Uncertainty and Acting

The uncertainty of the future is already implied in the very notion of action. That man acts and that the future is uncertain are by no means two independent matters. They are only two different modes of establishing one thing.

We may assume that the outcome of all events and changes is uniquely determined by eternal unchangeable laws governing becoming and development in the whole universe. We may consider the necessary connection and interdependence of all phenomena, i.e., their causal concatenation, as the fundamental and ultimate fact. We may entirely discard the notion of undetermined chance. But however that may be, or appear to the mind of a perfect intelligence, the fact remains that to acting man the future is hidden. If man knew the future, he would not have to choose and would not act. He would be like an automaton, reacting to stimuli without any will of his own.

Some philosophers are prepared to explode the notion of man's will as an illusion and self-deception because man must unwittingly behave according to the inevitable laws of causality. They may be right or wrong from the point of view of the prime mover or the cause of itself. However, from the human point of view action is the ultimate thing. We do not assert that man is "free" in choosing and acting. We merely establish the fact that he chooses and acts and that we are at a loss to use the methods of the natural sciences for answering the question why he acts this way and not otherwise.

Natural science does not render the future predictable. It makes it possible to foretell the results to be obtained by definite actions. But it leaves unpredictable two spheres: that of insufficiently known natural phenomena and that of human acts of choice. Our ignorance with regard to these two spheres taints all human actions with uncertainty. Apodictic certainty is only within the orbit of the deductive system of aprioristic theory. The most that can be attained with regard to reality is probability.

It is not the task of praxeology to investigate whether or not it is permissible to consider as certain some of the theorems of the empirical [p. 106] natural sciences. This problem is without practical importance for praxeological considerations. At any rate, the theorems of physics and chemistry have such a high degree of probability that we are entitled to call them certain for all practical purposes. We can practically forecast the working of a machine constructed according to the rules of scientific technology. But the construction of a machine is only a part in a broader program that aims at supplying the consumers with the machine's products. Whether this was or was not the most appropriate plan depends on the development of future conditions which at the time of the plan's execution cannot be forecast with certainty. Thus the degree of certainty with regard to the technological outcome of the machine's construction, whatever it may be, does not remove the uncertainty inherent in the whole action. Future needs and valuations, the reaction of men to changes in conditions, future scientific and technological knowledge, future ideologies and policies can never be foretold with more than a greater or smaller degree of probability. Every action refers to an unknown future. It is in this sense always a risky speculation.

The problems of truth and certainty concern the general theory of human knowledge. The problem of probability, on the other hand, is a primary concern of praxeology.

(Ludwig von Mises, Human Action, Chapter VI. Uncertainty)

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Convention of Kanagawa

In Japan, one of the most important facts in the second half of the nineteenth century was the signing of the Convention of Kanagawa in 1854 between the Commodore Perry, on behalf of the United States, and the Tokugawa Shogunate. Because of the weakness of its army, Japan was forced to accept trade relations with western lands.

What did this event? Firstly, opened the ports of Shimoda and Kakodate to the United States trade. Japan, as you know, had been isolated since 1633 and, therefore, this step helped the country to improve and to extend its commercial relations with other nations. Secondly, drove it to enhance its way of living by, for instance, setting up enterprises (without real competition, though) and leaving, gradually, feudal policies. Finally, it triggered upheaveals within the country and, as a result, marked the arrival of the Meiji period.

More: Black Ships

Picture below: Com. Perry carrying the 'Gospel of God' to the Heathen, ca. 1854 (James G. Evans)

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The Recovery of Bahía

The Recovery of Bahía de Todos los Santos (Juan Bautista Maíno)

The picture shows one episode of the Thirty Years War in which Spain got back Bahía from Netherlands. It was time of mercantilism and rivalries between european nations, although not only because gold and silver but also about religion (the same issue, actually). You can see on the right side Felipe IV, Olivares (his Primer Minister) and Victoria. Felipe is submitting 'misbelievers'. On the left, the scene is representing peace, piety and other catholic values. The rest explains the aftermath of the battle. That image is a good example of the history of the first half of the 17th century.

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Spreading The Humanism

In the second half of the twentieth century, the decades of the fifties, sixties, and also that of the seventies, were characterized by several important struggles that, in consequence, were going to change the world. What it happened? As long as the economic development created richness and new possibilities in the United States and other western societies, people started to demand new rights within its own borders and also to protest about the social situation in the others. Meanwhile, the Soviet Union, the representative of the other bloc, had to cope with other sort of problems, like those of more liberty, more democracy or, even, more opened and tolerant societies. Then, the Third World experienced a little transformation in order to control somehow their natural resources to improve the economy. That’s what I can call the challenges of the three-world order.

