Category Archives: economic history

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.

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’

Economic magic, the reason why politicians constantly interfere in the running of our schools. Also one economist’s explanation of Britains low productivity economy.

There is one untruth that is always repeated about the baby boomers pensions and the young. Regularly one politician or another states that baby boomer generation has taken such a large share of the nations wealth that little is left for the young. Recently the Resolution Foundation released figures that showed the median income of a pensioner household exceeded that of the of the average working family. This became a media horror story, which the media claimed demonstrated that pensions were to generous. What the media ignored was that the median income for pensioners is not especially high and what it demonstrated was the appalling low level of incomes of the average working family. Rather than as the politicians argued that there was an urgent need to reduce the incomes of pensioners; what it demonstrated was the urgent need to increase the incomes of working families. No politician or media figure stated the obvious which was that even if the median wage of the working family was increased to that of the pensioner household, the former would still have great difficulty in paying their bills.

Britain is a low productivity and low wage economy. Without structural change in the wider economy the majority of families will remain in the category of either the ‘just managing’ or ‘not managing’. Our government and politicians sort of acknowledge the problem by talking about the need for educational reforms, reforms that they claim which will produce a highly educated and skilled labour force. This highly educated labour force will then produce goods or services of a high quality which will be in great demand and will be highly valued. Then these workers will then be able to command high salaries because they will be so highly valued. Sociologists use the term magic to describe behaviour or practices that the practitioners (in this case politicians) believe will magically solve their problems. Of course magic does not exist and neither do the imagined solutions to our economic problems.

One can add the rider that twenty years of educational reforms have produced a workforce that is less productive than ever. Britain is slowly slipping down the world productivity league.

The real cause of the problem of low productivity and low wages is the business model practised by most contemporary businesses. This model can be explained  simply as the minimising the cost inputs and maximising the output of profit. Labour is the most expensive of the inputs and if the costs of that can be minimised profits are maximised. All the reforms of the neoliberal era have made its possible for businesses to minimise wage costs through what can be described as the zero sum or gig economy. What is taken from the workers is given to the business’s owners. Workers are no longer employed by  ‘Deliveroo’ for example but they are independent suppliers, who are contracted to work when there is wok for them. This system achieves a massive cut in wage costs as the independent suppliers are only paid when there is work for them, which means low incomes for the independent suppliers and high profits for the owners. Also the business can pass on many of the other costs of the business to the ‘independent supplier’. They insist that they  buy they own means of transport, whether it be bikes or vans. This has a further benefit in that the independent supplier has to maintain their vehicles meaning the worker and not the employer has to bear the costs of maintenance of the business’s vehicles. Delivery businesses (goods or people) such as Deliveroo and Uber have achieved the nirvana of business perfection. All the firms have to invest in is the computer systems and staff for the handling and dispatching of the customers orders, all other costs are borne by their self employed contractors. When firms invest so little in the business they can only be low productivity businesses.

High productivity requires investment in machinery, and staff training all of which are high cost. As successive governments have reduced workplace protections to a minimum, it has become much easier to make money by squeezing wages and employment costs to a minimum. It is no coincidence that in a high cost industry such as car manufacturing there are no British owned businesses, all are owned by foreigners. Even Britain’s prestige car manufacturers Rolls Royce and Bentley are owned by BMW and Volkswagen. When there is a successful British manufacturer such as ARM, which makes computer chips for most of the world’s smart phones, it is sold by its owners to a foreign company. The owners preferring to live of the proceeds of the sale and live a life less arduous than that managing a business.

Only if the government took on British management and introduced legislative changes that would persuade or compel them to adopt the high input cost business model, would the low productivity problem be solved. However the government and the political class generally see this as a problem to difficult to tackle, so instead they continue with the non solution of constant education reform. In consequence every year there will be introduced by the government a ‘proliferia’ of education reforms. ‘Shouting in the dark’ is a behaviour which is intended to demonstrate that those scared by the horrors of the dark can scare them by talking loudly. Believing the noise they make will show that they are confident of resisting the evil one and force it to turn away to  find an easier prey. Educational reform is a shouting in the dark, politicians hope that if they shout loud enough they will scare away the horrors of the low productivity and low wage economy. Also by shouting loudly they hope to distract the people from the real problems that they are failing to tackle.

