How Empires Fall

Globalization is not new, and neither is its repercussions.

A little over a hundred years ago England stood at the center of the first truly globalized economy.  The British navy and the East India Company had conquered nearly a fifth of the world’s land mass, and Queen Victoria ruled over roughly a quarter of the world’s population.  Raw materials and raw wealth flowed into England from all over the world, and at any time somewhere in the world backs were bent in sweatshops and fields laboring in England’s behalf.  It was truly said that “The sun never set of the British Empire.”  

Such great empires require complex organizations, and it wasn’t enough to send out agents from England.  Local bureaucrats and managers had to be trained to read and write in English.  As the bureaucratic infrastructure became increasingly complex new center of power emerged in the colonies.  A new middle class appeared, raised to think of themselves as citizens of the English Empire.  In time, they began to wonder why they should not also share in the rights of Englishmen.  Pressures for self-rule became protests for independence as local leaders began to emerge in the colonies.

At the same time similar questions were arising at home.  Increasingly the wealth of the empire was flowing into the pockets of investors, insurers and merchants while nearly a quarter of the English population lived at or below the poverty line.  With the industrial revolution many workers lost their jobs to mechanization, and major industries like mining and ship building saw periodic cycles of unemployment.  While nineteenth century reforms gave householders and farmers the right to vote many of the poor were still excluded, as were all women, and an arcane electoral system resulted in unequal representation.

Through the end of the 19th century the two main political parties traded the government back and forth with relatively little disagreement over foreign policy or free trade.  Then in 1901 disagreements over the Boer War brought the conservatives back into power on a wave of nationalist sentiment, but the war proved expensive.  It soon became clear that Britain could no longer act unilaterally, but long decades as the world’s only superpower had left British politicians ill prepared to negotiate with allies.  As news spread of Boer women and children dying in unsanitary “concentration camps” the public turned against the war.  The conservative defended their actions as military necessities, but the elections in 1905 saw a liberal victory.

The start of the twentieth century saw the rise of progressive issues.  Women demanded the right to vote, and working parents demanded better education for their children.  The poor demanded better living conditions, prison reform and reform of the poor laws, and the public demanded higher taxes on the rich and tariffs on imports.  The liberal party introduced national insurance and unemployment support, but the party began to fracture over its embrace of free trade and its willingness to compromise with conservatives.  Radical progressives formed a socialist “labor” party, and by the 1920s they had replaced the old liberals.  

Faced with declining influence overseas and an insurgent working class at home, those in power struggled to maintain their hold.  Politics became increasingly volatile as old answers no longer met the new realities.  This is how empires fall—not because those at the top become soft and weak but because those who have labored to build the foundations become lean and hungry.  To resist their demands, or to capitalize on them, only widens the cracks in the social infrastructure.

From the Bay to the Corner

Before the Pilgrims arrived, the people living along the shores of Massachusetts Bay were semi-nomadic.  They moved with the season from place to place where food was most abundant.  In the summer they might pick berries and in the autumn hunt for deer or game bird.  Whole families would travel together along the same circuit every year.  Every autumn they would meet the same neighbors at the hunting grounds, and in the winter each family would go their separate way.  Then they would join the same neighbors they had known the previous winter fishing along the rivers or bays.

In this way families would maintain networks of friends who they could turn to in times of need.  If one autumn the hunting was poor, then they could send word to the families they fished with in the winter.  Each family had incentive to help one another because they knew that next year they might need help in return.  The best defense against a precarious food supply was a reputation as a reliable neighbor—a good person to know when you need a friend.

This was something the English colonists never understood.  They also built strong communities, but centuries of agriculture had taught them a different relationship with the land.  They built farms, homes and cottage industries—all of which meant staying in one place, which in turn meant they could store food for the winter and accumulate material goods.  They saw that their lifestyle meant physical comfort and a reliable food supply, and they couldn’t understand why the native people wouldn’t just settle down.

The English couldn’t understand that the native people were dependent on a network of alliances that could only be maintained through constant movement—that they were asking the natives to abandon the only security they had known.  If one farmer is struck by a bad harvest, then the farmer’s neighbors will likely be struck as well.  Who could they turn to then?  The English had more material comforts, but they couldn’t see the assumptions implicit in their own way of life.  Their emphasis on self-reliance and independence stood in contrast to the native people’s interdependence.  They thought the natives were just lazy and lacked ambition.  

