We had some old friends to stay for a few days, and this morning one put milk into my hot coffee. I forgave her now as it serves nicely as an example. Imagine a cup of hot, beautifully black coffee and some cold, beautifully creamy milk. One is hot, one is cold, and together – as yet unmixed – they have a certain amount of energy in the form of heat (yes, even the cold one – anything warmer than absolute zero, -273°C has heat energy. This is called the Zeroth Law.). Once the milk is in the coffee, the new white coffee has exactly the same amount of heat energy as its constituent parts (this is the First Law), but there’s an important distinction: it’s whiter, and it’s colder. And you can’t go back to hot, black coffee and cold white milk without a good deal of trouble (engineers translate trouble as work input), if at all (engineers translate that as an irreversible process). That, with some artistic licence, is the Second Law.
So why is hot black coffee better than cooler white coffee? (Other than taste, of course, I’m going for the geeky metaphor here.) Hot black coffee has more available energy than white coffee. That is, should I choose to sacrifice my morning beverage thus, I could get more work done from a heat engine fed by hot black coffee and cold milk separately than I could from a mixture of them both. And why? Because the black coffee and cold milk are more different from their surroundings than the white coffee mixture is. Even though the total amount of heat is the same, only that which is different is available for use. Engineers call this available energy exergy and exploit it every chance they get. And I think politics is the same.
In New Zealand (and other countries too, I’m sure) we have two basic political sides: a left and a right. Historically, the right is more business and economics-minded, often consisting of people who have had successful financial careers before moving into politics, and who choose to wear shoulder-pads, lots of makeup, and tug waitresses’ ponytails. The left tends to be more social and therefore spending-minded, consisting of people who have children while in office, like taxes, and do not wear so much power makeup. Or whatever. One is good at piling up a whole lot of money in one place, and one is good at taking a whole lot of money and spreading it around. And at this juncture it would probably pay to remember that all generalisations are false.
The right would consider itself good at putting in work to make a state which is more different from its surroundings, and thus has a greater amount of exergy than otherwise. It works up the gradient in order to maintain it and increase it. It keeps cold white milk away from hot black coffee because it recognises that there is more potential when they are apart than if they were uniformly mixed. It’s the equivalent of taking your already hot cup of black coffee and heating it up some more. Or giving you a bigger and bigger cup of hot black coffee. Sounds good, right? But hang on …
The left would consider itself good at recognising that things like potential and availability are only important because of what they can be used to accomplish, not on their own merits. The left is good at using exergy to create a work output, or, spending that accumulated money on things which need money to be spent on them. It knows that the purpose of money is to be useful, and therefore that the only purpose of gathering more money is to be more useful. It is not the equivalent of adding milk to the black coffee, but of actually drinking it. Which is, after all, the point of coffee.
At this point the righties amongst you are thinking “No way! Not fair! We make the coffee and the lefties get to drink it!” Calm down. You didn’t make it. There was probably a state-owned coffee plantation somewhere which you sold off to an overseas crony and then took the money and called it “earning”. And before you lefties get too full of yourselves either, you guys need to understand that throwing money (or coffee) at people isn’t the same as using it or work output, it’s closer to just letting it grow cold so that everyone is equally lukewarm and grumpy.
So now that I’ve offended both sides, let’s pull it apart a little more. We’ve said that the right creates and maintains the gradient putting in work, but this is not strictly true. There is a gradient, a difference, and the goal of the right is to enhance it, that much follows. But the putting in work part doesn’t. It’s unfortunate that the terminology “making money” implies creation, when in the biggest earning (again, I use the word loosely) people or corporations it really it means no such thing.
Let me give a couple of examples. I have a house. I moved back from the UK to NZ with some savings in my pocket and, with a gift from my parents, had a deposit on a small 1950s weatherboard house in Glen Innes, Auckland. I’ve paid back the mortgage as fast as I could afford, helped by an inheritance from my grandmother, and now have a small way to go until it’s all finished. Being overseas for this year, I rent it to a family and have its running seen to by a property manager. Do not be fooled into thinking that I am working in this scenario. I’m not. I’m entirely passive. I’m sitting on the other side of the world and someone else’s work and earnings is paying my mortgage, due, in no small part, to the previous help of my family and their money.
