Was Thomas Malthus the first secular austerian?

By Glenn Stehle

In my last post I gave a brief history of the long tradition of religious austerianism in Western civilization, explaining that all too often what austerianism amounted to was austerity for the lower orders of society, and luxury and opulence for the upper orders.  But is there a parallel tradition of secular austeriansim?  In this post I will argue that there is.

The following quote by Thomas Malthus recently caught my eye:

A man who is born into a world already possessed, if he cannot get subsistence from his parents on whom he has a just demand, and if the society do not want his labour, has no claim of right to the smallest portion of food, and, in fact, has no business to be where he is. At nature’s mighty feast there is no vacant cover for him. She tells him to be gone, and will quickly execute her own orders, if he does not work upon the compassion of some of her guests. If these guests get up and make room for him, other intruders immediately appear demanding the same favour. The report of a provision for all that come, fills the hall with numerous claimants. The order and harmony of the feast is disturbed, the plenty that before reigned is changed into scarcity; and the happiness of the guests is destroyed by the spectacle of misery and dependence in every part of the hall, and by the clamorous importunity of those, who are justly enraged at not finding the provision which they had been taught to expect. The guests learn too late their error, in counter-acting those strict orders to all intruders, issued by the great mistress of the feast, who, wishing that all guests should have plenty, and knowing she could not provide for unlimited numbers, humanely refused to admit fresh comers when her table was already full.

Malthus was masterful at crafting what Stephen Toulmin called “cosmopolitical arguments,” a type of special-interest pleading whose advocacy is so subtle as to often go undetected.  “The function of cosmopolitical arguments is to show members of the lower orders that their dreams of democracy are against nature; or conversely to reassure the upper class that they are superior citizens by nature,” Toulmin explains in Cosmopolis:  The Agenda of Modernity. Cosmopolitical arguments were needed because, since the eighteenth century, the authority of God as a source of absolute truths of the world – the essence of the historic claim to authority of the Christian religion — had been superseded in many areas of society by the rise of science (Robert H. Nelson, Economics as Religion:  from Samuelson to Chicago and Beyond).  For this reason new secular-scientific arguments had to be found to replace the old religious ones, which had lost their authority to bestow moral and intellectual legitimacy upon the social and economic order.

Enter Thomas Malthus.

As Robert L. Heilbroner explains, in the first decades of the 19th century it became evident to the Worldly Philosophers that  rentiers and industrial capitalists (Robert L. Heilbroner, The Worldly PhilosophersMalthus would become the great defender and champion of the rentiers, and David Ricardo the champion of the rising industrial capitalists.  “Rents,” said Malthus in his Principles of Political Economy, which appeared three years after Ricardo’s On the Principles of Political Economy and Taxation (1817), “are the reward of present valour and wisdom, as well as of past strength and cunning.”

Conspicuously missing from this mutually sustaining folie à deux between Malthus and Ricardo, however, was labor, which was systematically demonized and had its interests summarily dismissed by both.  As Heilbroner points out, a great London banker of the time, Alexander Baring, declared in Parliament that “the labourer had no interest in this question” because “he will get dry bread in the one case and dry bread in the other.” This was deemed so because of the immutable nature of the workers.

After all, as Heilbroner goes on to explain, “although Malthus and Ricardo disagreed on almost everything, they did not disagree about what Malthus had to say about population.”    If the demand for labor increased, both Malthus and Ricardo argued, this would have the effect of boosting wages.  However, they both agreed, this “would soon tempt the incorrigible working orders to avail themselves of those treacherous delights of domestic society and so to undo their advantage by flooding the market with still more workers.”  Therefore the workers “just barely subsisted.”  And this was fated, predestined, and nothing could be done about it.  Furthermore, this was not the fault of the industrial capitalist or the rentier, but was caused by the nature of the workers, “since it was only the worker’s own blindness that drove him to multiply his numbers.”

