Soddy, Fuller And Modern Monetary Theory – Dave Svetlik * How Fiat Money Works – Chris Mayer * Wealth, Virtual Wealth and Debt – Frederick Soddy, M.A., F.R.S.

Dave Svetlik.

Born in the late 1800’s, Frederick Soddy and R. Buckminster Fuller led extraordinary lives. Soddy won the Nobel Prize in chemistry in 1921 and Fuller became known for his work in architecture, the geodesic dome, and visionary thinking. Sodd was a British citizen, Fuller an American. Both were deeply rooted in science and the laws of physics, and both spent the latter half of their life trying to apply their knowledge of physical reality to making the world work for everyone.

Inevitably their quest led them to the field of economics and the study of monetary systems. Remarkably, though they never worked together, both men reached a similar conclusion:

Money and economics were largely disconnected from physical reality and productive capability. The result was the unnecessary impoverishment of much of humanity.

Soddy and Fuller were both impacted by World War I. As a British scientist, Soddy saw the devastation caused across Europe by the first war to fully employ scientific knowledge in the act of destroying others. Fuller served as a rescue boat commander in the US. Navy.

Both men were struck by how nations could seemingly never afford to do any of the tasks necessary to improve the living conditions of people before or after a war, but could always afford whatever it took to go to war.

As Fuller stated in his books Operating Manual for Spaceship Earth (1963), and Critical Path (1981), whenever the financil power structure controlling a nation’s politicians feels its interests threatened:

“…vast new magnitudes of wealth come mysteriously into effective operation. We don’t seem to be able to afford to do peacefully the logical things we say we ought to be doing to forestall warring by producing enough to satisfy all the world needs. Under pressure we always find that we can afford to wage the wars.”

Soddy wrote in a similar vein referring to World War I in his book Wealth, Virtual Wealth and Debt (1926):

“Then, for the first time in history, we saw science used without artificial financial restrictions for the purposes of destruction. A degree of liberality and unity of purpose prevailed which is never lavished upon the less spectacular but more necessary task of construction. Year after year the industrialized nations produced an ever-mounting tide of munitions of war, There seemed no physical limit to the extent which a nation, shaken out of its preconceived habits of economic thought by the imminent peril at its doors, could turn out the material necessities for its existence.

Whereas now [post war] we have returned to peace and squalor, to idle factories and farms reverting to grass, we are back as a nation to the pre-war conditions with a million and a quarter workers unemployed, unable to feed and clothe ourselves adequately on a military standard, and unable even to build houses in which to live under existing economic conditions. Yet we have the same wealth of natural resources, the same science and inventiveness, with much more favorable conditions for production and an army of unused man-power being demoralized by enforced idleness! A nation dowered with every necessary requisite for an abundant life is too poor to distribute its own wealth, and is idle and deteriorates not because it does not need it but because it cannot buy it.”

The contemporary version of this incongruity is called austerity. Nation after nation is being told by its politicians that it cannot afford to do anything to help its people. “There is no money to buy it and people must tighten their belts.” Yet all of these nations have abundant physical and human resources waiting to be used and all of these nations mysteriously find whatever money it takes to fight the so-called “war on terrorism.” It is an unnecessary, artificially created state of poverty imposed in the midst of plenty.

Though they did not define it in current terminology, Soddy and Fuller had obviously been thinking in the realm of Modern Monetary Theory (MMT). They understood that food, clothing, a furnished house, a car and a lawnmower were wealth. Money was simply the claim to wealth, a medium of exchange accepted as valid by a society. It had no value in and of itself. But the manipulation of money exerted great power over the availability of wealth and who had legal claim to ownership.

Having witnessed the enormous productive capability that mysteriously became available during times of war, Soddy and Fuller were fully aware that production of wealth was almost limitless and subject only to the current state of scientific/technical knowhow. In his 1926 writings in Wealth, Virtual Wealth and Debt, Soddy concludes:

“There is no longer any valid physical justification for the continuance of poverty. The phenomenon of unemployment and destitution at one and the same time today is solely due to ignorance of the nature of wealth and the principles of economics.”

Scarcity in peacetime was the result of faulty economic thinking and manipulation of the money supply by the financial power structure. Nations were said to be in debt. They had spent too much money waging war and now there was no money left. People needed to “sacrifice.” The productive capability available during the war was forced into idleness. In Soddy’s words:

“The popular notion that because a nation has in the past generation produced it is unable to do so in the next, that God and usury provide so much and no more, and if we consume much one year we must make up for it in the future, is the inversion of the truth. It contains just enough of the truth as it applies to individuals that wealth is a real quantity, incapable of spontaneous generation and multiplication to be plausible; but in national terms it is as fallacious as abstaining from drinking from a river because last year was hot and everyone drank so much.”

