Capitalism: Pharaoh’s Dream

In the biblical book of Genesis, Pharaoh is troubled by a dream: “And, behold, there came up out of the river seven well favoured kine and fat-fleshed; and they fed in a meadow. And, behold, seven other kine came up after them out of the river, ill favoured and lean-fleshed; and stood by the other kine upon the brink of the river. And the ill favoured and lean-fleshed kine did eat up the seven well favoured and fat kine.”

As interpreted by Joseph, this dream foretold seven years of plenty, followed by seven years of famine.

Pharaoh’s dream is an excellent metaphor for capitalism — an economic system in which the state intervenes in the market on behalf of privileged classes. Only under capitalism, the dearth results not from natural conditions like drought or blight, but from human-made conditions. And unlike Pharaoh’s dream, which portended misfortune both for his realm and for himself, for capitalists this is a good dream.

You see, capitalists — as opposed to legitimate actors in a free market — make money by obstructing production and reducing productivity. Thorstein Veblen, the founder of institutional economics, observed that most of the revenues accruing to the propertied classes are rents from “capitalized disserviceability.” Most of their so-called “property rights” are property in the right to prevent production taking place except on their terms. A good example is landlordism, the enforcement of absentee title against those who actually first cultivate vacant and unimproved land, and their heirs and assigns. By this means landlords are able to reap where they did not sow.

Sometimes to accomplish this it is necessary to deliberately impair the productivity of new technology in order to make it more amenable to the extraction of rents. Hence Monsanto’s genetically-modified seeds, which are deliberately designed with a built-in terminator gene to prevent them from reproducing — so the farmer always has to buy more seeds from Monsanto (in fact Monsanto attempts to enforce patent rights against seed-savers even beyond the first sale, in cases where the seeds are capable of reproducing). Hence e-books sold to libraries, which are designed to self-destruct after a few readings so the publisher can keep selling replacement copies. And hence, more generally, digital copyright law whose sole purpose is to impose artificial inefficiencies on what would otherwise by nature be the instantaneous replication of information at zero marginal cost.

In the industrial field, the lords of artificial scarcity intend to hobble the potential productivity of 3-D printers by DRMing the CAD/CAM files and criminalizing the production of hardware capable of circumventing DRM.

The good news is that this strategy is futile. As Cory Doctorow pointed out, the computer is a machine for copying bits, without limit, at zero cost. A business strategy based on preventing the copying of bits is doomed to fail. And more generally, the collection of profits by impeding the free flow of information and the copying of improved techniques is doomed to fail. No matter how totalitarian the information lockdown the proprietary content industries attempt to impose through the state, the forces of information freedom are always one step ahead. Such laws simply speed up the mainstreaming of encryption, proxy servers, and the relocation of site hosting to countries like Iceland outside the DRM Curtain.

In the case of industry, a proprietary regime is simply unenforceable. Legally or not, open hardware hackers can easily replicate open-source desktop machine tools using … desktop machine tools. And they can strip CAD/CAM files of DRM as easily as file-sharers currently do from music and movies. Industrial patents are enforceable only in an environment of low transaction costs, like what prevailed under mass production. In the old days, the transaction costs of enforcing patents were low because a handful of oligopoly manufacturers produced a handful of similar designs, and marketed them through a handful of nationwide retail chains. What happens when a garage microfactory in every neighborhood is downloading design files from The Pirate Bay and producing knockoffs of proprietary designs, or making generic spare parts to keep GE and Westinghouse appliances running? What happens when they market their manufactured goods in a hundred thousand Mom-n-Pop stores and neighborhood bazaars?

We’re approaching victory in the five-thousand-year war between natural abundance and artificial scarcity.

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Citations to this article:

Free Markets & Capitalism?
Markets Not Capitalism
Organization Theory
Conscience of an Anarchist