Beyond this point of agreement, however, Ricardo and Malthus parted ways, for Malthus was the great champion of the rentiers, or more specifically the owners of the land upon which corn was grown.  If market forces were allowed to work unimpeded, a scarcity of corn meant high corn prices, which meant a windfall for Malthus’s hallowed land owners, who constituted the principle rentier class of the day.  Malthus thus became quite the fan and advocate of scarcity.

Scarcity was to be achieved through the Corn Laws, which placed severe limitations on the importation of corn into Britain and created an acute scarcity of corn.  “By 1813 the situation had gotten out of hand,” Heilbroner explains.  “Bad crops and the war with Napoleon conspired to bring about virtual famine prices.”  A bushel of corn in Britain cost the equivalent of twice the average worker’s weekly wage.  In comparison, in the US the highest price corn ever achieved amounted to 1/8 of the average worker’s weekly wage.

“Patently, the price of grain was fantastic, and what to do about it became a question of enormous moment to the country,” Heilbroner continues.  “Parliament studied the situation carefully – and came up with the solution that the duty on foreign grain should be raised still higher!”

Malthus was all in favor of this.   He wrote an essay, “The Grounds of an Opinion on the Policy of Restricting the Importation of Foreign Corn,”  explaining his support.  It is a masterwork of special-interest pleading, exuding all the wonderful things that would derive from the scarcity of corn and the exorbitant price it had achieved.  In Malthus’s estimation, there was scarcely any sector of society that would not benefit from the scarcity of corn, its high prices, and the transformation of British corn production towards corn independence.  “I firmly believe that, in the actual state of Europe, and under the actual circumstances of our present situation,” he counsels, “it is our wisest policy to grow our own average supply of corn; and, in so doing, I feel persuaded that the country has ample resources for a great and continued increase of population, of power, of wealth, and of happiness.”

If we fast-forward the clock 160 years, we see a redux of Malthus’s call to action in Carter’s Crisis of Confidence Speech.  But whereas with Malthus the proximate goal is corn scarcity with the ultimate goal being corn independence, with Carter it is energy scarcity with energy independence.

“We believed that our nation’s resources were limitless until 1973, when we had to face a growing dependence on foreign oil,” Carter begins.  But we’re not to worry, because, according to Carter: “Energy will be the immediate test of our ability to unite this nation, and it can also be the standard around which we rally. On the battlefield of energy we can win for our nation a new confidence, and we can seize control again of our common destiny.”  And, just like Malthus, to insure that the scarcity is permanent and will not disappear due to cheap imports, “Beginning this moment, this nation will never use more foreign oil than we did in 1977 — never. From now on, every new addition to our demand for energy will be met from our own production and our own conservation….   To ensure that we meet these targets, I will use my presidential authority to set import quotas.”

Of course, just like as was the case with Malthus, few of Carter’s predictions came true.  With Malthus, better crops ensued, Napoleon was defeated, corn prices subsided toward more normal levels, and the Corn Laws were eventually repealed.    With Carter, two things happened.

First, Volker unleashed his war on working men and women with his brutal monetary policy beginning in 1979, precipitating a world-wide recession.  As a result, oil demand plummeted from 64.0 MMBOPD in 1979 to 57.6 MMBOPD in 1983, and along with it oil prices, from $38/Bbl in 1979 to $14.64 in 1986 (From 1982 to 1985 OPEC attempted to set production quotas low enough to stabilize prices. Repeated failures occurred because various members of OPEC would produce beyond their quotas. Saudi Arabia acted as the swing producer cutting its production to stem the free falling prices. In August of 1985 they tired of this role and linked their oil prices to the spot market and in early 1986 increased production from 2 MMBPD to 5 MMBPD).