The case of the United States is, maybe, the most important one in terms of human development. Here we have to explain a little bit how women initiated campaigns for equality and empowerment. The Worlds Together, Worlds Apart book, for instance, says: ‘Women now questioned a life built around taking care of home and family’ (p. 779). The main figure of that feminist movement was Betty Friedan, who described the ‘idealized 1950’s sub-urban home as a comfortable concentration camp’ (p. 779). Moreover, I must stressed the demands of African American people, who until those years had not the same rights than the whites and they fight to conquered them, but ‘legacies of racism and inequality were not easy to overcome. In spite of Supreme Court decisions, most schools remained racially homogeneous not only in the South but across the United States, as “white flight” to the suburbs left inner-city neighborhoods and schools to minorities’ (p. 779). Protests to end poverty, to spread education (both demands were included in the protests of Paris in May of 1968), to vote and to end the vietnam war, are other plaints of that era in the western.

Carlo Leidi, Prague, 1968

The Soviet Union, in the meantime, needed to control other kind of unrests. The main one was that of Prague, when workers and students supported Alexander Dubcêk in order to create a new model of socialism and also calling for more freedom of expression and even of debate. Later, soviet forces did a counterattack and quelled the revolt, although its spirit would remain in the air. The Prague Spring of 1968, as was baptized, inspired what other people would do later in Poland or even within Russia. I would like to emphasize the importance that had the edition of a book called 'The Gulag Archipelago’, in which the author, Alexander Sholzenitshyn, ‘repudiated the notion that Socialism could be reformed by a turn away from Stalin’s policies’ (p. 781). At the same time, the other major communist power, China, who had designed a 'Great Leap Forward' to transform the country into a big industrialized one, failed in its aims and had to deal with and severe famine which forced the rulers to think in other alternatives. Den Xiaoping would show us later another radical and different ones.

In the Third World, the more important thing could be the fact of trying to control resources like oil in order to enrich countries. Firstly, they were supposed to choose between alignment with the first world or with the second, but some radical policies took some nations to unify and empower themselves. The creation of the Organization of Petroleum Exporting Countries (OPEC) was an example of that collaboration, which included the next countries: Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Although at the beginning they seized oil sales creating, above all, big problems to the western consumers, the result of that was that emerged more efficient ones, like Canada or Mexico, and, what was the most important issue, the strategy was backfired when they were aware that revenues flowed back to the first world banks. As a result: ‘Some of it was in turn re-loaned to the world’s poorest countries in Africa, Asia, and Latin America, at high interest rates, to pay for more expensive imports - including oil!’ (p. 782).

To sum up, I would like to say that this age represents the spread of humanism, understood as the need of the people to control their own lives and to create a better society in which the differences of sexe, age, race or origin don’t exclude anybody. That’s to say, a world where people have more rights, more liberties and more capacities to decide their own destiny. 

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Cold War: Kitchen Debate

Khrushchev: It’s clear to me that the construction workers didn’t manage to finish their work and the exhibit still is not put in order ... this is what America is capable of, and how long has she existed? 300 years? 150 years of independence and this is her level. We haven’t quite reached 42 years, and in another 7 years, we’ll be at the level of America, and after that we’ll go farther. As we pass you by, we’ll wave "hi" to you, and then if you want, we’ll stop and say, "please come along behind us" ... If you want to live under capitalism, go ahead, that’s your question, an internal matter, it doesn’t concern us. We can feel sorry for you, but really, you wouldn’t understand. We’ve already seen how you understand things.

Nixon: It’s a very effective exhibit, and it’s one that will cause a great deal of interest. I might say that this morning I, very early in the morning, went down to visit a market, where the farmers from various outskirts of the city bring in their items to sell. I can only say that there was a great deal of interest among these people, who were workers and farmers, etc ... I would imagine that the exhibition from that standpoint would, therefore, be a considerable success. As far as Mr Khrushchev’s comments just now, they are in the tradition we learned to expect from him of speaking extemporaneously and frankly whenever he has an opportunity. I can only say that if this competition which you have described so effectively, in which you plan to outstrip us, particularly in the production of consumer goods ... If this competition is to do the best for both of our peoples and for people everywhere, there must be a free exchange of ideas. There are some instances where you may be ahead of us--for example in the development of the thrust of your rockets for the investigation of outer space. There may be some instances, for example, color television, where we’re ahead of you. But in order for both of us benefit ...
     

