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Crusoe’s Heir
Let us now carry the analysis introduced in Part II beyond Robinson Crusoe’s natural life. Our subject, it is reasonable to suppose, appreciates the significance of what he has accomplished over the years. Beginning with no more than his intelligence and capacity to labour, he sacrificed, saved and created a pool of funding; with this pool, his capacity for thought and his flair for entrepreneurial risk-taking, he created productive capital goods; and by repeating this process over time he created for himself (albeit from a minimal base) a dramatically higher and more secure standard of living. Reflecting upon his accomplishments, Crusoe wishes to impart and perpetuate the knowledge, skills and ethics that underlie them. He realises, as the sole inhabitant of the island, that upon his death the elements will before long lay waste to all that his labour and ingenuity have created. That prospect is decidedly distasteful. Aside from a desire for companionship, then, Crusoe needs heirs to recognise and build upon his achievements.
Crusoe therefore decides to adopt a son from the neighbouring island. From a purely economic standpoint his wish has no obvious negative consequences. This is because the extent of capital accumulation on the island has reached a point where it can support another inhabitant. Crusoe’s long-term campaign of capital accumulation, in other words, refutes Thomas Robert Malthus: whatever its capacity at the time when Crusoe first set foot upon it, the island can now support a greater population at a higher material standard of living.
Hence Crusoe adopts a son. He teaches his son the tacit and technical knowledge and values that comprise the Robinson Crusoe Ethic. Robinson Crusoe II thus learns incidentally to consume but primarily to save, to search for and to undertake entrepreneurial activities, to create productive capital and thereby to produce. Like his father, Crusoe II is frugal, moderate, resourceful, diligent and intelligent. By the time he attains early adulthood he has demonstrated his capacity to preserve and extend his father’s legacy. When Crusoe I dies he is content with his accomplishments and is secure in the knowledge that a large part of his existence will endure vicariously through his adopted son. It is important to emphasise that Crusoe II has learnt well. He maintains the livestock, boat, implements and other capital goods bequeathed to him.
But Crusoe II does not merely rest upon his father’s laurels: he accumulates more and more productive capital goods. He clears fields in order to cultivate crops for himself and his livestock; he builds fences and pens and creates and improves paddocks for domesticated animals and fowl; he digs deeper and better wells; and he devises means to store fruit, vegetables and meat for extended periods. Because Crusoe II inherited an existing stock of productive capital, he did not need to repeat from scratch his father’s long and painful process of capital formation. Accordingly, although Crusoe II follows the same steps as Crusoe I, the son accumulates capital more quickly and thus enjoys a higher and more secure standard of living than did the father.
Crusoe II’s good fortune (i.e., inheritance of productive capital goods and allegiance to a government which taxes him lightly and otherwise leaves him alone) and wise habits (i.e., the maintenance of existing capital, savings, successful investment and creation of new and more-productive capital) also allow him to use significant amounts of time in ways far removed from the modest possibilities available to his father. He extends the size and amenities of his father’s house (it’s important to emphasise, Virginia, that residential housing is a consumption good: it is not a capital good and hence is not an investment); he paints and puts to paper scientific and philosophical observations; he plays music and writes his memoirs; and he records his recollections of his father’s tribulations, triumphs and ethics. Crusoe II is able to do these things because his hard work is increasingly productive work. Accordingly, by his father’s standards he becomes not just a wealthy man but also a cultured and civilised man.
The Third-Generation Curse: Meet Robinson Crusoe III
Let us now suppose that Crusoe II, reflecting on his accomplishments and also wishing to perpetuate them, marries a woman of noble lineage from the neighbouring island. Again, this is not surprising: since the level of capital accumulation on the island has reached an “advanced” stage, Crusoe II can support a wife with appreciable material expectations. The capital stock at his disposal, in other words, enables the island to support a bigger and richer population. Indeed, the birth of a son, Robinson Crusoe III, indicates that its capacity has trebled. Alas, Crusoe II is a much better businessman, capitalist and entrepreneur than parent. Further, from a purely economic point of view, his choice of spouse is not optimal: his wife regards labour as demeaning and frugality as unnecessary in their comfortable and secure circumstances – and spares no opportunity to remind Crusoe III of these views.
