Alice in Wonderland Economics

The book that I would recommend to anybody wishing to understand the economy is Lewis Carroll’s ‘Alice in Wonderland’. Not as a book to replace all the books that can be found in the economics section of any library, but as a first text which to give a good grounding in all things economic. What any budding economist needs to know about the economy is that things are not as they appear.  Alice is able to get through a door for which she is to tall by drinking from a bottle labelled ‘drink me’. After drinking that she shrinks in size to such an extent she is now able to walk through the door. She can be both giant and of normal stature in Wonderland. Later in the book she meets the Cheshire cat, who not only can become invisible but is able to become visible in place other than that in which he first appeared.  What the good economist should do is to be prepared to surrender their belief in a world of common sense. Just as for Alice the rabbit hole is a portal to another world, so a public corporation can equally be a portal to a world in which strange behaviours predominate.

One good example of this strange new world of economics is the strange behaviour of Starbucks. I was puzzled when I read that Costa Coffee a British coffee shop chain was more profitable than Starbucks. Starbucks seemed to be everywhere and I could see no evidence from what I observed that the business was doing badly. Then on reading more I realised that is was yet another example of a company not wanting to earn profits. Yet all the textbooks state that all businesses are profit maximisers. Profits earned are subject to corporation tax, so companies will do all they can to minimise their profits and tax bills. This is usually done by having a head office located in a low tax country such as Eire and that head office then imposes such a high level of charges on the business (for services provided) that the profits are reduced to such  a low level that the company is either ceases to be liable for tax or it only has to pay a minimal amount.

However the process becomes stranger and stranger the more it is examined. Usually the ‘charges’ that are paid to the Head Office are through a chain of offshore companies remitted to the multinationals homeland. Yet the profits declared then are only small part of the companies income. Such companies sit on vast cash piles which are located in various tax havens. This cash pile increases the companies wealth and the price of its shares. Shareholders are in many cases happy to have a reduced dividend but a reduction more than balanced by an increase in the value of their shareholding. Banks recognise that the shares held in such as Starbucks, Apple. Google etc. are extremely valuable assets. They will then lend large sums of money to these people against the security offered by there shares. These loans which are rolled over from year to year and which can be increased in line with the increase in the value of these shares. Loans have the advantage of not being income and are therefore exempt from tax. Many shareholders are content to enjoy their income in this way. Although there are a significant number who would still want to enjoy a cash return from their investment.

There is a passage in ‘Alice in Wonderland’ where Alice comes across a group of the Red Queen’s servants painting white rose red. This because the Queen wanted red roses and they mistakenly planted white roses. They hope that the Queen won’t notice the red paint. Similarly there is the many thousands of financial advisers who role in life is to paint earned income as anything but earned income. Anything that is either not liable for tax or which is taxed lightly. Unlike the Red Queens gardeners they are very successful in that the tax authorities never see through the disguise.

Apple is described as the world’s largest business. Although they are  the company with the largest sales revenue are not necessarily the most profitable. Much of the profit earned is changed into something quite different, such as a charge to Head Office at least in all the European countries. What profit Apple declares is largely resting in some offshore tax haven beyond the reach of the US tax inspector.

What any economist needs to realise is that to understand the behaviour of multi-national companies,is that the economics textbook is of little use. The book describes the behaviour of an ideal and imagined company, not a real one.

I could go further and relate other features of the book to the real economy. There are frequent examples in the book of nonsense verse, such as the song of the Walrus and the Carpenter. What the economist needs to know is that in the real world economy there are plenty such similar examples. All too often when a company goes bankrupt it is usually one that has received a successful audit. The auditors seem unable to notice those gaping black holes in the company accounts. This is because they use a set of industry agreed accounting conventions when analysing the companies accounts, conventions that serve to conceal rather than reveal mismanagement and a shortage of funds. While company accounts are not nonsense verse, they are often intended to deceive as often as they are intended to reveal the true state of a company’s affairs.

Politicians come the nearest to uttering nonsense verse on the economy. They are found of uttering what seem to be profound mantras on matters of the economy, but which are in fact meaningless phrases. Phrases such as the country has ‘maxed out its credit card’ a phrase uttered by a politician, when his government was doing all it could to encourage a borrowing binge to kick start the economy back to life.

Why I recommend Lewis Carroll’s book for any budding economist is that it reveals to the reader a strange world that is and is not ours. It prepares for them recognising the unfamiliar and strange amongst the familiar and it is often the strange and unfamiliar that make seemingly inexplicable behaviour explicable. Conventional or bad economists are unable to see beyond the fog that is the received economic wisdom. This is why these economists were unable to see the financial crash of 2008 looming in front of them, when all the danger signals were showing red.

Memories of a childhood spent in the countryside of post war Britain

When I recount stories of my childhood spent in the countryside of the late 1940s and early 1950s, people always tell me that I had an idyllic childhood. While to some extent I did, I had many wonderful childhood experiences. One of my earliest memories is being placed between the shafts on the hay cart seated directly behind the cart horse. The man that placed me there told me to take the cart back to the farm. Being a small child in charge of a cartload of hay and huge shire horse gave me a tremendous sense of excitement. I was dwarfed by both the loaded hay cart and the horse. Obviously I was not really in charge, the horse knew the way back and went on its way oblivious of the small passenger shouting commands to it. While I can paint an idyllic picture of a post war country childhood, I was even as a child aware of the darker side of country life.