This can only happen because of the difference between me and the tenant family. I have a house and they don’t. If we both had houses, they wouldn’t need to rent mine, and I’d have to actually use my own work to pay back the mortgage. If I were smart, I’d want to protect this difference as it’s the only reason for someone else to be putting money into my bank account. And, luckily for me, I live in a societal system called capitalism which does it all for me. You see, folks, the key to capitalism is to have this magical little thing in your bank account which attracts money. And it’s called money. If you have some, you get to have more. And then more, in proportion to what you already have. This is what engineers call an exponential trend, and it’s not a stable one. Don’t ever fool yourselves into thinking that this is a work input. It’s not the creation of anything other than a radically unstable snowball disaster of a system, as recent times have shown with the frankly horrifying statistics on the wage gap, the 1%, and all the rest of it. And now, for this year at least, my house and I are part of it as well.
Another example. I wrote some software a couple of years ago, and took it to an investors’ meeting for the university to see what the options were for selling it to other institutions. One of the guys met with me in a followup chat about what the investors’ expectations were of my software. They liked it. They thought it was good, there was a need for it, etc etc. Then they told me how the system worked:
- After a couple of years, they wanted a 30-times return on their money. 3000% after two years. And that’s a standard figure, apparently.
- They were realists, they said, so they knew there was no way it would generate that kind of cash working as a product should work, out in the world, doing its thang. They accepted that, but they still wanted to back me. But why?
- Their plan for my software was not to release it at all. It was to be a threat to bigger companies who would buy it for the sole purpose of not releasing it, and in return those bigger companies would give the investors the 3000% they expected.
This, ladies and gents, boys and girls, is how money is made, apparently. Through creation of something threatening which is then ransomed out of existence, with suppression of
the water-fueled car good ideas solely because they’re good (sorry folks, the second law doesn’t permit water-fueled perpetual motion either).
Does anyone else think that there’s something wrong here?
On the other hand, we have the socialist leanings of the left. And there are problems here too. First and foremost there’s the issue of sustainability. In our metaphor, the lovely cup of coffee will be finished before we know it, and soon enough everyone will be grumpy and decaffeinated. So somehow we need to find a way to replenish the coffee cup at the same rate as we’re drinking from it, and it’s an uphill battle. The left tends to use income taxes to drive up the hill, which is great in theory but fails in practice for two reasons: firstly, because those who earn the most money seem to have the greatest ability to avoid taxes, and secondly because taxes in general are seen as a punishment of success. Ayn Rand went to extraordinary extremes in Atlas Shrugged, but she got that perception right despite the craziness which followed. The right would rather use the just-as-unsustainable sale of assets, as well as eliminating most of the coffee drinking by others (the argument against social welfare being that it’s not fair that someone gets money for doing nothing. Oh, but, um, hang on a moment …). What we need is a way to stem the tide of capitalist non-really-earnings and turn it into something gentler and more sociable, but simultaneously sustainable and practical. Let me give you another example.
Once upon a time there was a family who sponsored refugees. This meant that they had individuals or families living with them for a time – months, usually – before settling in more permanent accommodation. Giving the refugee families money straight-out wasn’t something they could afford to do, and it wouldn’t have actually helped change the situation; it may have paid the rent for a few weeks or months, but in the long run the refugees would still be renting and still be permanently paying money off someone else’s mortgage. So they changed the system. The quiet superhero mum and dad bought a house and rented it to the refugee family, using their own house as leverage and the rent money to service the loans. Just like any aspirational landlord would do. But when, in a decade or so, the mortgages were paid off, the mum and dad sold the homes to the families. For a dollar. And with – in my mind anyway – a big, fat, left-handed one-finger salute.
We’re not going to change capitalism any time soon, mostly because those with the dosh want to keep it, and as we age and become richer, we too become more righty in our views and want to keep it too. It’s seductive. We’re human. Our hair falls out and retirement hoarding looms. And, of course, as we grow our own families they grow in importance over the rest of society. Our focus narrows from the broad distances of youthful revolution to our immediate circumstance.
But there must be ways to do this better. On one hand, we need gradients in order to have any kind of efficiency of scale in our creation of goods. One person grows tomatoes, one person grows lettuce, and they swap along the tomato-vs-no-tomato and lettuce-vs-no-lettuce gradients. It’s simply not practicable for everyone to grow all the tomatoes and all the lettuces and everything else that they need. We need specialists and exchanges simply because of their efficiencies of scale, and gradients must exist to drive those exchanges. Trying to remove or ignore them altogether (the very extremes of communism) is not practical or practicable. But neither is using capitalism to drive up the gradients. As we’ve seen, it creates an unmanageable snowball that does not involve actual output. Somehow we need to use the system better than how we currently do. To use, where we can, capitalist cash for socialist strategies, to stabilise the unstable, to break up the snowballs before they crush us (or more likely, someone else lower down the slope).
Money should be earned. Wealth should be created, properly, by – like, I mean, you know – creating something. Coffee should be drunk. Black and hot, with friends, if possible.