The problem with virtually all economic policy today is that it is stuck in the Malthusian framework — and "business" seems intent on forcing the consequences of this flawed paradigm on Ireland in the quest for profit that never seems to materialize . . . at least for those who would be most affected by the provisions of the treaty: the people of Ireland. It comes as no surprise to learn that Malthus published the first edition of his Essay on Population (1798) at almost the same time that the great controversy broke out between the Currency School and the Banking School with the suspension of gold payments by the Bank of England in 1797 — a "temporary" measure that lasted until 1821. The Currency School bought into Malthus' limited wealth assumption, and asserted an absolute reliance on existing accumulations of savings to finance capital formation. The Banking School rejected Malthusian assumptions, and asserted that existing accumulations of savings were not necessary to finance capital formation (the real bills doctrine).
There are, of course, gray areas in the controversy. John Maynard Keynes, for example, claimed to reject Malthus, but relied absolutely on existing accumulations of savings to finance capital formation (General Theory, II.7.v), while Adam Smith, one of the premier adherents of the real bills doctrine, inserted some proto-Malthusian doctrine into The Wealth of Nations (1776) by implicitly limiting ownership of the means of production to the rich and restricting "labor" to gaining income only through wages ("The Wages of Labour," I.viii). Despite the proven falsity of Malthusian doctrine, however, it had joined with the tenets of the Currency School to present a seemingly unshakeable and monolithic battlefront to common sense and empirical observation. As the economist Joseph Schumpeter noted,
The teaching of Malthus' Essay became firmly entrenched in the system of the economic orthodoxy of the time in spite of the fact that it should have been, and in a sense was, recognized as fundamentally untenable or worthless by 1803 and that further reasons for so considering it were speedily forthcoming. It became the "right" view on population, just as free trade had become the "right" policy, which only ignorance or obliquity could possibly fail to accept — part and parcel of the set of eternal truth that had been observed once for all. Objectors might be lectured, if they were worthy of the effort, but they could not be taken seriously. No wonder that some people, utterly disgusted at this intolerable presumption which had so little to back it began to loathe this "science of economics" quite independently of class or party considerations — a feeling that has been an important factor in that science's fate ever after. (Joseph Schumpeter, History of Economic Analysis. New York: Oxford University Press, 1950, 581-582.)
The Malthusian idea that there could be such a thing as excess people is, even from the crudest and most materialistic approach, utter nonsense. Even a rational materialist would say that unemployed people are a wasted resource, not a drain on society, regardless of their value as human beings. Nevertheless, Malthus' theories allowed the rich to assume that the misery and degradation of the working classes was their own fault for refusing to limit their numbers. Malthusian theory gave the rich a necessary salve to their consciences, and helped justify concentrated ownership of the means of production. People continued to believe — falsely — that if people were poor, it was because 1) they lacked the discipline to save and thereby accumulate the necessary financial capital to purchase productive assets, and 2) they were incapable of restraining themselves from breeding up to and beyond their own ability to support themselves.
There was, however, a slight problem with these assumptions. The predicted shortages didn't seem to be making their scheduled appearance. The new technologies that came in with the Industrial Revolution were producing marketable goods and services in such huge quantities that the problem was finding enough buyers with disposable income to purchase the tremendous amount of output, not a surplus of demand emanating from Malthus' Imaginary Multitudes. Supply and demand were becoming increasingly out of balance, but not because there was not enough to go around. On the contrary, the world was facing the paradox of people starving in the midst of plenty, even superabundance. What was going on?
