First off, I would like the court to note that my girlfriend who “claims” to love me, mocked me for this title, and accused me (wrongly) of being a giant nerd. She also “steadfastly” refuses to put my blog in her Favourites.
Yes it hurts, but I carry on. Now where was I?
Oh, yes:
“Britain and the USA, the two countries that are supposed to have reached the summit of the world economy through their free-market, free-trade policy, are actually the ones that had most aggressively used protection and subsidies.”
—Cambridge economist Ha-Joon Chang
Warning: This Is LONG and it’s really for Ryan (but if you’re interested in a little history of computer technology, state subsidy, ingenuity, protectionism and the Internet…)
A MASS DEBATE (SAY THREE TIMES QUICKLY)
‘Who’s Ryan?’ you might ask. The brilliant Ryan is a fella I know a little who comments on this blog now and then. I can tell you without hesitation that he’s intelligent, erudite, he has a remarkable memory, and the information he passes on is appreciated (although it took up a lot of my time tonight, when I should be working).
Ironically, although a comment in itself is gratifying, in the many responses he’s written to whatever I write, I don’t think he’s nodded an agreement, conceded he learned something, or barely said a nice word—in fact, quite the contrary. This is even more interesting to me by fact that I so often agree with his comments.
CASE IN POINT
I wrote a blog the other day pointing out that there is a significant degree of tax payer subsidy/state intervention in the American economy and that this is worth mentioning, particularly in light of how often it is denied; how the American system is thought to be so profoundly free market capitalism
My four off-the-top-of-my-head examples of state intervention in the economic system—thus a degree of state capitalism—were:
1) the pentagon’s tax-subsidized trillionaire child known as the computer industry.
2) the torturous stench of tax-payer subsidized factory-farm agribusiness.
3) tax-payer financed invasions and ruinations of countless countries, enriching and protecting private oil companies.
4) the bailout of the usurious banking institution.
AND THEN…
I backed up the comment about the growth of computer technology (and other massive industries) being state subsidized/publicly funded to a significant degree with a quote from Chomsky, that began:
I came here [to MIT] in the mid-50s…[1955] The electronics lab, along with the closely connected Lincoln Labs, was just developing the basis of the modern high tech economy. In those days, the computer was the size of this set of offices and vacuum tubes were blowing all over the place [with] computer printouts, paper running everywhere.
AND SO IT BEGINS
Ryan’s comments were, of course, negative—and never intentionally conceded a thing, or asked for clarification, or engaged in dialogue. Believe me, they could be worse. Ryan’s clearly a good guy. Nonetheless…
Ryan says:
Hm. Chomsky’s thesis appears to be…incompatible with reality.
Pete says:
You see what I’m saying? And given that I used Chomsky to back up what I was saying, well, gosh, I get the implication and, well, it just hurts a lot, that’s all.
Ryan says:
The IBM 1401 was introduced in 1959. Mr. Wiki says it sold or leased about 2000 units through 1961, and the lifetime number of active 1401s peaked at around 10,000. If I’m reading that article right, the US computer market was about 8000 computers in 1961.
Pete says, from that same Mr Wiki, in The history of IBM:
In the 1950s, IBM became a chief contractor for developing computers for the United States Air Force’s automated defense systems. Working on the SAGE interceptor control system, IBM gained access to crucial research being done at Massachusetts Institute of Technology, working on the first real-time, digital computer (which included many other advancements such as an integrated video display, magnetic core memory, light guns, the first effective algebraic computer language, analog-to-digital and digital-to-analog conversion techniques, digital data transmission over telephone lines, duplexing, multiprocessing, and networks [which appears to be proto-Internet stuff, too]). IBM built fifty-six SAGE computers at the price of US$30 million each, and at the peak of the project devoted more than 7,000 employees (20% of its then workforce) to the project.
And though this is not to do with the conversation, while we’re on the subject of funding, by whatever means, this is interesting history:
Although IBM actively worked with the Hitler regime [subsidized!] from its inception in 1933 to its demise in 1945 [IBM’s New York headquarters and CEO Thomas J. Watson acted through its overseas subsidiaries to provide the Third Reich with punch card machines that could help the Nazis to track down the European Jewry (especially in newly conquered territory)], IBM has asserted that since their German subsidiary came under temporary receivership by the Nazi authorities from 1941 to 1945, the main company was not responsible for its role in the latter years of the holocaust.”
