The Immorality of Current Economic Practice

Jeremy Bentham one of the more influential figures in 19th century economics was also one of the founders of the philosophy of utilitarianism. The foundational principle of utilitarian philosophy is that good actions are those that give the greatest pleasure to the greatest number. Those of an older generation of economists such as myself, will remember how utilitarian principles were used in the construction of market theory and in particular the laws of supply and demand. I think that utilitarian principles still influence economic theory and practice, although they have been modified with time. Welfare economics is still an accepted part of economic theory, a theory that tries to explain how the optimum levels of production can be attained in a particular economy. However the practice of economics has led to a very modified form of utilitarian theory, economic practice still aims at maximising the pleasure and happiness of people, but it is not always the maximising of pleasure of the majority, all to often economic practice can be directed at maximising the happiness of a privileged group.

Economic utilitarianism can now rewritten as follows,

happiness can only be maximised for the few through the pain and suffering of the majority’,

A recent example from business demonstrates this principle. Sir Phillip Green was only able to buy his third super yacht at the expense of his staff at BHS. There is  a rough equivalence between the money that he took out of the retail chain BHS and that which he paid for his new yacht. His yacht cost the jobs of 11,000 BHS workers. It can be argued that this one example of bad business practice is not representative of the theory of economics. However the most popular of current economic theories is supply side economics, which has been practised by both government and business over the past thirty years. This teaches that the major obstacle to maximising economic welfare are restrictions that the limit the supply of the factors of production, the principle factor being labour, that is people. Governments have since the 1980’s have successively removed employment protection legislation, so that today there are very few restrictions on how employers can use their workers. Given the removal of these protections Sir Phillip Green had few obligations towards his workers and could pass on his near bankrupt company to another knowing that he could avoid having to make redundancy payments and having to honour the pensions payments promised to BHS staff. This is not a unique example but just the latest in a long line of business owners of refusing to take any responsibility for their staff. If it had not been for the adverse publicity in the media and the hostile reaction of some MPs, his actions could have been put down to yet another failure of a UK business that failed to adapt to the times.

The name Ayn Rand is little known outside political circles, the media and the profession of economics.Yet this novelist cum prophet is the inspiration for much of current government policy.  What she preached was a crude social darwinism. The poor did not deserve to survive in society to which they contributed little. The poor through their low incomes and poverty demonstrate their unfitness to survive ,as they cannot even provide for themselves. In her novel ‘Atlas Unchained’ she sees the death of so many of the worthless people as a necessary means of social cleansing. The heroes of her books are the billionaires and the money men, those who through their own efforts have made millions. Any restriction on their activities such as  taxes on their incomes only makes society the loser, as it limits the creative and wealth making activities of these individuals.

‘Randian’ philosophy is applied to welfare policy. Those who claim benefits are part of the dependency class. These people who have come to depend on the state for their income and who in consequence have lost the incentive or will to provide for themselves. The harshest of sanctions are required to get this class of people into work, any suffering of benefit claimants is justified, as it the stick required to make this class of people work. This why the government can be indifferent to the suffering of those deprived of benefit for a number of weeks for a minor infraction of the rules. They don’t mind if these hungry and desperate claimants have to resort to food banks to survive, as they provide a useful example to others.  Hunger is the best spur for making people work.

Even in the benign 1960’s this malign philosophy was active within economics. At that time unemployment was around 1% of the workforce, it hovered around 100,000. People thought that the full employment of the post war period was a success. I believed that myself and was shocked to discover at university that there were economists advocating an increase in unemployment. They wanted the government to take action to increase unemployment to about 3% of the workforce. This they claimed would reduce the pressure of prices and cut inflation. Yet this was a time when the majority of people remembered the horrors of the Great Depression of the 1930’s. They found little support at first in government, because there was no desire to return to the 1930s and the misery of that period. Then for these economists the utilitarian maxim would have been

the happiness of the majority can only be achieved through the suffering of a minority’, now with ‘Randian’ philosophy dominating government it can be rewritten, as ‘the happiness of the minority can only be achieved through the suffering of the majority’.

This may seem an overly pessimistic assessment of government economic policy, when the majority of people are well fed, well housed and living well. The misery seems to be confined to the precariat, that is those in insecure low paid employment such as cleaners and shop workers. However the impoverishment is slowly seeping upwards. Large numbers of whom would have been the future well off middle classes, university graduates of whom large numbers are looking forward to an insecure future of low pay and insecure work. The government is actively working to reduce the privileges and protections enjoyed by the professional middle classes in their employ. Teachers and doctors are just two groups that are expressing discontent with the negative impact of government policy on there working lives.

There is no reason why economics should be directed by such a malign philosophy. Economic policy in the 1950s had the aim to maximising growth, employment and the welfare of the people. Apart from a small minority economists shared these goals. Only bad economics as practised today aims to immiserate the many and enrich the few.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s