One of my other early memories is of my father, a gamekeeper,  nailing a grey squirrel skin to a board. Once it dried out it was sent to the ministry for a bounty. The bounty was one shilling (5p) per squirrel skin, which in the hard times of the post war era was a substantial sum. Particularly if the gamekeeper sent in several skins at once. When I explain that my father’s wage was £3 10s (£3.50), it is obvious that the squirrel bonus was a useful addition to the family income.

There were other ways in which my father supplemented the family income. On such a low income meat was something of a luxury and all to often our meat was rabbit. What I should explain was then that rabbits existed in large numbers in the countryside. Farmers regarded then as a pest, as they consumed large numbers of their young plants growing in the open fields. Although my father’s  primary role was to breed and nurture pheasants for the winter shoots, his secondary role was as a pest controller. Quite simply this meant controlling the number of rabbits on the farm.

Now as an adult I can see how inefficient were the methods he used, which were trapping and snaring the rabbits. He studied the hedgerows and when he found a rabbit run he would put either a gin trap or a snare there. Then the following day he would go back to collect the rabbits caught in the trap or snare. Surprisingly the rabbits could often set off the gin trap and not be caught. When he did come across a trapped rabbit it would often be still alive and he had to put it out of its misery.

It was not only us who benefitted from this rabbit bounty, but also our neighbours. I can remember my father giving our elderly neighbours the Hugget’s nice plump young rabbits to make into a pie. Other workers on the farm similarly benefitted from this practice.

This brings me to the most disreputable of characters,  the ministry pest controller. This was a man who could be called in by farmers to remove the rabbits from their land. He was disreputable, because of the way he went about his trade. Once on the farm he would identify the areas most popular with the rabbits. Then he would lay traps in this area, but he was very selective in his trapping, as he never bothered with those areas where there were few rabbits. In this way he could always demonstrate to the farmer that he had killed a large number of rabbits and had largely solved the rabbit problem. However he always left enough rabbits to ensure that by the following year there were enough them to cause a nuisance, so he would need to be called back again. Countrymen such as my father despised him because he would make all the easy kills, leaving to the gamekeeper and others  to kill the more difficult to get at rabbits.

In the immediate post war years meat was rationed and then when it ceased to be rationed it remained an expensive purchase. Therefore families where looking for alternative sources of fresh meat. This man had a very profitable trade selling these rabbits to market stall holders or local butchers.

In January when the pheasant shooting season ceased  it was the rabbit drive season.  The pheasants now had been shot and could no longer be scared away by the noise of shooting. Also the vegetation had died down depriving the rabbits of cover, making them easier to shoot. This was a very popular event as it was the one time of the year that the lower social orders could gather on the land and shoot the rabbits. At other times of the year they would be regarded as poachers for and would be prosecuted. Local magistrates who were usually the local landowners dealt with poachers harshly.

These January shoots were an expression of the class divide, as only the lower orders shot rabbit. The gentry only shot game birds, shooting at rabbits was something they regarded as an affront to their dignity.

Sometimes the landowner or farmer would demand a larger cull of rabbits than usual. The only way to do this was to gas them in their burrows with cyanide gas. There was danger in this method, as the pump which pumped the gas into the burrow usually had one or two small leaks. Unfortunate gamekeepers could be killed by cyanide leaks. I can remember my father remarking on the gamekeepers whose obituaries appeared ‘The Gamekeepers Gazette’; men who had been killed by a gas leakage from the cyanide pump.

Gamekeepers regarded this as an unnecessarily cruel means of killing rabbits. I think memories of the First World War accounted for this feeling. Gamekeeper were invariably in times of war turned into infantry men. Certainly the older of my fathers work colleagues could remember the horrors of gas warfare. Also it represented a waste, all those rabbits were left in the burrows to decay; if other methods had been used they could have been used to feed a family.

While as an economist I can note is that this form of rabbit control was a labour intensive and relatively ineffective. As regardless of how many rabbits my father killed there were also a large number happily consuming the farmers crops the next year. Yet these same rabbits provided a source of food for the low paid workers of the countryside. Rabbit pie was for us a cheap meal which he had once or twice a week. Although rabbits consumed a large quantities of the farmers crops the crop yield in those days was still large. The methods used by my father and others to control rabbit numbers was sufficiently effective to prevent the rabbit problem getting out of hand. Farmers never seemed to be put out of business by the rabbit. In fact the farming industry produced a similar proportion of the nations food to that produced today by the same industry.

Farming in the 1940s and 50s was relatively low tech and as a consequence employed large numbers of workers. Such labour intensive industries are less productive per worker than capital intensive industries, so the wages of such workers were low. However such a labour intensive industry demanded a large labour force. When mechanisation became more common jobs began to disappear. As a teenager in the 1960s I can remember seeing abandoned country cottages being left to decay, as they were no longer needed to house workers.

