During the early stages of the industrial revolution, as England was coming out of a feudal-type of society and into what's basically a state-capitalist system, the rising bourgeoisie there had a problem. In a traditional society like the feudal system, people had a certain place, and they had certain rights - in fact, they had what was called at the time a 'right to live.' I mean, under feudalism it may have been a lousy right, but nevertheless people were assumed to have some natural entitlement for survival. But with the rise of what we call capitalism, that right had to be destroyed: people had to have it knocked out of their heads that they had any automatic 'right to live' beyond what they could win for themselves on the labor market. And that was the main point of classical economics. Remember the context in which all of this was taking place: classical economics developed after a period in which a large part of the English population had been forcibly driven off the land they had been farming for centuries - that was by force, it wasn't a pretty picture. In fact, very likely one of the main reasons why England led the industrial revolution was just that they had been more violent in driving people off the land than in other places. For instance, in France a lot of people were able to remain on the land, and therefore they resisted industrialization more. But even after the rising bourgeoisie in England had driven millions of peasants off the land, there was a period when the population's 'right to live' still was preserved by what we would today call 'welfare.' There was a set of laws in England which gave people rights, called the 'Poor Laws' - which essentially kept you alive if you couldn't survive otherwise; they provided sort of a minimum level of subsistence, like subsidies on food and so on. And there was something called the 'Corn Laws', which gave landlords certain rights beyond those they could get on the market - they raised the price of corn, that sort of thing. And together, these laws were considered among the main impediments to the new rising British industrial class - so therefore they just had to go. Well, those people needed an ideology to support their effort to knock out of people's heads the idea that they had this basic right to live, and that's what classical economics was about - classical economics said: no one has any right to live, you only have a right to what you gain for yourself on the labor market. And the founders of classical economics in fact said they'd developed a 'scientific theory' of it, with - as they put it - 'the certainty of the principle of gravitation.' Alright, by the 1830s, political conditions in England had changed enough so that the rising bourgeoisie were able to kill the Poor Laws, and then later they managed to do away with the Corn Laws. And by around 1840 or 1845, they won the elections and took over the government. Then at that point, a very interesting thing happened. They gave up the theory, and Political Economy changed. It changed for a number of reasons. For one thing, these guys had won, so they didn't need it so much as an ideological weapon anymore. For another, they recognized that they themselves needed a powerful interventionist state to defend industry from the hardships of competition in the open market - as they always had in fact. And beyond that, eliminating people's 'right to live' was starting to have some negative side-effects. First of all, it was causing riots all over the place: for a long period, the British army was mostly preoccupied with putting down riots across England. Then something even worse happened - the population started to organize: you got the beginnings of an organized labor movement, and later the Chartist movement, and then a socialist movement developed. And at that point, the elites in England recognized that the game just had to be called off, or else they really would be in trouble - so by the time you get to the second half of the nineteenth century, things like John Stuart Mill's Principles of Political Economy, which gives kind of a social-democratic line, were becoming the reigning ideology. See, the 'science' happens to be a very flexible one: you can change it to do whatever you feel like, it's that kind of 'science.' So by the middle of the nineteenth century, the 'science' had changed, and now it turned out that laissez-faire was a bad thing after all - and what you got instead were the intellectual foundations for what's called the 'welfare state.' And in fact, for a century afterwards, 'laissez faire' was basically a dirty word - nobody talked about it anymore. And what the 'science' now said was that you had better give the population some way of surviving, or else they're going to challenge your right to rule. You can take away their right to live, but then they're going to take away your right to rule - and that's no good, so ways have to be found to accommodate them. Well, it wasn't until recent years that laissez-faire ideology was revived again - and again, it was a weapon of class warfare. As far as I can see, the principles of classical economics in effect are still taught: I don't think what's taught in the University of Chicago Economics Department today is all that different, what's called 'neo-liberalism'. And it doesn't have any more validity than it had in the early nineteenth century - in fact, it has even less. At least in the early nineteenth century, Ricardo's and Malthus' assumptions had some relation to reality. Today those assumptions have no relation to reality. Look: the basic assumption of the classical economists was that labor is highly mobile and capital is relatively immobile - that's required, that's crucial to proving all their nice theorems. That was the reason they could say, 'If you can't get enough to survive on the labor market, go someplace else' - because you could go someplace else: after the native populations of places like the United States and Australia and Tasmania were exterminated or driven away, then yeah, poor Europeans could go someplace else. So in the early nineteenth century, labor was indeed mobile. And back then, capital was indeed immobile - first because 'capital' primarily meant land, and you can't move land, and also because the extent that there was investment, it was very local: like, you didn't have communications systems that allowed for easy transfers of money all around the world, like we do today. So in the early nineteenth century, the assumption that labor is mobile and capital is immobile was more or less realistic - and on the basis of that assumption, you could try to prove things about comparative advantage and all this stuff you learn in school about Portugal and wine and so on. Incidentally, if you want to know how well those theorems actually work, just compare Portugal and England after a hundred years of trying them out - growing wine versus industrializing as possible modes of development. But let's put that aside... Well, by now the assumptions underpinning these theories are not only false - they're the opposite of the truth. By now labor is immobile, through immigration restrictions and so on, and capital is highly mobile, primarily because of technological changes. So none of the results work anymore. But you're still taught them, you're still taught the theories exactly as before - even though the reality today is the exact opposite of what we assumed in the early nineteenth century. I mean, if you look at some of the fancier economists, Paul Krugman and so on, they've got all kinds of little tricks here and there to make the results not quite so grotesquely ridiculous as they'd otherwise be. But fundamentally, it all just is pretty ridiculous. If capital is mobile and labor is immobile, there's no reason why mobile capital shouldn't seek absolute advantage and play one national workforce against another, go wherever the labor is cheapest and thereby drive everybody's standard of living down. In fact, that's exactly what we're doing in NAFTA and all these other international trade agreements which are being instituted right now. Nothing in these abstract economic models actually works in the real world. It doesn't matter how many footnotes they put in, or how many ways they tinker around the edges. The whole enterprise is totally rotten at the core: it has no relation to reality anymore - and furthermore, it never did.

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