Chomsky’s words, off of which Ryan was bouncing:
I came here [to MIT] in the mid-50s…[1955 to be exact, four years before the IBM computer came out]. The electronics lab, along with the closely connected Lincoln Labs [see below], was just developing the basis of the modern high tech economy. In those days, the computer was the size of this set of offices and vacuum tubes were blowing all over the place [with] computer printouts, paper running everywhere.
Pete quotes from Mr Wiki, about Lincoln Labs:
MIT Lincoln Laboratory, also known as Lincoln Lab, is a federally funded research and development center managed by the Massachusetts Institute of Technology and primarily funded by the United States Department of Defense…
The Lincoln Lab was the mother to a revolution in modern computing in 1956, the TX-0 computer. The TX-0 was born in the Lincoln Lab, created as a military development and shipped over to the MIT campus on a long-term loan. This loan was priceless in terms of its value towards computer programming…
Ryan writes:
In 1965, DEC introduced the PDP-8 minicomputer. Hugely popular, it sells about 300,000 units. That’s because every medium-to-large sized business on the planet was using something this size or larger to do mundane stuff like customer management, billing, and various other batch-processing projects that were previously done by hand.
From Pete, quoting Mr Wiki:
[DEC, Digital Equipment Corporation] was founded in 1957 by Ken Olsen and Harlan Anderson, two engineers who had been working at MIT Lincoln Laboratory on the TX-2 project. The TX-2 was a transistor-based computer using the then-huge amount of 64 K 36-bit words of core memory. When that project ran into difficulties, Olsen and Anderson left MIT to form DEC.
From Ryan:
These are benchmark computers that sold, much earlier than Chomsky would have you believe, in mass-production numbers to private enterprises.
From Pete:
What you assume Chomsky was saying never really occurred to me. I just got the sense that Chomsky was making a point: that the journey of the computer’s development/history has been heavily state funded/tax-payer subsidized. The results of this public funding led in some sense all the way to the relatively recent boom of the personal computer—which weighs considerably less than the 5 ton IBM 401.
Chomsky comments, obviously loosely:
It was not until the 1980s after 30 years of development essentially in the state sector [tax-payer] that these things became marketable commodities [for individuals, obviously] and Bill Gates could get rich.
Ryan says:
Of course, we shouldn’t discount the shadowy government agency that was an avid customer of early computing equipment: the US Census Bureau, purchasers of the first UNIVAC I.
Pete says:
Indeed—even though I don’t know a thing about it, you do, and we shouldn’t discount this tax-payer subsidized government US Census Bureau.
Ryan says:
The first six customers for UNIVACs were all government bodies (though one was stationed at New York University; I’m pretty sure Chomsky didn’t mean to excoriate government-funded university research projects, did he?), but 12 of the next 13 went to companies. Big ones, but not government entities.
Pete says:
You’re information is terrific, as always, and increases my very limited knowledge of that time. Thank you.
But Chomsky, to me, is neither applauding nor excoriating government-funded research projects. He’s excoriating the lie that these massive market successes are not presented as also arising from great amounts of public, tax-paying subsidy, which denotes a sort of state capitalism, or public subsidy for private profit.
His point, from my take, is that this is a fact, and it should be known. That’s the essence of it.
Ryan says:
The original relay-based and tube-based computers of WW2 were indeed military creations, but they were outgrowths of pre-war technology, and well, there was a war on [what better time for increased state subsidy in R&D, invasions of non-complicit countries and bailouts of banks]. Technology was deficit-financed [by the tax-payer] and put to the service of fighting off existential challenges to democracy. Why does Chomsky hate democracy?
Pete writes:
Again, as you point out, these earlier models were “military creations”, which means tax-payer/publicly subsidized—Chomsky’s point. It has nothing to do with how Chomsky feels about democracy. Indeed, I believe he feels the general public/tax-payer should know, in a democracy, the truth of their profound role in subsidizing these seemingly “free market” adventures. I would say that’s the exact opposite desire of someone who “hates democracy.”
Ryan says:
Ahem. Returning to our narrative, MIT got a lot of pure-research money. Also, there were lots of military applications of computers, at a time when, as much as Chomsky loves to deny it, democracy was facing yet another existential battle, the Cold War.
Pete says:
That’s Chomsky’s point, too. Pure tax-payer research money. Development of technology via the state. This is to me, contrary, say, to Wilber and Orville Wright in a field somewhere in Middle America with their own creations, at their own expense, trying to take flight. That, to me, is an example of a very pure spirit of entrepreneurialism and even capitalism at its magnificent best.
