Category Archives: Economics

Fundamentalist Religion and the Economics of Fear

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A Rural Christian Childhood

When I remember when I was young and staying at an aunt’s house I picked up a copy of John Bunyan’s ‘Pilgrim’s Progress’ to read before going to bed. It was a old edition illustrated with what I imagine were wood cuts, which terrified me. Having tried scan the text for parts with interesting stories I gave up. What I read about Doubting Castle and Giant Despair and the numerous beatings that Christian and his companions suffered filled me with despair. I resolved that evening to live a virtuous life and not suffer the fates inflicted on Christian. However the fear that motivated me to adopt the strict lifestyle of my aunt disappeared on my return home. There days spent playing out in the sunlight summer countryside of Kent restored my childish optimism. Even when attending services at the village church, there was little to remind me of the horrors that that abounded in ‘The Pilgrim’s Progress’. Church services were happy affairs reaffirming the good life lived by the inhabitants of our rural community.

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What I learnt unconsciously as a child was that any religion or morality of fear was only effective as long as that fear was constantly reinforced by repetition. Sunlight and the beauty of the countryside removed the shadow of fear that clouded my mind. Once those influences that made fear so oppressive, that is the strangeness of the dark oppressive city bedroom, the terrible words and depressing images were removed my fears vanished. Instead there was my love of the Christianity of the countryside. Even through my periods of atheism at the big city university, my affection for the Anglican Church never diminished. Unknowingly I took with me to the city my love of the life affirming Christianity of my childhood.

This simple unreflecting religion of the countryside has remained with me. It was not a religion that was unaware of the unpleasantness of life, many from the village were all too familiar with such, having experienced the horrors of World War II. They did not want a religion that told them that they lived within the confines the ‘Vale of Tears’ and the ‘Slough of Despond’. The beauty of the surrounding countryside gave the lie to such perceptions. What they wanted was a religion that celebrated life they knew and experienced. The religion that enabled them to celebrate the seasonal rites of passage that gave meaning to their lives.

There were two vicars in my time in this village. Neither over intellectualised life and were very representative of that strain of bucolic Anglicanism that once characterised the English church. The one vicar I knew well had been a Cambridge Rowing Blue, a man who epitomised the muscular Anglican Christianity of Charles Kingsley, I suspect that as with Charles Kingsley he always slept in a bedroom with an open window, exposed to even the winter cold. Kingsley believed healthy living was an essential part of the Christian life a healthiness engendered by physical exercise and through a rejection of the soft effeminate lifestyle that avoided exposure to the elements. (It should be mentioned that his insistence on always having an open window led to him catching a chill which caused his death.) Our athletic vicar’s sermons were couched in a language that the unsophisticated country dweller could comprehend. There were no difficult intellectual frills, about the nature if the triune God for example. This God only mentioned The Lord’s Prayer a God whose existence was accepted and whose existence was never questioned or explained. Even this twelve year old choirboy as I was then could understand his sermons.

His predecessor commanded great respect in the village, even although I as a child found his manner gruff and intimidating. During the war he had been a padre and when his unit had been captured by the Germans, he refused repatriation which was his right as a non combatant and instead went into captivity with the rest of his unit. This man my father really liked as he would visit him when working in the fields and talk about their shared wartime experiences. I don’t think he once mentioned religion in his conversations with my father. On reflection I think what I mistook as gruffness was in reality the blunt manner of a countryman. A man with a simplicity of manner and directness of speech, who felt no need to add in the unnecessary courtesies of ‘townified’ speech making.

The Economics of Fear

Between the world of my Kentish childhood and that of England today, there is a yawning chasm, it as if the first never existed. All the certainties of my childhood, fair wages (sufficient income to support a family), good housing, security of tenure and employment have disappeared. One story illustrates this, there was on the estate a worker who was notoriously lazy. One day when he heard the church clock strike twelve for lunch, he stopped his hedge cutting mid stroke and left the half open shears on the hedge in the cutting position. Today such action would merit instant dismissal, then the estate management knew that he had a large family to support and they would be the losers if he lost his job. Now the manual work undertaken by my father and his friends is subject to low wages and insecurity of employment. Within the manual trades workers are either self employed or have zero hours contracts, both of which enable the employer to manage by fear, as the hours of work he gives his workers depends upon their good behaviour. Insecurity and the anxiety it brings are now seen as the best means of managing the workers.

