‘Commerce and Coalitions’ III — The Nature of Capital- and Land-Rich, Labour-Poor societies

In my first post reviewing Ron Rogowski’s Commerce and Coalitions, I said I would discuss the numerous issues raised by capital-rich, land-rich and labour-poor economies. Since the book was originally published, the effect of these problems has undoubtedly been multiplied: many of the problematic political and social trends since the 1973 oil crisis can easily be understood in terms of the expected political behaviour of economies rich in capital and land, but poor in labour, under a condition of rapidly expanding trade. This behaviour is, at first sight, contradictory when compared to other economies, but understandable in terms of their basic endowments and structures.

In my review of Commerce and Coalitions, and my communication with Rogowski via email, I noted the absence of capital- and land-rich, labour-poor regions for long periods (in fact for millennia), and that no explanation was given in the book, as if this extremely prolonged absence was accidental and inexplicable.

Why Were Capital- and Land-Rich, Labour-Poor Economies Nonexistent for So Long?

The most significant thing about societies abundant in capital and land but poor in labour is that for almost nineteen centuries at a minimum they were completely nonexistent. Although Rogowski notes that one area in Classical Greece — Miletus, comprising present-day Western Anatolia — was rich in both capital and land, his studies of both the contracting trade of the declining Roman Empire and the expanding trade of the long sixteenth century reveal no region abundant in both capital and land but poor in labour. Rogowski is definite about the lack of capital- and land-rich regions not merely during the long sixteenth century, but until the beginning of the twentieth century. His analysis of the declining Roman Empire is less conclusive but provides no evidence for any region rich in both capital and land.

Rogowski himself seems to have assumed this as coincidence, but given its persistence for two millennia, coincidence seems improbable. My initial reaction was that simultaneously capital- and land-rich economies were the product of lithophile metallurgy, for their emergence at the beginning of the twentieth century coincides therewith; however, upon rereading and noting the case of Miletus, I realised that this is, minimally, simplistic. A re-write of our question would ask why capital was never accumulated within land-rich regions? Evidence does suggest that there may exist unique difficulties accumulating capital in a land-rich region during expanding trade. Because labour, when scarcest, can normally be controlled via methods like slavery, serfdom, niẓām al-kafāla or mass incarceration, if capital be scarce there usually exists disincentive to replace labour with capital in land-rich economies.  Evsey Domar in his 1970 “The Causes of Slavery: A Hypothesis”, argues that owners of labour in land-rich economies gain their wealth from labour, and ownership of land is not so important. Consistent with this, Rogowski implicitly argued that land-rich Russia accumulated labour — not capital — during and after the long sixteenth century, and that this ultimately created an anti-capitalist, anti-Tsar coalition which made the Bolshevik Revolution.

Capital is inherently less powerless than slave or serf labour, while its preferences do not ipso facto coincide with the landed elites’. Contrariwise, where labour is abundant and gains (potential) power via increased trade, the scarce factors of capital and land possess incentive to replace militant labour with capital, thus accumulating the latter.

That land-rich economies began to seriously accumulate capital only via tariffs in North America, Australia and New Zealand in the nineteenth century, and Latin America in the middle twentieth century, supports the hypothesis that expansion of capital is difficult in land-rich economies during rising trade. In the Gulf States, the fact that oil was owned by the monarchs from the beginning of extraction and is extremely capital-intensive, meant that the conflicts noted above were completely bypassed. Possibly critical was abolition of slavery or serfdom, which weakened disincentives to replace labour by capital, and also accompanied capital accumulation in the Gulf States. (The ruling classes, as noted earlier, were always able to reorganise labour control.) These arguments are not conclusive, for most land-rich economies without slavery or serfdom still have never accumulated significant capital, while earlier changes to labour or trade structures were not accompanied thereby.

Where The Powerful Are The Rebellious

The counterintuitive, but critical, feature of an economy rich in capital and land, but poor in labour, is that under expanding trade, it is the powerful who rebel. This is because owners of capital and land can then use their ownership of agricultural products, minerals and capital-intensive manufactures to gain economic power in the world market. “Rebellion of the powerful” was noted in American politics as early as Kevin P. Phillips’ 1969 The Emerging Republican Majority, which argued that Richard Nixon’s 1968 election victory was produced by a rebellion by rural and suburban white America against government-enforced civil rights for blacks. Phillips ignored the role of America’s capitalist class in producing GOP dominance at a presidential level from 1968, while his Obama-era preface ignored the 1994 Republican Revolution entirely. Nonetheless, Phillips does demonstrate how American politics has been dominated by rebellions of the powerful — Southern, Plains and Mountain landowners, and since the 1970s, capitalists. With each new generation of Republicans the demands of richest one percent, even the richest 0.01 percent, for elimination of potential balances of power become ever-more extreme. Current GOP ideology originated from Murray Newton Rothbard and James McGill Buchanan. During the 1960s and 1970s these two, in exact opposition to Marx, saw capitalists as “makers” and the majority as “takers”. Their de facto argument was:

