The profit potential of a social system: A reflection from thermodynamic theory

For physical systems, the efficiency of work is

 (T₂ - T₁ )/T₂ = 1 - T₁ /T₂ 

Here T₂ and T₁ are temperatures at two sides of a system. The higher the temperature differential, the greater the efficiency. This is the famed Carnot principle.

In social systems, it is the same. The higher the wealth differential, the greater the profit potential for economic activities.  Corporations try their best to keep the wages low. They discourage unionization of workers. They often set manufacturing in low wage societies. Wealthy countries often subvert the democratic movements and democratic governments in poor countries. This will keep poor countries poor. For example, wealthy countries support the 1953 Iranian coup and 1973 Chilean coup. Both Iran and Chile have abundant natural resources, oil and copper, respectively. Prominent intellectuals in wealthy countries, such as Milton Friedman and Friedrich Hayek, often support the overthrow of democratically elected governments in other countries in the name of liberty.

For Friedman and Hayek, the wealthy should enjoy the liberty to exploit the poor in a market structured by the wealthy. The poor, however, don’t have the liberty to modify the market structure. When the poor try to establish a democratic system and organize themselves, they violate the so called market principle and hence their activities have to be crushed. Many workers are killed by the military. The powerful and wealthy, in the meantime, always socialize. This is never a problem. 

In physical systems, while work is done, heat flows from high temperature side to the lower temperature side. Unless fuels are added continuously, both sides will approach the same temperature.

The same tendency occurs among different social groups. With economic interactions, there is a natural tendency for wealth levels to equalize. How to maintain the inequality? At the fundamental level, it is to control the resources. In most of human history, this is to control the ownership of land, on which food grows. In an industrial society, in addition to control the ownership of land, it is often more important to control energy resources and other resources. It is also of vital importance to control the ownership of technologies that extract and utilize resources. Intuitively, it is the energy resources that keep the temperature, or wealth level, high. It is the lack of access to energy resources that keep the temperature, or wealth level low.

There are many ways to maintain temperature differential, or wealth differential. A common method is to promote and protect the totalitarian systems in many parts of the world. The dictators in totalitarian systems keep the ordinary people poor in their own countries by extracting large amount of profit from economic activities. They then transfer their huge wealth back to rich countries where their ill-gotten wealth are well protected. London is the largest money laundering center in the world, where wealthy dictators from poor countries transfer their wealth back to the rich countries. Harvard and other elite universities are the favorite places for the dictators and their offspring to launder their identity clean.

By continuously pumping back wealth into rich countries, the wealth differential between the wealthy countries and poor countries may be maintained.

The same is true between the elites and the mass in wealthy countries. The working class have to pay heavy taxes and deductions, which are mostly redistributed to the elites. Take pension deduction as an example. The working class pay much more into the pension system than the wealthy. The pension money generally goes to support the stocks of mostly large businesses controlled by the elites. In the end, the money made by the working class are largely pumped back into the capital markets and government coffers to support the elites. This sustained wealth differential makes it easy for the high class to generate profitable activities.

Social systems follow the same principle of the physical systems. Social wealth is supported by physical resources. When the wealthy counties have gradually lost the control of the remaining physical resources, as in today’s world, it has become increasingly difficult to sustain the lavish lifestyle indefinitely. The fertility rates drop below two. The biological returns become negative. Population ages. Society declines. This decline could be reverted. But a problem has to be acknowledged before it can be resolved.