Often when I talk to people about my childhood they say it must have been idyllic. The same belief prevailed amongst my mothers relatives who visited us from town. What they never understood was  that country life could be a hard demanding life. In summer my father would rise at dawn and work through to dusk, that is a day starting at 4.30 and ending at 9.30.They wanted the romance of the country, which they got as in there visits they never engaged with the realities of country life. Somehow they managed to be obvious to the brutal killing of wildlife, even when they were enjoying the rabbit pie for dinner.

In this essay I have chosen to emphasise the harsh realities of country life. Living what could be a hard and demanding life meant country people aged in a way that people do not do today. Ageing was noticeable once people passed the age of 40. However despite what I have written country people believed that they had a better lifestyle than those living in the urban centres. They were not oblivious to the beauty of the surroundings in which they worked. Also the nature of their work meant that they were unsupervised. They worked free from the constant intrusion of a supervisor. They were judged by the end product of their labour, the ploughed field or in my father’s case the number of pheasants seen on a shooting day. Although they might be paid as an agricultural labourer, they knew that they were highly skilled in the tasks that they undertook. They with a few exceptions took pride in their work and it was this pride that ensured that the unsupervised work they undertook was always completed.

What I believe is that the working environment on the land in this period created a group of men who were satisfied with their lives. The nature of their work made them tough resilient individuals. One writer in the 19th lamented the decline of agriculture as  means of employment, because it meant that there less of such men in the country. To this writer these agricultural workers were the backbone of the ‘thin red line’ that secured so many British military victories.

While I have no illusions about the nature of country life, I do believe the low tech lives lived by such as my father were in many ways superior to the lives lived by many today. It seems to me that the choice is living a more fulfilling life in a low tech economy or in living in a high tech economy with a higher income but with uninteresting working life.

Why we need economists

Being a former social worker and state secondary school teacher I am used to belonging to a profession that is disparaged in the media. Now I find that being an economist means that I am subject to similar vilification. What made economists (or rather the good economist) so disparaged is that they tell inconvenient or awkward truths about the economy and society. When faced with such truths politicians and the powerful will resort to abuse to silence the truth tellers. What is remarkable is that we have a parliament dominated by graduates from our elite universities and yet they are in greater ignorance of the world around them, than the parliaments of the past! Parliaments that were mocked for having too many of trade unions and country squires, men supposedly lacking in education and knowledge of the world around them.

Having made this declaration I must now produce the evidence to defend my assertion. These awkward truths usually are warnings about coming troubles that politicians would prefer to ignore. When the great crash occurred in 2008/9 politicians claimed that it was a once in a lifetime event that could never have been predicted. An economic act of God. The truth is that all the warning signs were there and instead of acting on them politicians refused to act, as any action taken would have been cutting spending and that would have been unpopular with the electorate. There were two causes of this crash were the banks irresponsible lending policies, such as 125% mortgages. The other guilty party were the governments and central bankers who rather than regulating the market for the greater public good, preferred to turn a blind eye to the irresponsible behaviour of the bankers. Their justification for their inaction was the doctrine of neoliberal economics, which states that economic well being is maximised under the free market economic system.

I suspect that those trade unions and squires of the past would not have been so gullible, as they had a superior understanding of human nature. They from their dealings with bankers would have known that these men were not the giants of the financial world but men as fallible as themselves. These men would have recognised that greed for ever greater and greater financial rewards motivated these bankers.

Awkward truth warning – little has changed since 2008 bankers are still lending irresponsibly and the government is still turning a blind eye to such behaviours. One area of concern is car finance, it is suggested that car dealers in their desire to sell more and more cars are not paying sufficient attention to the ability of their customers to fund their repayments and the risk is that these buyers will default in the future on their loans. This will cause the defaulting customers to return their cars leaving the dealers with an unsold mountain of cars other hands. This would in itself be sufficient to cause another economic downturn. The banks who source the funds which enable the car dealers to offer generous financial terms to buyers, rather than offering a word of caution or refusing to increase there lending to the dealers just continue to shovel cash in their direction.  Other forms of bank lending such as to the property market suggest that bankers have not learnt the lessons of 2008 and unfortunately neither has the government.

As an economist you learn to read the runes, in my case as I have no access to government statistics, it is those short comments in the financial section in the newspapers that give the game away. In this case it was a short piece of no more than three or four lines. A financier was asked if the Bank of England was now cracking down on irresponsible lending to prevent a repeat of 2008/9. His answer was no, as the governor knew that if he reduced borrowing he would cause an economic slowdown, which would increase unemployment with all its associated problems. If I read the article correctly little has changed since 2008.

I also realise that the banks have fought tooth and nail to stop the governments of Europe and the USA to make them resilient in the event of any future crisis. British banks have successfully persuaded the government that reserves of 3% are sufficient to enable them to ride out any future crisis. European banks have even smaller reserves. These reserves are either cash or assets that can be easily turned into cash to meet the demand for cash from their customers. (A greater ratio of assets to lending would limit the money banks could lend and in consequence reduce their profitability.) The suggestion is that in an event of a repeat of the financial crisis of 2008 the banks will lack sufficient reserves of cash to enable them to meet their customers demands for money. In a crisis customers fearing the future will withdraw their savings from the bank, either because they doubt the loudness of the bank or they want money in hand to deal with any future crisis. It will only take one bank to close its door for a general panic to ensue with the consequence that the government yet again will have to step in to bail out the banks. If the banks held greater reserves as have happened in the past such temporary crisis could easily be resolved  The banks would have sufficient quantities of cash in reserve to be able to pay those panicking customers who wanted their money back. Once it was seen that the banks had plenty of money the panic would cease. However if banks have insufficient cash reserves the whole system is liable to collective failure. If only one bank has to close its door, because it cannot meet its customers demands for cash, the contagion will spread and there will be a major run on the banks. Yet again the government would have to rescue the banks from their follies of their own making.