Fear is even the most used management practice in the middle class professions. As a former public service professional I witnessed the introduction of the target based culture and the accompanying culture of institutionalised bullying. Neo-Liberalism the dominant political philosophy of our times is a belief system that states that any service or product can best be judged by the quantitative or monetary value it is given by its purchasers. Other than taxes no price is paid for public services such as policing, health care care and education, this meant that politicians had no means of judging the productivity of the public service sector. It did not matter that the service provided was qualitative and had no direct monetary measure. How could a life saved be valued or in my case how could the treatment that cured my infant daughter of meningitis be valued? Ignoring the impossibility of turning quality into quantity, the government decided that they would introduce quantitive measures of output into these services. This was the target culture, there would be a time limit for how long a patient should wait in the accident and emergency department before being treated. There are very valid reasons for reducing waiting times, but the problem is that this directive outweighs the qualitative judgement of doctors. One consequence was those with minor illnesses nearing the four hour deadline for treatment would get priority over those with more serious illnesses.

Global target setting has one major failing, it is a very crude measure of service and can give misleading results. Very soon the politicians realised that these initial global targets were too broad to measure the output of public service workers. If the state was paying a large salary to a doctor, teacher or policeman, how could they be sure that the service provided by that individual was equivalent in value to say, £30,000? To ensure that the state was getting value for money it had to introduce more and more directives to direct the working practices of the public service workers to achieve the desired ends. The consequence is that the activities of all public service workers are now micro managed from Whitehall by bureaucrats at the behest of their political masters, who have little knowledge of the service they manage. Given the mismatch between the civil servants knowledge of working practices and actual working practice, there had to be found a way to ensure a reluctant workforce complied with these centrally imposed directives. Particularly where the workers thought they contradicted good working practice. Coercion or management through fear is the only possible way of making these directives effective.

Managers in the public sector fear now losing those jobs if their targets are not met and they transmit their fears through the workplace. Managers desperate for their jobs will adopt bullying measures to ensure these targets are met, not caring whether such targets improve the effectiveness of the service they are providing, all that matters is that these targets are met. To strengthen their arm the government has introduced job insecurity into the public service sector to improve efficiency. Workers deemed ineffective can be summarily dismissed and quickly replaced with new more effective staff. Such managers are unaware of the evidence from business that high staff turnover reduces the overall effectiveness of the business rather than increasing it.

The system in the public services now resembles the management practices in the old Soviet Union. There the KGB was the inspectorate that ensured compliance with approved management practices and that targets were met. Targets were met but often by producing poor quality goods or services. The same naivety permeates the English public sector, where London rather than Moscow bureaucrats write the service manual by which the inspectorate judges public sector workers. Their belief is that is they draft a sufficiently detailed manual of what the good teacher, doctor or policeman should do, the government inspectorate will ensure compliance with that manual so taking service provision to a higher level. The fact that top civil servants have little knowledge of the practices in the classroom or hospital does not matter, as constant revision of work practices to eliminate error will result in the perfect instruction manual for public service workers which will deliver the highest level of service provision. What they fail to realise is that this practise engenders uncertainty in the workplace and often confusion as this year’s directives may contradict last year’s. Politicians, civil servants, economists and political servants never understand that one model does fit all. The practice of teaching and medicine is as much an art as a science, individual practice cannot be reduced to a pre agreed script. The agreed script cannot produce the great teacher or doctor, but they can both thrive in a very different culture that values individual creativity. Again the Soviet Union provides an insight into the fallibilities of this system. Centrally given directives drafted in ignorance of working practices are frequently unworkable and can work to frustrate their intended purpose. To persuade workers to adopt these practices it was necessary to use extreme measures, failure to comply meant exile to a labour camp and possibly death. The point I am trying to make is that the more and more directive working practices become, the more and more extreme measures have to be adopted to ensure compliance. Is it not possible when the threat of dismissal proves to be ineffective in ensuring the public sector workers achieve their targets, more extreme measures will be considered such as imprisonment?

