In his podcast, Dave Smith has likened the lockdowns to gasoline and the murder of George Floyd to a spark. But why were the lockdowns fuel for social unrest? One of the reasons the lockdowns paved the way for social unrest is that they led to a widespread breakdown in the division of labor. This ...
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In his podcast, Dave Smith has likened the lockdowns to gasoline and the murder of George Floyd to a spark.
But why were the lockdowns fuel for social unrest? One of the reasons the lockdowns paved the way for social unrest is that they led to a widespread breakdown in the division of labor. This could only result in more conflict and social unrest.
Economist Ludwig von Mises has explained why this is so. In Human Action, Mises presents the division of labor as more than a purely economic concept. Although he certainly expounds the increased productivity attributable to the division of labor, he also heralds it as civilization itself. It is social cooperation and mutuality. He presents it in opposition to conflict and violence. The division of labor is predicated on and also results in peaceful relations between individuals.
Here, I want to discuss the gasoline, and not the spark. Mises.org writers have discussed the spark and the related issues of institutional problems with police departments, police brutality, a breakdown in trust in the police, and police militarization.
What Is the Division of Labor?
The division of labor is just what it sounds like: one person does one job while another person does a different job. In a market economy, these jobs are not assigned randomly, but are purposefully chosen by each individual according to his or her own skills and values. Instead of trying to produce everything we want to consume on our own, we produce one good and offer it in exchange for a variety of goods we prefer.
The ability to consume a larger variety of goods is not the only benefit of the division of labor. Total production increases enormously, such that each individual who participates in the division of labor enjoys a massive increase in his standard of living. The division of labor allows us to emerge from bare subsistence and flourish as a civilization, producing art, writing philosophy, celebrating holidays, and exploring space. These things are impossible for man in economic isolation.
One of the greatest laws of economics is the law of association, which Mises proves mathematically (uncharacteristically) in Human Action. The law of association shows that everyone who participates in the division of labor gains as a result. No one is excluded from this opportunity. Thus,
The law of association makes us comprehend the tendencies which resulted in the progressive intensification of human cooperation. We conceive what incentive induced people not to consider themselves simply as rivals in a struggle for the appropriation of the limited supply of means of subsistence made available by nature. We realize what has impelled them and permanently impels them to consort with one another for the sake of cooperation. Every step forward on the way to a more developed mode of the division of labor serves the interests of all participants. (p. 159)
Unraveling the Division of Labor
The undoing of the division of labor and the social cooperation that it both requires and entails is social conflict.
The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another. (p. 817)
During the months of government-imposed lockdowns, everybody was prevented from participating in the division of labor as they were accustomed to. Even those who kept their jobs could not exchange goods with those who did not keep their jobs. The entire social nexus was reduced to a small list of government-defined “essential” services. The increase in unemployment is really only a part of the picture of the economic harm caused by the lockdowns. Everybody who relied on the goods and services produced by the so-called nonessential businesses was harmed: consumers, employees, and proximate businesses in the structure of production alike.
Man shall not live by government-defined essential services alone, however. For a short time, and where possible, citizens resorted to black markets and self-sufficiency (which, as we have seen, is hardly sufficient). But a spark and the cover of protests in the streets gave some a chance to acquire goods by theft. These opportunists are aided by additional mayhem like vandalism, violent assault, and arson. Unfortunately, both insufficient and over-the-top responses by police also add to the mayhem, giving violent rioters more opportunity and also poorly reasoned, two-wrongs-make-a-right self-justification for their aggression.
We only have three options for getting what we want: we can produce it, we can take from somebody who has produced it, or we can exchange peacefully with somebody who has produced it. The third option is the division of labor, and it is the only one that involves peaceful cooperation with others. It is also the only option that sustains civilization. Looting, vandalism, assault, and arson are regressive—they are not a means to advance society. They are the unraveling of society and the social harmony brought about by the division of labor.
Restoring Social Harmony
But even the opportunistic looters should want the mayhem to end and the peaceful division of labor to resume, according to Mises:
Seen from the point of view of the individual, society is the great means for the attainment of all his ends. The preservation of society is an essential condition of any plans an individual may want to realize by any action whatever. Even the refractory delinquent who fails to adjust his conduct to the requirements of life within the societal system of cooperation does not want to miss any of the advantages derived from the division of labor. He does not consciously aim at the destruction of society. He wants to lay his hands on a greater portion of the jointly produced wealth than the social order assigns to him. He would feel miserable if antisocial behavior were to become universal and its inevitable outcome, the return to primitive indigence, resulted. (p. 164, emphasis added)
Peace can only resume when entrepreneurs find it profitable to reopen their businesses. Government lockdowns and violent mobs are data for the entrepreneur’s decision-making process. Mises warns that it can get so bad that civilization crumbles:
If apart from the market and outside of the market there is robbing and plundering, these facts are a datum for the market. The actors must take into account the fact that they are threatened by murderers and robbers. If killing and robbing become so prevalent that any production appears useless, it may finally happen that productive work ceases and mankind plunges into a state of war of every man against every other man. (p. 646)
This, then, is the difficulty. Peace and cooperation are both a prerequisite and an outcome of the division of labor. Entrepreneurs need to be assured that laws against looting, murder, and property destruction will be enforced to such an extent that they can reopen their businesses and rehire employees.
But this leads to yet another problem: when the police themselves are guilty of mishandling justice and sometimes even instigating violence, all trust breaks down and businesses may simply leave the area.
Mises had some comments about the issues police departments have in properly carrying out their jobs, and they have to do with the lack of economic calculation:
Success or failure of a police department's activities cannot be ascertained according to the arithmetical procedures of profit-seeking business. No accountant can establish whether or not a police department or one of its subdivisions has succeeded. (p. 305)
When I posted this quote to social media recently, somebody asked what Mises proposed as a solution to this problem. The quote is taken from a discussion about the profit and loss mechanism of the market, which is contrasted with bureaucratic management. Mises’s guidance was that citizens and government officials should keep a close eye on budgets to make sure that government services are provided in the best possible proportions and in the best ways. Mises’s greatest student, Murray Rothbard, would later provide a solution that allows security production to be regulated by the same profit and loss system of the market economy.