Stoicism and epicureanism philosophies for today

Recently on radio there was a programme about the Roman philosopher and politician Seneca. What occurred to me was the similarities between the world in which Seneca lived and the one in which I live today. He witnessed the decay of the old Roman Republic into an authoritarian state which was at first ruled by the rich oligarchs, a rule which evolved into the rule of one man the Caesar. Several books I have read suggest that we are living in the last days of liberal democracy and that our political system is being subverted by the rich oligarchs who are turning our society into one that bears strong resemblances to the Rome of the last days of the Republic.

These similarities are no more than that, Britain is not becoming a society ruled by a new class of Caesars. Violence is not employed by the rich oligarchs to destroy their enemies, no opposition politician has suffered the indignity of being murdered and having his skull converted into a wine cup by his enemies. These oligarchs to gain power have used more subtle methods. They have corrupted the legal system with their wealth so all kinds of judicial restraints have been developed to silence their opponents.  One such restraint is the super injunction whereby a powerful individual or business can prevent any reporting or discussion of their alleged wrong doing as it is claimed that it will unfairly damage their reputation. Such stories can remained suppressed for years.  The other powerful weapon wielded by the oligarchs is the destruction of their opponents reputations. This is conducted through the publication of hostile articles in the media, which they largely control. It a weapon whose power cannot be underestimated, as when the politician Nick Clegg was asked to explain why so many MPs voted against their principles and backed the government over its policy to leave Europe, he said that they were scared of ‘The Daily Mail’. While there is no equivalent of the Roman mob who could be incited to attack opponents of the oligarchs there are the internet trolls. They can be whipped up into a frenzy and encouraged to launch virulent attacks on the oligarch’s enemies.

When hearing this programme I wondered if stoics such as Seneca who lived under the cruelest of authoritarian rulers could provide evidence of how to live the good life today in a society which is becoming increasing dominated by rich unpleasant oligarchs.

Stoicism taught that the world was created by logos (the spirit) and that logos remains force which continues to direct the development of the world and humankind. The logos determines everything, so people have a choice either to ignore logos and risk being crushed under its onward movement or change their actions and behaviours to accord with the movements of logos. What stoicism taught was that history was pre-determined and wise individual was the one who accepted their lack of control over their lives, Happiness was gained attained by those who cultivated an air of indifference to those things that they could not control. A person who valued material wealth above all else would suffer great pain from its loss. This cultivation of indifference reaches its extreme limits in the writings of Epictetus. He advises the father not to kiss his son goodnight or show any kind of affection, as that son might be dead by the morning. At its simplest stoicism was a philosophy of pain management. In the Roman society of the Caesars  it was rule by Caesar a capricious individual who if he wished could tomorrow deprive you of your wealth or even your life, therefore one should not be greatly attached to either.

In a society in which social and economic inequality is increasing to such an extent that it is likely that the great majority of people will be poor, in which the poverty that characterised earlier societies will begin to characterise the Britain of tomorrow. Material riches of even the most modest kind will be denied to a majority of people, so an indifference to material wealth will help them cope with a life of relative poverty. People would not be depressed for a lack of things of this world, as they have minimised their attachment to them. However such poverty does bring real suffering and why stoicism will help with managing the discomforts and unpleasantnesses of poverty it is not an answer to pain and suffering. Poverty is not caused by the movements of the logos, but through the greed of the rich oligarchs. A more activist philosophy than stoicism is required.

Stoicism was usually a philosophy of the educated rich. These people who had ample wealth could afford to affect to be indifferent to material wealth, as even under the worst of the Caesars very few of them lost their wealth. The poor of Rome preferred the fairy tale religion of the Olympian Gods. They would turn out in their thousands to celebrate the festivals of the old Gods, as the theatre of these festivals offered them some escape from the misery of their lives.