1. the only legitimate state was a privately owned state that gained all income via earning money
• this method is primarily used today by the Gulf oil monarchies
• its impossibility in resource-impoverished Europe and East Asia — where marketable natural resources have been destroyed by glaciation and orogeny — undoubtedly played a key role in those regions’ political development
2. taxation was, ipso facto, theft from the “makers”
3. public debt (following the classification of states on page 18 of ‘The Politics of the Invisible: Offshore Finance and State Power’) was also ipso facto theft from the makers because it devalued their saved wealth

Rebellion of the powerful can also be seen in al-Qa^cida and other Muslim terrorists substantially supported by Gulf royalty, who similarly monopolise local gains from increasing trade. The goal of these terrorists, like the contemporary Republican Party, is eliminating all potential balances of power via either:

1. legitimising absolute monarchy as divinely ordained (until Rerum Novarum orthodox Christianity held similar views) and making capitalists part of the ruling families
2. declaring that God’s laws are divine and cannot be challenged by the masses and a theocracy or caliphate as the only legitimate government

One can detect similar attitudes in Vladimir Putin, and also in the Palmer United Party, and even John Howard in Australia. Under expanding trade, the wealth of the capital–land coalition, as noted by Martin Gilens and Benjamin Page in Affluence and Influence: Economic Inequality and Political Power in America and Thomas Paul Bonfiglio in The Psychopathology of American Capitalism, makes labour-based political organisations financially powerless. Labour within the public sphere — and in the Gulf States and substantially the US labour stands entirely absent therefrom — becomes extremely timid, focusing merely upon limiting further transfers of wealth to the rich, or, as we shall see, colonising external labour into a hierarchically split market.

Split Labour Markets and “Labour Imperialism”

In the middle 1970s, University of California Riverside professor of Sociology and Ethnic Studies Edna Bonacich argued in ‘Advanced Capitalism and Black/White Race Relations in the United States: A Split Labor Market Interpretation’, and ‘Abolition, the Extension of Slavery, and the Position of Free Blacks: A Study of Split Labor Markets in the United States, 1830-1863’ that the United States has been always characterised by a “split labour market” based upon wage differentials between blacks and whites and formal or informal rules to hire blacks last and fire them first. This is an extremely efficient means for controlling scarce labour because it pits nonelites against each other. Under expanding trade the scarcity of labour means labour-intensive tradable industries are moved to labour-rich regions and nonelites work only in nontradable industries. Jacobin noted in November 2019 that nontradable industries possess very limited power to produce class solidarity. This would be multiply so when capital neither loses from trade nor needs compromises with labour.

Split labour markets are also characteristics of the Gulf States, where the majority — in Qaṭar as much as 98 percent — of private sector work is done by expatriates, mostly from the labour-rich Levant and South Asia, where their remittances (despite the extreme exploitation of niẓām al-kafāla) are frequently the largest single source of domestic revenue. These workers have no bargaining power because:

1. they cannot obtain citizenship:
1. de jure for non-Muslims in at least the majority of GCC states
2. de facto for almost all non-Arab Muslims and the majority of Arab Muslims
2. they are forbidden from forming organisations to represent their interests
3. they can be fired at will by citizen employers
4. they can never own capital and usually cannot own land
   

The effect of remittance dependence is undoubtedly profound. It blocks workers in countries like the Levant, Pakistan and substantially tropical Asia from gaining via expanding trade in labour-intensive industries. Instead, workers sacrifice all political rights both at home and abroad for a restricted economic gain. Politically, in fact, workers lose both at home and in their new abodes. De facto Gulf citizen control over workers from backward, labour-rich countries means that conservative authoritarian regimes gain unchallenged power. Their nations’ scarcity of capital and resources means these authoritarian rulers could not challenge the Gulf rulers even if they wished to — and their risk-averse nature precludes them so wishing. This system constitutes labour imperialism: the Gulf States control neighbouring labour-rich nations via remittances and niẓām al-kafāla to ensure an adequate labour supply at low cost. Similar labour imperialist relationships, although less rigid, also exist between:

1. the United States and Central America plus the non-Stalinist Caribbean
2. Australia and noncontinental Oceania
3. Russia and Kazakhstan with the labor-supply nations of Tajikistan and the Caucasus

These relationships undoubtedly blockade necessary challenges to the international power of the United States, Australia and the GCC nations, especially over the critical issue of climate change. Because the workers of the labour-rich nations are not engaging in tradable activities, they cannot generate solidarity against their imperialist oppressors. Free trade serves to intensify the dependence of the most oppressed and labour-rich nations upon the new capital- and land-rich imperialist powers. It can even benefit the public sectors of the imperialist powers whilst weakening those of oppressed nations.