Chomsky, in my reading, doesn’t out of hand deny the threat of the Russians. He gives an alternate view on that threat, with the suggestion that it was exaggerated at different times for political expediency—and, indeed, on one level, to ensure the ongoing tax-paying/public-subsidy of, for instance, the Military Industrial Complex. And if that is a lie, then the military-decorated President Eisenhower lied long before Chomsky.
Eisenhower says in his 1961 Farewell Speech:
This conjunction of an immense [tax-payer funded] military establishment and a large arms industry is new in the American experience. The total influence—economic, political, even spiritual—is felt in every city, every Statehouse, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.
We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.
Ryan says:
A brief interlude here from my more serious point: Chomsky seems to assume that any endeavor in which research is funded with public monies and in which private companies use the public knowledge thereof to create profitable products is some sort of mortal taint on capitalism.
Pete says:
It’s funny, I don’t read him that way at all. Indeed, it pays his salary, for which I have always felt he is grateful, and aware of the paradox. My take is he’s pointing out what people and the general media seem to forget, or deny, or don’t grasp—the type of capitalism this is, at least to a considerable degree: state capitalism. And this state capitalism (and massive protectionism, by the way) via the Big Government Powers That Be is a massive part of what is generally heralded as free market capitalism.
Ryan says:
Is Chomsky thus arguing against publicly-funded research, or in favor of government-owned patents and licensing for publicly-funded research?
Pete says:
The way I see it, neither. In fact it’s not his point at all. Again, like you do to a certain degree, he’s pointing out the reality of state capitalism.
Ryan says:
It’s as if he’s decided the only fiendish path is the middle road taken by the US.
Pete says:
By “middle road”, I think you might be saying subsidized road (as opposed to the Buddhist idea). Either way, that is Chomsky’s observation, too. These successes are subsidized by the state—and thus are by definition a form of state—or a “middle way”—or publicly subsidized capitalism.
Ryan says:
Though I wouldn’t put it past him to be arguing for the latter of my two weird choices, in which case I would have a philosophical disagreement with him about the value and purpose of intellectual property.
Pete says:
He’s saying little about either, as far as I can tell. But instead of insulting him, or presuming so, just write him. Be kind about it, and he’ll write you back very quickly. He’s great that way, and although you don’t read him as I do, he is a wealth of knowledge and observation—as are you, by the way.
But as Chomsky has said, the inability to see that this economy has been intensely publicly subsidized and state protected [what is the Iraq War, to a degree, if not protectionism?] goes “…beyond manufacture of consent. It belongs in the history of organized religion.”
Ryan says:
And the founding fathers would be on my side. (“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”)
Pete says:
Whether Chomsky would agree or not, I can’t say. But if I understand this correctly, I agree with you and the Founding Fathers, too.
Either way, to a significant degree the “Authors and Inventors” of the works we have been speaking of here were, indeed, often heavily, state/tax-payer subsidized. This may be either good or bad, or neutral, at different times, in its meaning, but a fact nonetheless (and an often unspoken one), which Chomsky was pointing out, and you have also pointed out.
Ryan says:
Okay, now it’s Chomsky versus the Internet. DARPA/ARPA did indeed provide a lot of funding for what became the Internet, but its function was, at least until the 1990s, primarily as a university research network. They were the prime users, and passing data among those universities was a prime purpose.
Pete says:
I don’t see it at all as you do, as a Chomsky vs the Internet argument. In fact it has nothing to do with that. And Chomsky certainly wouldn’t see it that way. He in fact sees it as you do: “DARPA/ARPA did indeed provide a lot of funding for what became the Internet.” In other words, “a lot of funding for what became the Internet” was state funding/public/tax-payer funding.
Ryan says:
The separate military networks, well, heck, you read the article and draw your own conclusions.
A second interlude: Is Chomsky innumerate?
Pete says:
I’m not sure if Chomsky is innumerate, but I doubt it, but I must be nearly illiterate, for I had to look up innumerate. It means: Adj. 1. innumerate—lacking knowledge and understanding of mathematical concepts and methods. Chomsky seems pretty smart to me.
Ryan says:
Okay, he’s decided that the roots of the US computer industry are in Pentagon-funded research projects.
Pete says:
It seems to me, according to some of the quotes above from Wikipedia and elsewhere, from Chomsky, from my own research, and from many of your own quotes, a lot of the roots of the US computer industry are tax-payer/subsidized research for military/Pentagon use.
Ryan says:
He himself describes that industry as a “trillionaire child.”
Pete says:
That isn’t Chomsky’s line, it’s mine. Maybe computers aren’t yet a trillion dollar industry, but I would guess it’s got to be close, my god. And an incredible economic success story. Almost like no other we have seen, except for perhaps the oil business in times of war over oil [see how effective publicly subsidized protection is?]. Either way, despite my best efforts, I remain relatively innumerate.