Being scientist/technologists, Fuller and Soddy felt the need to define wealth, to quantify it in an equation. They knew the components of wealth were physical resources, matter and energy and the level of knowledge available to most effectively employ these resources. Simplistically stated:

WEALTH = (MATTER + ENERGY) X HUMAN KNOWLEDGE

Energy stored in fossil fuels Earth’s energy savings account is, of course, unavailable after the fuels are burned. But both Fuller and Soddy understood that expanding human knowledge would eventually make it possible for humanity to operate on Earth’s energy income using solar, wind, tidal, biofuels, etc. (but for lack of political will and resistance from the fossil fuel industry, we have reached this potential today).

Additionally, the First Law of Thermodynamics says the total amount of matter and energy in the universe is constant and can be neither created nor destroyed, only interchanged. Since knowledge can only grow, wealth can only grow.

It is critical to understand that wealth is governed by the laws of physics and is incorruptible, whereas money is governed by the laws of man and is infinitely corruptible.

It is also important to note that wealth can be applied productively by enhancing the human condition, or counterproductively by harming the human condition.

An example of the counterproductive is weaponry. War is ultimately about who can claim ownership of productive wealth artificially limited by misguided monetary policy. Wealth wasted counterproductively by waging war further reduces available productive wealth and the result is a downward spiral.

However, we can choose an upward spiral. By aligning our man-made economic thinking with physical reality, we can lay the path to ongoing human success. This is the promise of Modern Monetary Theory.


Modern Monetary Theory (MMT): How Fiat Money Works – Chris Mayer.

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There are plenty of theories out there that seek to explain the intricacies of money and its role within the economy. The problem is, ”money” today looks an awful lot different than it did several years ago. That’s why, for the last year or so, Chris Mayer has been extolling the virtues of the Modern Monetary Theory (MMT).

Warren Mosler tells a good story that shows how our economy works at its most basic level.

Imagine parents create coupons they use to pay their kids for doing chores around the house. They “tax” the kids 10 coupons per week. If the kids don’t have 10 coupons, the parents punish them. “This closely replicates taxation in the real economy, where we have to pay our taxes or face penalties,” Mosler writes.

So now our household has its own currency. This is much like the US. government, which issues dollars, a fiat currency. (Meaning Uncle Sam doesn’t have to give you something else for it. Say, like a certain weight in gold.) If you think through this simple analogy, all kinds of interesting insights emerge.

For example, do the parents have to get coupons from their kids before they can pay them to do any chores? Obviously not. In fact, the parents have to spend their coupons first by paying their children to do chores before they can collect the tax. “How else can the children get the coupons they owe to the parents?” Mosler writes.

“Likewise,” he continues, “in the real economy, the federal government, just like this household with its own coupons, doesn’t have to get the dollars it spends from taxing or borrowing or anywhere else to be able to spend them.”

The government creates dollars. It doesn’t even have to print them. The vast majority of spending is simply done by adding electronic dollars to bank accounts. Therefore, the U.S. government can’t go bankrupt. It pays all its bills in U.S. dollars, of which it is the sole issuer.

the state is… at best, bumbling and incompetent and wasteful. At worst, it is an evil force on society.

This sounds really obvious, but it is amazing how many people even very smart people forget this simple fact. They get hysterical about the fiscal deficit or the national debt. (This is not to say there aren’t bad consequences from issuing too many coupons, or from government spending in general.) The only way the U.S. government can default is if it chooses to do so.

Going back to Mosler’s example, let’s ask another question: How can the kids “save” coupons in excess of the weekly tax? Well, they can only do that if the parents spend more than they tax. There is no other way to hoard coupons. In the real economy, the same is true. The private sector can save dollars only if the government spends more than it taxes. Spending pours fiat money into an economy; tax payments drain it away.

Another question: Do the parents have fewer coupons if they spend more than they tax?

No. The parents make the coupons. They don’t even need physical coupons. They can simply track them on a piece of paper or in a spreadsheet. Likewise, the US. government doesn’t have any fewer dollars after running deficits. It can’t run out. (There are real-world restraints on how much government spends.) To borrow from another Mosler analogy:

The US. government can no more run out of dollars than a scorekeeper can run out of points.

You don’t have to like this. (I don’t.) It’s merely a description of how a fiat currency system works. That’s the world we live in. Too many people tackle economic questions ideologically. I can be as guilty of this as anyone. My own view of the state is that it is, at best, bumbling and incompetent and wasteful. At worst, it is an evil force on society. (My sympathies lie with those old American radicals, such as Lysander Spooner [1808-87]. If you don’t know who he is, look him up. He was a great American. I have his six-volume collected works here on my bookshelf.)

Nonetheless, after much reading and thought, I agree with Mosler: The state’s ability to enforce tax liabilities, fines and fees drives the demand for money. Or as Mosler says, “Taxes drive money.” This is a view of money called “chartalism” and it is one I subscribe to. It has been around a long time. And it forms one of the building blocks of a school of thought Mosler helped to found, called Modern Monetary Theory (MMT).