Second, Reagan carried through with the Reagan version of the Carter Doctrine, which resulted in the militarization of US energy policy.  This ushered in an era of productivity-destroying militarism financed by running large trade deficits.  Chris P. Dialynas and Marshall Auerback variously called it “guns AND butter foreign policy,” “the military option“ and “an increasingly militaristic foreign policy,” all financed with “a cheap form of war finance, a particularly important consideration as the U.S. has gradually militarized its energy policy”    (Chris P. Dialynas and Marshall Auerback, “Renegade Economics:  The Bretton Woods II Fiction”). Carter’s Crisis of Confidence speech seemed to foretell these future events when he stated:  “And this one from a labor leader got to the heart of it: ‘The real issue is freedom. We must deal with the energy problem on a war footing’.”  It was Reagan who would fully complete the strategic reorientation towards a “guns AND butter” foreign policy, the idea being that the “United States would rely on military might to keep order in the Gulf and maintain the flow of oil, thereby mitigating the implications of American energy dependence” and prolonging “the empire of consumption’s lease on life.”  (Andrew J. Bacevich, The Limits of Power).

The militarization of energy policy appeared to work quite well for a couple of decades.  However, as world oil demand began bumping up against world oil supply once again in the early naughties and the US suffered disastrous losses in its resource wars in Iraq and Afghanistan, it is not at all clear that the US will be able to rely on military might to keep order in the Gulf and maintain the flow of oil.

Carter, just like Malthus, was interested in using the power of government to bestow windfalls upon pet constituencies.  Carter’s proposed energy system transformation amounted to little more than lavish pork barrel spending on projects of questionable economic and environmental merit.  “To give us energy security,” Carter implored, “I am asking for the most massive peacetime commitment of funds and resources in our nation’s history to develop America’s own alternative sources of fuel — from coal, from oil shale, from plant products for gasohol, from unconventional gas, from the sun.”   But now, and with the benefit of hindsight, we can readily see that a better shortlist of non-solutions to energy and environmental problems, driven by politics and special interests, would be difficult to come up with.  The money to transform the energy system was to come from a massive new tax on the oil and gas industry.  “These efforts will cost money, a lot of money,” Carter said, “and that is why Congress must enact the windfall profits tax without delay.”

15 responses to “Was Thomas Malthus the first secular austerian?

  1. “The positive supply shocks in the energy markets is what broke the back of inflation, led by the deregulation of natural gas in 1978…”
    – Warren Mosler

    • I don’t know what “positive supply shocks” he is talking about.

      Here’s a graph of US natural gas supply. Natural gas is not fungible like petroleum, and one can see that from 1972 to 1986 US natural gas production was in constant decline:

      http://upload.wikimedia.org/wikipedia/en/3/3c/UsNaturalGasProductionAndPrices.png

      The same is true for world oil production, which is fungible. World oil supply was in steady decline from 1979 to 1985:

      http://gailtheactuary.files.wordpress.com/2011/04/world-oil-production-1965_2010.png

      • Here is Warren’s story of the Thatcher era: http://moslereconomics.com/2013/04/10/my-story-of-the-thatcher-era/

        MMT does not subscribe to the idea that low interest rates are inflationary.

        • I don’t know why the obsession with inflation.

          Me, I’m more concerned with the size of the pie (aggregate utility and aggregate production) and how the pie gets split up. Inflation and money creation are interesting only insofar as they affect these two variables.

          Both A.W. Phillips and Milton Friedman ignored costs other than labor costs, including the cost of energy, in the cost of production, and thus inflation. This to me seems highly unrealistic, to say the least. Here’s Paul Krugman’s description of Friedman’s theory of inflation and how he claims it predicted the 1970s stagflation, and as you can see energy costs appear nowhere:

          An even bigger triumph, however, came from his application of Economic Man theorizing to inflation. In 1958 the New Zealand–born economist A.W. Phillips pointed out that there was a historical correlation between unemployment and inflation, with high inflation associated with low unemployment and vice versa. For a time, economists treated this correlation as if it were a reliable and stable relationship. This led to serious discussion about which point on the “Phillips curve” the government should choose. For example, should the United States accept a higher inflation rate in order to achieve a lower unemployment rate?