Ryan says:
Is it just me, or haven’t those companies (and their employees) paid back in taxes way more money than the Pentagon ever spent on computer research (and quite possibly, on everything else the Pentagon spends money on, too)?
Pete says:
I can’t say whether you’ve paid back in taxes way more money than the Pentagon spends, but I’d doubt it. As for the Pentagon, I don’t know if you’re correct, but even if you are, does it make it all right? Some, yes, surely. Some, surely no?
For instance, the weapons industry in all its facets: I don’t know if a huge economic return on an industry of that nature, say, from a higher plane of observation, would justify its existence morally—at least at its tentacled, worldwide pervasive size.
And no countries can come close to matching the US’s weaponry research and development budget, but I also despise, say, the creation and foul smuggling of small arms (Russian AK-47s etc) from former Eastern Bloc and Middle Eastern countries and elsewhere to all across debt and civil war riddled Africa.
Ryan says:
Doesn’t that make the Pentagon’s profligate spending [tax-payer money] a net benefit to taxpayers? Doesn’t that make Pentagon spending seem like one of the most fruitful engines of any economy ever?
Pete says:
To question one, it depends on how one judges “net-benefit.” Actions, of course, have consequences. The unstoppable growth of, say, the weapons industry, and use of said weapons, has huge consequences, including ongoing cost, massive environmental degradation and innumerable civilian casualties.
Nonetheless, if the key economic marker is, say, GNP, perhaps you’re right. For me, that is instructive yet vastly incomplete.
That said, the factors that define a healthy or unhealthy economy are simultaneously so simple and so complex, disfigured and manipulated that their distillation by an innumerate-disadvantaged fool like me remains beyond challenging.
However, in my opinion, statistics on mental stress, physical health, general happiness, incarceration, freedom of speech, working hours, environmental degradation, racial and social justice, education and on and on should be an inherent part of the equation.
Either way, the price and cost of externalities (as you know cost via unaccounted-for damages) are forever left out of the equation, making, perhaps, economists the most innumerate.
With regard to economic health, the American economy, in all its greatness and flaws, I think has a debt of 11 trillion dollars and counting. And I’m not sure—and I’m sure you know more of this then I do—but I don’t think that even includes personal debt. That seems, at least to some degree, a sign of ill-health.
Ryan says:
Why does Chomsky love the Pentagon?
Pete says:
I’m not sure what you mean. But even as sarcasm, it deflects the conversation from Chomsky’s point, which is that state subsidy has played a large role in America’s capitalistic journey, making it a form of state capitalism—as you in a sense, by certain quotes, have also pointed out. Again, a debt of $11 trillion, a number most any mainstream economist would have mocked fifteen years ago as even a possibility, must be some kind of reflection of excessive public subsidy/government spending and poor fiscal management.
Ryan says:
I know a little about the private competitors to the Internet, because I was an avid user of them (FidoNet, most notably) starting sometime in the late 1980s. To the extent those private competitors disappeared after the rise of the Internet for everyone (and to clarify, the Internet was not, to any meaningful extent, “privatized.” Instead, it was thrown open to commercial use, and an NGO (the IETF) was put in charge of its governance)…
Pete says, quoting IETF:
The first IETF meeting was on January 16, 1986, consisting of 21 U.S.-government-funded researchers…During the early 1990s the IETF changed institutional form from an activity of the U.S. government [hardly NGO] to an independent, international activity associated with the Internet Society.
Ryan says:
…it was largely because it was the biggest coherent and interconnected network, and it had the best stuff (like Usenet) on it. Before I entered SFU, I was paying a private provider (Computer Dynamics) for a few years to get access to Usenet and my own Internet e-mail address via dial-up.
Pete says:
I am sure what you say there is correct, but I don’t know enough about what you’re saying there to comment. But I read this from Mr Wiki:
“In the 1960s, computer researchers, Levi C. Finch and Robert W. Taylor pioneered calls for a joined-up global network to address interoperability problems. Concurrently, several research programs began to research principles of networking between separate physical networks, and this led to the development of Packet switching. These included Donald Davies (NPL), Paul Baran (RAND Corporation), and Leonard Kleinrock’s MIT and UCLA research programs.”
As far as I can tell:
NPL is England’s National Physical Laboratory. I couldn’t find out if this was publicly funded, but I think so.
