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History of the Other Canon

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Arvid Jensen

on 13 November 2012

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Transcript of History of the Other Canon

Cyropaedia
Here Xenophon presents what in hindsight can be seen as the foundation for a theory of fair exchange in the market.
In one anecdote, the young Cyrus is to judge the fairness of an exchange made between a tall and a short boy. The tall boy forces the pair to exchange tunics, because the tall boy's tunic is too short, shorter than the short boys, which is too tall for him. Cyrus rules the exchange fair because it results in a better fit for both boys.
Later in the biography, Xenophon discusses the concept of division of labor, referencing specialized cooks and workers in a shoemaking shop. Scholars have noted that Adam Smith's early notes about this concept "read like a paraphrase of Xenophon's discussion of the role of the carpenter as a "jack of all trades" in small cities and as a specialist in large cities.(Lowry, S. Todd (2003). "Ancient and Medieval Economics")
Marx attributes to Cyropaedia the idea that the division of labor correlates to the size of a market. Ways and Means
is a short treatise on economic development, and showed an understanding of the importance of taking advantage of economies of scale and advocated laws promoting foreign merchants. Works
Hiero
Ways and Means
Oeconomicus
Cyropaedia Xenophon
430 - 354 BC The Oeconomicus
Discusses the administration of agricultural land. In the work, subjective personal value of goods is analyzed and compared with exchange value. Xenophon uses the example of a horse, which may be of no use to a person who does not know how to handle it, but still has exchange value. Although this broadens the idea of value based in individual use to a more general social concept of value that comes through exchange, scholars note that this is not a market theory of value. Hiero
Is a minor work which includes discussion of leaders stimulating private production and technology through various means including public recognition and prize A history of 'The Other Canon' Plato
427– 347 BC) Italian
Renaissance: Il bene Commune
Das Gemeinwohl
The Commonwealth Jean-Baptiste Colbert
(1619-1683) Alexander Hamilton
(1755-1804) Adam Smith
(1723-1790) Thomas Jefferson
1743 – 1826 Pamphlet: Cotton is King
”We must prevent the increase of manufactures, force the surplus labor into agriculture, promote the cultivation of our unimproved western lands until provisions are so multiplied and reduced in price that the slave can be fed so cheaply as to enable us to grow our sugar at three cents a pound. Then without protective duties, we can rival Cuba in the production of that staple and drive her from our markets…” Friedrich List
1789 – 1846) Galbraith:”Here was the strongest, most enduring and, for that matter, most nearly irrefutable of arguments against Adam Smith and his followers and their case for free trade: they were not affirming a universal truth; they were simply urging what was indubitably advantageous for the special case of Britain.” Marshall Plan 1948 Milton Friedman
(1912-2006) $13 billion
Economic Cooperation Administration (ECA)
counterpart funds: 60% for investment in industry.
Technical Assistance Program.
Stepping stone to political and economic integration in EU Erik S. Reinert
(1949-) Ha-Joon Chang
1963 Abraham Lincoln protected the steel cronies—by paying a little more for steel,9 the United States created a huge steel industry with many high-paying jobs that also provided a base for government taxation. Economic development is about aligning the public interests of the nation with the private vested interests of the capitalists. George Gemisthos Plethon
(1355-1452) Antonio Serra
(end 16th century) Queen Elisabeth
(1533-1603) Abraham Lincoln
(1809-1865) Aristotle
(384 BC – 322 BC) Imago viva dei Mercantilism Antiquity Great Britain and
Economic Imperialism ”It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Conflict between individual and society: "Slavery may be a public calamity for a country, nevertheless some people may do very well in carrying on the slave trade and in holding slaves.", ”Every invention has some inconvenience for a number of individuals, and is nevertheless a public blessing.” Free trade: "Laissez faire et laissez passer, le monde va de lui même!"