Misconceptions from Absence

There are certain popular theories — even amongst scholars — which may be unconsciously based upon situations where societies abundant in capital and land, but poor in labour, were nonexistent or almost so.

1. Development Produces Democratisation

The first theorem that shows a lack of understanding of societies rich in capital and land is that a developed society will always be at least partially democratic, stated by such writers as Robert Dahl and James A. Robinson. This assumption is, upon analysis, clearly based on the assumption that “developed” societies are labour-rich, which was consistently true between the birth of Christ and the end of the nineteenth century. Under this scenario, workers gained alongside capital in the most developed and powerful nations through a democratisation based upon challenges to the landowning class. Due to their opposed positions on trade, capitalists in advanced nations could not consistently ally with landowners to defeat the demands of labour for democracy. Even in nations rich in land but poor in capital and labour, the inability of capital and land to ally strongly meant that democratisation was frequently possible.

When, however, capital has benefitted from rising access to trade and labour has not, capital will seek to expand trade to increase its gains and labour’s losses by:

1. colonising internal and external labour sources over which capital and land have unlimited control
2. expanding the power of capital sufficiently to disenfranchise labour either de jure or de facto
3. privatising the functions of government so that the actual workers have no say in how they are carried out
   

Similarly, the number of individuals, in the words of Bruce Bueno de Mesquita and George W. Downs

“with sufficient time, education, and money to get involved in politics”

will actually decrease as the economy grows. Economic growth becomes monopolised by a tinier and tinier minority while the majority possess less and less free time for politics as ruling elites makes more and more demands on them as workers, and the money and resources required to challenge rulers multiplies. Thus, a highly developed land-rich nation is likely to become less and less democratic as it accumulates capital. Labour — the sine qua non for democratisation — becomes totally powerless. This can be see through the history of voter turnout in the United States:

1. high turnout of eligible voters before capital became abundant
2. rapidly decreasing turnout amongst the lower classes as the coalition of capital and land made voting more difficult after about 1900
3. moderate increases in turnout between the New Deal and the 1973 oil crisis
4. falling turnout with mass incarceration and increasing disfranchisement since the middle 1970s
   

2. Isolation Produces Social Reaction

Closely related to (1) immediately above is the idea that an isolated society is necessarily backward. Whilst this point is much hard to establish than the first, there is enough evidence to question this assumption as reflecting the absence of capital- and land-rich societies during such periods as the declining Roman Empire. Although Rogowski is less clear about the relative abundances of capital, land and labour there, he provides zero evidence that any region of the declining Roman Empire was relatively abundant in both capital and land. This may account for the strength of religion in the ensuing Middle Ages. With no region where only labour benefitted from collapsing trade, political liberation by democratisation, secularisation, and a more scientific approach, which would if strictly applied help the masses, was disfavoured everywhere during the reduced trade of the Middle Ages.

That social reaction is not a necessary product of isolation can be seen in certain sects in the antebellum United States, such as the Shakers, who were the first to buy blacks from slavery at a time when conditions for them were increasingly bleak, and gave women social equality before they gained the right to vote in land-poor societies. The pre-Sichtungszeit Moravians constituted another example, but there were many other communities of this type before the great globalisation of the late nineteenth century (a useful look can be found in Visiting Utopian Communities: a Guide to the Shakers, Moravians, and Others by Gerald and Patricia Gutek). Intentional, experimental communities are, one might argue, a likely product of a capital- and land-rich society increasingly valuing labour under falling trade. Similarly, social experiments in communal living in North America during the 1960s might be viewed as a product of restricted trade under Bretton Woods, by which workers develop innovative means of decision-making and agreements to work for the community.

In fact, the tendency of ruling classes in this type of society to divide nonelites means such sects and communes are likely whenever trade is not expanding. Nonelites, when they do gain economically, will prefer to associate only with culturally similar peers rather the unite collectively. It would, theoretically at least, mean powerful separatist movements and the creation of numerous small states or even microstates, but this would probably on second thought be countered by the reluctance of these societies to participate in politics.