Religious fundamentalism and the economics of fear

This essay is intended to demonstrate the similarities between religious fundamentalism and the new economics of fear. Fear is one of the main drivers in Baptist religious practice. One of the last services I attended was in small corrugated iron chapel in a remote country field. There the preacher spotting a large audience of young people on the threshold of adult life, resorted to a sermon on the dangers of hellfire, intending to set them on the right path for adulthood by warning them of the dangers of failing to do so. Similarly When I attended a service given by a well known American preacher he also tried to frighten his audience into becoming Christian by talking about the imminence of death and the likelihood of eternal torment for sinners. Hundreds went up to the front in a sign that they had received the message. One of these was my atheist friend, but by the next day he had recovered his composure and gave up the Christian religion, when the fear of hellfire had been lost. I don’t think he has been to a religious service since. Only by being repeatedly reminded of the perils of hellfire would he have continued in his newly discovered Christian practice and belief.

Management in the public sector is similarly premised on fear, the fear of dismissal rather than hellfire. Both the Baptist preacher and public sector manager lack faith in their congregation and workforce, and believe that only fear can deliver the right behaviours. While I disapprove of the use of fear as a means of controlling human behaviour, I do have some sympathy with the Baptist preacher who is using fear to for a good end, even if I don’t agree with the means used. I have none with the public sector manager who uses fear as a means of improving productivity, the ends don’t justify the means.

If I can compare myself with my atheist friend he was Christian for one night when the terrors of hellfire where present in his mind, while I have remained a Christian (with a few lapses) as a consequence of having been introduced to Christianity which was a celebration of life. Fear is only effective for the moment it is introduced and will only remain an effective motivator of human behaviour if it is constantly reinforced. The consequence for the public sector in Britain is that an ever growing workforce of managers and inspectors is required to ensure that the workforce complies with the ever growing list of centrally issued directives. However productivity is measured this ever growing non productive workforce can only diminish individual productivity, or to put it more simply a decline in the quality of service.

Thinking ourselves into poverty

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If there were two words that I could use to describe the current state of economic thinking, they would be pessimism and helplessness. All economists can offer is an indefinite period of continuing misery, which they call austerity and that this misery is unavoidable and necessary given the conditions that prevail in the world economy. The Europeans in particular must suffer for indulging in a frivolous life style in which they squandered money on welfare, education and health services, money which would have been better spent on investing in industry. Now it’s payback time. What Europeans did not realise that there is an economic Darwinism, that governs the world economy. Those nations that are uncompetitive fall by the wayside and must suffer the consequences of which the main one is a dramatic fall in living standards. Europe having become uncompetitive through increasing its labour costs by taxing employers to pay for welfare spending etc. must now pay the price. The price is increased unemployment, poorer working conditions and lower pay and only then will Europe become competitive in the world economy.

What economists never say is that they are advocating for Europe a return to what used to be called the ‘second world’ standards. In the initial period after the Second World War there was a category of development status between first and third world, it was the second world. Second world economies were those of Eastern Europe where the standard of living was modest, people were poor but not in want, that is they were fed, housed and clothed but lived a life devoid of luxuries such as car ownership. Labour was cheap in these countries and businesses would never lose out to foreign rivals because of high costs.

The best way of understanding contemporary economics is by way of metaphor, contemporary economists can be compared to high priests in the blood stained Aztec, Mayan and Inca cultures. Then the people believed that the natural catastrophes that they suffered were the actions of malevolent Gods, who punished the people for offending them. Only the priests understood how to manage these supernatural malevolent forces which was through human sacrifice. The priests decided when sacrifice was necessary and how many should perish. The Mayan had one cruel ritual in which two teams of young men played a form of hand ball, in which the losing team were beheaded. This ritual blood letting would appease the Gods and stop them inflicting suffering on the Mayan people as a whole. Today rather than priests it is the economists who understand and manage the malevolent forces that threaten our well being. Only they have the knowledge necessary to appease the angry Gods of the free market and that is yet another form of human sacrifice. Fortunately the sacrifices to be made are of income not life. People must be prepared to accept drastic cuts in their standard of living for the betterment of all. In a world beyond human control the only way to control or assuage those violent forces that threaten human well being is to appease the Gods of nature or market through human sacrifice.

