Faceless Economy

 Introducing the faceless economy

In a traditional village you know everyone and you can see the skill and effort that goes into the production of everything.  This knowledge, combined with your own sense of what is easy and what is hard, helps to set the perceived value of things.  When you are separated from the production process it is harder to know what would be a fair price.  Instead the perceived value is determined by its worth to you, without regard to how it was produced, or who produced it.  If it is priced at a value lower than your perceived value then it is good, if it is priced even lower, then even better.  This separation enables things to be priced at perceived value rather than perceived cost. It is a separation that underpins the retail industry, and it is a separation that is now so complete that we live in a faceless economy.

Ever purchased something that is so cheap that you wonder how it is possible for that to be the price?  For example it might be a $2 t-shirt from Kmart.  I have done precisely that.  Wondered how it can be that the retailer, the wholesaler, the transport company, the manufacturer and the cotton grower and everyone who works for them can get enough return out of their part in the process of providing me with a new t-shirt for just $2.

We are told that this is the great benefit of free-trade.  We are told that global markets optimise production to maximise efficiency.  This is partially true, in that free markets will find the most efficient producer and in doing so they will get the highest level of production.  The issue is that this philosophy is built on the premise that the efficiency will be due to some form of ingenuity, whereas the reality of many aspects of free trade is that there is no efficiency if all human effort is treated equally.  The price reduction comes from massive differentials in labour costs.

Economic rationalists justify the differential in labour cost with a concept called purchase price parity.  There is some credit to this concept as it looks past the inherent value of money to see what the real value of money is in a particular location.  For example it compares the cost of a meal in Fiji to the cost of a meal in the UK.  As the intent is to compare an equivalent unit, the universal constant of the McDonalds Big Mac has been used to calibrate the cost of living via the Big Mac Index. Some researchers have now taken this a step further and indexed how many hours a McDonalds worker has to work to buy one of the Big Macs they are serving  in various cities across the globe. This explains why a Big Mac is considered a luxury item in Moscow and a contributor to obesity in Dallas. It also highlights the global disparity in income for identical work, and the worldwide ambivalence to the existence of this disparity.

Before exploring where the faceless economy is taking us, let us pause for a moment and look at how we got here.

Monopoly & Hegemony

There are two dominant aspects of economic power that have nothing to do with economic principals.  The first is best explained using a well-known board game called Monopoly.  The aim of the game is to own everything and in the process bankrupt everyone else.  It is an excellent lesson in capitalism for children of all ages.

For those unfamiliar with the game of Monopoly, all players start on equal terms, with the same amount of money and with all property on the board available to purchase.  While the rules of the game are constant throughout, the game is generally played in three stages.  The first stage is acquisition.  During this stage players try and buy as much property as they can hoping to secure a set of properties they can then develop.  Throughout this stage the rents are small and the players rich.  The next stage is consolidation, during this stage players try and invest in development so that they can boost their income and inflict higher costs on their competitors.  Throughout this stage a balance needs to be achieved between investing in income generation and having the ability to pay substantially higher costs.  The final stage is attrition, in which the rich generally get richer and the poor get poorer. Throughout this stage the rich are able to invest excess income to create more income generating opportunities while the poor are required to mortgage investments to pay for expenses that exceed their income.

The biggest difference between the game of Monopoly and real life is that without innovation or government intervention, capitalism is played exclusively in the attrition stage of Monopoly.  No wonder the elite favour free markets and small governments.  But given the elite are such a small percentage of the population, why do so many democracies keep voting in governments that agree with them?  The answer: hegemony.

Hegemony is a concept introduced by Italian Anontio Gramsci in the first half of the 20th Century. He reasoned that the ruling class must gain the consent of the working class as no government could rule by force alone for long.  He called this process hegemony, the means by which the ruling/dominant group wins over a subordinate group through ideas. The principal idea that democratic capitalism sells us, is that we live in a meritocracy, a social construct in which people are rewarded on the merit of their contribution.  Here everyone plays by the same rules and therefore anyone can succeed if they are good enough.  In principal this is true, just as the rules of Monopoly do not change throughout the game, the rules of democratic capitalist society are the same for all.  And so we buy into the idea – and effectively join a game of monopoly during the attrition stage.

Most people do not see the difference between a meritocracy and democratic capitalism. Indeed our own self-interest tends to support some of the distortion. For example, most parents want to use any advantage they have gained to assist their children in some way.  Throughout our lives we will try and provide our children with better opportunities through education and networking and so forth.  At the end of our lives it is normal for our children to inherit our worldly possessions.  All of this ensures that the next generation does not start on an equal playing field.  In this way the real life game of Monopoly is never reset, and that is even without the immortal creations of capitalism: Companies and Trusts.

Without innovation or intervention, the gap between rich and poor grows over time.  If the time is spread across generations, the gap becomes a chasm. Historically innovation and intervention have both played a role in reshaping this scenario.  Innovation can realign the relationship between ownership and value.  The establishment finds that its assets have lost value, while the innovators have created a new source of wealth generation.  Unfortunately for the general population this tends to simply create a new rich, rather than spreading wealth to the poor. Intervention can range from changes in taxation or legislation through to compulsory acquisition, revolution or war. Since the global financial crisis all of these forms of intervention have been used in various countries across the world. So what does the future hold?

The future of the faceless economy if left unchecked

Economic theory is based on the rational behaviour of the informed purchaser. Marketing is the dark art that overrides rational behaviour. Marketing fuels the flames of desire, and this desire is the engine of consumerism. Buy now pay later, is the central behaviour pattern of the consumer in the faceless economy.  Instant gratification made possible by easy credit without any real thought to the true cost – not only to the individual’s future self, but also of the influence of their behaviour on the economic ecosystem. Of course consumers are not encouraged to think about these things, indeed in many instances they are actively discouraged and intentionally kept ignorant. Sold the sizzle without questioning what is actually in the sausage or how it was made.

An unfortunate characteristic of the faceless economy is that it has no moral compass.  Price is everything and everything has a price. Consumers find it difficult to make ethically-based purchasing decisions when the source of the goods or service is hidden from them. Moreover the reality of the faceless economy is that society has stopped thinking in moral terms.  Even public debates on issues such as homelessness or domestic violence are presented with their economic cost as a key component in the argument for action. It is an attitude reflected across the global village with refugees and victims of civil wars shunned for the economic burden they represent.

The internet has made it possible to connect with other people all over the world at any time.  At the same time we have never been more disconnected from our real neighbours.  It is a potentially dangerous combination.  Individuals are assessing their personal values with like-minded individuals rather than the broader community.  This is fertile ground for extreme views and anti-social behaviour; it is evident in the rise of child-pornography, terrorism and rape culture.  Combine these abhorrent social trends with a faceless economy with no moral compass and the free-market has created a living hell for millions of women and children around the world.  Of course marketers sell it by other names, like sex tourism and pornography.  There is even a new word for slavery – people trafficking.

Society has been here before, many times and in many places over its long history. It is an unfortunate truth that humanity’s greatest enemy is humanity.  Economic rationalists argue for small governments and free markets as they are more efficient.  They argue against public health and the minimum wage. However the efficiency of the corporate machine whose primary objective is to generate wealth for the shareholders should not be the only consideration.  The economy is an ecosystem that is a human and social construct and must be tended to if it is to survive.  History tells us that if the gap between rich and poor becomes a chasm, then society will fall.  The Arab spring is simply the most recent reminder.

In western society and throughout the global village, the faceless economy is accelerating the gap between the top 2% of the population and everyone else.  This is creating major imbalances in the economic ecosystem which, if left unaddressed, will result in major social and economic upheaval.

 

Recap

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