Praxis

April 6, 2008

Hume on the Balance of Trade

Filed under: Uncategorized — duncan @ 7:32 pm

Frustrated and embarrassed by my apparent inability to understand even the basics of economics (but it all connects up, and every piece of polished marble floor, offered as solid ground, is a trapdoor into a whole other area of the discipline, the floor of which is in turn all trapdoors. I feel like Indiana Jones, only without the charm, or the unreconstructed colonialism) – frustrated and embarrassed, let me spew out a few thoughts. I’ve been reading Hume on the balance of trade.

“Suppose four-fifths of all the money in GREAT BRITAIN to be annihilated in one night… what would be the consequences? Must not the price of all labour and commodities sink in proportion…? What nation could then dispute with us in any foreign market, or pretend to navigate or to sell manufactures at the same price, which to us would afford sufficient profit? In how little time, therefore, must this bring back the money which we had lost, and raise us to the level of all the neighbouring nations? Where, after we have owned, we immediately lose the advantage of the cheapness of labour and commodities; and the farther flowing in of money is stopped by our fulness and repletion. [kudos for 'fulness and repletion'; this phrase should be used more as a technical term in economics]

Again, suppose that all the money of GREAT BRITAIN were multiplied fivefold in a night, must not the contrary effect follow? Must not all labour and commodities rise to such an exorbitant height, that no neighbouring nations could afford to buy from us; while their commodities, on the other hand, become comparatively so cheap, that, in spite of all the laws which could be formed, they would run in upon us, and our money flow out; till we fall to a level with foreigners, and lose that great superiority of riches, which had laid us under such disadvantages?

Now, it is evident, that the same causes, which would correct these exorbitant inequalities, were they to happen miraculously, must prevent their happening in the common course of nature, and must for ever, in all neighbouring nations, preserve money nearly proportional to the art and industry of each nation.”

The logic of Hume’s argument, I think, would imply that the world economy moves towards an exact, or almost exact, equivalence of value. A bagel in Connecticut will eventually be worth a bagel in Baghdad, all else being equal. The argument itself seems reasonably convincing, from where I’m standing. But since there are in fact large inequalities of value across the world (equivalent goods are not exchangeable for equivalent or nearly equivalent amounts of money worldwide; not nearly), and since there doesn’t seem to be much of a movement towards the equilibrium of value-equivalence either, there must be something wrong or missing here, one would think.

I don’t understand; I know nothing. But -

First thing: Hume seems to assume a single currency; or the equivalent of a single currency – fixed exchange rates. That’s to say, he ignores monetary sovereignty, which is surely an important, though I guess perhaps not a necessary, feature of the system of distinct nation-states that his consideration of the problem in terms of national wealth presupposes.

Second thing: Hume’s argument would seem to imply that there are equivalent and opposite movements of commodities and money in the world economy. At one level, this must be true. But I would be inclined to believe – based on, like, New Statesman articles or something – that historically, by and large, both money and commodities have tended to move in the same direction: from the weak to the strong; from the militarily powerless to the militarily powerful; from the third world to the first – and that this is part of the hegemony that has made global free trade possible. I’ll try to find some books that will tell me about this without drowning me in rhetoric (like the rhetoric, but want to understand). But I would imagine one could argue that the structure of international debt, for instance, might be at least in part a way of draining developing economies of money, which in turn cheapens those economies’ products on the world market, which in turn allows the purchase, or appropriation, of those commodities for a steal. (Is this true? I don’t know! I know nothing!!) In short, and to put things more generally: the movement of money and of commodities need not cancel each other out, as Hume implies, in the movement towards value-equivalence. They might, on the contrary, supplement each other, as the movement of money from country A to country B (or from person A to person B) enables the movement of commodities in the same direction, which was the purpose of the original money transfer.

The point, I guess, is that money is not in the first place a means of exchange or of valuation, but is either itself a commodity, which obeys the same laws of appropriation as any other commodity, or is alternatively a kind of contract – and contracts, as we know, always favour the most powerful party. Or both – a commodity that is a contract; the contract as commodity.

I’ll stress again how little I know and understand. So let me end by point you to a post that does know what it’s talking about – Limited Inc’s latest post links up with some of what N. Pepperell was saying the other day about Derrida’s take on Marx – specifically Marx’s use of the metaphor of the head. Sample:

“Marx was a man who wanted to seize society and make it stand on its feet – on its own two feet – and in that ambition he was serious – an avatar of seriousness. But since that seriousness was realized in images of standing on one’s head and inversion, his seriousness would slip away into ilinx as he analyzed the upside down society, as he corrected the reigning ideology, as, indeed, he spoke for revolution. For even though revolution was on the side of play, was the realization of the society of seriousness, it was entangled from beginning to end in ilinx – the irrepressible euphoria of the revolutionary act.”

All this post written at speed; apologies if nothing useful said.