It’s hard to talk about MMT with people, because they are often quick to draw hasty cartoonish conclusions about what MMT is or represents. (I have to admit, I choked on MMT a bit at first, too.) Over the last several months, I’ve read a handful of books and perhaps a dozen academic papers on MMT. So I believe I can speak by the card.

On one level, MMT is simply a description of how a fiat currency system works. On another level, there are policy prescriptions that flow from this understanding. My only advice on the latter is this: Don’t let your politics deter you from making sense of MMT. (MMT itself is politically agnostic.)

I’d recommend both of Mosler’s books. Start with The 7 Deadly Innocent Frauds of Economic Policy. It’s a short book, just over 100 pages and written in plain English. Mosler has a gift for making complex things simpler. If you try to think through the issues in an honest way, you’ll come away with some “Ah-a!” moments.

Then you can move on to Soft Currency Economics. Believe me, these books will challenge your long-held Views on money. (Always a good thing, in my mind. What’s the point of only reading things you know you’ll agree with? Challenge yourself… or ossify.) If you want more, pick up Randall Wray’s primer Modern Money Theory.

Mosler himself is an interesting character. Unlike most economists, he is no armchair theorist. Mosler made a lot of money in markets. And in markets, you get paid to be right, which is where all too many economists fail.

For an investor, macroeconomics has limited uses most of the time. Mosler’s career shows this can be otherwise.

Warren Mosler is, like me, a former banker. He began his career in banking in 1973, working to collect on bad loans. After a year of that, he became a lender. And I can tell you: This is great training for an investor. As Mosler recounts, he had ongoing discussions with his boss about the “logic of banking” and the “theory of lending.” As every lender learns, you want to make loans where the odds are heavily in your favor so that profits easily make up for small (but expected) losses. Investing is not much different.

Anyway, Mosler was a good banker with a head for the odds and the payoffs. Eventually, he would move on to manage the bank’s $10 million investment portfolio. He came up with a bunch of good, if unconventional, ideas. He made the bank a lot of money pursuing no-risk trades. Mosler had a knack for smoking out mispricing in the market for things like bonds and CDs.

He went on to join the Wall Street broker Bache & C0, followed by Bankers Trust and then the investment-banking firm of William Blair & Co. in Chicago. (In his books, he recounts his adventures at these places.) He made each firm a bunch of money with his “free lunch” trades, just as he did in his banking days.

In 1982, he co-founded his own fund, Illinois Income Investors. Over the next 15 years, III would rack up a remarkable record with only one losing month and that was a 0.1% loss due to a timing issue that reversed the next month. Managed Account Reports ranked 111 No. 1 in the world through 1997, when Mosler left the firm.

One great story Mosler tells in both books is how he cleaned up on another free lunch in lira-denominated bonds in the early ’90s. This was before the euro and back when there was worry over a default by Italy’s government. Italy’s national debt was 110% of GDP and interest rates were high on its bonds

But Mosler knew that it was the sole issuer of lira. Italy could not default unless it wanted to. Mosler actually met with senior officials in Rome to let them in on the “secret.” Long story short, Italy didn’t default. Mosler’s fund made over $100 million.

For an investor, macroeconomics has limited uses most of the time. Mosler’s career shows this can be otherwise. But then again, you have to study economics that actually describe the real world. And Mosler’s economics, or MMT, does that rather well.

Modern Money Theory: Deadly Innocent Fraud #1. Government Must Tax To Spend. – Warren Mosler


Wealth, Virtual Wealth and Debt (1933) – Frederick Soddy, M.A., F.R.S.

Dr. Lee’s Professor of Chemistry in the University of Oxford; Nobel Prize Winner in Chemistry, 1921

THE SOLUTION OF THE ECONOMIC PARADOX

“That which seems to be wealth may in verity be only the gilded index of far-reaching ruin; a wrecker’s handful of coin gleaned from the beach to which he has beguiled an argosy; a camp-follower’s bundle of rags unwrapped from the breasts of goodly soldiers dead; the purchase-pieces of potter’s fields, wherein shall be buried together the citizen and the stranger.”

JOHN RUSKIN, Unto this Last, 1862.

Science the World Ferment.

What has gone wrong with the world? In the throes of the Great War, many discovered for the first time that they were living in a scientific civilisation, and even scientific men themselves realised the difference between the leaven of theory and its practical aspect in a world boiling in ferment. Science then almost emerged from its esoteric seclusion to become a cult at least, something worth cultivating, for professional ends. So indispensible in wartime, it seemed curiously insignificant among the public services in time of peace. Fortunately for science the danger passed. There are scientific professions, many of them, but science is not a profession. It is a quest. What has gone wrong in the world? Let us follow the quest.