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There is a crude economic determinism that governs economic thinking. People are pawns in the game of competing market forces, if those forces turn against a people they must expect to suffer. Economists can read the runes and advise that sacrifices have to be made to avoid the direst of economic consequences. Any reading of an economics textbook demonstrates the view that the economy is a force outside or beyond human control, and that human life must be managed according to its dictates. There are the laws of supply which demonstrate that if prices are too high (incomes) demand will fall and products will remain unsold (unemployment). Only when prices (wages) are cut will demand rise (employment levels increase). This even has a name it’s called Say’s Law.

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One example is the economic austerity that is deemed necessary to reduce the out of control government deficit. It makes sense that if we reduce our spending our debts are reduced and as government debt total is about 80% of GDP, obviously we the British must cut our spending until the debt is back under control. Actually this is nonsense economists are lying. They are well aware of the much greater national debt and that is the one run up by the banks which totals about 400% of GDP. If the UK GDP was £1.5 trillion government debt would total £1.2 trillion while bank debt would total £6 trillion. Economists rarely mention the latter, it is deemed irrelevant relevant to their analysis. What matters is not the truth but what authoritative voices say is the truth. Economists as with the ruling caste of priests in Mayan culture could manipulate data to further their interests. If there was a bad harvest the solution was not to arrange a fairer distribution of food, but to appease the Gods by increasing the number of human sacrifices. Economists as with the Mayan priests practice a philosophy of non answers, ritual substitutes for action. Enforcing a policy of austerity on the majority benefits the economists and the financial elite of which they are members, as it is a ritualised substitute for taking sanction action against the real debt, bank debt. Cutting bank debt would mean reducing the cash balances of the banks and as the largest depositors are the rich they would suffer disproportionately.

Rather than seeing us as the victims of economic forces beyond our control, the economy should be seen as a human creation subject to human control. The economy is a organised set of human relationships designed by people to achieve particular ends. If it is a human creation, it is infinitely malleable and it can be designed to serve a variety of ends. Either the economy is designed to benefit a privileged elite or to benefit the majority. There are
There are other ways of understanding of economics other than accepted Neo-Liberal model. To outline the alternative I want to borrow from the writings of the 19th philosopher Hegel on phenomenology. He believes what we experience as reality, is reality as perceived through our conscious mind a reconstruction of reality, nothing more. We live in the world of our imagination. Hegel’s theory of phenomenology is fraught with difficulty when applied to the natural world, as our perceptions of cold and heat are not subjective. However it does offer insights into understanding society, something not visible but understood through our consciousness. Is it not true that we know the social world subjectively? It is a projection of our minds, yet it is also a imagining rooted in the common reality of our culture. If we admit that any individuals understanding of society is subjective, the apparent realism of free market economics with their laws of supply and demand disappears, it becomes just one of many understanding of social reality. Admittedly an understanding that one of the most authoritative groups in society that the interlocking elites of economists, financiers, traders and economists. There can therefore be other equally valid understandings of the economy. Why should the understanding of Andy Haldane (Senior Bank of England economist) be privileged over the understanding of a joiner, engineer or doctor. This economists understanding of the economy is but one of the valid views, there is no reason why the joiner should not have an equally valid of the economy. What I have in mind is the ends or purposes of an economy, rather than the techniques of economic management, in which Andy Haldane will be superior. Ends do inform technique so the separation is not complete. The joiner would see making people unemployed in large numbers as an invalid technique of economic management.

Rather than there being one authoritative understanding of economics there needs to be an acceptance of their being a number of equally valid interpretations. In a free society there would be representatives of different economic understandings participating in the political debate that decides economic policy making; instead of as in the UK where only representatives of the Neo-Liberal economic tendency are heard in the political debate. Holders of dissenting views are not usually imprisoned in the UK, the exception being is if their campaigning is perceived to be too,effective. Yesterday representatives of Occupy London and Jenny Jones London Green Party Assembly member were arrested for demonstrating in Parliament Square and intimidating the MP’s going about their business. Other ways are usually found to exclude or marginalise holders of dissenting views.