“Lad være og lad gå, verden fortsætter på egen hånd!” “[I]f the whole globe were united by a union like the twenty four states of north America, free trade would indeed be quite as natural as it now is in the union…this state of things may be very desirable…but…it is not the state of the actual world” ”That, however, under the existing conditions of the world, the result of general free trade would not be a universal republic, but on the contrary, a universal subjection of the less advanced nations to the supremacy of the predominant manufacturing, commercial, and naval power, is a conclusion for which the reasons are very strong and, according to our views, irrefragable.” - The National System of Political Economy fra 1841 beskriver List ”Britain used enhanced military power to impose tariffs, taxes, and treaties that furthered the interests of its manufacturers. India, for example, became a net cloth importer by 1816 in part because many Indian states were obliged to accept free trade in textiles.”
--"The Human Web: A Bird'S-Eye View of World History" McNeill & McNeill ”One looks to underworking the Hindoo, and sinking the rest of the world to his level; the other to raising the standard of man throughout the world to our level. One looks to pauperism, ignorance, depopulation, and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilisation. One looks toward universal war; the other to universal peace. One is the English System; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing the condition of man throughout the world.”1 Henry C. Carey
1793 – 1879) Free Trade Harmony of interes
"Greed is good." Comparative advantage David Ricardo
(1772 - 1823) Neoclassical principle: Free trade is the goal per se, even before the required stage of industrializationis achieved. Comparative advantage in being poor
- Erik Reinert The American
Economic Revolution The civil War
1861-65 The American System
of Political Economy The Marshall Plan “The premise of neoclassical theory is that, if the investments are made, the acquisition and mastery of new ways of doing things are
relatively easy, even automatic” - Reinert Does capital per se lead to economic development, regardless of the economic structure within which investment is made? Loans are given to poor nations with productive/industrial structures that are unable to absorb such capital profitably. Interest payments often exceed the rate of return on investments made. Brain drain. Similarly, investments in human capital, made without corresponding changes in the productive structure to create demand for the skills acquired, will tend to promote emigration. Development Policy Myrdal advice for 3rd World Countries
“They should be aware of the fact that very much of these theories are partly rationalizations of
the dominant interest in the advanced and rapidly progressing industrial countries…it…would be
pathetic if the young social scientists of the under-developed countries got caught in the predilections of the thinking in the advanced countries, which are hampering the scholars there in their efforts to be rational but would be almost deadening to the intellectual strivings of those in the
under-developed countries. I would instead wish them to have the courage to throw away large
structures of meaningless, irrelevant and sometimes blatantly inadequate doctrines and theoretical
approaches and to start out from fresh thinking right from their needs and their problems. This
would then take them far beyond the realm of both out-moded Western liberal economics and Marxism.” Among nations at the same level of development has always been beneficial. Regionalintegration is, therefore, key to development. The problem, however, is that poor neighbouring countries often have little to sell to each other. In Africa, pressures from the United States and the EU, together with the spaghetti bowl of regional integration schemes (Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) Southern African Customs Union (SACU), Southern African Development Community (SADC)) and cross-membership of countries in these schemes, present difficulties for development and discourage policies promoting industrialization under local competition. The pressures to export faced by developing countries undermine, rather than advance, the Listian principle of regional integration that must precede any successful globalization. The EU presses for market access for their apples in Egypt, thereby destroying the century-old tradition of Egypt’s buying apples from Lebanon. The present carving up of Africa into different economic spheres is exactly the opposite of what Africa needs, which is stronger economic integration within Africa and a certain degree of development before opening up for globalization. Why Poor Countries Stay Poor Works:
The Republic. Works
Politics
Nicomachean Ethics The Republic
Division of labour
The state as the root of welfare Politics.
In transactions, Aristotle used the labels of "natural" and "unnatural". Natural transactions were related to the satisfaction of needs and yielded wealth that was limited in quantity by the purpose it served. Un-natural transactions aimed at monetary gain and the wealth they yielded was potentially without limits. He explained the un-natural wealth had no limits because it became an end in itself rather than a means to another end—satisfaction of needs. This distinction is the basis for Aristotle's moral rejection of usury. Nicomachean Ethics
Therein, Aristotle discusses justice in distribution and exchange. About the state
About the state: Aristotle's "Thus the state is by nature clearly prior to the family and to the individual, since the whole is of necessity prior to the part; for example, if the whole body be destroyed, there will be no foot or hand, except in an equivocal sense, as we might speak of a stone hand. . . . The proof that the state is a creation of nature and prior to the individual is that the individual, when isolated, is not self-sufficing; and therefore he is like a part in relation to the whole." Philosopher Kings
Instead of rhetoric and persuasion, Plato says reason and wisdom should govern:

"Until philosophers rule as kings or those who are now called kings and leading men genuinely and adequately philosophise, that is, until political power and philosophy entirely coincide, while the many natures who at present pursue either one exclusively are forcibly prevented from doing so, cities will have no rest from evils,... nor, I think, will the human race." (Republic 473c-d)

Plato describes these "philosopher kings" as "those who love the sight of truth" (Republic 475c)