The time is opportune. Much of what has been attributed to our inevitable destiny, superiority of character, unquenchable spirit, invincibility of purpose, and other human qualities, takes on a new valuation with the discovery that we are living in a scientific era. As much might be said of the virtues attributed to democracy and free political institutions; or again, of the capitalist system in its pride, of an Empire on which the sun never sets and of the phenomena of class hatred and slums on which the sun never rises. Science has changed the nature of our economic life, and older systems based on a different mode of living are, on all hands, admitted to be working most dangerously if, indeed, they have not already become impossible.

They remain only because there is nothing constructive to replace them, and are conventionally defended for fear of anarchy and chaos following their open repudiation. Everything in the world now is so delicate, which is merely another way of saying that nobody seems to have any real understanding of how the economic system works at all or why it works so dangerously, that the policy of all parties seems to be rather to bear the ills we have than to fly to others which we know not of. The people in this respect have frankly given up real hope that Governments, of whatever complexion, will find any solution even for any of the immediate practical problems of the day, and it is a period of marking time.

The Great War itself is seen to be not a separate historical event but more and more as an inevitable consequence of the same ultimate cause. The sudden rise of the Western world to a position of dominating material greatness and power, the dangerous and manifold insoluble social problems that accompanied it, and now threaten our times, and the phenomenon of modern worldshattering war on the scale we have just survived, are all now more generally seen to be due primarily to the changes introduced into the economics of life by the discoveries of a handful of scientific pioneers in possession of a new and fruitful method of gaining natural knowledge, and to the failure of the older humane sciences to cope with the new situation.

On the one hand, a larger class than ever before have attained to a higher standard of life, greater leisure and opportunity for culture, carrying along with them hosts of servants and dependents, who minister to their comforts and luxuries and share, to some extent, their prosperity. But the workers in the more fundamental and essential industries, such as agriculture, mining and manufactures, have been cheapened by competition with rather than benefited by machinery, and, worse, are deprived by it in increasing numbers of their customary livelihood.

For the propertyless masses, if there has been any improvement whatever in the average standard of life, it is so small as to be doubtful and in comparison with the general progress of wealth production contemptible. The lot of the masses has certainly become more strenuous and insecure, being now never free from the spectre of unemployment and consequent submersion into destitution and degradation. So that, at the other extreme, a larger class than ever before, because of the increase of the world’s wealth, are existing in conditions of poverty and economic thraldom that would have shocked a poorer age.

By neglecting the changes that have come over the science of production in the past century, it may be possible to argue that the lot of the majority today is a little better or at most but little worse than it was. But this is not the real question at issue.

Rather we have to find out how it comes about that science, which, without economic exhaustion, provided the sinews of war for the most colossal and destructive conflict in history, with the man-power of the nations engaged in military service, has not yet abolished poverty and degrading conditions of living from our midst in the piping times of peace.

It is impossible for those who profess to understand economics and government to escape the charge of knowing nothing whatever of these subjects so long as poverty and unemployment exist in an age of brilliant scientific achievement. Never tired of attributing economic heresies to others, the state of the whole world is the monumental evidence of their own.

The Glasgow of James Watt and Adam Smith.

It is significant to reflect that Glasgow, which produced James Watt, the inventor who brought the steam engine to practical success, was the home of Adam Smith, the father of the system of political economy under which the scientific era has developed. Whilst the former in 1774 was perfecting an engine destined to lift men from the drudgery of animal labour and to establish over the whole world a new mode of livelihood, the latter in 1776 was erecting into a theoretical system the conditions under which, till then, men had pursued their economic livelihood. The world might have assimilated either the steam engine or the economics, but it is difficult to understand how it could possibly digest two such mutually incompatible productions simultaneously. Ever since, the world has been attempting to move in two opposite directions at one and the same time, towards a higher standard of life for some and a lower standard for others.

The Glasgow of James Watt and Adam Smith was a city of 28,000 people, hardly less provincial than Kirkcaldy, the birthplace of the author of The Wealth of Nations, and the place to which most of his outlook on the subject can be traced. The Glasgow of James Watt and Adam Smith is, today, a city of over a million people, the second largest in the British Empire. It is a monument as much to the work of the one as the other, being, on the one hand, the centre of the great Clydebank marine engineering industry and, on the other, of the social revolution against rent, interest and profit, fostered by unemployment, house-shortage and high cost of living, famous for its ships and street orators in every corner of the globe.

The Economic Paradox.

This book is not concerned with the possibly sensational future progress of science, but is, in origin, rather of the nature of a return to present problems from one such anticipation now a generation old, concerned with the discovery of atomic energy. Though one would hardly guess it in normal times, under the revealing experiences of the Great War many of the consequences which it was natural to anticipate would follow the control of physical powers greater than any we now possess were shown to have come about already with the powers actually available. Then, for the first time in history, we saw science used without artificial financial restrictions for the purposes of destruction.