Crusoe II attempts but unsuccessfully transmits to Crusoe III the tacit and technical knowledge, values and wisdom learnt from his father and which served both so well. Crusoe III thus learns incidentally to produce, constantly to whinge and primarily to consume. Indeed, unlike his father and grandfather, and much to the dismay of his father, Crusoe III is spendthrift, self-indulgent, unimaginative, indolent and complaisant. He has neither the ability nor the inclination to maintain the livestock, boat, fields, paddocks, pens, sheds, stores, wells, implements and other capital goods bequeathed to him. He eats and drinks excessively, spends much of the day aimlessly, writes nonsense, paints drivel and on frequent and prolonged visits to the neighbouring island acts boorishly, disturbs the peace and otherwise makes a nuisance of himself. He awaits his inheritance and a life of leisure. Crusoe I, whose last resting place is increasingly unkempt, rolls in his grave.
Our allegory now approaches its unhappy end. With the death of his father Crusoe III assumes the mantle of the estate. It takes some period of time for the negative consequences of his values and actions to manifest themselves, but eventually they become apparent. The boat, for example, springs a leak and is not repaired. As a result far fewer fish can be caught and the store of dried and cured fish depletes. Crusoe III’s capacity for joie de vivre also suffers, for only under very favourable weather conditions (which by definition occur irregularly) can he travel freely between his and the neighbouring island. This imposition upon Crusoe III’s accustomed lifestyle causes great consternation.
Similarly, fewer crops are sown and those which are sown are ineptly harvested; as a result far fewer fresh fruits and vegetables can be consumed and the store of dried and preserved fruits and vegetables diminishes. Livestock break through the fences and are not recaptured, and the fences are not mended. As a result far less fresh meat and milk is available and the stock of salted beef and pork shrinks. Crusoe III’s inability to consume virtually unlimited quantities of fresh food causes him great irritation, and the impending depletion of the wine cellar is regarded as an intolerable outrage.
Many implements break and remain unrepaired, the pens and stables are a disgrace, and so on and so forth. In short, because his time horizons are distorted away from saving and entrepreneurial activity in the present for the purpose of consumption in the future, and are directed almost exclusively towards current consumption, Crusoe III’s stock of current capital and his pool of funding (i.e., his capacity to replenish and create new capital) inevitably shrinks. Even worse, as time passes the rate at which he shrinks his capital accelerates. As time passes, in other words, his ability to maintain his accustomed standard of living decreases.
An Eventual Reckoning
It is important to emphasise that Crusoe III’s decline into the decadence of excessive consumption and aimless leisure at the expense of hard work, thrift and sobriety seems at first to cause few problems. Because he is able to draw for a considerable period of time from the pool of funding established by his grandfather and expanded by his father, Crusoe III’s standard of living seems superficially to remain unchanged. To the outside observer nothing appears amiss. We can see, however, that (literally as well as figuratively) Crusoe III has been consuming his seed-corn. It is clear that eventually this squandering of capital will produce a rude awakening: Crusoe III will be forced, suddenly and drastically, to restrict the level of his consumption. Not only will Crusoe III be forced by circumstances to reduce his consumption to a level compatible with his impoverished pool of funding: his belt must remain tightened until he is in a position to rebuild the pool by saving aggressively and undertaking successful entrepreneurial activities. Until this replenishment occurs he will have at his disposal fewer consumption goods and less (and less productive) capital than did his father. Further, his children, if and when he bears them (his chastened circumstances militate against it), will be obliged to restrict their per-capita consumption even more significantly, and to save and invest more aggressively, if they hope to enjoy a standard of living approaching that of their grandfather (Crusoe II).
Born to expect in perpetuity the local equivalent of long lunches, long service leave and lattés, Crusoe III must henceforth live on less. The return to the living standards to which he is accustomed (to say nothing of their improvement) requires a much lower time preference and a much higher rate of savings and level of capital formation than he has hitherto evinced. It will also require a significant amount of time. The unresolved – and, quite possibly, unrecognised – tensions between complaisant expectations of a secure and prosperous future, the unwillingness to save for it (to say nothing of a rainy day) and the sudden imposition of a much less secure and prosperous future than envisaged irritates and antagonises Crusoe III. His distemper must resolve itself either through lowered expectations, greater savings and capital formation or a combination of the two. A return to the Robinson Crusoe Ethic is one means of redressing this tension. Crusoe III’s belated and incomplete realisation of this tension and the unpalatable choice which follows from it (which he shares with many Australians), together with the resentment of the necessity of the choice imposed upon him by the cumulative effects of his own behaviour, is a harbinger of The Distemper of Our Times.
...continued in Part IV
 
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