However we tellers of awkward truths have a problem. We cannot predict exactly what will happen or  when. We are tellers of possibilities and probable truths and us such we can be easily discredited. Economist predicted that a vote to leave the EU would have a negative impact on the economy. Then when in the days after the Brexit vote, the economy failed to collapse the naysayers could claim that they were wrong and that the collective opinion of economists was worth no more than that of the collectivity of politicians. What these naysayers overlooked was  that the Governor of the Bank of England being all too aware of the negative impact of a Brexit vote took immediate action to offset its negative economic impact. He simply increased the amount of to the nations borrowers enabling them to go on spending spree which prevented the economy from taking a nose dive. What the naysayers don’t realise it that it is a crisis postponed  not as they believe an imaginary economic ghoul or nasty conjured up from the feverish imaginings of the economists.

There is one prominent economist or truth teller who has consistently, warned of the impending credit crisis but is consistently ignored by governments and that is Anne Pettifor. She is never called to sit on the committees that governments set up to advise them on matters economic, as they don’t want to hear her truths. She has written extensively about the impending first world debt crisis, yet like some unheard of  Old Testament prophet her writings remain in obscurity.

Our one weakness as economists is that we cannot say exactly when or how or what we predict will happen. Even more frustratingly we can be right but events prove us wrong. There are no economists that can accurately predict the future, we are the scientists of the possible or the perhaps. The economy is such a volatile and complex construct that sudden and unexpected changes can make fools of us. This is why a leading politician* can say with confidence  ‘we have had enough of experts’ (meaning economists) and be praised in the media for his sagacity and foresight.

Yet our awkward truth remains the economies of Western Europe and the USA are over indebted and not one government has taken any realistic debt reduction measures. The fact that Britain with Japan shares the unwanted title of the most indebted of developed countries has passed our politicians by. They will speak endlessly about the public sector or government indebtedness, but they are focusing on the mice in the room while ignoring the elephant that is private sector indebtedness. Prior to the crash of 2008 government debt was less then a tenth of private sector debt. While great pains have been taken to reduce government debt little has been done to reduce private sector indebtedness*. This indebtedness will possibly rise to unheard of levels as the Governor has said that he is relaxed about the possibility of banks increasing their assets to nine times the size of GDP. Banks assets are loans, so he is relaxed about the banks increasing the nations debt to nine times the total of its wealth!

*Michael Gove a prominent politician who campaigned for Britain to leave the EU

* A policy practice that is common to all Western European governments.

A suggestion from an economist as to how the free market could be made to work for the benefit of all

All the evidence from the economy suggests that the free market system is failing. The list of markets that are failing seems almost endless. Perhaps the most obvious failing market is the housing market. In 1973 a minister (when the state directly provided social housing) could state with some justification that there were no homeless people, today the reverse is true. Yet despite the evidence of thousands either living in temporary local authority accommodation awaiting rehousing andthe  countless others living in unsatisfactory private rental property, politicians deny that the housing market is broken.

Why do politicians not recognise the failure of the free market system? One answer is political fashion, which to paraphrase George Orwell pigs ‘public sector bad, private sector good’. This belief in the supremacy of the market system for providing goods and services can be traced back to one influential thinker, Friedrich Hayek. In his book ‘The Road to Serfdom’  (1944) lauded the supremacy of the free market over any alternative economy model. In this very readable book he states that freedom is the free exchange of goods and services between individuals. When the state decides what people want it is tyranny, an economic tyranny comparable to the political tyranny exercised in the fascist and communist states of Europe. Although to this economist cannot see how the provision of state subsidised social housing is a deprivation of economic liberty.

Hayek was a voice speaking in the wilderness until the economic crisis of the 1970s happened. In Britain in 1976 inflation hit the unheard rate of 27%. Politicians desperately looked for a solution and found one in the writings of Hayek and his prophet Milton Friedman. The next twenty years saw a bonfire of regulations and a rush to transfer what public sector services and businesses to the private sector. What politicians hoped and believed was that the introduction of the free market economy was the once and for all solution to the economic ills of the this decade.

Hayek still grips the imagination of the political classes. The privatised railway system in Britain is one of the most expensive and inefficient in the developed world. Yet despite polling evidence suggesting that a majority of British voters would welcome the re-nationalisation of the railways, the majority of politicians regard this as beyond the pale. Only an outsider such as the current opposition leader would argue for this popular cause. There is one certain outcome from this election and that is even if the opposition won the election, the consensus view within parliament would effectively nullify any attempt to return to a nationalised rail service.