A degree of liberality and unity of purpose prevailed which is never lavished upon the less spectacular but more necessary tasks of construction. Year after year the industrialised nations produced an ever-mounting tide of munitions of war, with the flower of their man-power withdrawn from production. There seemed no physical limit to the extent which a nation, shaken out of its preconceived habits of economic thought by the imminent peril at its doors, could turn out the material necessities for its existence.

Whereas now we have returned to peace and squalor, to idle factories and farms reverting to grass, we are back as a nation to the pre-war conditions breeding a C3 race, with a million and a quarter workers unemployed, unable to feed and clothe ourselves adequately on a military standard, and unable even to build houses in which to live under the existing economic system. Yet we have the same wealth of natural resources, the same science and inventiveness, with much more settled and favourable conditions for production and an army of unused manpower being demoralised by enforced idleness!

The sensationalism of the scientific prophet could hardly imagine anything so sensational as this. A nation dowered with every necessary requisite for an abundant life is too poor to distribute its wealth, and is idle and deteriorates not because it does not need it but because it cannot buy it. This book attempts to give an original analysis into the causes underlying this surprising contradiction.

The Prospect.

As often happens in these swiftly changing times, even with pure science, new subjects and fields of discovery are past their most active period of growth before they become accepted as a normal and permanent part of our social inheritance and enter into the ruminations of philosophers or the curricula of universities. As regards the applications of science of most economic importance, the mass production of all kinds of commodities by mechanical power, new modes of transport and communication, and by far the greater part of the inventions by which the physical sciences have been harnessed to the chariot of life to do useful and profitable work, we are merely witnessing now the full fruition of an insight into the laws and processes of Nature obtained quite long ago.

Contrary to common belief, such developments are not inexhaustible. A mechanical invention, like a bicycle, after a rapid initial period of everchanging design, reaches its final expression, and so it is in general with the great group of the mechanical applied sciences founded on the perfection of the steam engine in the first instance, and, in general, on the proper understanding of the laws of energy and its transformation, which is the necessary prelude to the control of natural forces.

It would appear that in due course something like an end may be reached to major developments. Even in the younger group of electrical sciences the same tendency may already be seen. True, there have been great and sweeping advances in the pure parent sciences of physics and chemistry, but these as yet for the most part are still immeasurably beyond any practical application at all. So that an interregnum, as regards substantial practical progress, is likely to occur. The older fields will be worked out probably before the newer are effectively opened up. The biologists are already claiming that this century will be their innings, as last century admittedly was that of the physical sciences in practical world-revolutionising discoveries, and it is to be hoped that in due course they will implement the promise.

Among the more thoughtful, the profound misgivings as to where such applications of science as we have already made have led and are leading civilisation naturally cloud the outlook as regards the future. They are very different in inception and spirit from those which characterised Butler’s Erewhon, and other jaundiced satires of the Victorians, but they are of somewhat similar trend.

Have we obtained dominion of the major powers of Nature to fall a victim to our own machinery and ultimately to be destroyed by it? Is our civilisation to end in breeding the Robot and the rentier, and to go down under class conflicts at home and fratricidal wars abroad? Is there much point in multiplying by a million the powers already conferred by science if the use we make of those we already have are sufficient to endanger the future of civilisation?

There is this difference between the criticism of today and the earlier, more interested and professional disparagement to which, in the Victorian era, science was subjected. No one now is disposed to put the blame upon science or the scientific workers for the state of social affairs their discoveries and inventions have produced. Whoever else may have profited, scientists themselves have not. No one now sees the evil in the greater knowledge of and mastery over the forces of Nature, nor in the material fruits of this knowledge in lightening the labour of living, and in providing material necessities and comforts in abundance. The sourest and most jealous fanatic today could hardly maintain that good and nourishing food, sufficient fuel, clothes and houses, efficient and rapid means of locomotion, transport and communication and the multifarious interests of modern life are in themselves evil. The evil is rather that these things, which science makes so prodigally, are not more universally obtainable. The medical man will tell you precisely what is essential for the maintenance and preservation of a healthy body. What the Victorian theology attributed to sin and the devil, medical science today would ascribe to poverty and disease.

It is an indication of the backsliding that has occurred from the high standards of the terrible Victorians that an author recently referred to his own great-grandfather, who was responsible for the English Poor-Law, as “not the inhuman devil which his works would imply, but a painfully conscientious, duty-loving Victorian Englishman.”

Physical Science and the Humanities.

There is always a tendency for complementaries to be treated as opponents. If we start from monistic prepossessions, that Nature is a divine harmony and expresses some single superlaw, philosophy is presented with the very difficult task of trying to pieceout at least three jig-saw puzzles that have been wilfully mixed up. Neither mechanical nor biological science, nor the humanities alone, can solve human problems, but each can contribute its quota. In mechanics the basis of the rapid progress made from sweeping generalisations to practical achievement is due to the entire freedom of its problems from the disturbing element of life. It might be thought a policy of despair to seek aid from such a study in problems that have hitherto defied solution by humanists. Nevertheless, life obeys physical laws. Its methods are at the poles from those of the engineer, but it cannot work mechanical miracles. Physics is complementary to it, and life works according to, not against the principles of the physical sciences.