          In 1967, however, Friedman gave a presidential address to the American Economic Association in which he argued that the correlation between inflation and unemployment, even though it was visible in the data, did not represent a true trade-off, at least not in the long run. “There is,” he said, “always a temporary trade-off between inflation and unemployment; there is no permanent trade-off.” In other words, if policymakers were to try to keep unemployment low through a policy of generating higher inflation, they would achieve only temporary success. According to Friedman, unemployment would eventually rise again, even as inflation remained high. The economy would, in other words, suffer the condition Paul Samuelson would later dub “stagflation.”

          How did Friedman reach this conclusion? (Edmund S. Phelps, who was awarded the Nobel Memorial Prize in economics this year, simultaneously and independently arrived at the same result.) As in the case of his work on consumer behavior, Friedman applied the idea of rational behavior. He argued that after a sustained period of inflation, people would build expectations of future inflation into their decisions, nullifying any positive effects of inflation on employment. For example, one reason inflation may lead to higher employment is that hiring more workers becomes profitable when prices rise faster than wages. But once workers understand that the purchasing power of their wages will be eroded by inflation, they will demand higher wage settlements in advance, so that wages keep up with prices. As a result, after inflation has gone on for a while, it will no longer deliver the original boost to employment. In fact, there will be a rise in unemployment if inflation falls short of expectations.

          At the time Friedman and Phelps propounded their ideas, the United States had little experience with sustained inflation. So this was truly a prediction rather than an attempt to explain the past. In the 1970s, however, persistent inflation provided a test of the Friedman-Phelps hypothesis. Sure enough, the historical correlation between inflation and unemployment broke down in just the way Friedman and Phelps had predicted: in the 1970s, as the inflation rate rose into double digits, the unemployment rate was as high or higher than in the stable-price years of the 1950s and 1960s. Inflation was eventually brought under control in the 1980s, but only after a painful period of extremely high unemployment, the worst since the Great Depression.

          By predicting the phenomenon of stagflation in advance, Friedman and Phelps achieved one of the great triumphs of postwar economics. This triumph, more than anything else, confirmed Milton Friedman’s status as a great economist’s economist, whatever one may think of his other roles.
          http://www.nybooks.com/articles/archives/2007/feb/15/who-was-milton-friedman/?pagination=false

          All I can say is that even a blind hog finds an acorn every once in a while, of which this is the perfect example, and Friedman and his admirers have a bad case of confusing causation with correlation.

          How could any rational person ignore energy costs as a cause of the 1970s inflation? Oil prices increased from $3.30 per barrel in 1970 to $38 in 1981. Since at the time the energy equivalent of about 2.24 barrels of oil was needed for each $1000 of GDP, this calculates to an increase from less than 1% of the cost of production to over 8%.

          Even though Mosler doesn’t “remember it all” completely accurately, I think he gets a lot closer to the truth than Friedman, because he at least doesn’t completely block the high oil prices out of his analysis.

          • The mainstream belief is that high interest rates hurt the economy. The evidence people cite for this is the early 1980s, but the problem is that oil prices were also high then.

            High interest rates cause the federal government to make higher interest payments, thereby increasing the federal budget deficit. It’s Keynesianism. I don’t think Volcker commenced the assault on the middle class.

            • The mainstream belief is that high interest rates hurt the economy. More than just a mainstream belief, which is why Keynes, MMT propose “euthanasia of the rentier” / low or zero interest rates. Yes, at times like now, when rates are low already, lowering rates is not stimulation, but the opposite. But in “more normal” times, rate hikes like Volcker’s will make private investment collapse and unemployment rise. Until now, Volcker’s rates and the deep recession they caused was the biggest single battle in the war on the middle class.

