound plans to come to them they needed to get out to local authorities and help them head off problems. Im glad that a version of such a ‘pull’ system was introduced. By and large now plans only come forward when the signals from the inspectorate say they are ready.

There are numerous other ways in which customer information can be propagated backwards and business processes adjusted to match going forward. I know some firms are making a lot of money on such advice. But there is no mystique about it. ‘Business Process Reengineering’ is just jargon for thinking this way.

Think of all planning case files, real or virtual, as inventory. Remember Hesiltines charge of ‘jobs sitting in filing cabinets’, time to prove him wrong.