Roughly three hundred years later this same misunderstanding arose again as the descendants of the English colonists encountered new waves of immigrants from Europe.  At the end of the Great Depression, William Whyte described the difference between “college boys” and “corner boys” in Boston’s North End:

“The college boys fit in with an economy of saving and investment.  The corner boys fit in with a spending economy.”  A college boy must save his money to pay for education; “In order to participate in group activities, the corner boy must share his money with others.  If he has money and his friend does not, he is expected to do the pending for both of them.”

Like the colonist storing food for the winter, the college boy saves his money to achieve independence.  The corner boy spends his money to build a network that he can rely on in times of need.  This distinction can affect all aspects of their social lives.  For example, the corner boys were criticized for gambling what little money they had despite the low chance of winning.  However, there’s little incentive to save money if one is expected to share it, but a sudden windfall, however small, creates an opportunity for public displays of generosity.

Of course, this does not mean that Depression-era Italian immigrants were a hunter-gatherer culture.  The strategy of interdependence has been used throughout history and around the world to deal with periods of unreliable resources.  Rather, the feature that has remained consistent over all this time has been the mutual misunderstanding.  The corner boys saw the college boys as selfish and unreliable while the corner boys were seen as lazy and impractical.  Neither group fully recognized their own assumptions, so they couldn’t understand each other’s way of life.

Public Good and Private Gain

The idea that property is best protected through private ownership is one of the central pillars of capitalism.  As Adam Smith explained: 

"The proprietor of land is interested, for the sake of his own revenue, to keep his estate in as good condition as he can, by building and repairing his tenants’ houses, by making and maintaining the necessary drains and enclosures, and all those other expensive improvements which it belongs to the land-lord to make and maintain."

                 The same logic applies to the owner of a ship, a factory or any other property that can be used to make money.  The property owner will only be motivated to make repairs if he or she has a financial interest in maintaining the property in working order.  According to this notion, no one would invest in maintaining communal property unless they could expect some sort of return.  Rather each individual would try to extract as much benefit as possible from a communal resource with the minimum investment—thus depleting the resource.

Even if we accept this rather bleak view of human nature, this notion fails to consider a number of factors.  For example, it may have worked well in the late eighteenth century when most business owners managed their properties themselves and often passed their businesses down in the same families for generations.  However, most major companies today are owned by investors who may not be aware of what corporations they own.  Since shares of stock can be bought and sold in a single day, they have no long-term commitment to the corporations.  Their only interest is in obtaining the maximum short-term profit possible even at the expense of the long-term health of the company.

This was the fate of the Pacific Lumber Company.  In 1931, Pacific Lumber adopted a policy of selectively cutting trees in order to maintain a sustainable yield based on a hundred year plan.  It was exactly the sort of enlightened maintenance of a profit-making property that would have had Adam Smith grinning from ear to ear.  However, it didn’t last.

Source: CA Dept. of Forestry & Fire

Protection; Pacific Lumber Co.

In 1985 Pacific Lumber was taken over by Maxxam, Inc. in a highly leveraged buyout that left Maxxam heavily in debt.  In order to pay its investor, Maxxam began to clear cut the forest while reducing costs by laying off workers and shipping more raw materials rather than finished goods.  Ironically, in defiance of Adam Smith’s prediction, 60,000 acres of the forest were saved by environmentalist and the Bureau of Land Management who purchased the land and converted it into a national park, thereby removing it from commercial use.  The land was preserved by converting it to communal property.

As Pacific Lumber continued to practice clear cutting, regulations were enacted to limit its destruction of the forest.  People with no financial interest in the forest saw more value in preserving the property than its owners did.  Pacific Lumber was prevented from consuming all of its resources, but it was too late.  In 2007 the company filed for bankruptcy.

The town of Scotia, California was a company town, wholly owned by Pacific Lumber Company, and all of the residents were company employees or their dependents.  A town that had survived an earthquake, a fire and the Great Depression was reduced to half its former size, and the workers who were laid off were forced to leave the area in order to find new jobs.  They lost their homes along with their incomes.

A company that could have lasted a century was brought down in fewer than twenty-five years, families were left unemployed and homeless and thousands of acres of redwood forest were reduced to barren fields of shrubs and stumps.