One positive effect of adopting stoicism as a philosophy would be an ending of the cult of celebrity. All these endless talent shows would lack an audience, as people would not longer see a rags to riches story as real, as celebrity would be due not to talent but the arbitrary movement of the fate. Also a people that attached little value to material wealth would have little interest in programmes which celebrated individual talent as a means to material wealth. Celebrity culture acts as a safety value, it releases the pressure that builds up from social discontent. The poor can be pacified by the fairy tales of celebrity that claim that no matter how poor there are celebrity offers an escape from poverty. People will instead have a keen sense of reality and are less likely to taken in by stories of celebrity success.

Stoicism can perhaps be called the philosophy of unpleasant reality and as such it will always lose out to philosophies of hope. In the Roman Empire such a philosophy of hope was Christianity.  Contemporary Britain lacks such a philosophy of hope which will act as a catalyst of change. There are many alternative philosophies in our society but they do not have the messianic appeal of Christianity with its potential for change.

There is another philosophy that was popular among the Romans of this time and that was epicureanism. This is a much misunderstood philosophy it usually thought of as the philosophy of hedonism, as Epicurus taught that the good life should be one of pleasure. However it was a very different pleasure that he had in mind. Individuals should take pleasure in the essentials of life, pleasure should be derived from enjoying a modest diet, dressing modestly, these things were sufficient to enable the individual to live a good life. If one took pleasure in the luxuries of life, life was reduced to a constant craving for more and more of sensual pleasures and this craving made life one of misery. For Epicurus only a person living a modest life could be described as happy.

Epicureans were often persecuted by the authorities because by only valuing a life lived modestly they threatened a society that valued overindulgence and sensual pleasures in all forms. At Roman meals the rich had vessels placed near the table at which guest could vomit into, so as to make room in their stomachs for more of the extravagant dishes that would be placed before them. They took pleasure in all kinds of sensual pleasures as demonstrated by the popularity of gladiatorial sports. Pleasure was gained from watching the pain and suffering of others. Epicurean philosophy through offering an alternative to the dominant philosophy of excess was seen as a threat to a society that valued excess.

If epicureanism was more widely known, there would be one major beneficial effect. The rich billionaires rather than being celebrated for their wealth, would be seen rather as slaves to it and as such to be pitied. There is one marvellous passage in Thomas More’s Utopia where it is seen as slavish behaviour to wear gold and valuable stones as jewellery or chains of office, they are seen as slaves to their possessions. If the rich billionaires who dominate contemporary society were seen to objects of pity, rather than celebrity, their malign influence on politics would be much reduced. Politicians would not seek out their company and not be so desperate to give them favours.It goes without saying that in contemporary Britain and the US the billionaires can buy policy favours, with what to them is the small change from their pockets. Unfortunately the most successful of our politicians worship wealth and despise modesty. Politics for them is a means to acquiring a substantial fortune.

In today’s papers an open secret is being exposed and that secret is that London is one of the major centres of money laundering for criminal enterprises. In this instance the police forces of Latvia and Moldavia exposed this criminal behaviour of the London banks. It was the poor underfunded police of two poor European countries that exposed this activity, not the well funded City of London police. Perhaps the relative poverty of the police and politicians there means they are of higher moral calibre than those of the UK. Only where wealth is so celebrated as the chief of virtues could such corrupt practices be sanctioned.

Billionaires by their very nature will always seek to corrupt those around them. What is the threat to our democracy is the willingness of our politicians to be corrupted by them.  An annual salary almost three times the median wage in Britain is seen as inadequate by most MPs. Too many of them seek sources of income from outside politics making them susceptible to persuasion or corruption. Now the successful politician is seen to be the one who uses their position to acquire the most wealth; the practice of politics taking second place to money making. Reform has become redefined as making changes in the law or society that benefit the MPs wealthy benefactors. Epicureanism with its emphasis on modesty if more generally accepted would give us a generation of politicians less susceptible to corruption and a political class more deserving of respect. Those few politicians uncorrupted by money are drowning amongst the swill of corruption that is contemporary politics.