If you want to know more about this, click here: (1) Kitchen Debate - (2) Transcript

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Taking Different Paths

As you probably know, from last decades of eighteen hundreds to the first quarter of the twentieth century world economies were led by free trade and gold standard, in which social and economic progress settled. Meanwhile, imperialism and rivalries didn´t stop. As a result, the world was doomed to world war (thirty years of warfare, actually) and countries started to adapt their resources to the new context. Certainly, was the aftermath of the first world war what explains the end of the victorian boom, an era characterized by the economic interdependence all over the planet, and also by the idea that goods were manufactured in order to consume them wherever you live and work. One example of those was fordism, that spread the assembly line and mass production everywhere.

Why, finally, main economies left the previous model of economic globalization? Maybe, at this point we must study the post-war conditions. In this way, we can read the following in Worlds Together, Worlds Apart: 'Its causes went back to the Great War, which had left European nations in deep debt as they struggled to rebuild their economies and pay off war debts. To restore stability, Europeans borrowed heavily from the United States. When wobbly governments and small investors defaulted on their loans, the U.S. Federal Reserve reacted by raising interest rates. Starting in central Europe, financial institutions began to collapse. As banks fell, other lenders scrambled to call in their loans. Companies, governments, and private borrowers were soon floating in a sea of debt. The panic then spread to the world’s stock markets, which led to the Wall Street crash of 1929, which spurred more bank closures' (p. 719).

The situation was untenable and the United States enforced penalties to import and export assets, signing the Smoot-Hawley Tariff Act, and also taking the first step towards protectionism. In response, trading partners cut links and international relations started to break down. We can also read some words in the textbook concerning that worry: 'After the United States enacted protective tariffs, other governments abandoned free trade in favor of protectionism. Manufacturers cut back production, laid off millions of workers, and often went out of business' (p.720). In Europe, actually, the crisis started when an austrian bank, the Kredit-Anstalt Bank, collapsed. In consequence, diplomacy tried to arrange the issue. It failed, anyway. One example to solve it was the Paris Conference of 1931.

Patterns of Recovery

Liberal economies were, hence, put in question, claiming that the market place hadn't a self-equilibrating structure. Here, we must quote figures like John Maynard Keynes, who despite believing in the free market, also argued that it should be controlled by the state. Therefore, following these ideas, countries like the United States applied its policies to stimulate the economy. In this particular case, it was called New Deal. However, there were other kind of responses. Sometimes diametrically opposite. These replications relied on popular support to carry out its strategies, which it could be divided in hard-core command economies and medium-core command economies. In this way, the state became the representative of the common will. Let me analyze them briefly.

Collectivized Agriculture - Soviet Propaganda: 'Let's Achieve a Victorious Harvest'

On the one hand, the most relavant example of hard-core command economy was the Soviet Union, country in which the collective way gained immense importance. What did collective way mean? Roughly, collectivist policies tried to accumulate resources in the hands of the state. That's to say, everything you produce must be property of those who run the country's destiny. Private property and other individual rights were largely beaten in the name of the state. This sort of planned economy was very effective to mobilize people and technology, especially in war time. Nonetheless, it demanded much sacrificies (of all types) and the need of produce new tools caused the population, in the end, remain exhausted. In reality, things were not so easy: 'The realities behind the images (like in the poster above) of smiling farmers were low productivity, enormous waste and often broken-down machinery' (p. 724).

On the other hand, medium-core command economies like Japan and Germany did not take over the organization of production. The state was above everything, that's true, but it left some freedom for the commercial activity (always for the general interest), which was supervised but the state officials. The aim was to create loyalty and capacity to consume, but needing reliance on peripheries to satisfy their needs (great resources), so they kept the persistance in the way of empire because of primary staples for industrial recovery. Although Japan broke down, Germany, the Third Reich, was the best example of this kind of policy. Both of them were great militarized and led societies.

In conclusion, this financial crisis took countries to make decisions like to leave the gold standard and retreat into protectionism. Liberal democracies relied on the state as a key agent to stimulate economy. However, others, like the Soviet Union and Germany pushed for policies in which peoples support, expansionism and popular will played crucial roles, not only in the recovery but also in the nationalist and popular machinery.

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The Panic of 1907

'For the past two centuries recurrent crises have shaken the banking system and financial markets in the United States. One severe crises, the Bank Panic of 1907, disrupted financial markets to such an extent that it became and important catalyst for creating the Federal Reserve and the U.S. banking system as it operates today [...]' 