A philosopher has the moderate love for wisdom and the courage to act according to wisdom. Wisdom is knowledge about the Good or the right relations between all that exists. Division of the state
Productive. Which represents the abdomen. (Workers) — the labourers, carpenters, plumbers, masons, merchants, farmers, ranchers, etc. These correspond to the "appetite" part of the soul.
Protective. Which represents the chest. (Warriors or Guardians) — those who are adventurous, strong and brave; in the armed forces. These correspond to the "spirit" part of the soul.
Governing. Which represents the head. (Rulers or Philosopher Kings) — those who are intelligent, rational, self-controlled, in love with wisdom, well suited to make decisions for the community. These correspond to the "reason" part of the soul and are very few. It is however said that Plato once disclosed this knowledge to the public in his lecture On the Good (Περ τγαθο), in which the Good (τ γαθόν) is identified with the One (the Unity, τ ν), the fundamental ontological principle. Georgius Gemistus (later Plethon or Pletho, Greek: (c1355 – 1452/1454)
was a Byzantine scholar of Neoplatonic philosophy. He was one of the chief pioneers of the revival of Greek learning in Western Europe. In the dying years of the Byzantine Empire, he advocated a return to the Olympian gods of the ancient world. [1]
He re-introduced Plato's thoughts to Western Europe during the 1438 - 1439 Council of Florence.
Here Pletho met and influenced Cosimo de' Medici to found a new Platonic Academy, which, under Marsilio Ficino, would proceed to translate into Latin all Plato's works. 1613
"Breve trattato delle cause che possono far abbondare li regni d’oro e d’argento dove non sono miniere"
"A Brief Treatise on the Causes that can make Gold and Silver plentiful in Kingdoms where there are no Mines" The problems of establishing the institutions conducive to economic growth faced by mercantilists at the end of the Renaissance are shared today by policy-makers in the developing world, and it can therefore prove to be fruitful, if not necessary, to explore the historical roots of this early innovation system approach. Both List and
Roscher quoted and referred to a certain Antonio Serra, a Neapolitan Mercantilist whom Schumpeter claims was “the first to compose a scientific treatise… on Economic Principles
and Policy” (Schumpeter 1954: 195), as an authority when arguing that Germany shouldfollow England’s path to industrialization (List 1841; Roscher 1881: 191). Antonio Serra VS. Marc' Antonio de Santis
Where his rival Marc’Antonio de Santis, to whose work Serra’s Breve trattato was a response, sought to improve the Neapolitan economy manipulating monetary and fiscal variables, Serra insisted that the unfavourable monetary and fiscal situation of Naples merely reflected underlying factors in the real economy, factors that could be influenced and developed through governmental interventions in the real, as opposed to the monetary, economy. These two conflicting ways of structuring the economic sphere—one focusing on monetary variables and the other on knowledge and productionp Serra was, in particular, the first
economist to systematically introduce two mechanisms that are at the core of the process of economic development: increasing returns and cumulative causations. Thomas Robert Malthus
1766 – 1834 The power of population is indefinitely greater than the power in the earth to produce subsistence for man. Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. Malthus argued that population was held within resource limits by two types of checks: positive ones, which raised the death rate, and preventative ones, which lowered the birth rate. The positive checks included hunger, disease and war; the preventative checks, abortion, birth control, prostitution, postponement of marriage, and celibacy. Malthus assumed a constant labor-demand in his assessment of England[citation needed], and in doing so he ignored the effects of industrialization. As the world became more industrialized, the level of technology and production grew, causing an increase in labor-demand. Thus, even though labor-supply increased, so did the demand for labor. In fact, the labor-demand arguably increased more than the supply, as measured by the historically observed increase in real wages globally with population growth. Between 1798 and 1826 Malthus published six editions of his famous treatise, An Essay on the Principle of Population, Criticism Biography Main ideas Bibliography The American System The Other Canon The new Ways of mercantilism Whereas Aristotle and the Scholastics resisted economic initiatives on the grounds that they inevitably exacerbated social inequality through diverging incomes, the mercantilists realized the economy could be directed towards increasing the material welfare of the entire population: enlightened statecraft could increase the common good. Mercantilist
literature can thus not be properly understood without reference to their cosmological context: the understanding of an expanding cosmos brought an end to the economy as a zero-sum game. Both cosmos and the economy ceased being static and incapable of growth. At the same time a religious reinterpretation meant that innovation was no longer a term of heresy. In 1278 Roger Bacon was arrested in Oxford for “suspicious innovations,” when Francis Bacon wrote his Essay on Innovation around 1605 innovation was something to be actively
sought for in order to improve the lot of mankind (Reinert and Daastøl 1997). The zero-sum game Weltanschauung slowly disappeared and the learning economy was born. The overriding economic question of Serra’s day was why all the gold and silver thatflowed into Spain from the Americas rapidly flowed out of an increasingly impoverished
Spain and ended up creating unprecedented wealth elsewhere, particularly in Venice and in the Dutch Republic. To Serra the explanation of this phenomenon was to be found in the study of the real economy, not in the study of monetary phenomena. To him, the key to this
mystery was that different economic sectors were subject to different economic laws; manufacturing was subject to increasing returns as production expanded, and agriculture was not. Serra explained the underlying causes in the Realökonomie that determined the flow of
gold in and out of nations. To Serra, a deficit of gold was but a symptom of other ills that could only be explained in the realm of production. As Schumpeter says about Serra’s work:
“Essentially the treatise is about the factors on which depend the abundance not of money but
of commodities—natural resources, quality of the people, the development of industry and
trade, the efficiency of government—the implication being that if the economic process as a whole functions properly, the monetary element will take care of itself and not require anyspecific therapy” an argument recently revived by Alessandro Roncaglia’s excellent survey of the history of economic thought (Schumpeter 1954: p 195; Roncaglia 2001: 52). Bibliography Alessandro Roncaglia’s excellent survey of the history of economic thought The Kingdom of
Naples continued to treat the symptoms of the outflow of gold and silver rather than its
causes, and for a long period joined the rest of Italy in the periphery of the world system.
After this, Serra and his work remained shrouded in darkness for more than a century. It was
seemingly a pure coincidence that the Tuscan mathematician Bartolomeo Intieri [1678-1757]
rediscovered the Breve trattato while stationed as administrator of the Medici estates in
Naples in the middle of the eighteenth century. Intieri is best remembered for having founded
10 the chair of political economy at the University of Naples, the first of its kind anywhere
outside Germany and Sweden/Finland. The chair of political economy was given to the
influential economist Antonio Genovesi2 in 1754 and Intieri gave him the only known copy of
Serra’s Breve trattato as an inaugural gift. Genovesi later donated this book to Ferdinando
Galiani, the ardent anti-physiocrat, who was the first author to write on Serra. Galiani gave
the book to his student and fellow economist Giuseppe Palmieri [1721-1793], who gave it to
the Neapolitan nationalist Francesco Salfi, a friend of Baron Pietro Custodi (Custodi 1803:
xxviii). Custodi honored Serra’s memory by including it as the first tract in his 50-volume
collection of pre-nineteenth century Italian economic thought (Custodi 1803: xxviii; Ziersch
1905: 29). It is through this 1803 edition that Friedrich List and Wilhelm Roscher were so
heavily influenced by Serra’s work. The single known copy of the Breve trattato at the time
thus passed, like a “proverbial lamp of life and learning”— a “lampada di vita”—through the
hands of the greatest Italian economists of the time (Croce 1970: 151).3