In a democracy the economic understanding of the economist or financier would be challenged by the holder of an alternative view. The financier would want freedom from regulation which which restrict their entrepreneurial activities arguing that by so doing the society as a whole would benefit from their wealth creating activities. This would be opposed by a trade unionist who would argue that the removal of restrictions on the entrepreneur would harm the community. They may want to use low cost methods of manufacture that are dangerous and pose a threat to the health of the workers. They may want freedom to employ labour as and when they need them, but the trade unionist would point out that this would be extremely harmful to the individual worker who would be denied a regular wage with which to support their family. The needs of people cannot be switched on and off to suit the whims of an employer. While neither side would ever accept the standpoint of the other a compromise could be achieved whereby the excesses of each could be curbed. A process not too similar Aristotle’s mean, whereby he saw virtue situated between two extremes. Courage was the virtue equidistant between foolhardiness and fear. Courage has elements of both, the courageous person knows fear but has the ability to overcome those fears. Perhaps the ideal state is one that practises Aristotle’s mean, all be it an economic mean.

Why economics needs a religious underpinning

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Perhaps it is coming from a rural community in which religion was part of the backdrop to rural life, that causes me to regret the absence of religious thinking from the contemporary debate. In the countryside you are aware of a continuity with the past, it is always visible in the present. The school I attended was a church school and it stood next to the church which was centuries old. We were told that the reason for the church’s high spire was that it was to inform distant travellers that here was a welcoming Christian community. A welcoming beacon amongst the wilds of the forests of the Weald. Later I learnt that this was a Victorian romance as there would have been no forests in the Weald when the church was built. Sometimes fantasy is more real, certainly to an impressionable child. The various seasonal rites of passage were marked by religious ceremonies, the beginning of the farming year was marked by the Plough Monday Service, harvest by harvest festival and the end of the year by Christmas. Christmas was marked by a children party at the big house at which mummers performed.

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Coming into a secular world at my urban secondary school and later at a sixties university quite destroyed my childhood religious ethic and practice. The rural community of my childhood was being destroyed by commerce and my similarly religion seemed to be an echo of my past, a thing remote in a lost past. It was not helped by the undistinguished quality of the religious thinkers of the sixties, that is Teilhard de Chardin and Hilaire Belloc. Both of which were dismissed by my tutors as serious thinkers, the first for his woolly mysticism and the second because he wanted to return Britain to the Middle Ages. However my religious belief had deep roots and re-emerged from the depths of my consciousness after leaving university. Much as I loved the religion of my childhood, I came to realise that the magical realism of my childhood religion was not the religion for an adult. It was a religion that relied too much of the magical props of the supernatural, it is possible to be re-enchanted with Christianity without having to accept the magical supernatural props of a former age. Christianity can be compatible with any of the cultural manifestations of modern, it becomes the same truths can be told in a different manner.

When Caputo (The Weakness of God) writes of the weakness of God, he is expressing the strength of God in a way differently to that described in the Old Testament, his God does not have to destroy cities to be all powerful. God for him has chosen to refrain from intervening in men’s lives. This God treats men as adults, not children to be forced to coerced by supernatural terrors. Although he does not state this he implies that Christian officialdom, be it popes or priests have failed to understand the message of Christ. Dostoevsky’s grand inquisitor exemplifies the thinking of much of the priestly hierarchy. The Grand Inquisitor criticises Christ for giving men the choice of either accepting or rejecting an absolute set of values which on their salvation depends. There can be no choice in deciding whether or not to accept a Christian morality that embodies a series of absolute values, free choice means that some will unwittingly condemn themselves to eternal damnation. By torturing and killing heretics the Grand Inquisitor is more effective at fulfilling Christ’s mission that Christ himself, as people are scared into being good Christians, as death by torture and fire faces those who are not. What the Grand Inquisitor and most churchmen fail to understood is that God manifest’s his power in a different way. He he strong enough to allow men the freedom of choice, only a weak God would feel the need to coerce mankind into believing in him. Caputo’s God is the unknown God who makes himself known by pushing into human society, making his presence is known through his values. These values are known to all and it is up to men to choose to accept those values and acknowledge God’s existence. Christ (God) wants followers who choose him freely not a group of scared rabbits.