There is one failing in the free market philosophy of Hayek that is always ignored. He assumes that the exchange of goods and services takes place between individuals who are equals. The worker for him is free to bargain with the employers to obtain the best possible wage. In Hayek’s impossible scenario the worker and employer equally benefit from the exchange. What he does not recognise is that there is no equality of power in this exchange. While the employer is free to buy the workers labour at the lowest possible wage he can negotiate, the employee very rarely has the power to negotiate the highest possible wage. History demonstrates that in a market lacking employment protections and trade unions, the worker rather than being able to negotiate the best possible wage has to accept the going rate, no matter how poor. It is a market in which Says law applies. Rather than workers negotiating for the highest rate of pay possible, they have to accept the wage whatever rate of pay the employers are prepared to offer.

When the market works well it is unrivalled as a means of exchange of goods and services. The problem is that in Britain it rarely works well. It is the unequal distribution of bargaining power that prevents the market working to the benefit of all. When one person has significantly more bargaining power than the other, be that person an employer or landlord, the other person is at a significant disadvantage. They will inevitably lose out, whether it be having to accept a low wage or by paying a high rent for inferior accommodation. The only way to make the market work is to introduce some equality of power into the relationship. Only then will the more powerful not be able to exploit the less powerful.

One solution would be to introduce legislation to remedy the imperfections in the free market, as was the practice in the 1950s and 60s. However this is not possible when the majority of political classes are committed to Neo-Liberalism or the free market economy. A majority of the of the current generation of politicians would oppose any such policy. There is another solution that might appeal to the free market politician. Greater equality could be introduced into the market and through the legal system so making the exchange of goods and services a more equal relationship. At present civil law with its remedies for civil wrongs is unavailable to the majority of the population, because of the high costs of legal action. Not only is there the high  cost but the wealthy subject of a legal action can spin out a case almost indefinitely so discouraging all but the most determined and wealthy of plaintiffs. A reformed legal system that made justice available to all could make Hayek’s free market work in a manner which he intended. The free market politician would have no reason to object as such a change would only be to enforce the rights of the individual and not subject the business to the whims of the almighty state.

This might seem an incredible statement but the legal system of the Roman Empire particularly that of Justinian was in some ways superior to that of contemporary Britain. Under this system the aggrieved individual could bring their case before the local magistrate. These magistrates seem to have had more power than contemporary British magistrates. They could interrogate the plaintiff and witnesses before arriving at a verdict. From what I understand of the Roman system there was an approximate equality of position of the plaintiff and defendant, something lacking in British courts.

There already exist in Britain a network of small claims courts(1). The remit of these courts could be extended to include a new category of civil wrongs. These courts would retain the principle of not penalising the less well off plaintiff, by not privileging those defendants that have legal representation and through preventing the defendant claiming their legal fees from the plaintiff. What matters would be that the court proceeding do not privilege the wealthy, making these courts accessible to the poorest.

There is one example demonstrates the ugly nature of our current legal system. The British Human Right act gives every person the  ‘right to enjoy the privacy of your own property.’ In our unbalanced legal system a rich property developer was able to persuade the high court, that privacy meant the right to develop their property regardless of the noise nuisance it caused the neighbour’s. In a fairer legal system there would have been a counter claim by the less well off neighbour, which would have prevented this nonsense becoming law.

One further requirement would be an amendment to the Human Rights Act, an amendment that included new rights such as a fair recompense for work. These rights could be incorporated in a relatively short document as they are only statements of principle and it would be the role of the courts to define what these rights meant in practice.

What I am proposing is a remedy for market failure. A remedy that restores a measure of equality in  the bargaining process in the free market. Rather than looking to government to remedy market imperfections, individuals working through the court system will able remedy the failings of the free market. Employers and landlords will be less inclined to adopt exploitative or abusive practices, if they know doing so will involve them in having to defend such practices in open court. Instead of a race to the bottom in which employers vie to adopt most exploitative cost cutting practices to save, there would be a move upwards towards a fairer employment regime.

A salutary lesson for this left of centre economist is that the legislature cannot be relied upon to protect the rights of citizens. Individual legislators are too easily corrupted by powerful corporate interests. As the recent past demonstrates they are only too willing to legislate away the right of citizens to further the corporate interest. Not so long ago a senior member of the government (of a party claiming to represent the workers) saw his role as frustrate the EU commissions attempt to increase the rights of agency workers.There is an old adage that states that the person who can be best relied upon to defend your rights is yourself. The record of the Westminster parliament over the past forty years only too clearly demonstrates the truth of this adage.

This is only intended to a sketch of how the free market could be changed to the benefit of all. Today’s news has demonstrated the need to find an alternative to seeking remedies through parliament. The Prime Minister announced that she would be introducing a policy which entitled all workers to a 12 month period of absence to care for an ill relative. What she failed to make clear was that this would be unpaid leave. A meaningless reform on a par with all the rights of the Soviet citizen that were written into that country’s constitution. Rights that in a police state were meaningless.

(1) There are a number of tribunals that at present that consider these wrongs,but I have left out reference to them for ease of writing.

