Why Things Are Going to Get Worse - And Why We Should Be Glad. Michael Roscoe

it. These are the things that Warren Buffet, one of the world’s most successful investors, called ‘financial weapons of mass destruction’.

      Obscure as this business might seem, there is one thing we can be fairly certain about: all this apparent economic activity in things that have no real value has distorted the overall picture, as far as the true value of the world’s wealth goes. It just isn’t possible to create wealth out of nothing; an obvious point, I know, but I feel it is worth repeating nonetheless. When these traders make themselves or their banks some money from such speculation, they are taking that money from someone else. If one trader gains, someone else must lose. Sometimes, as with Greece, a whole nation loses.

7 From warehouse to whorehouse

       Early industry and the dawn of trade

      Without real wealth to back it up, money has no value. Or, to go back one stage further: without real wealth, there is no economy and no civilization. It is perhaps worth reminding ourselves how we ended up where we are now, trading worthless contracts and gambling with money that doesn’t exist. The modern world seems so complex; so random and confusing. Looking back to simpler times, gaining a historical perspective as it were, might help us to understand things better.

      In the beginning

      Since the story of economics must start somewhere, we might as well start at the beginning. Once upon a time the world was a green and pleasant land, full of lush forests, pure rivers and an abundant variety of life. Making their way slowly towards the top of the food chain were our ancestors, the early humans. They lived off wild fruits, nuts, birds’ eggs, dead animals they found lying around, seafood if they were near the coast.

      As their brains developed, they figured out ways of killing animals using sharp pieces of stone and sticks. About a million years ago, humans became hunter-gatherers rather than just scavengers. They began to make tools such as axes and spearheads out of flint, a hard sedimentary rock that splits into sharp pieces, to help them kill larger animals. They lived nomadic lifestyles, following herds around.

      People were smaller in those days and still resembled the apes from which we’ve all evolved, even though the earliest human ancestors had split from chimpanzees about five million years earlier. So humans have been around a long time in one form or another, but as far as the economy goes, they took a while to get started.

       Figure 34

      Homo sapiens began to evolve as a distinct species around 200,000 years ago. A combination of factors around 50,000 years ago – the requirements of tool-making, living in large social groups, sexual selection – resulted in an increase in brain size and greater intelligence among humans. Tools became more sophisticated and people began to fish as well as hunt. Simple boats, resembling canoes, had been invented by this time.

      People had also begun to use pigment for self-decoration and for painting cave walls. They made jewelry and wore clothing made from animal skins; this coincides with the migration of modern humans out of Africa and into the cooler climates of Europe and northern Asia, as shown in Figure 35.

      It was also around this time that different groups of humans began to barter goods, perhaps swapping tools for animal skins, fancy shells for precious stones or pieces of shiny metal. The concept of trade was born.

      Humans start to settle down

      Around 12,000 years ago, towards the end of the last ice age, many regions of the world began to experience longer dry spells. This change in climate favored plants that died off in the dry season, leaving a dormant seed or tuber that would grow again when the rains came. This resulted in a large supply of wild grains and pulses of which the human population, still nomadic hunter-gatherers at this time, could make good use.

Figure 35

      Following this change, some societies began to stay in one place, most likely around a spring or other water source where animals also gathered, and where the fertile land supported a variety of plants that could feed both animal and human populations. These plants and animals – the wild ancestors of cattle for example – were subject to a process of domestication. In other words, humans started to control them.