            • I’m not sure Mosler would agree with you about Volcker, since in the article you linked he wrote that “tall Paul in maybe 1979…put on what might be the largest display of gross ignorance of monetary operations with his borrowed reserve targeting policy. ”

              I assume this is what Mosler is talking about:

              In the fall of 1979, inflation was running at more than 10 percent a year. Paul Volcker, the Fed chairman, believed that the usual procedure of gradual interest rate increases were inadequate. In the first place, it was proving difficult—perhaps impossible—to determine the “right” level of interest rates that would stem inflation. And some at the Fed believed interest rate manipulation had just become ineffective.

              So Volcker dramatically changed how monetary policy was implemented.

              On October 6, 1979, the Federal Reserve announced that it would begin targeting bank reserves rather than the federal funds rate in order to curb inflation and “speculative excesses in financial, foreign exchange, and commodity markets.” This meant that the Fed would allow interest rates to vary much more widely and climb much higher in reaction to changes in demand for money and bank reserves.

              [….]

              The Fed’s new plan began by setting a limit on the rate of increase of money it sought to achieve. It then would set the “reserves path” that it believed would achieve that money growth.

              The plan to limit reserves began with the understanding that it could, as a practical manner, only target “non-borrowed reserves.” That is Fed speak for reserves created through securities purchases in Open Market operations. “Borrowed Reserves” are reserves from the discount window, which it knew it couldn’t control directly without causing catastrophe.

              So what the Fed planned to do was to set out to limit the supply of reserves supplied through the open-market operations

              http://www.cnbc.com/id/46970524

              Are you arguing that Volker’s monetary policy did not cause a worldwide recession?

              • I don’t have the expertise to assign blame for the early 1980s recession. However, I recently discussed this subject with Rodger Malcolm Mitchell and he said the following: “Probably reduced debt growth was the most important factor. We don’t seem to have recessions when federal debt growth is above 10%.”

  2. Of course it would never have occurred to Malthus that the spoken and written language that he used to advance the interests of a small minority was evidence of Nature providing a tool for human beings to cooperate with each other for the purpose of survival.

  3. I do not find the explanation satisfactory that “new secular-scientific arguments had to be found to replace the old religious ones” because the belief in the transcendental force of nature as directing teleology (in the Malthus quote that is the inevitability of material needs, personified by a figure that recalls mother earth, Gaia, “the great mistress of the feast”) can itself easily be interpreted as appealing to ‘religious’ needs (not supplanting them, but borrowing their language). Also, do not forget that Malthus was the person Darwin mentioned when people asked him about his greatest inspiration for his theory of natural selection. The language Darwin used to describe and understand the processes of nature came deeply from within Malthus’s moral elitism, hence the term ‘social darwinism’ that is now often used to describe such attitudes in politics. I am personally working on this (and other) stuff and I would just like to say that things are much more complicated than they often appear at first sight (and of course I realize this is a blog, not a book). The “cosmopolitan arguments”-theory is certainly right in some respects, but it glosses over the problems of rhetoric, aesthetics and materialism that I find crucial to the intellectual history of imagining the natural and the human.

    • “The language Darwin used to describe and understand the processes of nature came deeply from within Malthus’s moral elitism, hence the term ‘social darwinism’ that is now often used to describe such attitudes in politics.”

      However, we know that Darwin struggled with Malthus’s moral elitism in his evolutionary theories when it came to eusociality although Darwin didn’t fully grasp the implications of the eusocial aspect of evolution which would have enabled him to see the defects in Malthus’s arguments. Here is a quote from a 2010 article by Nicola Plowes:-

      “Even Darwin (1859) commented on the challenge of understanding eusociality as “one special difficulty, which at first appeared to me insuperable, and actually fatal to the whole theory. I allude to the neuters or sterile females in insect communities: for these neuters often differ widely in instinct and in structure from both the males and fertile females, and yet, from being sterile, they cannot propagate their kind.” Darwin goes on to argue that “This difficulty, though appearing insuperable, is lessened, or, as I believe, disappears, when it is remembered that selection may be applied to the family, as well as to the individual. . .”

