The Luddites Among Us
by Gary North: Liberty
Is Making the World Richer. You're Included.
ideas that are both logically wrong and unsupported by historical
facts, and which have been known to be wrong for 250 years, are
still widely held. This annoys economists.
There is something
that seems inherent in men's approach to thinking about their own
wealth that persuades them that what they have seen, over and over,
in nation after nation, either did not happen, or, if it clearly
did happen, will not continue.
One of these
ideas is that sales taxes on imported goods increase the wealth
of most people in society. This is the doctrine that tariffs
and quotas imposed by the government somehow make people richer.
This error was refuted definitively by one of the greatest philosophers
of all time, David Hume, in 1752. About 25 years later, it was refuted
in detail by Adam Smith, David Hume's friend, in his classic book,
Wealth of Nations. Nevertheless, despite almost universal
agreement among economists, and despite repeated political successes
in lowering tariffs and quotas, which have led to increasing prosperity
everywhere, there is still a hard core of anti-economics thinking
that says that the federal government but never state and
local governments needs to increase sales taxes on imported
goods, or else we will all be made poor.
I have written
many times about this over the last 45 years, and I intend to write
a lot more, but I have no illusion that the anti-economists among
us will never figure out that national sales taxes on imports do
not make us richer. Some people simply do not have the intellectual
capability of following a line of economic reasoning. This includes
people who believe that sales taxes on imported goods make most
There is another
error, comparable to the error of the pro-sales tax non-economists,
which is also widely held. This is the belief that machinery makes
workers poorer. It is usually described as the Luddite philosophy.
A man named Ned Ludd (or Lud) supposedly broke knitting machines
in a fit of rage in 1779. In 1811, an article on Ludd was published
in a newspaper. When people then began destroying machinery, they
were called Luddites.
Who were the
attackers? They were people who had been employed as relatively
high paid producers of goods in narrow markets that catered to better-off
clients. They found that they had fewer customers when other producers
began to use machinery to mass produce these goods, thereby increasing
the supply of goods. This forced down prices. Those guild members
who had for centuries used political power in urban areas to gain
a monopoly in specific markets found that price competition from
these new goods was reducing their income. In response, they destroyed
machinery. In other words, they used violence against property owners
in order to maintain their monopoly. Before, they used political
power to achieve this.
"saboteur" comes from the French word for shoe, "sabot." Workers
threw shoes into machinery in order to destroy the machinery, and
thereby reduce the output of highly specific goods. This was seen
as destructive by most people, but it clearly was a short-term benefit
to those who were facing competition from the machines. It was one
more case of violence against property owners.
believe today that such violence is wrong morally, and they also
believe that it is wrong economically. This is an advantage we have
today. There are large numbers of people who have begun to understand
a basic economic principle, namely, that whatever increases the
supply of goods, and which is also profitable to the person increasing
the supply of goods, is a good thing for most members of society.
is, the philosophy of the Luddites is still with us. It specifically
has to do with the criticism of robotics. We still see people who
have little economic understanding of the nature of free markets
and their relationship to economic prosperity. These people are
hostile to the use of robots in all areas of production. Well, this
is not quite correct. They accept robotics in traditional lines
of manufacturing, which have used robots for 30 or 40 years. In
other words, they become traditionalists. The good old days were
good, meaning the good old days 30 or 40 years ago. Those days were
much better than the days of hundred years ago or 200 years ago.
Yet the increase
in productivity which got the world to the good old days of 40 years
ago was based on the adoption of techniques of mass production that
we today would call robotics. It was the substitution of machinery,
which in turn rested on new supplies of energy, which enabled the
whole world to get richer. Think of the early inventions of the
19th century. Think of the railroad. Think of the grain reaper.
Think of the sewing machine. All of these substituted equipment
for manual dexterity. John Henry lost the competition to the steam
driver, and the world was better off.
No matter how
many stories come to us about the increased economic lifestyle that
the world enjoys because of increased use of energy and increased
use of machinery, the Luddite mentality still is with us. We are
told that automation is going to make us poorer. We have been told
this for 200 years.
in our lifestyle are based on an increased quantity of goods and
services. This has made possible by automation.
There is a
fundamental rule of economics which should not be ignored: anything
that can be done by a machine profitably should be
done by a machine. Why is this true? Because human labor is
by far the most versatile and mobile of all capital. People can
learn new ways of serving customers. Old dogs really can learn new
tricks. But, in order to get them to learn new tricks, they need
to face reality, namely, that whatever they did before to earn a
living can be done better and cheaper by machine. Old dogs can learn
new tricks, but necessity is the mother of invention. Old dogs prefer
doing old tricks. They prefer high income for doing their old tricks.
But economic progress does not let us continue to make high income
from old tricks whenever there are new tools available that will
enable newcomers to do the same tricks, and do them even better,
at a lower price.
The way the
West got rich after 1800 was through entrepreneurship, creativity,
lower cost energy, and better machines. We got rich because we were
able to harness the productivity of nature, in the form of energy,
and by means of specialized equipment, which could be substituted
by the valuable labor of human beings.
learned to do new tricks. They learned how to serve customers better,
because a mindless machine that was highly specialized, and which
could do nothing else except a limited routine, was substituted
for human labor. Customers benefitted. The fact that specialized
laborers who had been replaced had to find new ways to serve different
customers was the price of the rising wealth of millions of customers.
always comes on behalf of the displaced worker, whose services can
no longer compete in a free market. He comes in the name of the
displaced worker, as if the needs of the displaced worker have some
kind of moral authority that exceeds the desires of customers who
are looking for better deals. It assumes that the free market operates
for the benefit of the producer, rather than for the benefit of
This is the
logic of the guild. It is the logic of a person who can no longer
compete with the output of machinery that can run day and night
profitably, with only occasional shutdowns to make repairs. Any
time it is possible to substitute a machine for a human being, and
to do this profitably from the point of view of the investor, it
means that customers are being better served by the machine. Who
says? Customers. They buy the output of the machines.
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North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 31-volume series, An
Economic Commentary on the Bible.
2013 Gary North
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