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4 Comments »

  1. I don’t know about commodities, money, Hume, appropriation, or the balance of trade. But do I feel anxious about the metaphor of flow. Presumably there is nothing natural or given either about flow or the possibility thereof. Flow is, to to speak, something that is done or not. A set of practices and arrangements. If whatever it is that flows is somewhat similar before and after (whatever similar might mean), then this is an astonishing achievement. To put it differently, I guess that part of the problem has to do with the materialities of flow. The world is not (I guess) well understood as a set of pipes that is already in place. Bruno Latour makes the point in a somewhat more poetic way:

    ‘We say that the laws of Newton may be found in Gabon and that this is quite remarkable since that is a long way from England. But I have seen Lepetit camemberts in the supermarkets of California. This is also quite remarkable, since Lisieux is a long way from Los Angeles. Either there are two miracles that have to be admired together in the same way, or there are none.’ ‘Irreductions, page 227)

    Comment by Heterogeneities — April 8, 2008 @ 5:05 pm

  2. Hi there – great to have you commenting!

    Re: the materialities of flow – absolutely. Hume uses the analogy still more explicitly in the passage that immediately follows the one I quote. “All water, wherever it communicates, remains always at a level. Ask naturalists the reason; they tell you, that, were it to be raised in any one place, the superior gravity of that part not being balanced, must depress it, till it meet a counterpoise; and that the same cause, which redresses the inequality when it happens, must for ever prevent it, without some violent external operation.” Even on its own terms, this analogy is highly troublesome – because, of course the “violent external operation” that Hume excludes from the natural law of flow he is attempting to describe, is itself a part of the naturalists’ ‘nature’. If water’s movement can be described in terms of natural laws, then the very imbalance that nature rectifies through the influence of gravity on water’s movement is already a product of natural laws. Yet Hume – and many other economists – use the metaphor of flow to attempt to exclude the disequilibrium, which the law of flow corrects, from their concept of nature. Only part of nature is natural – and this is, perhaps, a basic principle in the creation of the concept of nature.

    Keynes, in a famous passage, uses this same metaphoric field to attack economists’ emphasis on long run equilibrium. “[T]his long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.” So Hume, and economists like him, avoid confronting the real ‘laws’ behind the movements of money and commodities by only deploying part of the analogy opened up by the metaphor of water.

    It would perhaps be interesting to connect all this to modern environmental themes: the fact that one of the principal effects of capitalist economic development looks likely to be the wholesale disruption of the ‘natural’ laws of our planet’s water’s flow. An economic system that receives part of its justification from the metaphor of water’s self-correcting level is in part exposed as flawed and calamitous by the fact that it is causing massive non-correcting non-reversible changes in water levels and water supply.

    But I think your point is to challenge the concept of ‘nature’ at a deeper level. I haven’t read Irreductions, and so I really shouldn’t comment. But I worry a little that analogies like the one Latour uses are in danger of taking things too far in the other direction – attempting to abolish the ‘natural’ and ‘artificial’ distinction in a way that can draw our attention away from the real effects produced by this distinction, and the real meanings associated with it. Still, I shouldn’t say any more until I’ve done my reading. (And of course it goes without saying that this doesn’t imply any kind of endorsement of the ‘naturalists’ of the bloody ‘science wars’, who can walk the plank, IMO, and spend the rest of their water-logged life in Davy Jones’s locker.) But enough.

    Take care.

    Comment by praxisblog — April 8, 2008 @ 6:22 pm

  3. This is very nice:

    Only part of nature is natural – and this is, perhaps, a basic principle in the creation of the concept of nature.

    I would add: and only part of society is “social” – and that such things, thought together, begin to suggest interesting possibilities for thinking how such sensibilities are enacted and become plausible…

    Your hesitation about Latour sounds a little like the sort of hesitation I have, when I worry that approaches are attempting an “abstract negation” – trying to abolish a distinction – in effect, to “wish it away” – when the distinction has an effect, as you point out above – but also when it might be productive to ask how a distinction is an effect – how a distinction is being generated as meaningful and intuitively plausible, such that it becomes tempting or attractive for perception and thought. Many critiques are perhaps too quick to dismiss their opposition as pure ideation – if it were that simple, my suspicion is that critique would be much easier… Tacitly, such forms of critique actually naturalise their own positions – by not problematising why they believe they are suddenly able to “see through” a distinction that used to seem plausible. Strangely, critique very often replicates what it is criticising, in new vocabulary, precisely by making this step. But I’m being too abbreviated here – apologies – laptop battery dying…

    Comment by N Pepperell — April 9, 2008 @ 4:36 am

  4. “only part of society is ‘social'”. Yes. And I’m probably being profoundly unfair to Latour. From what I understand of ANT (not nearly enough), part of the point is to emphasise that the distinction between the social and the non-social (e.g. between a community and the machines involved in that community’s practices) is already a product of those practices – and thus the social is itself ‘produced’, and cannot provide the as it were ontological foundation that some sociology (and plenty of philosophy: e.g. a certain strand of Wittgensteinianism) would like it to. Not just social existence determining consciousness, but social existence itself already determined or enacted by practices we could call social, but that we could also understand in other ways.

    Ach! too much to think & do. Enough for now.

    Comment by praxisblog — April 9, 2008 @ 6:07 pm


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