This first known copy of Serra’s tract was finally donated to the Biblioteca
Ambrosiana in Milan, and eight more copies of the original seem to have been discovered.
Several editions have appeared in Italian, but apart from a translation of a few pages in Arthur
Eli Monroe’s 1930 Early Economic Thought (Monroe 1930), the Breve trattato has not been
available for an international audience. 390 years after its first publication, however, this
might be in the process of change. The first complete translation of Serra’s 1613 treatise, into
Portuguese, was published in Curitiba, Brazil in 2002 (Serra 2002). It was predated by an
article in a Brazilian student journal, Oikos (Padula 2002), and, given the pertinence of its
message, one can hope that a critical mass of interest for Serra’s work soon will be reached
and an English translation published. Serra's Influences The Story of Breve Tratto Main Ideas The link to developing countries today Works We must keep in mind that the core of European colonial policy was to prohibit the establishment of manufacturing – i.e. increasing return activities – in the colonies, such activities being reserved for the Mother Country. Serra’s insistence on the role of manufacturing in creating economic welfare is therefore a denunciation of colonial policies of all ages, including that of today’s neo-colonialism. Like in the later German tradition, Serra clearly defines economics
as an Erfahrungswissenschaft, a science based on experience rather than on a priori
assumptions. This reasoning also echoes the work of his English contemporary and creator of the modern concept of innovation, Francis Bacon [1561-1626] (Reinert & Daastøl 1997). Very much in the spirit of Bacon’s New Atlantis, Serra also summons the vision of a ‘neverending frontier of knowledge’ when he complains that “there are still people who think everything they do not understand is impossible even though many such things, including ancient and modern discoveries, are now discussed that had once too been thought impossible by everyone” (177). Particular factors, Serra argues, “may occur in only one kingdom and no others,” whereas “common factors may appear in all kingdoms alike.”

The particular causes are
contextual and consist of the twin factors of agricultural abundance and geography.

The common causes, are results abstract ideas that can come to fruition and improve the state of affairs in any nation, constituting the most important causes of the wealth
of nations;

They are “the quantity of industry,” “the quality of the population,” “the
extension of trading operations,” and “the regulations of the sovereign.”

Serra was quite certain that his modelling of the economic sphere included all pertinent causes of wealth, arguing “other causes besides the ones mentioned do not exist, as they are either subordinated
or consequential to the ones mentioned” (39).

The natural causes, while alluded to in the full title of Serra’s work, receive brief coverage, as they were of little relevance to his own context. Serra argues that “the natural class comprises only one situation: when there are mines of gold and silver in a country” (20). Causes of Wealth Accidental Causes - two types

Particular factors, Serra argues, “may occur in only one kingdom and no others,” whereas “common factors may appear in all kingdoms alike.”

