Economics for Dummies #5: Matrix Connection

That the existing economic system isn’t perfect is obvious and undeniable, but most proponents of capitalism then fall back to paraphrasing Winston Churchill:

“Capitalism is the worst form of economic systems – except for all the others that have been tried.”

 

I’ve never heard anyone explain a deep, structural problem with the system as well as Yanis Varoufakis does in Talking to My Daughter About the Economy. At one point, he quotes Agent Smith from the movie, The Matrix, who has this say to say about humans:

“I'd like to share a revelation during my time here. It came to me when I tried to classify your species. I realized that you're not actually mammals. Every mammal on this planet instinctively develops a natural equilibrium with the surrounding environment but you humans do not. You move to an area and you multiply and multiply until every natural resource is consumed. The only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. Do you know what it is? A virus. Human beings are a disease, a cancer of this planet. You are a plague.”

While we as a species have indeed caused and continue to cause enormous damage to the planet, is Agent Smith overstating the case?

 

The root of the problem, Varoufakis says, lies in we as a species giving higher weightage to “exchange value” over “experiential value”. First, let me explain what he means by those terms. Exchange value is, to over-simplify it, the act of putting a price on something – land, food, the poolside view in an apartment, labour. Experiential value is the emotion we feel via an experience, but for which we cannot assign a price – the view from a mountain top, for example.

 

Over the centuries, we’ve paid greater and greater weightage to exchange value over experiential value. An almost inevitable consequence of that is that we stop caring about things that don’t have exchange value. He gives an example of a forest fire. Say, nobody started it to clear the area for construction – it just started on its own.  A large chunk of trees and everything living there will probably get wiped out. Tragic. Assume the region that gets cleared out is of no use to humans, so we won’t take “advantage” of this natural calamity in any way. Yet:

“In economic terms, the health of market society will be rising fast. Not in spite of the forest fire but because of it.”

 

How can that be, you wonder. Until the fire, the region had experiential value to whoever walked through it, the solitude, the oneness with nature. But it had no exchange value. But now that the fire has started, exchange value begins to rise – the planes flown to try and put out the fire use fuel, which is adding to somebody’s bottomline. Same with the fire trucks scampering to the place. Those houses that were too close to the area and got destroyed will be rebuilt – adding money to those who construct houses and everything else that goes into a house, from pipes to furniture.

 

Which is why Varoufakis says:

“If a tree or microorganism has no exchange value, our market society behaves as if its destruction is meaningless. If exchange value can be derived from its destruction, we can’t act fast enough.”

 

And ends with a depressing statement:

“Deep down, we’re afraid that Agent Smith is right.”