Indeed, it may be doubted whether, strictly, any other aspect of life has yet come within range of exact scientific inquiry. Life itself is an experience which has yet to find the proper methods of investigation. The biological sciences are almost entirely concerned as yet, because of this, with the physical chemistry of living processes, rather than with life. Biology threatens to give us children without parents by ectogenesis, much as chemistry gives us, by synthesis, indigo innocent of any connection with the indigo plant. But in spite of these imitations there is still something infinitely more interesting and difficult to understand about the natural processes. Still, it is no small thing to be sure that life cooperates with and does not violate natural physical laws, much as the engineer achieves his triumphs by understanding rather than defying the powers he controls. Neither individuals nor communities can escape conforming to the laws of matter and energy, however they may apply them to their own ends.

In this country, especially, there has been a long divorce between natural and human knowledge. The boycott of science and its control by hostile vested interests are still most remarkable features for an age pre-eminently distinguished only by its science. The universities and public schools, in this, set the standard and fashions of popular education, and we shall not escape lightly the penalty of these obscurantist policies.

Their effect on economics, essentially a subject with the closest relations with the world of facts and physical realities, has been singularly disastrous, and the hopeless muddle into which the affairs of the world have been allowed to get is largely to be traced to no clear recognition of the physical principles underlying that subject.

The very first economists in France did have an understanding of the natural knowledge of their time. But though never so necessary as in the scientific era that was to follow, the physical foundations of the subject became more and more neglected, in favour of conventional ideas derived from legal attitudes towards property rights and human interindebtednesses.

But this is merely a single example. Everywhere the idea that the few thousand, at most, active creative workers in science can really be exercising any important influence on the destinies of great nations and that, without these, and the ferment they have introduced, present civilisation would probably not be different from that of previous epochs has yet to receive due political recognition.

As for scientific investigators, they are for the most part too intently preoccupied in their highly specialised and abstruse inquiries to give time to social problems. Their activities regulate more and more automatically the principles that appertain to the normal business of the body politic, but are as completely divorced from the consciousness of society as breathing is from volition. They consider themselves capable of doing better work in the laboratory than in affairs. They recognise that the ability to make the simplest and smallest contribution to the stock of knowledge demands many years of serious preparation and study, many fruitless purely negative results, and that, in the end, the discoveries made are not likely to be those sought for, but the by-products, as it were, of a life of ceaseless quest into the unknown. They probably more than suspect that something quite analogous applies in any other field of inquiry, and not least to the confusions of politics. This makes them realise that their own political opinions are usually no more original than those of other people and are not in the least likely to be any more helpful.

The Author’s Path from Physical Science to Economics.

Some may be interested to know how it was that the author came to stray so far from the confines of his own subject and to lay himself open to the abuse which passes for argument in the matters that affect the pocket rather than the mind or soul. At least, in defence, he may claim that in consequence he has himself seen things clear and seen things whole which he could not otherwise have done, even though he fail to convey the vision to his readers.

In the closing years of last and the opening years of this century the discovery of radioactivity, and its interpretation in terms of existing knowledge, revealed the existence of stores of potential energy in the atoms of the radioactive elements of the order of a million times greater than any previously known. These stores were and remain impossible to harness to any practical physical purpose, and are given out at very slow rates in a purely natural process of transmutation of the radioactive elements into lead and helium. There is no doubt of their existence in these elements, and the existence of similar stores in other elements has been legitimately inferred, though not as yet experimentally proved. Following the very well-known reasoning that applies in chemistry, it appears certain that any process of artificial transmutation would be able to liberate these stores and to render them available as the energy of coal and fuel now is.

Many purely speculative deductions along the same vast lines have since been made from the theory of relativity, and it is to atomic energy, in the first instance, that physicists and astronomers now look to account for the maintenance of the heat of the sun and stars, and in general, the live energy of nature, over cosmical periods of time. It is unnecessary to enter further into this field, as few scientific discoveries have attracted more widespread interest than radioactivity, or have been more fully interpreted for the benefit of the nonscientific public. The names of Becquerel, M. and Mme. Curie, Rutherford, J. J. Thomson, Ramsay, Joly, Bragg and other pioneers in this field are household words.

It was natural to consider what sort of a world it would be if atomic energy ever became available. To compare such a world to that of today, it was necessary to contrast the latter with the world before the dawn of history and the art of kindling a fire. Just as the savage died of cold on the site of what now are coal-mines, and perished with hunger on corn fields now energised with the fertilisers produced at Niagara, so, it seemed, we were leading a pettifogging existence, fighting one another like wild beasts for a share of the supplies of energy somewhat niggardly vouchsafed by Nature, whilst all round us existed the potentialities of a civilisation such as the world had not then even imagined possible.

