One of the many useful concepts to come out of the fertile brain of the late French economist François Perroux was that of the “dominant revenue” that explains much about the blind alley into which President Obama and other word leaders have led the world. He held that in every period those in the economic saddle single out the revenue of their class as an adequate index of the welfare of society as a whole. And when that reigning economic class gives way to another, the dominant revenue changes.
Thus the land-owning class in Britain during and after the Napoleonic wars pushed up ground rents in the countryside and the large cities so that food prices soared high. But then in the 1830s James Watt’s steam-driven machines replaced human muscle as power-source in Britain’s factories. And with that the dominant revenue shifted to the factory owners who sought to make the most of their monopoly of steam power. Their dominant revenue required free trade to reduce survival wages in the factories even more drastically. And to counter the protectionism of the American and German industrialists who clamored for high tariffs against the British monopoly of steam power of the day.
But the most dramatic instance of the “dominant revenue” concept of Perroux occurred around 1870, when the very concept of economic value changed drastically. Up to then most of the great economists in both Britain and Europe adhered to some version of the “average labour” needed to explain the value of products.
So long as the British worker was illiterate he could not grasp what economists were discussing. But by the mid-1800s workers had learned how to read – first through philanthropic and eventually due to the spread of public schools. Moreover, barricades were thrown up in the late 1840s throughout much Europe, and the defeated socialist leaders from Northern Europe and anarchists from southern Europe – including Karl Marx and his family – started pouring into England. Before long Marx’s tragic gifted daughter Eleanor and others of his family were organizing open air meetings in Hyde Park almost within earshot of Buckingham Palace. The revolutionary implications of any theory attributing the value of commodities to the amount of labor, average or whatever, had thus become a dangerous risk.
Hence around 1870 quite independently in several European capitals marginal price theory was formulated that deduced market value of goods not from the amount of labor involved in their production but by the degree of their buyers’ enjoyment in consuming them. That solved a lot of awkward problems. For example, it claimed to do away with any possible unemployment problem as an illusion. Allegedly unemployed workers had simply compared their enjoyment of leisure in their parlors with the pleasure of working at the wages offered.
Such a theory opened unlimited portals to speculative market activities and has come to define the ultimate wisdom of official policy. Critically minded historians, economists and sociologists have noted that when economic power changes hands from one social group to another, the reigning political group too, undergoes change, whether by violent means or peacefully. That is why it leads nowhere but to assured ever deeper disasters ahead for President Obama to choose key officials for his supposed epoch-making reforms from key members of the political and economic group that led the world into its ever deepening troubles.
It just can’t be done and guarantees economic and military disasters ahead. That is why we have need of the suppressed history of how the world finally came out of the Great Depression of the 1930s and, in the developed countries, built a prosperous world.