My answer to the Ecotrain QOTW: In what ways has centralisation failed us?
I love @eco-alex and his work on Steemit, especially his Questions of the Week. The latest one ..... “In what ways has centralisation failed us?” might be my favorite so far and I'm excited to give my take! However, in the post that introduces the question Alex makes the following statement: "Isn't it interesting that every political system we have today, whether it be capitalism or communism, is based on a totally centralised system.." and my answer must therefore address an error in this statement.
Capitalism is not a centralized system.
It's likely @eco-alex was simply confusing capitalism with corporatism, which is an incredibly centralized system. By its very definition, corporatism is a move toward centralization: a partnership between corporations and government agencies in an attempt to remove competition, either through regulation or allowed consolidation (mergers). Corporatism is ultimately a move toward monopolies, and a monopoly is full centralization of an industry.
Capitalism, on the other hand, is an economic system based on capital. That's all it is. It depends largely on the market context in which that capital is employed. In a free market, (meaning free from government intervention) capitalism is completely decentralized.
Because @eco-alex is an environmentalist, I'll cite one of my favorite books on this subject, Bionomics. The book illustrates the parallel nature of economies and ecosystems: “Fair-minded environmentalists know that traditional 'command-and-control' methods have failed, yet too few are willing to abandon their faith in rule-making and trust the spontaneous power of free prices. Confused 'moral' arguments keep a solvable economic problem imprisoned by politics. To this day, most environmental activists remain blind to the fact that the chaotic, self-organizing system known as capitalism is the only tool we have to rescue the chaotic, self-organizing system called nature.” (p.282)
When the book's author, Michael Rothschild, mentions “command-and-control methods” he's referring to controls employed by centralized government bodies that are attempting to control decentralized human activity: unpredictable innovations in an economy's supply chain and unpredictable preferences and choices of an economy's customers. It'll never work.
In Bionomics, Rothschild compares firms to living organisms, and workers in the economy (like bakers or CEOs) to cells. Survival in both systems depends on decentralization: “The cost of keeping our brains fed would be far higher if the body's information processing were not decentralized. Although we tend to think of ourselves as being in complete command of our bodies, most of life's choice--like the 'decision' to produce more of a certain enzyme in a particular cell--are left to that cell.” (p.96)
So what are some ways that has centralization harmed us? Limiting my answer to economic issues, I'd point to three trends in centralization that have harmed human beings: central banks, corporatism, and Marxism.
While Europe has had her own problems with central banks, here in the US, we've endured four of them. The first, the Bank of North America, was a private bank instituted by Robert Morris in 1782. However, in 1787 legislation restricted its centralized banking activities; it then morphed into the Bank of Pennsylvania, eventually ending up as Wachovia, which was acquired by Wells Fargo.
Alexander Hamilton, our first Treasury Secretary, then began pushing for a second central bank. The Federal Reserve History's website (maintained by the Federal Reserve Bank of Richmond, Virginia) explains how Hamilton talked us into it: “In Hamilton’s view, the Bank was indeed 'necessary' because the cash-strapped new republic lacked a central institution that could expand the money supply, extend credit, collect taxes, pay the nation’s debts, handle foreign exchange, and store government money...” which are exactly the activities that drain wealth from US taxpayers every day. That private bank, the First Bank of the United States, was instituted in 1791.
To fund the First Bank, Hamilton had a few ideas. First, he suggested the government purchase $2 million in the Bank's stock. The problem, of course, was that the government didn't have $2 million, so the First Bank could loan it to the government. Hamilton also suggested the government could raise money to purchase Bank stock by taxing distilled liquor, which led to the Whiskey Rebellion.
The country's first Attorney General, Edmund Randolph, believed the Bank bill was unconstitutional. Both Thomas Jefferson and James Madison were opposed to this second central bank iteration, as they tended to oppose all forms of increased centralization of power in the government. To this day, being “Jeffersonian” generally means to support lesser government power, while being “Hamiltonian” means to support tighter centralization.
The First Bank was only chartered for 20 years and when the charter expired, the federal government declined to renew it. Central bank proponents then began pushing for a third. The Second Bank of the United States, another private bank, was chartered in 1816. It was plagued by fraud and its 20 year charter was never renewed.