The Part played by Energy in Human History.

In that way, some conception of the part played by energy in human history began to take shape, and progress in the material sphere appeared not so much as a successive mastery over the materials employed for the making of weapons, as the succession of ages of stone, bronze and iron, honoured by tradition, but rather as a successive mastery over the sources of energy in Nature, and their subjugation to meet the requirements of life. The whole of the achievements of our civilisation, in which it is differentiated from the slow, uncertain progress recorded by history appeared as due to the mastery over the energy of fire reached with the advent of the steam engine. It, therefore, there is at hand not merely in the remote stars, but at our feet, an unlimited source of energy of the order of a million times more powerful than any known, what tremendous social consequences await the discovery of artificial transmutation!

Yet how far is human society from being safely entrusted with such powers? If the discovery were made tomorrow, there is not a nation that would not throw itself heart and soul into the task of applying it to war, just as they are now doing in the case of the newly developed chemical weapons of poison gas warfare.

In The World Set Free Mr. H. G. Wells, just before the outbreak of the Great War in 1914, devoted himself with his customary brilliance and insight to the question, and so vividly depicted the probable consequences that it would be superfluous for anyone of lesser gifts to pursue the topic, at least until the practical realisation of the disturbing dream comes nearer. For this is one of the newer developments of pure science, already referred to as still immeasurably beyond practical application. It may come quickly or again it may never come. At present there is hardly a hint even of how to begin. If it were to come under existing economic conditions, it would mean the reductio ad absurdum of our scientific civilisation, a swift annihilation instead of a none too lingering collapse.

“If what you tell us is true,” a scientific colleague, one of the Professors of Engineering, remarked to Rutherford in Montreal as long ago as 1902, “then we ought all, it seems, to be leaving the work we are doing and to concentrate our attention on the solution of this problem.” Possibly many have since had the same thought. Yet, in scientific research, nothing is less likely than that the discoverer will discover what he sets out to discover. La Salle set out to discover China by sailing westwards from Europe. Lachine is not in China, but in the middle of the Province of Quebec, a tramride from Montreal, on the great modern trans-continental route of the CPR. to the Orient. But the name still recalls the derision with which La Salle’s pioneer attempt was greeted by his contemporaries.

Scientific discovery could record episodes as strange. Pasteur studying fermentation discovered the important property of optical isomer is, which has developed almost into a science in itself, in passing on the road to the recognition of the part played by bacteria. But the most important part of his work was neither in brewing nor saccharometry. It revolutionised surgery, and to it countless millions owe their very lives.

Scientific discovery is a growth rather than a journey to plan. The voyage may be west to discover the east, and it is through fog and by dead-reckoning to put places upon, rather than to hit them off from a map. That transmutation may one day be possible and that the Coal and Oil Age will give place to an Atomic Age may be confidently expected, but when, and whether in this civilisation’s cycle, none can guess.

The Real Capitalist a Plant.

Still one point seemed lacking to account for the phenomenal outburst of activity that followed in the Western world the invention of the steam engine, for it could not be ascribed simply to the substitution of inanimate energy for animal labour. The ancients used the wind in navigation and drew upon water-power in rudimentary ways. The profound change that then occurred seemed to be rather due to the fact that, for the first time in history, men began to tap a large capital store of energy and ceased to be entirely dependent on the revenue of sunshine.

All the requirements of pre-scientific men were met out of the solar energy of their own times. The food they ate, the clothes they wore, and the wood they burnt could be envisaged, as regards the energy content which gives them use, value, as stores of sunlight. But in burning coal one releases a store of sunshine that reached the earth millions of years ago. In so far as it can be used for the purposes of life, the scale of living may be, to almost any necessary extent, augmented, devotion to the primitive ideas of the peoples of Kirkcaldy and Judea notwithstanding.

Then came the odd thought about fuel considered as a capital store, out of the consumption of which our whole civilisation, in so far as it is modern, has been built. You cannot burn it and still have it, and once burnt there is no way, thermodynamically, of extracting perennial interest from it. Such mysteries are among the inexorable laws of economics rather than of physics. With the doctrine of evolution, the real Adam turns out to have been an animal, and with the doctrine of energy the real capitalist proves to be a plant. The flamboyant era through which we have been passing is due not to our own merits, but to our having inherited accumulations of solar energy from the carboniferous era, so that life for once has been able to live beyond its income. Had it but known it, it might have been a merrier age!

So, if atomic energy is ever tapped, an outburst of human activity would occur such as would make the triumphs of our times seem tawdry, and primitive humanity’s struggle for energy as the fantastic memory of some horrid dream.

Is Science Accursed?