Particular:
Agriculture,
geographical locaton

Common:
The quantity of industry (most important)
The quality of the population
The existence of extensive trade
The fortuitous regulations of the sovereign
All work dynamically and in synergetic conjunction. Dynanic relationship between the common factors:
Serra here alludes to the concept that German economists used to refer to as "Strukturzusammenhänge" in
economics—the organic synergy of factors in relations of cumulative causation at the core of
the innovation system approach, i.e. the idea that various independent factors cumulatively
influence each other and the end results organically. Increasing returns
Manufactures, Serra argued, are unique because total costs decrease with increasing volumes of production:
“There can be multiplications in manufactures which lead to a multiplication of profits, something which does not happen in agriculture as one cannot multiply it. Nobody, for example, having a territory upon which only a hundred tomola of wheat can be sown, will be able to have a hundred and fifty sown; but among the manufactures,
it is just the other way, since they may be multiplied not only two-fold but two hundred-fold, and with proportionately less expense.” Division of labourt - synergy effects
To put this statement in a modern language: Serra sees the multiplication of the division of labour in industries where a large market share—in form
of ‘niches’—can be achieved through increasing returns and resulting lower unit costs of production, linking this to a potential for higher profits and higher national welfare. Serra’s distinction between increasing and decreasing return activities was thus implicitly built on the theory of the division of labour as it dates back to Xenophon. To this is added a synergy argument in Serra: the greater the division of labour, the richer the city. The possibility of increasing returns was, throughout the entire mercantilist andCameralist traditions, seen in connection with the increased opportunity for division of
labour in manufactures, and therefore highly activity-specific. scale. The concepts of
production and exchange, for example, intersect in Adam Smith because they both represent
time spent in activities classified as “economic.” While both indeed can be reduced to “time”
at a certain level of abstraction, many important distinctions are lost in the process. The
economic historian Biernacki argues that “an emblematic contradiction between form and
content runs through the Wealth of Nations: the argument makes labour the font of all value,
preparatory to sale, whereas the language of analysis treats the labour activity—production—
as itself a vending transaction” (Biernacki 1995: 252). Indeed, we find Smith declaring that
“labour was the first price, the original purchase of money that was paid for all things. It was
not by gold or silver, but by labour, that all the wealth of the world was originally
purchased.” Biernacki further perceptively argues that Smith equates, or even confuses, “the
original process of production – the creation of a good through the labor activity – with the
socially organized way of acquiring goods through monetary exchange.”
In Smithian economics production and exchange become one through the nexus of
labour; the various investments of time in economic pursuits—in trade or manufacture—
become unified in the overriding concept of labour-time, in the abstract, metric unit of
economic activity. “No wonder Smith’s usage makes no distinction between commerce and
industry. He assimilates the process of production to that of exchange” (Smith 1976: i, 35;
Biernacki 1995: 252-254). Smith’s list of required factors for “putting industry into motion”
are indeed indicative of this: one needs “materials to work upon, tools to work with, and the
wages or recompence for the sake of which the work is done” (Smith 1976: i, 313). Where,
one could ask, is the knowledge, tacit or otherwise, that makes the industrial undertaking
possible? This development continued in the work of David Ricardo [1772-1823], who we all
agree “more than any other single individual set the tone of modern economic theory”
(Arrow 2000: 172). Ricardo indeed argued “the value of a commodity… depends on the
relative quantity of labour which is necessary for its production, and not on the greater or
lesser compensation which is paid for that labour.” The qualitative differences between
goods are thus mere reflections of the qualitative disparity present at their production;
knowledge and innovation lose all meaning in a system where technological progress merely
reduces a good’s exchange value in terms of embodied labour (Biernacki 245-246). With this
23
theory the core importance of Man as inventor and producer almost automatically goes over
board, establishing an economic theory based on barter and trade where the built-in result is a
world of economic harmony and of factor-price equalisation.
If one is to operate on the abstraction level in the works of Smith, Ricardo, and
Samuelson’s trade theory, where production and exchange melt into the elusive concept of
“labour time,” one loses an entire axis of value, namely the measurement of qualitative
difference among economic activities (Reinert 1999). The natural consequence of these
standard assumptions of neoclassical economics is that prices of the factors of production—
capital and labour—will tend to equalize under a system of free trade (Samuelson & Stolper,
1948 & 1949, Samuelson 1953). It can be argued that this theorem is the very foundation of
today’s world economic system, and it has its roots in Adam Smith’s equation of economic
activities. We argue that by going back to seeing the world through the lenses of Antonio
Serra, we can find the reasons why present globalisation produces such different results in
different countries.
The birth of neo-classical economics in the late nineteenth century dealt the theory of
increasing returns The Quality of the population
The “quality of the population,” again a term used by Botero (1590), was the second
most important aspect of Serra’s economic engine; a country would be rich if its people were “by nature industrious, or diligent and prone to inventions, and on the watch for opportunities to apply their industry and build up trade not only in their own country but in others” It should be noted in this context that industry signified diligence and assiduousness. The word only gained its modern meaning in the nineteenth century, when it lost the qualitative dimensions it originally had Following the 1798 publication of Thomas Malthus’ [1766-1834] Principles of
Population) a large population was generally considered a hindrance to development, thoughearlier economic theorists held the opposite view. This, we will argue, was not the result of their analytical ignorance, as the “Malthusian Principle” itself was well-known centuries before Malthus: “Divested of nonessentials,” Schumpeter wrote, “the ‘Malthusian’ Principle of Population sprang fully developed from the brain of Botero in 158910” (Schumpeter 1954: 254-255). The virtus generativa was stronger than the virtus nutritiva, Giovanni Botero argued, and a population would therefore always grow to a limit of subsistence manipulated by negative and positive checks such as moral restraint and pestilence (Botero 1590: 222-
226). Trade
By this
Serra did not mean only skimming profits from long-distance trade, but also the import of raw
materials, to which great value was added through manufacturing, and the subsequent export of the finished product. Export-led growth through importsubstituting
industrialization has indeed been the basis of almost every single successfulindustrialization policy from Solonic Athens to the Asian Tigers, a mandatory passage point of sorts on the road to the free market (Sombart 1902: ii, 55-56; E. Reinert 1999, Kay and Gwynne 2000: 52; Chang 2002). Clusters of innovation
In Serra’s eyes, Venice grew powerful, because she had managed to create a serendipitous cluster of industry, innovation, trade, and people— an effect he very explicitly argued was the result of good governance.