Contemporary Britain, a country dominated by Nietzsche’s untermensch (under men)

Nietzsche hated democracy because it makes possible the rule of the common man and the suppression of the superman. A term that Nietzsche uses to describe the common man is untermensch or underman, a term which was open to misunderstanding and abuse. What he meant by the untermensch was a man who lacked the potential to live the life of a ubermensch or superman. What was never understood was that for Nietzsche the distinction was based on intellect and character, not power or physical strength. Originally he named the saint, artist and philosopher as his supermen. Even his dislike of Christianity as the religion of slaves did not stop him admiring Christ as a possible superman. He admired Christ as a founder of a religion but despised Christians for slavishly following the beliefs of another. What I think is most useful is his description of the untermensch as those in thrall to a slavish culture. People incapable of independent thought. When I look at the British parliament and the legislatures of other Western nations it seems obvious that we live in an age of the untermensch.

What the untermensch share is a slavish adherence to a common culture which means that politicians of whatever political stripe, will all give the same replies to questions on policy. These are a few examples which demonstrate this clearly.

In Britain the housing market is broken and many people are forced to live in private rental sector. Properties in which they have no security of tenure and for which they pay ever increasingly exorbitant rents. Whenever it is suggested that these tenants should be given security of tenure or have their rents controlled, the same parrot cry comes from politicians, whether of the parliamentary left or right, that such controls would only make matters worse. They claim that such controls would force landlords to withdraw from the market, reducing the number of properties for rent and so making the situation worse for tenants.

Britain’s railways are the most expensive and some of the least efficient in Europe. When it is suggested that these railways should be taken out of private ownership and returned to the state, it meets with howls of derision from the collective parliamentary body. Everybody in parliament knows that the state is peculiarly unfitted to run business and businesses such as the railways are best left in private hands. The solution to the problem is as every parliamentarian knows is to transfer the railway franchises to more efficient private owners.*

There are many other examples of the politicians collective thought that could be mentioned. What is common to these practitioners of politics is a hatred of those that think independently, they expel or seek to suppress from the collectivity of politicians those who think differently. At present the parliamentary Labour party is seeking to purge itself of a leader who thinks differently. A glance at the politics of contemporary Europe provides evidence that those who think differently have no place in the mainstream political parties, they have to come from insurgent parties such as Podemos in Spain or The Five Star movement in Italy.

One common place truth of contemporary political analysis is that the political elites have lost touch with the people. It is a resentful and sullen people that turn to the populist parties of the right. These parties at leas recognise the pain of the people, something that the political parties of the left fail to do. Durkheim called socialism a cry of pain, the parliamentary socialist parties of today no longer this truth. Rather than ignoring the people, parliamentarians are following a culture that denies the validity of other expressions of the truth other than its own. Truths that might appear obvious to the people are to politicians merely uninformed opinions.

Another demonstration of the untermensch mentality is the slavish following of opinion polls. Rather than leading, politicians prefer to follow, all to often they are prepared to abandon their principles because the people as expressed a different views to theirs in an opinion poll and the peoples will  must be respected. Never do they consider that they are elected to lead the country, they prefer to follow.

The language of politics is so often that of the untermensch. One of our most popular newspapers is said to ensure that all of its content can understood by the average thirteen year. It does not tax its readers with difficult text or content. Similarly our leading politicians prefer the language of the thirteen year old which are  expressed in what are meaningless phrases or slogans. Our current Prime Minister is campaigning for re-election with a series of simple phrases, such as that she will provide ‘strong and stable government’ as opposed to the opposition who represent a ‘coalition of chaos’. She it seems feels no need to present a detailed and reasoned manifesto to the electorate.  A vague and rather meaningless manifesto will suffice and that is all she and her advisors believe is necessary is a few repeated slogans to get out the vote.

Defenders of the present political system will argue that the overwhelming majority of parliamentarians not only went to university, but elite universities and got good degrees. However the very intelligent can be members of the untermensch, as its a mentality or way of thinking and it is as much about  character as intellect. Politicians rarely stray beyond the party line or parliamentary consensus of views, they sacrifice their individuality on the altar of group think. What Nietzsche’s supermen do is to challenge the conventional thinking of the time. When politicians continually speak and think in the language of the average thirteen year old, it cannot but deform their personalities. What at first becomes a means of communicating with the masses through does through constant repetition become incorporated within their personality. They take some of the characteristics of what they affect to despise, the common or under man.

While I think that Nietzsche’s understanding of British democracy is correct today, it has not always been the case that the British parliament promotes the mediocre at the expense of the talented. Today parliament has been overtaken by the culture of the untermensch, whether its expressed in terms of loyalty to the one’s party, obedience to the will of the people or submission to the dominant Westminster belief system. In previous times there has been a much more vigorous culture at Westminster, one in which individualist thinkers could thrive and even achieve the highest office. What is needed is an ending of the stranglehold on Westminster culture of the parties of the consensus, then politicians of an independent mindset will begin to flourish there.

There are those who will have a different understanding of Nietzsche’s concept of the superman. Mine derives from the earlier writings of Nietzsche, as his understanding of the superman did change in his later writings. Obviously those who have read ‘The Will to Power’ a book created by his sister out of his notes will have a very different understanding. Personally I think that this understanding of Nietzsche’s superman is invalid and of little intrinsic merit.