Theologians such as Caputo only claim to be offering one understanding of God, they realise that there can be others. They don’t need the threat of fire to suppress possible heresies. It is an understanding best expressed by Hick (The Metaphor of God Incarnate) as the ‘universal salvic’. His salvic includes the deities of other religions as he believed that they all express the same essential religious truth. Strength comes from the persuasiveness of argument not through the exercise of power.

The default assumption is that theology has to learn from the contemporary sciences and modify its content in the light of current changes in philosophy etc. John Caputo in the spirit of the times has written a post modern theology, entitled ‘What would Jesus a Deconstruct?’. Movement in the other direction is never assumed necessary yet it is an equally valid to assume that social scientists such as economists could learn from the theologian, could they not learn from some borrowing from the learning of the past. The Christian father’s such as St. Augustine wrote about the nature of evil, something that an emotion and moral free economists never recognise as existing in human societies.

What Christian theology should be influencing is not the methodology of economics, but something more fundamental. Economists always see there subject as free floating, it’s abstract truths are ungrounded they don’t need social context or reference to the wider society. What they fail to see that the economy is part of a greater whole, unlike Christians who see human society as but part of God’s greater creation, a cog in the wheel not the wheel itself.

Their needs to be a reorientation in the basics of economics as can be demonstrated by an analysis of welfare economics. Welfare economics despite its name has little to do with the welfare of mankind, it is only a theory of how to optimise production. It is possible in theory to draw a production possibility frontier, which represents maximum output of different combinations of goods. Peoples welfare is maximised at any point along the frontier as that represents the largest amount of goods that can be produced by a specific combination of the factors of production it is up to society to choose the desired combination of goods, as to the economist any point along that frontier is equally desirable as it maximises the output of both consumer and capital goods (a,b,c d is inefficient and e is impossible)

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Their needs to be a reorientation in the basics of economics as can be demonstrated by an analysis of welfare economics. Welfare economics despite its name has little to do with the welfare of mankind, it is only a theory of how to optimise production. It is possible in theory to draw a production possibility frontier, which represents maximum output of different combinations of goods. Peoples welfare is maximised at any point along the frontier as that represents the largest amount of goods that can be produced by a specific combination of the factors of production it is up to society to choose the desired combination of goods, as to the economist any point along that frontier is equally desirable as it maximises the output of both consumer and capital goods. What is notable is what it leaves out, it’s only a two dimensional diagram that can only show a tiny part of the desired outcomes for human society. Christianity reminds us that there are other goods that are desirable. In the words of the gospel of Matthew (6, 19-24)
“Do not lay up for yourselves treasures on earth, where moth and rust [a] destroy and where thieves break in and steal, 20 but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.
This is the command not to overvalue material goods, but to invest time and money in those activities that directly benefit humanity now. It is a reminder that economists undervalue those services that cannot be priced, the caring and health services. Why do economists advocate private health care, because of intellectual laziness? It’s easy to value the contribution of health to the economy when it is sold as a commodity like any other marketable good. Profit or private profit is easy to calculate when health care is a matter of calculating costs and prices. The fact that the majority of the population is excluded from good health care under systems of private health care, because they are priced out of the market is irrelevant. A Christian underpinning to economics would remind economists that there are some goods that cannot be priced and that the price cost benefit matrix is often irrelevant to the valuation of goods and services.

Free market or Neo-Liberal economics values inequality, income inequality is justified in the sense that each gets paid according to the value the Market places on their services. Therefore the neurological surgeon gets paid far more than the cleaner. However the market makes some strange decisions that seem hard to justify. Why are financiers and other speculators paid such huge salaries when their contribution to society seems so minimal? Why are workers in the caring industry paid so little (often less than a living wage), when their contribution to society is so great. A different measure is needed of the value of labour. One clue to this revaluation comes from the Bible. In Genesis, God is said to have created man in his own image, not an exact physical copy as Maimonides (The Guide to the Perplexed) states, but a being that as with God has consciousness. A being that is conscious of the consequences of its actions, a being that is capable of directing its actions to,achieve a particular end. If all are created in God’s image this implies an equality between human beings all are valued equally by God as he made them in his image. This suggests that their needs to be a value system that counters the harsh inequality of the market. A system that sanctions the regulation of wages to ensure that all that work can earn a living wage.