Social democracy was formerly the force which ensured that the market economy worked for the benefit of the majority not the minority. Unfortunately nominally social democratic politicians have abandoned the substance of that philosophy believing that Neo-Liberalism was the philosophy of today. In the heyday of social democracy many politicians of the right subscribed to its tenets and contributed making Britain a fairer and better society. With the discrediting of social democracy it is unlikely that those moderate politicians of the right would ever subscribe again to its tenets. Epicureanism has none of the baggage associated with social democracy and could be easily adopted by those moderate politicians on the right. In a country with a political class in thrall to the philosophy of greed what is needed desperately in a philosophy of compassion and fairness to counter that extremism.

(Gauis Gracchi was the unfortuante Tribune of the people who lost his life and head.)

Swamp creatures, entrerpreneurial economics and Donald Trump

When Donald Trump spoke of draining the Washington swamp, he conjured a very different image up in my mind to the one he intended. I immediately thought of an old film that I had watched entitled ‘The Creature from the Swamp’. In this film the inhabitants of a small American town are terrorised by a creature from the swamp. This creature has been created from the interaction of the chemical discharges from the town’s factories with one of the embryonic reptilian creatures developing in the swamp. Needless to say after a number of deaths the creature is killed by the ‘all American Hero’ a man who was a feature of so many films of the fifties. I should have added that this film included the fainting helpless blonde who attracted the desire of the swamp creature and who had to be saved from the creature by the all American hero. If Donald Trump has seen this film he would have identified with the all American hero, instead of seeing the swamp creature as an all too realistic portrayal of himself.

The swamp creature I believe provides a very useful analogy for the understanding the politics of our time (and the misguided economic policies of those politicians). There are I believe many cultural swamps within our culture that damage and distort the personalities of the people within them. Although it may appear an unfair  comparison, I think there are two similar swamp cultures within our society that are particularly damaging. One is the criminal sub culture that produces the bosses of organised crime and the other that entrepreneurial subculture, usually focused around property development, that produces the new class of sociopath entrepreneurs.What both cultures produce is a people who lack empathy, who lack an understanding or appreciation of others. These creatures rise to the top through a career that involves the destruction of others. The sociopath crime boss or entrepreneur sees others either as an obstacle to their advancement which has to be overcome or as tools that can be used to advance their interests. What both swamp creatures lack is empathy as they cannot see others except as either having or not having a ‘use value’. They are incapable of recognising the humanity of the other, people for them as people don’t exist. Only by denying the humanity of the other can practise the cruelties and deceits which are the prerequisites  of their success.

In a radio programme I heard how the Tony Schwartz the author of ‘Trump: the art of the Deal’ describe how he first came into contact with Donald Trump. He was a journalist working in New York and he was sent to investigate a redevelopment project for which Donald Trump was responsible. He discovered that Donald Trump had hired a firm who specialised in getting those with a legal right to remain in their home to move. (He could only redevelop an empty apartment block so he needed these people out.) They could make it undesirable for these tenants to remain by removing the lights from corridors or putting lifts out of action. What is significant about this story is how Donald Trump turns what could be a human obstacle into a tool for their own use? The journalist Tony Schwartz was so captivated by Donald Trump the man, that he agreed to write a book on Trump the deal maker. The book was a tremendous success and it made Donald Trump into a national and international celebrity. Such a favourable public image is essential for the sociopath hungry for power. The mythic status of being a deal maker turns the uglier aspects of the personality, the ruthless and abusive personal manner into something more positive. Donald Trump became the man who could get things done, which became the essence of his successful Presidency campaign.