* Any independent minded economist could easily expose the flaws in such thinking.

Fake Economics and the Great Shock Theory of Economics

This is the age of fake news it is also the age of fake economics. One such is the Big Bang or Great Shock theory of economics. It is the policy preference for those politicians that have a disdain for the facts. They have an impatience with the world of fact or reality as it does not fit with their view of the world. In a very prescient film ‘Who Shot `Liberty Valance’ , John Ford has one memorable line in the film in which the news editor states that ‘when the facts become legend, print the legend’. This very much describes today’s politicians who have a preference for their ‘legend’ or story over reality. One consistent and common story is that by administering some great shock to the economy they will shake it out of its torpor and kick start a new dynamic economic era.

Believers in fake economics or the story predominate in the politics of the Anglo Saxon world whether its in the form of Donald Trump or Theresa May. The latter believes the necessary shock treatment that will revive the UK economy is the leaving of the EU. Once firms are deprived of their cosy relationships with the European market, they will be forced to find new markets outside Europe (or go out of business). The necessity of finding new markets for their products will inject a new dynamism into business, so transforming British businesses into world beaters. Businesses will now put a premium on those leaders who are doers and the influx of doers into the top levels  of business will have this transformative effect. The proponents of this shock therapy do admit that some businesses will fail to adapt and have to close, but these failures will be more than made up for by the new enterprises that will replace the old failing businesses. However what the proponents of shock theory fail to admit is that the shock is as likely to kill as cure. Evidence from the past suggests whenever the government administers shock therapy to the UK economy it kills more than it cures.

The classic shock treatment occurred in 1981, when the government decided to introduce the reforms that are associated with Neo-Liberalism. The shock killed of 20% of UK manufacturing industry and unlike the theory suggests new businesses did not develop to replace them. One consequence is that the UK now has the largest trade deficit of any developed country (as a proportion of GDP). Good fortune has enabled the UK so far to escape the consequences of this folly, but that good fortune cannot last forever.

Much as in a John Ford movie legend has replaced fact. Politicians generally accept that despite the evidence to the contrary the 1980s were a success story. With such a complex institution as the economy it is always possible to find evidence for your own good story and even when there ar plenty of bad facts, as their existence can be conveniently ignored. Ignorance of the workings of the economy is so widespread amongst the political classes and the media that its easy to sell the fictitious ‘good story’.

One consistent story coming from the government is that British business can find new markets to replace those lost through leaving the EU. India is one of the most populous of Asian nations and it is home to one of the world’s fastest growing economies. This is claimed by government ministers to be one of the new markets British business can exploit.This year India has been the subject of two trade missions to India, one led by the Prime Minister and another by the Chancellor of the Exchequer.  What India requires from the UK is an easing of restrictions of Indian migrants coming to Britain and until that is granted it will not consider a new trade deal. This government has made its priority restricting immigration into the UK and this means that all those trade missions have been in vain. Until Britain makes some concessions on immigration, India will not open up its markets to UK business.

Trade deals with other nations are also fraught with problems that make any negotiations fruitless. Brazil and Argentina are the two largest economies in South America and as such should be a potential markets for UK exports. However there is one issue that prevents a new trade deal being negotiated. These two countries both have a large beef industry and would love to export beef to the UK. However in these two countries the cattle diseases such as foot and mouth are endemic. If the UK accepted imports of beef from these countries it would possibly be importing disease into the country. Then the UK would lose its status as possessing a disease free cattle industry. British beef farmers would then be prohibited from exporting their beef to such as the disease free countries of the European Union. The powerful UK farmers union would prevent such a trade deal, particularly as the governing party is the party of the largest of agricultural landowners. Economic realities mean this is yet another potential market that is closed to UK exporters.

However for the practitioner of fake economics none of this matters. When one of the most significant purveyors of false economics said that the public were tired of experts, what he meant was that they were tired of hearing the difficult truth. They like their political leaders want believe the easy to fictions of fake economics. What fake economics does convey is the false story that the political leaders of this and other countries know what they are doing and that they are making those policy decisions that will be of benefit to the economy and the people. Nobody wants the truth which is that our political leaders have only the vaguest grasp of economic realities and that are doing the equivalent of shooting in the dark.

There is one other great advantage of fake economics. When the train wreck of the great shock inevitably materialises the politicians can claim that is not their fault. They have done their bit in that they  have administered the correct medicine, the failure now is with the patient for not taking the medicine correctly. Business leaders and workers have failed to respond in the correct way, the failure lies with them, not with the government. When one of the major purposes of a policy is to transfer blame to some other party than the policy maker it is always going to be the wrong policy. Being unwilling to take responsibility for one’s actions suggests that at least sub consciously the policy maker knows that they are in the wrong.