      Of course evolutionary and anthropological theory has now moved on to where it’s not just “the family” but the tribe, the nation and humanity in general that is driven by eusocial instincts for cooperation:-

      http://isites.harvard.edu/fs/docs/icb.topic426436.files/five_rules.pdf

      • David Sloan Wilson claims that “Darwin was the first group selectionist.”

        As D.S. Wilson and Edward O. Wilson explain here:

        This way of thinking about evolution is called multilevel selection (MLS) theory. Although the term
        “multilevel selection” is newer than the term “group selection,” the Russian-doll logic has been present from the beginning, going back to the works of Darwin.

        Darwin would not have been motivated to think about group selection were it not for the existence of traits
        that are selectively disadvantageous within groups. In a famous passage from Descent of Man, he notes that morally upright people do not have an obvious advantage over less-upright people within their own “tribe,” but that tribes of morally upright people would robustly outcompete other tribes. He concluded by saying “… and this would be natural selection.” Darwin was clearly employing the Russian-
        doll logic of MLS theory in this passage. He did not comment on the irony that morality expressed within
        groups can become morally problematic in between-group interactions, but his hypothetical example perfectly illustrates the general rule stated above, which makes adaptations at one level part of the problem at higher levels.

        http://evolution.binghamton.edu/dswilson/wp-content/uploads/2010/12/American-Scientist.pdf

        But even given multi-level selection, purely materialistic theories struggle to explain human spirituality, which at its best is truly transcendent and can give meaning to existence quite independent of the vicissitudes of the individual, the family, the tribe, the nation or even the community of mankind.

    • @ JV

      The notion that there was a clean break between the old religious theology and the new secular science is part of Enlightenment mythology. The great hope of the Enlightenment was that a sure ticket to human progress and perfectability was to ditch the old religious superstitions and in their place substitute human reason and knowledge. But it was fiction, because the very origins of science lay in theology.

      As Toulmin explains, one of the “principal elements, or timbers of the Modern Framework” was that “Nature is governed by Fixed Laws set up at the Creation.” The “causal phenomena of physics” treated “nature as fixed in static, mechanical, repetitive, and unchanging patterns laid down by God at the Creation. In the late 20th century, the phrase ‘laws of nature’ has lost its theological overtones, and means little more than ‘regularities.’ But in 1700, the ‘laws of nature’ were still a material expression of God’s Will and Wisdom for the world: in revealing the laws by which nature operates, scientists saw themselves as doing God’s work — even reading His mind.”

      Here’s how Michael Allen Gillespie explains it in The Theological Origins of Modernity:

      What actually occurs in the course of moderity is thus not simply the erasure or disappearance of God but the transference of his attributes, essential powers, and capacities to other entities or realms of being. The so-called process of disenchantment is thus also a process of reenchantment in and through which both man and nature are infused with a number of attributes or powers previusly ascribed to God…

      Newton saw time and space as the forms of divine being. After these divine capacities had been transferred to man or nature, it was easy for the Encyclopedists Diderot, D’Alembert, and Holbach to demonstrate that revealed religion was not only false but also superfluous… The Enlightenment (and post-Enlightenment) exaltation of human individuality is thus in fact a form of radical (although concealed) Pelagianism. Divine or at least quasi-divine powers reemerge although always in disguise. Nature is an embodied rational will; the social world is governed by an “invisible hand” that almost miraculously produces a rational distribution of goods and services; and history is the progressive development of humanity toward perfection.

  4. Oops forgot to include the web reference for the Nicola Plowes article. Here it is:-

    http://www.nature.com/scitable/knowledge/library/an-introduction-to-eusociality-15788128

  5. The late post modernist philosopher Paul Feyerabend warned that science and religion are both belief systems and that governments should not rely too heavily on either in decision making.