Despite my reservations the sociopath can fulfil a useful function in society. It was Robert Merton who said that crime and organised crime fulfilled an invaluable role  in society. They made available to people products or services that they otherwise could not get. Without organised crime the low income addict could not get their drugs and the city financial dealer their cocaine. Some accounts suggest that cocaine is the essential tool for maintaining that high level of frenzied intellectual activity which makes a successful trader. Similarly many of the great entrepreneurs of the past such as Andrew Carnegie America demonstrated the ruthless behaviours characteristic of a sociopath. He believed that steel worker union was hampering him in his efforts to trade union prevent him from make Carnegie steel into the largest and most efficient maker of steel in the USA.  He decided that he would remove this obstacle which resulted in the notorious Homestead Strike of 1892. He employed the Pinkerton Detective Agency to break up the steel workers strike. Extreme acts of violence were committed against the trade unionists and by the trade unionists in their defence. Ultimately the ruthless boss triumphed.  Other businessmen were not above using organised crime to deny the worker their rights in their endeavours to make their businesses more profitable. Jimmy Hoffa the boss of the Teamster’s Union decided to fight fire with fire and he allied himself with organised crime to use the employers weapons against them. He was so successful that many of the dockyards in the 20th century USA were in effect controlled by the Teamsters Union and their allies in the American mafia. Although I can condemn these men as monsters, they performed an essential role in driving the American economy forward.

While Donald Trump is but a pale imitation of the great entrepreneurs such as Andrew Carnegie. This particular monster is far more damaging to American society, as the damage he has done to the social fabric is not matched by any benefits accrued to the wider society. A steel mill is far more beneficial than a casino, for example the former requires skilled highly paid workers, the latter the reverse. The one single factor that makes the difference is that in 1890 although Andrew Carnegie was able to subvert the local legal system and manipulate it to his advantage, the larger national legal system remained largely uncorrupted. Andrew Carnegie was a monster but his monstrous activities were largely constrained within a manner that benefitted society.  In contemporary America there are no longer the legal constraints limiting the damage that these people can inflict on society. Wolfgang Streeck describes American variously as a kleptocracy or oligarchy. It is a state in which the rich oligarchs can use their money to bend and twist the law to suit their purposes. Just recently the US senate passed a law guaranteeing the US banks unlimited and ‘no questions asked bailouts’ in the event of another financial crisis. The monsters are no longer constrained in their behaviours in a manner that ensure that there activities work largely to benefit to the wider American society.

In a successful and viable social system monsters such as Donald Trump would be constrained. He would have been the owner of a small chain of casinos and leisure centres, the legal system would have prevented his ‘walking away’ from his serial failures. Unfortunately in the current US the legal system has been rendered ineffective in regulating the bad behaviour of rich oligarchs, so there is now no limit on what these monsters can achieve. There is a similar change taking place in the UK. There is on disturbing example that proves this, when the EU was proposing to introduce legislation to make money laundering more  difficult, the British government successfully lobbied against it. The City of London had argued that if the legislation was passed British banks would be at a disadvantage, as other countries would not observe the law, while the British government would operate it to their competitive disadvantage.This spurious argument worked and the UK is now called the world’s largest tax haven by the IMF.

Unfortunately for us all the creatures from the swamp are allowed to roam freely within our societies and wrecking damage to the host society to further their own self interests.

The Great Lie and the Rise of Trump and the alt.right

Economists have to shoulder their share of the blame for the dawning of the age of Trump, May and Farage. Their responsibility lies with the creation of the ‘Great Lie’ which led to the economic and social change which caused the current economic malaise. Governments longer seem to be in control, they seem powerless to arrest the decline in living standards. We now have government that operates on the Pontius Pilate principle, it shares the people’s pain, but it is powerless to anything to alleviate their suffering. In such circumstances when government claims to be helpless in the face of the current crisis, it is hardly surprising that those who claim to have a solution, no matter how wrong headed that solution are now gaining  power.

The ‘Great Lie’  is the one propagated by economists that they have discovered the economic model that if adopted will resolve all the economic and social problems that beset society, that is  the free market. A great lie can be easily identified, it is when economists claim that they have the answer to all society’s problems. Usually such optimistic solutions are called utopian, but economists have greater credibility and there claims are never subject to such scepticism. Economists never seem to accept that the economy as a human creation is as flawed as its makers, mankind. They will never admit that there proposed model for change is but an experiment that may contain as many or more flaws than the system it is replacing.  It is hard to explain why the free market model was so widely accepted, when the very failures of such a system had led to the Great Depression of the 1930s. Until the 1970s it had been accepted that the unfettered free market system was subject to extremes of volatility, whose worst manifestation were the periods of economic depression. Times whne unemploynent was high and people were impoverished. Overnight economists seemed to forget all the negatives of a free market economy and all began to speak from the same hymn sheet, the free market one. The deciding factor seemed to be the unending slow growth and high inflation crisis of the 1970s. A crisis whose origin lay in politics not economics, yet this fact was ignored by politicians desperate a for a solution to the current crisis. (For this particular economist the origins of the crisis were in the excessive demand for raw materials that the Americans required to fight the Vietnam war, which pushed up prices for steel to astronomic levels.)