Enforcing each other, these factors together set Venice on a very different trajectory from the one on which Naples found itself. Naples would not be able to
solve her economic problems without creating a productive structure similar to that of Venice. Concluision
The Breve trattato is, in the final analysis, a policy pamphlet seeking to propagate what Serra, echoing the humanist tradition in which he writes, calls the common good. Bernard de Mandeville [1670-1733] Role of the state Unlike the “invisible hand” of Bernard de Mandeville [1670-1733] and Adam Smith, this tradition stressed the importance of the state taking an active role in the establishment of institutions and legislations conducive to economic development How England got rich England’s penetration of the world’s markets in the sixteenth and seventeenth
centuries could never have occurred without the careful superintendence of royal charters
granting certain privileges to entrepreneurs in specific sectors of the economy, but the after-
11 And even an English translation, On the Greatnesse of Cities, published in London in 1607.
30
the-fact nature of Mandeville’s and Smith’s writing enabled them to take a number of
productive institutions for granted Throughout the five hundred years of political support for industries yielding increasing returns, it is noticeable that – with the exception of the first movers Venice and the Dutch Republic – virtually no nation has ever taken the step from poverty to wealth without passing through a temporary stage of nurturing and protecting such increasing return activities.12 Serra seems to have established an ‘iron law of economic development’. This is, however, not reflected today in the policy recommendations of the Washington Consensus. In
terms of economic welfare, the de-industrialization of parts of the Third World in the past decades has been devastating and quite the opposite of what Serra would have recommended
(Reinert 2003 & 2004). Conclusion Throughout the five hundred years of political support for industries yielding increasing returns, it is noticeable that – with the exception of the first movers Venice and the Dutch Republic – virtually no nation has ever taken the step from poverty to wealth without passing through a temporary stage of nurturing and protecting such increasing return activities.12 Serra seems to have established an ‘iron law of economic development’. This is, however, not reflected today in the policy recommendations of the Washington Consensus. In terms of economic welfare, the de-industrialization of parts of the Third World in the past
decades has been devastating and quite the opposite of what Serra would have recommended
(Reinert 2003 & 2004). Adam Smith left out
the synergies, linkages, innovations, and differences between increasing and decreasing returnactivities in the economic system. On the macro level we thus lost the dynamic systemic
effects that today are called a National Innovation System. In the early 1980’s Paul Krugman had grasped the factor increasing Criticism Biography Causes of Wealth
There are, according to Serra, two main categories of factors affecting the economic development of a nation: the natural and the accidental. Details Natural causes
Receive brief coverage in Serra's work.
Serra argues that “the natural class comprises only one situation: when there are mines of gold and silver in a country” Industry
Division of labor. The greater the division of labour, the richer the city
Cumulative causation
Clusters of innovation
increasing returns and resulting lower unit costs of production, linking this to a potential for higher profits and higher national welfare. The Quality of the population
A country would be rich if its people were “by nature industrious, or diligent and prone to inventions, and on the watch for opportunities to apply their industry and build up trade not only in their own country but in others”
It should be noted in this context that industry signified diligence and assiduousness. The word only gained its modern meaning in the nineteenth century, when it lost the qualitative dimensions it originally had The case of Venice Venice had amassed great wealth for centuries bybeing the nexus of world trade.

Serra: “all the commodities which come from Asia into Europepass through Venice, and from there are distributed into other parts; while commodities whichgo from Europe into Asia are likewise shipped from there.”

Naples, however, suffered from an unfavorable location “at the tip of the arm of Italy, where nobody found it convenient to trade” Real vs. Monetary economics Sophisticated Mercantilism approached the problem of increasing national wealth from the standpoint of a state supporting individual initiative, rather than of unilateral state intervention. Unless the sheer size of the industry made it suffer from barriers that were too high for entry by individual actors in the economy—in which case Mercantilism adopted the
approach of modern state capitalism—the state was seen as a guiding force, rather than an actual owner (see, in the tradition of Serra, Costantini 1742: 103-104). Reinhold C. Mueller:

“The single aspect that characterizes Venetian history and historiography is the dominant role of the state in the life of the city and the symbiosis between public and private sectors of the economy, between public and private interests” The state
State determining direction into activity-specific economic activities
Securing the common good
Contrary to Adam Smith and Bernard Mandeville Climate Rage – Naomi Klein, Rolling Stone Magazine

“Justin Lin, chief economist at the World Bank, puts the equation bluntly: "About 75 to 80 percent" of the damages caused by global warming "will be suffered by developing countries, although they only contribute about one-third of greenhouse gases."