Decades passed before a group of wealthy financiers at the end of the 19th century met secretly on Jekyll Island to plan the country's fourth iteration of a private central bank. Woodrow Wilson was writing The New Freedom at this time, in which he lamented, “However it has come about, it is more important still that the control of credit also has become dangerously centralized... The great monopoly in this country is the monopoly of big credits.” His book was published in 1913, just months before he signed the Federal Reserve Act and with that signature, Wilson threw the country out of the frying pan and into the fire.
The argument for any central bank is that it will stabilize the economy and avert financial crises, yet financial crises continue unabated; we endured our most recent one in 2008. But more than that, the Federal Reserve enjoys a monopoly on producing money considered “legal” tender (meaning you can pay US taxes with it). This monopoly continually distorts the banking industry and through its inflation of the money supply, the Federal Reserve drains the wealth of American citizens. Of the Federal Reserve's activities, expanding the money supply (inflation) probably causes the most harm to people as rising prices continually result.
Arthur Burns, the 10th chairman of the Federal Reserve, gave the following hopeless take on the function of central banks in 1979: “My conclusion, that it is illusory to expect central banks to put an end to the inflation that now afflicts the industrial democracies, does not mean that central banks are incapable of stabilizing actions; it simply means that their practical capacity for curbing an inflation that is continually driven by political forces is very limited.” It's this form of corporatism, the “public-private partnership” between a central bank and a central government that is the most harmful.
Corporatism is the result of progressive reforms of the 19th and early 20th centuries. Progressives were chasing the ideal of “efficiency” and believed that eradicating competition was the answer to social progress. Competition seemed destructive and violent to progressives; they often described it as “cut-throat” and “ruthless.” But removing competition from commercial markets had the effect of centralizing them.
Here are just a few progressives declaring the need to remove competition, combine firms, and centralize business:
“[Competition] is costly, for it requires many companies and establishments to do the work which would be more economically performed by one.” - editors, Blackwoods Magazine 1864
“It is not altogether clear what it is hoped that potential competition--namely, competition which may come into existence; and residual competition, namely, survivals of competition in centralized business--may accomplish.” Richard T. Ely, Monopolies and Trusts 1900
“[T]he United States Steel Corporation is rather a federation of independent companies, a combination of combinations... Mr. Carnegie encouraged friendly rivalries between his plants... and succeeded surprisingly in adding to the efficiency of his force.” Ray Stannard Baker, “What the United States Steel Corporation Really Is and How It Works,” McClure's Magazine1901
“We should not strive for a policy of unregulated competition and of the destruction of all big corporations, that is, of all the most efficient business industries in the land.” Theodore Roosevelt, “The Trusts, the People, and the Square Deal” 1911
“[W]ith the competitive system, underproduction alternates with overbuilding and overproduction. Where instead of fierce competition there is cooperation (and this is only possible where there are large units), the great losses are avoided...” Charles van Hise, Concentration and Control 1912
Marxism is, by definition, a centralized economy. “In a centralized economy,” writes Rothschild, “where virtually all economic activity is concentrated in one mammoth organization, coordination costs are ruinous. An immense bureaucracy whose futile mission is to coordinate all the economic activities of 300 million people soaks up resources that would otherwise be available to productive, independent organizations.” (p.111)
But in addition to destroying much of its human population's resources, centralized economies eventually end up destroying much of its human population, itself--a population that, because of its very decentralized nature, has become impossible to control.
“An economic system that clashes with fundamental life processes is not just another option; it is a profound aberration from the natural way in which human economic activity spontaneously organizes itself. This is the real reason for perestroika. After seven decades of a system erected on nineteenth-century Marxist theories of how an economy should work, the Soviet leadership has concluded that these theories cannot work. The abject failure of Marxist economics--whether in the Soviet Union, China, or assorted other countries--is not a matter of poor implementation of a sound theory. Quite the contrary, the implementation of Marxist ideology has been remarkably thorough. Marxism failed because its core elements violate processes essential to the functioning of all living, evolving systems.”
Millions of human lives have been destroyed in the pursuit of a centralized economy, so on November 7 (a day some are marking as Victims of Communism Day) I would list poverty, misery, and death as the top three ways centralization has harmed us.