Economics is pervaded by dishonesty, an unconscious dishonesty but dishonesty never-the-less.The free market or monetary economists never admitted that there would be any downsides to their free market model. Humility was the one quality lacking among these economists. They could make valid and reasoned criticisms of practice of social democratic economics, but were completely blind to the failures of free market economics. When such dishonesty is prevalent among government policy advisors, it should be no surpise that the dishonest claim made by the alt. right with its claim that immigration is the cause of all the problems is an acceptable a truth as the one that the free market works,when it it obvious to many that it does not. 

What these new economists failed to admit was that in creating a free market economy that the people would be exposed to the negative effects of adverse changes in the market. There would be many more losers in the free market. One such example comes from Sunderland, one of the areas that voted in large numbers to leave the EU. One of the main employers is  the Swan Hunter shipyard, which built merchant ships. In the 1970s it was failing to win orders because it could not compete with more modern shipyards in the Far East. The government realised that if it invested in re-equipping the yard with the latest in ship building technology, it could compete with other major shipyards. This would create many new jobs in an area of high unemployment. In 1979 a Neo-Liberal government came to power who thought any government intervention in the economy was wrong and they withdrew their support for the shipyard. All the new shipbuilding technology was sold to a rival shipyard in South Korea. Swan Hunter survives as a manufacturer of warships and equipment for the North Sea oil industry. However the people of Sunderland seem never to have forgotten the government’s betrayal of them and this year they could demonstrate their hostility by voting to leave the EU, against the advice of the government.

While the economists cannot be held responsible for the decisions of the government, they were the cheerleaders for the changes in economic policy making. One of the greatest of these new economists Milton Friedman supported the government of Pinochet when it tortured and killed its opponents, claiming that Chilean society would be better off without these people. A variation on the saying that you cannot make an omelette without breaking eggs, except that in this case the eggs are people.

One chilling example of the eggs being broken is housing policy. Increasing numbers of people, particularly the young are being forced into the private rental market. There they suffer from the twin problems of exorbitantly high rents and insecurity of tenure. When it has been suggested that the solution is to give private tenants security of tenure and to introduce rent controls, the social democratic party in this country has always rejected it as an unworkable solution. They claim that the introduction of such controls would reduce the number of properties for rent and so be against the long term interests of the private tenant. In reality a policy that did both things and which included measures to prevent a reduction in the number of rental properties could be devised. Yet this party clings to the Pontius Pilate principle of politics, vicariously sharing the pain of the private tenant while saying that bad as the situation is there is nothing they can do to improve the lot of the private tenant. When such is the official policy of this party it is no surprise that it is threatened with losing constituencies to the party of the alt. right that claims to have an answer.

There is little doubt that the adoption of free market economics has created an increasing number of losers in society and it is these losers that are looking to the alternatives for a solution. The only solution to the woes of society appear to be those  offered by the xenophobic right; as all the other political parties seem to adopt the same message which is that things may appear to be bad now, but they would be much worse if the government tried an alternative policy.

One solution to the current malaise is for politicians to accept responsibility for their actions, instead of looking for unreal solutions from the world of economics. While it was the unregulated financial markets that caused the crash of 2008/9 the slow recovery has been due to the governments adoption of an austerity policy. If the governments of the West had learnt anything from the 1930s it should be that adopting those economic policies to tackle non existent problems, they should take action to ameliorate the negative effects of the crash. Austerity programmes designed to do little more than cut government debt and increase and prolong the agonies of 2008/9. What is required is imaginative solutions to the crisis, usually not available from economists who are stuck with ‘Big Lie’, that the market will solve the current crisis if left to itself,when it quite obviously won’t.