The Economics of The Iron Heel

The Iron Heel is not one of those books that a person reads for leisure; a huge chunk of the book is devoted to intellectual / philosophical discussions about socialism, and at times it reads more like a socialist tract than an actual novel. But despite the dry, academic tone in certain chapters, The Iron Heel does posit solid, logical arguments for socialism, and it helps that some of the supporting evidence for socialism - and even its objections - are dramatized through dialogue. It’s certainly livelier reading the arguments and counter-arguments through the lenses of different characters, than if I were to read an economics textbook, for instance.

One chapter I found fascinating was “The Mathematics of a Dream”, because it explained in such simple terms the unsustainability and shortcomings of a purely capitalist system. The basic premise is that because capital begets capital (i.e. retained earnings, profits), this leads to it being reinvested in other ventures –  by bonds, shares, etc. Eventually the amount of capital accumulates, and other industries and markets have to be searched out in order to dispose of the excess capital. But what happens when all the industries in your country are thriving? When you hit saturation point? You would then have to go on investing in “developing” countries, and so on and so forth. But these countries would go on to become developed themselves, and soon would be searching out other countries in which to invest. Ultimately, everyone would run out of space and countries to dump their excess capital. And eventually an economic slump is created.  

I don’t presume to be an expert in economics. But in my own simple understanding, I think that as much as Jack London manages to point out many flaws in the capitalist system (the wastefulness, the misallocation of resources, the pitting of labour against capital), I’m not entirely convinced that socialism is the be-all, end-all solution to the problem.

One of the things that London foresees is the rise of labour castes. He narrates that there will be skilled labourers who abandon the socialist cause in exchange for higher pay, higher job security, benefits like housing, etc. In today’s terms, they would be the white-collar workers. London portrays them as traitors, and that there will be very strong altercations between them and the proletariat, or the blue-collar worker. But what London didn’t anticipate is the growth in literacy rates and school attendance rates. And he certainly didn’t expect the emergence of a knowledge-economy. The demand for white-collar jobs grew, and the supply grew along with it (or vice versa). So his vision of the “proletariats” rising up in a sort of brotherhood against the skilled labourers remained only a vision. In reality, people were more concerned about becoming white-collar labourers themselves, to move upwards in the “caste” system. They didn’t want to rally against them, they wanted to join them.

London keeps forgetting the very first premise with which he himself started: that the average man is selfish. When faced with the choice, most people would opt to work within the system for the sake of his family or his own livelihood, rather than have to work against or revolutionise the system. Sounds bleak, but this was the proposition that London himself recognized, and verbalized through his main character.

This oversight, I would say, is the major flaw in his argument for socialism. In the chapter “The Machine-Breakers”, London shows what he perceives to be the foolishness of small capitalists and manufacturers. He says that they are pushing against the stream of social evolution, because although these smalltime capitalists recognize that oligarchs and big corporations are more efficient at producing goods, they are bullheaded in demanding from the government a more competitive market. It’s true that there are many laws that are in place to promote competition, and there are so many regulation bodies and watchdogs to make sure that a competitive market stays that way. But London’s idea that there is simply no place for smalltime capitalists in the economy is faulty. There are many niches in which smaller businesses and entrepreneurs can thrive, and we only have to take a look at the many small businesses and start-ups that have sprung up over the past decade to see that people don’t necessarily go for the big corporations.

I would argue, though, that the biggest flaw in London’s own argument is that socialism is the alternative to capitalism, when eerily, capitalism and socialism have similar modes of operation. If the flaw of capitalism is that power is concentrated in the hands of the rich, the flaw of socialism is that power is concentrated by those actually in charge of making decisions. Theoretically, socialism is a system in which everyone, every person, gets a say on how resources gets allocated. Practically speaking, there will only ever be a select group of people who would be involved in the actual process of distributing resources. We can take a look at Animal Farm. It starts off well enough, but to be sure, we can’t have everyone making decisions. So the decision-making power goes to the pigs. But power corrupts, and boy, does it corrupt absolutely.

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EDIT (01/02/2016) - This is an interesting quote from Herbert Spencer, a biologist-philosopher that London himself greatly admired:

Every one is from time to time surprised by others' behavior, and even by the deeds of relatives who are best known to him. Seeing, then, how uncertainly any· one can foresee the actions of an individual, how can he with any certainty foresee the operation of a social structure? He proceeds on the assumption that all concerned will judge rightly and act fairly; will think as they ought to think, and act as they ought to act; and he assumes this regardless of the daily experiences which show him that men do neither the one nor the other [...] - The Man versus the State

 

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If man is selfish, therefore, what makes the centralisation of power in the socialist system any better than the centralisation of power in the capitalist system? Can we really trust that the people in charge of making decisions in a socialist system are nobler than the ones decision-makers in a capitalist system? Ultimately, what I’m saying is that both economic systems have flaws. It may be a cop-out statement, but I think it’s essential that these two systems stop being seen as polar opposites, when both are clearly flawed, and both are clearly imperfect.