Cargo Cult Economics
by Bill Walker
by Bill Walker
Caravels of the Gods
In the 1600s, New Guinea experienced a wave of UFO sightings. These Unidentified Floating Objects behaved in supernatural fashion: traveling over the ocean without visible paddles at impossibly high speeds. Bigger than any log ever recorded, they were clearly beyond human technology.
Those who ignored the UFO sightings as kava-induced dreams soon regretted it. Near-humanoid gods from the UFOs soon landed, performing miracles daily. The gods killed those who failed to worship and propitiate them properly, wielding invisible thunder death rays from great distances. Then the probings and abductions began.
Some New Guineans learned to coexist with the gods. They sold them food and unwanted relatives for supernatural objects: Cargo. Cargo allowed a man to perform superhuman deeds. Cargo axes let you cut down thousands of trees, Cargo knives could butcher hogs without breaking, Cargo mirrors dazzled and seduced women. A new religion was born, the Cargo Cult. They built watch fires and prayed for the return of "John Frum," with Cargo for all the faithful.
John Frum was mostly busy elsewhere for centuries (perhaps he went back where he was ‘frum'). Then, in the 1920s, he dropped into the middle of the New Guinea highlands in his Ford trimotor magic flying house. He paid in Cargo and kina shells for the soft, valueless metal he called "gold." This caused a devastating kina shell inflation, pricing non-Cargo-Cultist men out of the bride market. (Modern Papua has continued this tradition; their currency is still called the "kina," and they still inflate it).
In the 1940s, Cargo Cult prophecy was finally fulfilled. Thousands of flying houses dropped US soldier-gods all over New Guinea. The soldier-gods revealed the sacred rituals that summon Cargo: first you clear a sacred landing strip. Then you build a sacred landing beacon fire, and say certain sacred code prayers (into a shortwave radio, but this point went largely ungrasped). Then canned food, machine guns, penicillin, and bulldozers drop into your village. It's more fun than digging taro roots!
The Cargo Cultists maintained their religion long after the departure of US troops, continuing to build the sacred landing strips and beacon fires. Sadly, they had not actually grasped the true secret of Cargo (or radio). Today there is reportedly still a remnant of Cargo Cultist influence in the Papuan Parliament; they get some Cargo from foreign aid, and remain confused.
Of course everyone laughs at the Cargo Cultists. But are most "modern" people any different? Do most average Americans know from where "Cargo" comes? Of course they know it comes from "China," because that's written on the tag. But do they have any idea of the market system, of division of labor, of comparative advantage? I doubt it. For most Americans, "Cargo" is produced by the magic beacon fires of elections, subsidies, and government paper money. Some of them have the vague idea that human work and thought is involved somewhere, but they don't know exactly how it all fits together.
In fact, Americans are so confused about Cargo that many of them think that they would have more Cargo if only someone would forcibly prohibit them from buying Cargo from China. This concept might have merit if someone would forcibly prohibit them from eating Twinkies, but it can't be generalized to all economic goods.
Where We Get Cargo
Cargo comes from the thought and labor of individuals. But to make very complicated Cargo (e.g., a pencil) requires Trade. Trade allows specialization and the use of the principle of comparative advantage.
Let's assume that a US worker can make burlap twice as well as a Bangladeshi (unlikely), but can make computers a thousand times as well. Obviously it does not pay the US worker to waste resources making burlap on her Simi Valley apartment balcony, or the Bangladeshi worker to try to make silicon chips out of jute. Both can do better by specializing where they have a relative (comparative) advantage. Both the Bangladeshi and the Californian benefit by "exporting jobs," thus allowing greater specialization and an increase in overall productivity.
The rule of comparative advantage does not change because someone draws lines on a map and says, "this is the United States, this is Mexico, this is Texas, this is California." It makes no economic difference whether your trade partner is "outside" or "inside" your city, state, or nation.
If cutting off trade between nations could create wealth, then the same principle could be used between states, counties, cities, and households. Why would Texas allow Californian goods past the borders? Why would Fort Worth trade with Dallas? Why would anyone go to the grocery or the computer store? Why would anyone give a flint axe for a bearskin…
The reductio ad absurdum of anti-trade policies is that everyone should become a Robinson Crusoe. Grow your own wheat (don't forget to hybridize the triticale genes and build the diesel tractor factory), assemble your own computer out of sand, perform your own appendectomy (make sure to go easy on the anesthetic and make sure every scalpel is within reach before beginning).
There is no way to magically generate wealth by using arbitrary force to suppress voluntary trade. If cutting off trade could somehow "protect infant industries," "end worker exploitation," or provide any of the other Cargo-generating wonders that xenophobic politicians promise, then Pol Pot's Cambodia would have been the world's greatest economy. But this is not what we observe; it is the nations with the freest trade that become the wealthiest… even if they start as barren rocks or swamps with sparse and destitute populations, like Hong Kong or Singapore.
Cargo Is Made by Other People
So, Cargo is mostly made by other people. You can only get advanced Cargo if other people make it (and only if you make something that THEY want). The more other people there are, the more specialized everyone can be, the more research can be done, and the more and better Cargo there is. The more Cargo that is made in China, the more plentiful and cheaper Cargo should be in the US.
So, where IS our Cargo? Why did the US worker keep getting more Cargo every year from 1945 to 1975, and now struggles hard just to stay even? Why are all the Cargo factories moving to India and China? Perhaps the Cargo Gods are angry with us? Should we sacrifice a goat to Ba-el Gates or Al-en Greenspan? Build a large beacon fire in Los Angeles and pray that the Cargo Gods drop some SUVs and DVD recorders from the skies?
There are two simple reasons why we don't get more Cargo. The first is that you can't have your Cargo and eat it too. Every bit of Cargo that is taken out of your paycheck and given to the world's kleptocrats is a bit that you don't have. Whether used to build sports stadiums in your home town or nuclear reactors in North Korea, taxes consume capital. And every year, taxes go up while the proportion of Americans helping to make Cargo goes down.
The second reason is that in order to keep getting the most Cargo, you have to make the most Cargo. That means always making the most complicated and valuable product. America used to make cars and jet aircraft; in the 1960s, these were complicated and valuable products.
It is now the 21st century. Internal-combustion cars are over a century old, commercial jet aircraft are nearly 60 years old. These are no longer new ideas. Cars are made very well by Toyota in Japan, jet aircraft are made very well by Embraer in Brazil. If Americans want to make more than Japanese or Brazilians, then we have to make something new.
We could make cancer cures… but the FDA won't allow it. We could make new-technology nuclear power plants… but the EPA and NRC won't allow it. We could have made banking software with real encryption… but the NSA wouldn't allow it. We could make nuclear spacecraft… but the DOT, the EPA, NASA, and Homeland Security make even thinking about it impossible.
So we can keep on making the same products our grandfathers did, and get less and less Cargo for them. Or we can allow ourselves to invent and make new products, and once again make more Cargo every year.
The choice is ours.
May 31, 2005
Bill Walker [send him mail] works as a Research Associate in telomere biology at an undisclosed (thanks to legal threats from his tax-financed employer) location.
Copyright © 2005 LewRockwell.com