3. Underestimated Ruling Class Militancy

Another, more significant, effect of the absence of economies rich in both capital and land is the assumption that the ruling class can never be as militant as the working class. However, the radical capitalism of the modern GOP and the militant Islam supported by the Gulf States are extremely militant movements with undoubted ruling class bases, as is the movement for reconquest of Ukraine in Russia, and Pan-Turkism in Central Asia. Rogowski can be faulted for assuming that under expanding trade, ruling classes in advanced nations with high land:labour ratios will simply be content with corporatisation and severe weakening or elimination of unions. In fact, since the 1973 oil crisis the global ruling class has sought to entirely eliminate the freedom of workers, seen in “noncompete” agreements between corporations that virtually eliminate the freedom of many US workers to seek alternative employment, and prevent them, as The Politically Incorrect Guide to Capitalism wrongly assumed, from choosing employers based upon wage. 

The ultimate goal of the global capitalist elite is an entirely private state where law enforcement, courts, defence and intelligence are provided for-profit in competitive markets where the ruling classes can coerce the masses more perfectly. It also means that rulers gain their wealth by means considered “ethical” by capitalist apologists — selling goods or services. This is exactly how the Gulf monarchies gain revenue with zero taxation of capital or land, and limited taxation even of labour. Critics have noted this would mean the rich can access extremely expensive and elaborate services, whilst those without money lack access to these services at all, which would make the poor either:

1. even more vulnerable to exploitation by the super-rich, or
2. totally dependent on the super-rich and forbidden from criticising them

Any such system would undoubtedly be exceptionally oppressive for an immense majority, who would lose the most basic freedoms.

4. Imperialism Comes from Resource Scarcity

It is typically assumed that Western Europe’s incentive to seek colonies in the tropics and North America resulted from that region’s extreme scarcity of land and mineral resources — in turn due to:

1. intensive and repeated Quaternary glaciation producing soils of geologically vanishingly rare fertility
2. highly dense rural populations supported by those soils and a highly favourable climate for agriculture
3. extreme poverty in metallic minerals, which the glaciers largely destroyed

It is typically argued that natural-resource-poor countries are not worth colonizing, for instance Irma Adelman and Nobuhiko Fuwa in ‘Income Inequality and Development. The 1970s and 1980s Compared’. Except where natural-resource-poor lands possess strategic value, this was true for colonisation by Western Europe. This explains why some of the world’s most natural-resource-poor countries, for example Japan and Nepal, were never colonised.

However, if an imperialist country is labour-poor, it will want primarily to control labour-rich countries. Nevertheless, direct colonial rule is improbable because backward, labour-rich countries that have not experienced revolutions led by workers or landless peasants will inevitably possess indigenous ruling classes too weak to act independently of the ruling classes of the advanced, land-rich nations, and too fearful of potential political threats from their lower classes under expanding trade to avoid such alliances. This relationship, it must be emphasised, is colonialism and is imperialism. The advanced, land-rich societies exploit abundant labour, pay this labour vastly less than its productivity, and dictate the politics of the source nations. Although significant local income sources, remittances from the Gulf, North America, Russia, Kazakhstan and Australia are very small vis-à-vis corporate profits.

Similarly, foreign aid emerged with the transfer of global power to the land-rich US and USSR. Aid can be understood as a means of maintaining friendly regimes and consequently access to abundant labour. As Gilens and Page noted in Affluence and Influence, mass interest groups have zero independent political influence even in the purportedly democratic US; however, loss of access to the abundant labour of humid Eurasia would likely empower these mass interest groups radically and rapidly. In other countries rich in both capital and land, loss of this access would likely produce much more violent mass [citizen] rebellions, although, because so many of these societies are so specialised that they do not engage in manufacturing at all, democratisation even under these conditions remains uncertain.

Conclusion

Whilst it is not perfectly easy to ascertain the effects of the absence versus existence of economies rich in both capital and land, it does appear to me that there is a substantial difference in the geopolitical results under these two scenarios. Popular conceptions of politics can be inverted in advanced, land-rich societies where the already-powerful are rebelling against any constraints upon their power — seen today in skyrocketing inequality and runaway climate change impossible to counter because doing so ipso facto depletes the wealth and limits the power of US corporations, Australian coal barons and Soviet and Gulf oil rulers,  who have built a complete geopolitical system precisely to eliminate threats thereto. The question of what conditions permit or prevent the existence of societies abundant in both capital and land is still more difficult and I will not claim to have a clear answer; nonetheless, the observed trajectory of pokitics today makes understanding these societies and the questions they raise more critical than in 1989 when Commerce and Coalitions appeared.