"What we need is not something we should be begging for but something that is owed to us, because we are dealing with a crisis not of our making," says Lidy Nacpil, one of the coordinators of Jubilee South, an international organization that has staged demonstrations to promote climate reparations. "Climate debt is not a matter of charity."

nd while developing countries like China and India have also begun to spew large amounts of carbon dioxide, the reasoning goes, they are not equally responsible for the cost of the cleanup, because they have contributed only a small fraction of the 200 years of cumulative pollution that has caused the crisis.

Equally important, the idea is supported by the United Nations Framework Convention on Climate Change — ratified by 192 countries, including the United States. The framework not only asserts that "the largest share of historical and current global emissions of greenhouse gases has originated in developed countries," it clearly states that actions taken to fix the problem should be made "on the basis of equity and in accordance with their common but differentiated responsibilities."


Bolivia cannot fuel economic growth with cheap and dirty energy, as the rich countries did, since that would only add to the climate crisis — yet they cannot afford the heavy upfront costs of switching to renewable energies like wind and solar.
The solution, Navarro argued, is three-fold. Rich countries need to pay the costs associated with adapting to a changing climate, make deep cuts to their own emission levels "to make atmospheric space available" for the developing world, and pay Third World countries to leapfrog over fossil fuels and go straight to cleaner alternatives.

"We cannot and will not give up our rightful claim to a fair share of atmospheric space on the promise that, at some future stage, technology will be provided to us," she said.
Angelica Navarro, the chief climate negotiator for Bolivia

"If we are to curb emissions in the next decade, we need a massive mobilization larger than any in history," Navarro declared at the end of her talk. "We need a Marshall Plan for the Earth. This plan must mobilize financing and technology transfer on scales never seen before. It must get technology onto the ground in every country to ensure we reduce emissions while raising people's quality of life. We have only a decade."


Costs
The World Bank puts the cost that developing countries face from climate change — everything from crops destroyed by drought and floods to malaria spread by mosquito-infested waters — as high as $100 billion a year. And shifting to renewable energy, according to a team of United Nations researchers, will raise the cost far more: to as much as $600 billion a year over the next decade.

Ecuador's center-left president, Rafael Correa, said something very rare for the leader of an oil-exporting nation: He wanted to leave the oil in the ground. But, he argued, wealthy countries should pay Ecuador — where half the population lives in poverty — not to release that carbon into the atmosphere, as "compensation for the damages caused by the out-of-proportion amount of historical and current emissions of greenhouse gases." He didn't ask for the entire amount; just half. And he committed to spending much of the money to move Ecuador to alternative energy sources like solar and geothermal.

Debt vs. Aid and who til distribute
But to ensure that climate reparations are real, advocates insist, they must be independent of the current system of international aid. Climate money cannot simply be diverted from existing aid programs, such as primary education or HIV prevention. What's more, the funds must be provided as grants, not loans, since the last thing developing countries need is more debt. Furthermore, the money should not be administered by the usual suspects like the World Bank and USAID, which too often push pet projects based on Western agendas, but must be controlled by the United Nations climate convention, where developing countries would have a direct say in how the money is spent.

Nomoney no deal
"No money, no deal," is how one of South Africa's top environmental officials put it. "If need be," says Ethiopian Prime Minister Meles Zenawi, speaking on behalf of the African Union, "we are prepared to walk out."


Obama on Climate Debt
In the past, President Obama has recognized the principle on which climate debt rests. "Yes, the developed nations that caused much of the damage to our climate over the last century still have a responsibility to lead," he acknowledged in his September speech at the United Nations. "We have a responsibility to provide the financial and technical assistance needed to help these [developing] nations adapt to the impacts of climate change and pursue low-carbon development."

Yet as Copenhagen draws near, the U.S. negotiating position appears to be to pretend that 200 years of over-emissions never happened. Todd Stern, the chief U.S. climate negotiator, has scoffed at a Chinese and African proposal that developed countries pay as much as $400 billion a year in climate financing as "wildly unrealistic" and "untethered to reality." Shock Doctrine Naomi Klein on Climate Debt Hurricane Catrina
Disaster Capitalism “Shock and Awe are actions that create fears, dangers, and destruction that are incomprehensible to the people at large, specific elements/sectors of the threat society, or the leadership. Nature in the form of tornadoes, hurricanes, earthquakes, floods, uncontrolled fires, famine, and diseases can engender Shock and Awe.”
--"Shock and Awe: Achieving Rapid Dominance", the military doctrine for the U.S. War on Iraq Naomi Klein “only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”
"Capitalism and Freedom", Milton Friedman The Chicago School Economy as Science
“The core of such sacred Chicago teachings was that the economic forces of supply and demand, inflation, and unemployment were like the forces of nature, fixed and unchanging. In the truly free market imagined in Chicago classes and texts, these forces existed in perfect equilibrium, supply communicating with demand the the moon pulls the tides.” Policy advice:
Corporations should be free to sell their products anywhere in the world, and governments should make no effort to protect local industries or local ownership
All prices, including the price of labour should be determined by the market
No minimum wage
Privatize
health care,
Postal service
education, retirement pensions
National parks


One critique: Total laizzes faire exists nowhere but in the minds of people Milton Friedman “Just as ecosystem selfregulate, keeping themselves in balance, the market, left to its own devices, would create just the rights number of products at precisely the right prices, produces by workers at just the right wages to buy those products – an Eden of plentiful employment, boundless creativity and zero inflation.”