But what is gained merely by magnifying a scale? Would an enlarged reproduction of the present age satisfy any human soul? Awkward questions demand an answer. With all this new wealth the poverty of our ancestors has not been abolished, but has come back in a monstrous form. A growing army of unemployed, without proper means of subsistence, haunt a world capable of producing far more than it consumes, so that in a sense, new in history, the poor have become subservient to the rich even for permission to earn their livelihood.

Is science accursed?

What is the evil genius that perverts even the fulfilment of our sanest hopes and labours, and makes progress more like a nightmare climb among slippery slopes of ever increasing steepness, than the mass march of humanity along a broad high road, made straight and smooth by increasing knowledge, order and law?

It is idle to aspire to a more dangerously exalted civilisation until something of the definiteness and certainty of the economics of a fuel-engine can be extended to the economy of men. So that the crying need becomes not for ever and ever greater accessions of physical power, but the knowledge how to secure the fruits of what we already possess. The strong still plunder the weak, nations and individuals alike, whereas there is that in the growth of knowledge which would make the whole world kin. But that cannot come about until we understand what is wrong, nor whilst we attribute to an economic system mysterious powers which a physicist would laugh at.

Applied Science and Root Science.

So as we drop back into the present from, as it were, a telescopic anticipation of a far remote future, the voices of the marketplace fall somehow upon ears that hear with a difference. Scientific men are temperamentally unsuited to the tasks of government, but they might make valuable technical contributions in the wider problems of transport, the better utilisation of our natural resources, the more efficient training of labour. The nitrogen of the air might be wedded to the spirit of the waterfall to fertilise our soil in peace-time, so that we may breed more men, and again, to make high explosives in war-time to blow up the surplus, a veritable sine qua non of modern civilisation.

Or, again, in agriculture, science could assist in breeding better brands of wheat, in making a Burgoyne’s Fife that will outcrop the traditional Square Head’s Master and stand the climate better. In Empire development, too, with its wealth of tropical possessions uninhabitable by the white man, science alone can hope to cope with the scourge of malaria and allay the ravages of sleeping sickness, and if our civil servants were pathologists, instead of morbid students of the pathology of human nature, much might be achieved. Again, looking on what government is, and on how the actions of the peoples may be swayed by expert appeals to their feelings and enthusiasms, psychology, the youngest of the sciences, might be roped in to lead humanity out of the morass into which it has been tumbled by the too rapid growth of knowledge.

Whilst, like the undertow of life, breaking on the obstructions that bar its flow, a ceaseless warning booms religiously of the scientific spirit and its search after truth for its own sake, without which there can be no hope of regeneration for society.

Science and Government.

Are we any nearer the root of the matter? This book deals with none of these things. It does not deny their scope and possibilities in these days of universal education and the growth of intellectual interests, should civilisation last. It is concerned rather with the difference that comes over the familiar viewed from a fresh standpoint. The contribution of a physical scientist from the starting-point of physical science, it has nothing to do with technology or engineering, with psychology or the inculcation of the scientific spirit, but with the problem of government in its highest form! Just as in biology, materialism has proved itself fruitful and vitalism sterile in the winning of new knowledge, not in the least because organisms are merely machines, but because whatever else they may be, they obey the ascertainable laws of physics and chemistry, so in the tasks of government it would seem that a great clarification may result by applying to their elucidation common physical conceptions that are a truism in the inanimate world.

The theme, in various stages of development, has already been the subject of numerous public lectures and discussions and of two pamphlets. The validity of the argument and the deductions therefrom, though sufficiently challenging have never been publicly challenged. But some have desired a fuller and less elliptical treatment. The attempt to meet this led the author very much further into the subject than he ever hoped or expected to be able to penetrate, and finally, in his own estimation, to the definite solution of the economic paradox of the age. He found himself rather like Saul of Tarsus being converted into St. Paul, setting out to persecute the economists and ending, if not by becoming one, they may not be quite as forgiving a body as the early Christians, hopeful of ultimate reconciliation.

At least he now has a more lively respect for the subtle pitfalls with which the subject abounds, and the impossibility of avoiding them all without some such mariner’s compass as the physicist’s law of conservation. Behind and aloof from the jostling of the individual members of the community, each intent on his own affairs, there exists an almost unknown science of national economics, as far removed from disinterested controversy as the propositions of geometry, and as simple, relatively, as the gas-laws obeyed by all gases in common are in contrast to the infinite complexity of the laws that regulate the behaviour of their component molecules. In this vital field at least there should, in this age, be no longer any room for bickering.

Scientific men have been repeatedly urged to cooperate in finding the solution of the problems that threaten our times. This is an unauthorised and individual contribution to a subject which is usually tabooed by them. It must not be taken as representing any but the author’s own original studies in the subject. It would be a pity if it were taken as in any way reflecting upon the reputation for vision and nobility of thought which contemporaneous science has inherited as the result of the work of its early pioneers, after they were safely dead.

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