Click and Read: Lessons from The Panic of 1907 (Federal Reserve Bank of Atlanta, 1990)

Flag draped Wall Street with Trinity Church in the distance (Andy Kingsbury / Corbis)

                                              
More Information: Video - John Pierpont Morgan    

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Faith, Silver and Mercantilism

Not only social and political changes of the seventeenth century were important, but also their causes and consequences. In this period of time, instability spread all over the world, specifically in Europe, where we must mainly look for the reasons of these important shifts. The steady increase of wealth in states like Spain, Portugal, Netherlands, England or France (especially thanks to the gold and silver extracted from the colonial lands), involved all of them, and eventually others, in serious strains, particularly in the Thirty Years’ War.

In the lectures, Jeremy Adelman often talks about the essential change from interconnection to interdependence happened during this time, that’s to say, the path through which states and regions began to be more sensitives to whatever political and economic transformation that occurred in other parts of the world. One example of this new pattern of behavior was the adjustment of China, that moved southwards in order to produce the goods that europeans needed, which they exchanged for the silver that, meanwhile, was being extracted from the Americas mines and that the Ming Dinasty decided to use for its own consumption. Later, as we will see, the crisis of this commercial interdependence will be, among others, the cause of the upheavals within China and of what, finally, will incite the arrival of the Qing Dinasty. Anyway, as you can see, at that point in time the world was already interdependent from the Atlantic Ocean to the Indian Ocean. Let’s now explain the causes and consequences of this new reality.                                                                                    

Interior of the church of St Odulphus in Assendelft (Pieter Jansz. Saenredam, 1649)

On the one hand, we may point out some causes of this turning point. To start with, in my view, the main one was the paradox of becoming wealthy. While Europe was obtaining more richness, the competition among their states rose deeply. What’s more, they were divided into two religious groups: reformists and counter-reformists. By the way, it’s commonly said that convictions were an excuse to gain bigger revenues, and I strongly agree with this statement. The fact was that when silver, above all, became scarce, states had to deal with this threat through different replications. One of them was warfare (for instance, the long conflict of Spaniards in Netherlands), another one was piracy (Francis Drake’s actions), and so on. Secondly, besides competition, we have to stressed the fact that during the seventeenth century there was a sort of ice age, the world cooled, which caused famines everywhere and harmed seriously the harvests and the whole agriculture in regions like China (the Deccan famine in India was significant, too) where, as I said before, silver were exchanged for new goods in order to sustain its needs. The scarcity of those preciosities rebounded in the trade among China and Europe, forcing the Ming Dinasty to cope with revolts within its own borders. As you probably know, the consequence of that issue was the arrival of the Qing Dinasty, who created a new manchu state and also modified the bureaucracy and military priorities of the ancient one. In consequence, the Han majority was displaced. Finally, what was truly important was the Mercantilism, a new relationship between states and merchants. By quoting some words from the book Worlds Together, Worlds Apart, ‘the lasting prosperity of the landed interest depends upon foreign commerce’, what means that states wanted to ensure that because ‘augmenting our mercantile and royal navies, they necessarily become the means of our permanent prosperity and of the safety and preservation of our happy constitution’. So, as you can read, the aim was to enrich states and to maintain armies in order to defend the general interest of the countries, if necessary, by doing the war. One example of that was the Dutch East India Company. Russia, meanwhile starts to move westwards thanks also to commerce and warfare.

On the other hand, the impacts were crucial to understand the world that was coming. The increasingly importance of mercantilism caused the growth of important companies, which in the mid and long-term would probably have a different vision of their interests than those that previously had the states. Each state had toeholds in Asia, in Africa, in America too, but, from this moment, companies took control of the business in the name of each nation. In addition, the rivalry between europeans smash up the old dream of recreate the ancient Roman Empire. The Treaty of Westfalia (1648), closed the problems within Europe somehow, but moved them abroad, which supposed a reordering of the world. Another important point was the situation in which stayed nations like Spain who, because of the great debts acquired to fund warfare, lost its key possesions in Netherlands and political weight in the global framework after Westfalia. In the Islamic World, the Mughal empire weakened because of the trade with foreign companies.

In summary, the evolution and new behavior of global trade triggered drastic changes in the importance states gave to the monopoly of certain goods, emerging that way mercantilism. That was reflected in strains within Europe, and in the second half of the century, everywhere. If we add to the previous calamities, the answers to natural disasters, famines and discussions on religion, seventeenth century may be considered as the perfect modeler of the post-columbus world.

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A Financial Crisis

Do you know the story of the South Sea Bubble?

Click and listen (BBC Radio 4)

Hogarthian image of the South Sea Bubble (Edward Matthew Ward, 1816 - 1879)

  
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A History of the World since 1300

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