The system is never wrong - rather the world is wrong
Siding with the enemy - Marxism The Case of Chile “The Chile Project” 1956 Chicago Boys Salvador Allende 1970,
A democrat who won on program for nationalizing important sectors of the economy. Nixon: “Make the economy scream” ITT (International Telephone and Telegraph Company) – owned 70% of Chile's soon to be nationalized telephone comapany. Purina, Bank Of America Pfizer.
Block loans to Chile
Boycott Chicago Boys: “The Brick”
Privatization
Deregulation
Cuts to social spending Pinochet, September 11th. 1973 – on the way to natural equilibrium
Installed chicago Boys as key people
Opened borders for foreign import
Cut governement spending by 10% (except the military)
Eliminated price controls 1974
Inflation reached 375 % - highest in the world
Bread prices through the roof
Chileans lost their work as as markets were flooded with cheap goods

1975 Friedman: Economic “Shock Treatment” - 25% reduction in public spending The “Chilean Miracle”

1982
Unemployment 30%
Debt of 14 billion dollars
Codelco – only nationalized mining company, delivered 85 % of Chile's eyport revenues.
1988
45% of the population had fallen below the poverty line
The richest 10% of chileans had seen their income increase 83% from “Chile under Chicago School rule was offering a glimpse of the future of the global economy, a pattern that would repeat again and again, from Russia to South Africa to Argentina: an urban bubble of frenetic speculation and dubious accounting fueling superprofits and frantic cosumerism, ringed by the ghostly factories and rotting infrastructure of a development past; roughly hakf the population excluded from the economy altogether; out-of-control corruption and cronyism; decimination of nationally owned small and medium-sized businesses; a huge transfer of wealth from public to private hands, followed by a huge transfer of private debts into public hands.” Thomas Mores (1478 – 1535) "Utopia" from 1516
The role of the King(the State)

”Why do you suppose they made you king in the first place?... Not for your benefit, but for theirs. They meant you to devote your energies to making their lives more comfortable, and protecting them from injustice. So you’re job is to see that they’re all alright, not that you are – just as a shepherd’s job, strictly speaking, is to feed the sheep, not himself.”1 Challenging mainstream economics A battle of Ideas What is a human being? Discovering the human Report on the Subjecy of Manufactures
Invest in insfrastructure
Tariffs and bounties
Sovereign currency
US should go from being af colony producing raw materials to a highly productive economy First Secretary of the treasury Challenging Adam Smith's comparative advantage The American Colonies
Producer of raw materials for the the mother country Begge dele skulle sikres ved målrettede investeringer i industri, infrastruktur, oprettelsen af toldbarrierer, samt en selvstændig møntfod og national bank, således at USA kunne gå fra at være en råvareproducerende koloni til en højproduktiv nation. Wealth of Nations 1776 The nature of economy “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.”
--Wealth of Nations, Adam Smith Free Trade “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.”
--Wealth of Nations, Adam Smith Productive powers:
Let the machines do the work The American System “[I]f the whole globe were united by a union like the twenty four states of north America, free trade would indeed be quite as natural as it now is in the union…this state of things may be very desirable…but…it is not the state of the actual world” ”That, however, under the existing conditions of the world, the result of general free trade would not be a universal republic, but on the contrary, a universal subjection of the less advanced nations to the supremacy of the predominant manufacturing, commercial, and naval power, is a conclusion for which the reasons are very strong and, according to our views, irrefragable.” - The National System of Political Economy fra 1841 beskriver List Friedrich List
1789 – 1846 Infant industries Going from poor to rich
Navigation Acts
Tariffs and Bounties
Protecting commerce and technology
State initiated investments into infrastructure
From the end of the 18th century up until 1880 Great Britain was the dominant force in the world The Case of England Edmund Burke
1729 – 1797 ”[T]hey should send all their products to us raw, and in their first state; and that they should take every thing from us in the last state of manufacture.” The policy Stanley Jevons (1835-1882) ”Unfettered commerce…has made the several quarters of the globe our willing tributaries.” Don't do as the British tell you, do as they did. ”Here was the strongest, most enduring and, for that matter, most nearly irrefutable of arguments against Adam Smith and his followers and their case for free trade: they were not affirming a universal truth; they were simply urging what was indubitably advantageous for the special case of Britain.” ”One looks to underworking the Hindoo, and sinking the rest of the world to his level; the other to raising the standard of man throughout the world to our level. One looks to pauperism, ignorance, depopulation, and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilisation. One looks toward universal war; the other to universal peace. One is the English System; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing the condition of man throughout the world.” Henry C. Carey
1793 – 1879) Comparative advantage in being poor
- Erik Reinert
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