A few days ago, I was thinking (as I often do) about the abuses of the State and how it could be made to disappear. I was trying to list all the ways we could wound the master, through civil disobedience, boycotting fiat currencies, etc. As the saying goes, "we have gold because we cannot trust governments".
Then it occured to me. With DARPA's massive scientific R&D budget, they could eliminate that hedge against inflation. They could simply manufacture huge quantities of gold and silver using nuclear reactors. Then, everybody who thought that precious metals would protect them from the big bad State will be financially ruined.
What, then, would be a safe store of value? Perhaps oil? Not if hydrogen fusion reactors are ever developed. Then, huge quantities of energy could be generated from nothing but a few pints of water.
It dawned on me that there is only one force more powerful than the market, and that is the atom. And since the nuclear industry is the most tightly regulated industry known to mankind, governments in the future will be an unchallengable economic force to be reckoned with.
Take the experiment a little further. If you had an unlimited supply of electricity, what would you do with it?
I know what I would do. I would take my unlimited supply of electricity, and use it to desalinate seawater. Then, I would have an unlimited supply of water.
Then I would take my unlimited supply of water, use it to grow genetically-engineered crops, and have an unlimited supply of food.
Of course, any sober economist will take me to task for using the world "unlimited" in such a context. Obviously, there nothing is free, even if it is extremely, extremely cheap. There is no way the private sector could compete with a government of nuclear scientists.
A government that develops the technology to make electricity from water, or make gold out of mercury, would first do whatever dirty deeds it must to ensure that its technology is never shared with anyone. It would then outperform other states economically to such an extent that it could force other governments to disarm simply by refusing to trade with them. The first government to use the atom in a completely controlled and productive manner will extend its jurisdiction on a global scale.
Once that occurs, the conquering state will solidify control over the world population using electronic surveillance technology. A combination of facial recognition, voice recognition, license plate scanners, cell phone triangulation, and credit-card traces will allow officials to locate an individual anywhere on earth, at a moment's notice, with a simple Google search on his or her name.
It will become impossible for dissenters and rebels to try to escape, as they did from East Berlin; there will be no place to run. Governments could institute any kind of wage or price control, or confiscate one's wealth altogether, with no resistence at all.
Given that scenario, one would hope that the bureaucrats in charge will not be particularly sadistic. As you are reading this, various military officials and so-called defense contractors are daydreaming about non-lethal weapons; microwaves, lasers, and EMPs that scald, blind, or render unconscious the enemy without killing him. I recall reading a general who said he wish he could fight a war without killing anybody; and that may soon become a real possibility.
Such non-lethal weaponry would become indispensible for the tyrants of the future. They turn their targets into startled and submissive subjects, rather than warriors who died for their cause. Much more orderly. Much more efficient.
Economically, such a system of omnipotent, benevolent dictatorship would violate every known law of economics. Private property, the price system, profit and loss, and the calculation problem become irrelevant when the cost of making things is (almost) zero. Even freedom of association becomes a simple dichotomy: associate with the State, and live; or refuse to associate, and starve. It certainly would catch most libertarians by surprise if they saw Ben Bernanke dropping gold bricks out of a helicopter.
Such a government would fulfill the dreams of welfare statists and communists of ages past: a State that can put food on everybody's table, make everybody toe the line, not hurt anybody, and is impossible to overthrow. On the other hand, I don't think that is like to happen anytime soon. Government scientists are too busy making bombs to blow people up to think about bringing about the Singularity.
"As long as there are sovereign nations possessing great power, war is inevitable."
What you describe would not be an abolishment of scarcity. So the laws of catallitics still apply. This means the calculation problem also holds.
>"manufacture huge quantities of gold and silver using nuclear reactors"
Per the link, this isn't economically viable currently. What makes you think it will be? Also, what makes you think the quantities created will be "huge"? Even gold and silver dug out of the ground adds only a small amount to the total accumulated over centuries. If someone can synthesize huge quantities of gold and silver, then the price of those metals will drop and the cost of the inputs (like mercury, technicians' labor, etc.) will rise until it becomes only maginally profitable.
I think it's unlikely, but another possibility is that people come to value natural gold ingots or historically minted gold coins more than bricks of rumored-to-be-radioactive, synthetic, socialist gold. (E.g. try telling your fiancee you are buying her a synthetic diamond - which is more "perfect" than a natural diamond - and see how she responds.)
Furthermore, since particle accelerators can do the work, IMHO it's quite likely that some private company will beat the government to it and solve the problem with a tabletop particle accelerator.
>Then, everybody who thought that precious metals would protect them from the big bad State will be financially ruined.
True. Along with the people using paper money fresh off the printing press as a store of value.
>Not if hydrogen fusion reactors are ever developed.
Haha, that's always 50 years from now.
>Take the experiment a little further. If you had an unlimited supply of electricity, what would you do with it?
I would sell my shares in electricity companies. And I would invest the money in scarce things. Like Picasso paintings. And some cooks, gardeners, and maids. Nuclear reactors cannot create those scarce things.
>It dawned on me that there is only one force more powerful than the market, and that is the atom.
Actually, I think the coming artificial intelligence singularity will be far more significant than your scenario. And it still won't affect scarcity or the laws of economics one whit.
This is an extremely good point, one that's absolutely vital to understanding how real markets work: What differentiates goods is the mind of the consumer, and only indirectly the qualities of the thing itself. This is why a replication of a Van Gogh will never sell as for much as the original unless fraud is involved, even if the replication is, electron for electron, exactly the same.
If you really did have an unlimited supply of energy you could do far more interesting things than that...
Though heat dissapation would be a big problem.