As for Paul Baran and RAND Corporation, I read this from an article on Paul Barand entitled The Influence of Paul Baran On The Development of the Internet:
“The Internet dates back to the beginnings of the Cold War. In 1957, the Union of Socialist Soviet Republics has launched the Sputnik satellite. This set off fears in the United States about a possible technological and scientific gap between the two nations [that according to Paul Baran did not exist]. In response to this, before the end of the year, the United States’ Department of Defense (DoD) created the Advanced Research Projects Agency (ARPA) [see Ryan’s mention of publicly-funded ARPA above] in order to establish an American lead in science and technology. One of the earliest concerns of the [publicy/tax-payer funded] DoD was the issue of communications in the event of a nuclear war…
Near the beginning of 1960, the United States Air Force commissioned Paul Baran of RAND Corporation to study the possibility of creating a decentralized network which could survive a nuclear attack, while allowing the United States to retain command and control of communications to it’s Army, Air Force and Navy in order to launch a counter attack. The United States saw a survivable communications framework as a necessity in the case of a nuclear attack, in order that proper command and control might be maintained.”
And Leonard Kleinrock’s MIT and UCLA research programs are, by definition, publicly-funded/state subsidized. Huge state subsidy, it seems.
Ryan says:
However, the story of the really big private networks of that era (Compuserve, AOL, The Source, others) is a whole other tale, and I’m not sure what Chomsky’s explanation for their existence in the first place is. But I suppose the existence of those very large private networks doesn’t fit Chomsky’s Standard Model…
Pete says:
I don’t know, but I don’t think Chomsky would disagree with a lot of your facts and statistics. Nevertheless, you would have to define Chomsky’s Standard Model, then send him that definition and get his thoughts on it to see if it is what he’s saying. From there your supposition would be in greater integrity.
Ryan continues:
…nor does the fact that to a large extent, the success of the Internet had little to do with infrastructure, and everything to do with having a nice, well-developed interoperability protocol (TCP/IP and related technologies) at a time when inter-linking the big private online companies looked like a really good idea.
I mean, I guess what I’m saying is that Chomsky has created a ludicrous version of computer history to suit his own rather bizarre preconceptions.
Pete says:
It seems to me that his preconceptions are that the foundations of computer development have been state subsidized to a significant degree. This appears to me accurate by both what he has written and what you have written.
Ryan says:
That his delusion has its adherents doesn’t make it less daft.
Pete says:
What I discovered in literally a few minutes of searching—and I have explained what I believe Chomsky was saying—is that computer technology in America has developed not in a small part by state intervention/public subsidy (and protectionism has also played and plays a major role in many industries).
This appears to be true despite the ongoing perception and media expression of America being so free market. Several of your comments back this up.
Ryan says:
The Chomsky Model would probably explain the pocket watch as a tainted commercialization of the militarily-funded Longitude Prize. Which is a way of looking at history, but doesn’t really capture the essence of the story, does it?
Pete says:
Again, you’d have to define the model, and be correct about the definition. Why use an analogy when we’ve just had all these examples of state subsidized development with the computer? By no means the complete story; by no means a denial of remarkable ingenuity; by no means one type progress is better than another. It might even be a great thing. I can’t see why admitting the truism of state intervention is necessarily so terrifying, or negative (although it may be). Perhaps because we’ll feel scared like the people who voted McCain because they were afraid of Obama’s socialism!
Fair enough. But in the words of Conservative John Lukacs:
“[Conservatives] who oppose governmental regulations, bureaucracy, further and further applications and extensions of the American welfare state, are, more than often, believers in and vocal supporters of ‘defense’ expenditures, of the army and navy and air and space programs, of more police powers, etc.—as if these were not ‘government’”
As for Paul Baran, I stumbled on this interview with him in Wired, which is quite over my head, but, Ryan, I think you’d find it really fascinating.
There is, it seems to me, something even more important than entrenching tribal orthodoxies when similarities exist. This is love, kind words, communication, and increased solidarity. Moving the Internet inwards, in a sense. Anyway, this is where, subsidy or no subsidy, these technologies truly developed from in the first place: from the remarkable and unstoppable human spirit. And what a mystery that is.
Lots of love to you and yours, and all wired-in beings,
Pete
*Ryan’s Hope is a long extinct Soap Opera that I’ve never seen, but this opening sequence seems to extol a time of utterly free market happiness and unsubsidized joy spinning around the Statue of Liberty. Watch at your own peril.
PS A short, really funny video from Ryan, filming his dog, on the couch, in time lapse, over the course of the day. About three quarters the way through, it all goes to temporary hell for the dog—a bit like my days around 2 PM.
