Economics has been called mockingly the ‘dismal science’ because economists are always predicting a dire future for humanity. It remains a dismal subject; but I take exception to the use of the word science. In trying to establish it as a science economists have created an abstract world of economics distant from reality. The language in which economics is written often hides through its over complex technical jargon insights that are lacking in originality and often of little value. A bad economist such as myself eschews the use of the technical language of economics and uses a simpler language to arrive at different insights to my contemporaries.

One of the objectives desired by economists is the a attainment of a free market. A market that is free from any artificial constraints imposed on it by government (e.g. laws regulating the labour market or price controls) will maximise human welfare by maximising the output of goods and services at the lowest possible price. The market knows best and the government should not try to second guess it. Rather than go into a more detailed explanation, I shall assume that everybody is familiar with government propaganda extolling the benefits of a free and competitive market. Can I as an economist point out one unique feature of the free market; it is unlike any other part of society in that it is practically free of rules and regulations. As a civilised society we recognise that our community is best governed by regulations (laws), which ensure that society is run to the benefit of us all. Recent governments have produced a proliferation of laws regulating our conduct, except in the market where on the contrary it is trying to reduce them to a minimum. The government would never reduce criminal law to a minimum as it knows there are certain individuals who would exploit a law free society by using that freedom to harm others. Yet naively the government assumes that people who would behave badly in any other context, will behave well when working in the economy.

What I am suggesting is that from a common sense point of view, the free market should be called the law free market or more appropriately the ‘lawless market’. Viewing the market from this perspective gives a completely different understanding of the free market. I would suggest that the free market is more akin to those lawless states governed by criminal mafias, such as Mexico or Russia. What I shall attempt to demonstrate is that by applying the concepts used to explain the mafia states, it is possible to develop a new and more valid understanding of the free market.

In lawless societies it is the strongest and best organised gangs that predominate. In Mexico they are the drug cartels and in Russia it is the Bratva (the organised collective of crime elements). These criminal elements rob and despoil their host communities, using both violence and bribery to attain their ends. It is no coincidence that the richest people in both these countries are linked to these mafias. Also in both countries they have corrupted the political process and the forces of law and order so successfully that they now work to protect the interests of the various mafias. Russia has been called the ‘mafia state’ as the criminal elements in that society are reputed to be closely allied with the government of President Putin.

A similar analysis can be applied to the relatively law free economies within British society. The difference being one of degree rather than kind. Bankers and the City of London have long argued for a ending of any legal restraints on the trade in money and savings. With the so called ‘Big Bang’ in 1986 (that is the deregulation of financial services) they have achieved their aim. Now gangs of bankers and financial traders as the strongest and best organised gangs are the best placed to exploit the lawless money markets.

With the introduction of large bonuses, City traders were encouraged to use clients money not to benefit them, but in a way best suited to maximise the traders’ bonuses. It could mean ‘naked short trading’, whereby traders borrow shares to sell, so as to force down their price. A practice which enables them to now buy shares at the new lower price, having already contracted to sell the same shares at the old higher price in a previous deal. The difference in the buying and selling price represents the trader’s profit but a loss to those funds who now find their holdings of shares have been reduced in value. Their are many types of financial scams (charges) that City traders, fund managers use to divert their clients money to their own accounts.

This is the reason that an individual who invests in a private pension is likely (once inflation has been taken into account) only get back what they have invested. The profit earned from investing those funds as gone to others. In the more regulated financial market in the Netherlands, the average return on private pensions is 50% higher.

The City of London has as with the Russian mafia captured the government to such an extent that it can change policies to suit its interests. One example occurred at the start of the reign of ‘New Labour’. The Corporation of the City of London wanted to do something unique in a democracy, it wanted to enfranchise city businesses, so they could have a vote (size of vote determined by their number of employees) enabling them to outvote the residents of the City of London. Thereby there would be a Corporation that worked exclusively in the interests of the financiers. The government duly obliged. Obviously Gordon Brown’s infamous ‘light touch’ regulation maintained the relatively law free zone in the financial market brought about by the deregulation of the 1980’s. The result no restarting on the irresponsible behaviour of the financial community that brought about the crash of 2008/9. After the crash the government turned to the very people who caused the crash for a solution. The solution was to throw billions at the financial markets so no financiers suffered a real loss and the only losers were the non financier majority who provided the bail out money.

The corruption of the government and the law and order agencies is almost complete. The HMRC that is supposed to be a tax collecting agency, now actively works with large financial and industrial conglomerates to help them find ways of easing their tax burdens. The most infamous was the Vodaphone case when a tax bill of £6 billion was reduced through negotiation to a much smaller sum that only made a minimal dent in Vodaphone’s profits.

One of the most effective ways of bending governments to the City’s will is to fund them. The majority of the Conservative parties funds come from this source. With the successful media campaign to deny the Labour Party finance from the trade unions, it will become more dependent on friendly city financiers for cash.

While having focused on the financial sector I must not neglect the industrial and commercial sectors. Company law has been revised little, other than to favour business interests, since it was introduced in the 19th century. It is hopelessly out of date and is unfit for purpose, it provides no effective restraints on irresponsible company directors. There no no sanction that prevents gangs of company directors from raiding their company’s funds to pay themselves exorbitant salaries. Shareholder democracy is a myth. The thousands of individual shareholders have no means holding the directors to account. There is no way they can prevent irresponsible directors rewarding themselves handsomely, while running their company into the ground.

There are some governmental bodies intended to regulate business for the benefit of the wider community, but as with the old Department of Trade and Industry they have been shrunk into insignificance. Or as with the Serious Fraud Office so seriously under funded or so hampered by fraudster friendly laws that they are relatively ineffective.

Politicians such as Keith Joseph, Margaret Thatcher, Nigel Lawson, Tony Blair and Gordon Brown did not initiate a new era of prosperity through their free market market reforms, but instead introduced a new law free economy in which criminal like behaviours could thrive. Sharp or fraudulent practice is more widespread then ever in the ‘new economy’. Only if we stop regarding the economy as somehow distinct from the rest of society in that it must be ‘law free’ or ‘lawless’, can the economy be set of the path to sustainable recovery.

While I am bitterly critical of the new City of London, my criticisms are laced with regret. I worked in the old City of London in the 1960’s. A city in which different standards of conduct prevailed, a City in which the financial sector was well regulated and policed by government. Nostalgia may prompt me to over state the probity of conduct of the financiers of that time; but there has been a marked decline in the standards of conduct since then.

Finally I must state that I am reviving in this essay an old way of thinking about the economy, political economy. However I prefer to call it bad economics as it suggests an economics completely out of line with current thinking.