Societies of no opportunity – reflections on the Anglo-Saxon societies of today

Politicians always have a story that transforms this dull rather ordinary looking individual into something quite different. These people who look rather like your unimpressive neighbour claim to have charisma. They are imbued with special qualities denied to the common man. Usually these stories come from a shared stock of charismatic images. One that is constantly brought up is how hard was the politicians childhood and how they overcame immense difficulties to achieve their current position. Recently a new story has become part of the common stock of images, the politician as revolutionary. However it as a special kind of revolutionary, what they are doing is overthrowing the tyranny of past thinking. They are much like Nietzsche’s iconoclast taking a hammer to those false idols that trap people into a false way of thinking and behaving*. While Nietzsche was taking a hammer to the Gods and idols of the Judaic Christian tradition, the current revolutionaries are taking the hammer to the idols of the Social/Christian democratic state. They as did Nietzsche believe that these idols encouraged the development of a feeble civilisation, one which suppressed the great men. A civilisation that reduced all to the most mundane levels of living, great men were forced to live the life of the mundane middle which prevented from fulfilling their potential. He despised the UK a society which through its democratic system gave ordinary men the power to rule over the great or the supermen. Similarly today’s political revolutionaries believe that the welfare state has given rise to a culture of feebleness which has led to the current political malaise.

One of the most detested aspects of the social democratic state for them is the dependency culture. State benefits created a type of person that rather than be go-getter looking for work and constantly trying to improve themselves, would instead rely upon the state for handouts to support them and their families. These people were a drag on society and in urgent need of change. I think General Kitchener best epitomises this way of thinking when he objected to the introduction of pensions for war widows in the First World War. He thought this would encourage the wrong kind of man to join the army, one who wanted to get killed or wounded so he or his family could benefit from state handouts. This type of thinking is very prevalent today. Politicians constantly talk about families that live from generation to generation on benefit, families in which no one has worked. Their solution is to reduce benefits to a level that are just sufficient for human survival, so the misery of a life on benefit will be the incentive to make people want to work. This one act will change the feeble creature of the dependency culture into a go-getter that is proud to work and prides themselves in supporting their family.

The lack of evidence to support this policy of cruelty does not matter. Whenever research is undertaken into the unemployed it never produces evidence of a work shy population. One estimate suggests that there are only 33 families in which the parents and then the children have never worked. However such evidence can be dismissed when the popular media can always produce stories about inhabitants of the work shy benefit culture. It is for politicians the morality of the hypocrite they can do evil in the cause of a greater good. Misery and suffering become merely the start of a life cycle that propels the individual towards the good life.

There is one fallacy in this revolutionary logic, it assumes that there is a career path out of poverty for the work shy. However in a low wage economy it is impossible for this new generation  of strivers to move out of poverty. This is the culture in which the strivers have to take two or three jobs to survive. There is little scope for such people either amassing the savers to improve their life circumstances or shave the time study to achieve the qualifications to improve their life chances. What is wrong with our society is not the people but its lack of opportunities? The economy is designed or structured to produce few winners and many losers. In an unfair society which denies an increasing majority of the population the opportunity to live a decent and civilised life, what is needed is a story to justify this unfairness, a story that turns moral dross into moral gold.

One is that told by our new generation of revolutionary politicians. They believe that it is the culture of the welfare state that has produced a generation of the feeble minded. People who lack the drive and initiative to improve themselves. Demolishing the welfare will be the shock these people need, it will transform the general population.  There will be a few degenerates that will be mired in poverty, but the rest will the strivers and achievers. The latter group will be the winners who will be rewarded with the material rewards that characterise the good life. This story has the virtue of demonising the poor as deserving their fate, a just return for their lack of drive. It’s a persuasive story but one that has little foundation in reality. In an unfair unjust society even the hardest working of the strivers can be denied a good life.

There is another story circulating about the unfair society and that is that it the natural outcome of a  the meritocratic society as suggested by the writer Toby Young and the sociologist Peter Saunders. Evidence shows that the IQ scores of the middle classes exceed those of the lowest classes. The argument is that higher income is the just reward for possessing the greater intelligence. However there is doubt that can be cast on IQ as a measure of real innate intelligence. If coaching for the IQ test can improve markedly the individuals test core it cannot be a valid test of innate intelligence. Innate intelligence just is there it can’t be taught, if these tests were a real measure of innate and not acquired intelligence, training in these tests should make little difference to the final score.

What unites this new generation of revolutionaries is their high income. These revolutionaries don’t live in garrets or hovels plotting change, they live in big houses and enjoy the lifestyle of the affluent. It is not unusual for these new  revolutionaries to enjoy six figure incomes, profitable second jobs can be as a columnist for a newspaper or lobbyist for a city finance company. Revolutionaries don’t live the comfortable life they are driven by a desire to change the unfairness of society, an unfairness manifested in widespread poverty and misery. These new revolutionaries wish to increase unfairness, inequality and poverty. Rather than accepting the self image of these new revolutionaries they should be seen as the really are stripped of their revolutionary romantic aura, they are merely the spokesmen for the rich and powerful oligarchs. These politicians rather than ushering in a new revolutionary age are the reactionary spokesmen for a new generation of backward looking oligarchs. What they are spokesman for is a hatred of modernity.  The oligarchs associate modernity with all that they hate which can be reduced to taxation and legislation to improve the life chances of the majority, which they see as reducing their opportunity to make money. As one of their spokesman so eloquently put it, its immoral to increase taxation on the well off. Making excessive amounts of cash and not paying taxes is the new approved morality of these new revolutionaries.

*Nietzsche ‘Twilight of the Idols’