While studying economics in the 1960’s, I always had the feeling that something was missing from the subject I studied. It was not just the absence of left thinkers amongst economists, I had the nagging feeling that there was a lack of a fundamental something. In a subject that is essentially about people there seemed to be a complete absence of the people factor. I was a bad economist who failed to grasp that in essence people were just another unit of production and their humanity did not entitle them to any special privileges. Only a ‘good economist’ (of which I am not one) could understand that the free market represents the epitome of human organisation in the economic affairs. Alternative such as the mixed economy, the planned economy have all failed and it is only the free market that can maximise wealth and human happiness.
Bad economists such as myself always fail to see the bigger picture, we focus on the misery suffered by individuals as a result of economic change, failing to realise that this misery is the necessary price to be paid for changes that benefit society as a whole. We focus on the suffering caused to people by the changes that have accompanied the introduction of the deregulated and flexible labour market; ignoring the benefit to employers who now have the power to adjust the hours their staff work to fit in with the needs of business. All supermarkets now benefit from the split shift system. Formerly they had to employ staff for fixed hour shifts, so they could end up with having too many shop floor staff in slack periods. Now they can send staff home during the slack periods and recall them for a second shift during a busier part of the day. Then there is the beauty of zero hour contracts, where employers can call staff in when they need them and they can include an ‘exclusivity’ clause which means that the employee cannot take on any other work when not required by their employer, meaning they are always available for work. Being able to treat people as if they where just another resource such as a machine which can be switched on and off when needed, enables employers to maximise their profits. Good economists see the necessity of relieving the workforce of their humanity, as sick and maternity leave do little more than disrupt the productive process.
There was recently a Question Time programme on radio where an employer and ‘good economist’ lauded workers in an American factory where the workers had agreed to incremental increases in the hours they worked (without compensatory wage increases), so that in the end all staff were working ten hours a day for six days a week. They had the good sense to realise that trivialities such as the right to a family life, were merely impediments that prevented the achievement of the greater good, that is the increased profitability of the business. That in turn meant that the owners would not feel compelled to relocate their business to a country where wages were lower, accepting inhuman working conditions were a price worth paying for keeping your job.
Income inequality is a subject that I constantly fail to understood. The ‘good economist’ sees widening income inequality as an unqualified good. Today company directors pay is about 128 times greater than the average wage of their employees, whereas in the 1980’s it was a ratio of 1 to 35. An economist would explain to an ‘economic dimwit’ such as myself, that the high pay for company executives was a necessary reward for talent. They could point to the recent example of the Co-op, where business consultants decided that the going market rate for a CEO was £3.5 million per annum. If the boss of the lowly Co-op supermarket chain can command that salary, obviously the boss of a giant bank such as HBSC deserves a much higher salary. By paying astronomically high salaries we would attract the best people to run our companies. We would all gain from the high growth that these companies would experience. The fact that I as an individual don’t seem to have benefitted from this upsurge in prosperity is that I am one of the unskilled apathetic who don’t deserve a wage increase.
Perhaps the doyen of free market economists or ‘good economists’ was the Chicago economist Milton Friedman. He understood why President Pinochet’s government on seizing power had to lock up and kill many of their political opponents. It was necessary for attainment of a greater good the introduction of a free market economy. These opponents, many of whom were trade unionists, would have opposed the free market reforms that the government intended to introduce. He could see that in the greater scheme of things, the death of a few trade unionists meant little compared to the increase in wealth for all from that came the introduction of the free market economy. There are right greater than the right to life, if you are the wrong kind of person. Death was merely one way of marginalising opponents of the free market.
When the reforms failed to deliver the promised wealth for all, it was pointed out by economists that it was the fault of individuals not the system. The talented and hard working had become rich, while those lacking the true entrepreneurial spirit remained mired in poverty. It should not be expected that economy should provide for those lacking in skill or drive.
I confess to be an economic slower who would want to reserve all the changes in the labour market, that have led to Britain becoming the low wage capital of Europe. It was not so long ago that a Korean company opened a factory in Wales because wages were lower there than in Korea. To reverse these changes I would introduce tougher wage regulation imposing a minimum wage never the ‘living wage’ and ensure that it was enforced. At present it is left to the goodwill of employers to pay the minimum wage. Since its introduction there have been no prosecutions of employers who flout this law. Job insecurity which imposes untold misery on millions I would reduce by re-introducing the job protection measures removed by successive governments since 1979.
A ‘good economist’ would see this as folly, he would gently take me aside and tell me that my proposals would work to the detriment of the labour force. They would point out that Ian Duncan Smith’s reforms that have reduced many to living in poverty are in reality a good thing, it is misguided individuals such as myself that misunderstand their purpose. Before the advent of Ian Duncan Smith far too many individuals were mired in the dependency culture. They had become individuals with no purpose in life other than to collect state benefits on which to subsist. These apathetic, aimless creatures spread misery, neglecting their houses and letting them and their neighbourhoods deteriorate too such an extent that they resemble Victorian slum areas. Reducing their benefits to a level less than on which it is necessary to subsist means they will be forced to find work. Once in work they will learn the pleasures of a life independent of benefits and they will gain immeasurably in self respect. Pushing these people into a poverty enforced misery will make them change their ways, it will eventually create a race of sturdy self reliant individuals.
Such a person would tell me that I misunderstand the benefit of low wages, it gives the worker the incentive to work harder. They also would say that what is wrong with the low paid worker having to have two or three jobs to make ends meet. It teaches them that nothing comes to them unless they work for it. They are incentivised through poverty level wages to work for self improvement. We need to instil into the workforce the work ethic that would be the most effective driver for prosperity. A living wage would have the reverse effect, it would mean that the lazy and incompetent would get the same wage as hard working and clever. This would be self defeating as the costs of production would be pushed up through having to over pay poor workers, thereby increasing prices, reducing sales, followed by staff lay offs. The poor need to be motivated by fear, they are a different in nature from the talented company directors who need high pay to be incentivised to perform at their best. They are a totally different type of being that responds better to rewards than fear.
As a bad economist I have this nagging feeling, I do not see after having thirty years of the free market that it has delivered on the promises made by its advocates. Certainly a small elite group have done excessively well out of the reforms, but what of the majority. Incomes for the majority have in real terms remained stagnant since 2003. House prices are spiralling out of control to such an extent the trend to home ownership has gone into reverse. Surveys suggest that the sense of national well being peaked in the mid 1970’s, not in the free market noughties. Is it possible that the benefits of the free market economy are merely illusory? In Stalin’s Russia of the 1930’s one five year plan after another was produced, always promising that at the end of each plan the communist nirvana would be achieved. All that happened was that nirvana seemed to recede further and further into the distance, somewhat like George Osborne’s plans. He promised remove the structural deficit by 2015, now its 2018, whereas in 2017 it will be put back to 2020 and so it will continue. Can I suggest that instead that a change of direction in government policy, one that takes account of the hesitations of bad economists such as myself. Bad economists prefer to look at the world as it is, not try to make it conform to some imaginary model.
2 thoughts on “The Musings of a Bad Economist”
Awesome. I wish more young people understood the benefits of a true free market.
Thank you, I’m glad you enjoyed my post