What a religious or Christian origin would give economics is a different starting point, a starting point rooted in the valuing of humanity. Then perhaps a Milton Friedman could no longer justify President Pinochet’s torture and slaughter of dissidents as a necessary first step to establishing a free market society. There are some economic policies that can never be justified.

Philosophical scepticism the antidote to Neo-Liberal fantasies

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Although I have read economics, philosophy and theology at university, I am not an academic and I want a description that distinguishes me from the professional philosophers and economists. I think I can best be described as a ‘Hedgerow Philosopher or Economist’. It is a steal from Thomas Hardy’s ‘The Return of the Native’, at the end of that novel Clym Yeobright becomes a hedgerow preacher. Lacking the formal qualifications necessary to become a preacher in an established church, he takes to the roads literally preaching to the country people in the fields. The hedgerows being the walls of his church and the place where he sleeps most nights. He is a figure that has always fascinated me and I Identify with Clym. I am a hedgerow philosopher because I speak as an outsider, looking in from outside the academy. This is not a viewpoint soured my malice or envy, but a viewpoint that expresses freedom and my independence, as outsider I am not obliged to follow the disciplines of any school. It is this distancing that gives me a different perspective on the practice of economics.

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Country people such as myself believe that our being in constant contact with nature gives us an understanding of the world denied to town folk. It is the experience of witnessing the sunrise or sunset over a country landscape that makes us feel we are closer To those elemental forces that govern nature and the world. Probably this arrogant assumption is totally unjustified, but nevertheless country people do assume a superiority over their townie cousins.

As a philosopher I would suggest that economists are making a similar error to that made by philosophers as described by Nietzsche. One of the assumptions that under pins any moral philosophy is that humans are responsible for their actions, they make choices good or bad. However as Nietzsche write psychology demonstrates so many of actions that an individual makes are predetermined, so how can they be responsible for their actions? He accuses moral philosophers of falsely attributing behaviours to men which are absent in reality. They fall at the first hurdle in constructing their their moral philosophies. Similarly economists fail as they fail to understand the relationship between the economy and the host society of which it is part. One exception to this common misunderstanding is the economist Michael Polyani.

Contemporary economists know the writings of Friedman, Schumpeter, Hayek and Rand, yet never Hayek’s great rival those of Polanyi. Polanyi is absent from the economics curriculum of universities. Probably because he puts the economy back into the society of which it is part, he makes it one social science among many, relegating it from it’s position as the Queen of social sciences. He writes that the market economy is a threat to the social order and must be regulated so as to control its destructive tendencies. The example he use to demonstrate this is the Industrialisation of Britain in the late 18th and the threat that posed to society. The new textile factories produced cheaper and better cloth and in greater quantities than the home workers, That is the hand loom weavers. With the collapse in demand for their cloth these weavers were impoverished and faced the very real threat of starvation. The government responded to their misery by introducing the ‘Speenhamland system’, which as with today’s working tax credits was a supplementary payment made to the weavers to enable them to pay for the necessaries of life. He suggests that it was the system that prevented there being an English revolution to match the French one. Desperate starving weavers would have had no option but to resort to violence to obtain the food for their families. It was a series of bad harvests and hunger that drove the Parisian mob to violence and it was that mob that was one of the driving forces behind the revolution. Any economist that preaches a message contrary to the ‘feel good’ philosophy of Neo-Liberalism is unwelcome in today’s economics departments and Polanyi would not be found on any departmental book shelves.

Fear of the damage an unbridled free market can wreak on society is slowly becoming better understood within the governing classes. Recently the Head of Transport for London spoke of his fears that the high price of transport could provoke social disorder. He feared that what happened in Brazil could happen in London, when the poor took to violent street protest to express their anger at high fares. Neither economic or social history intrudes on the unreal world of Neo-Liberal economics; if it did they would know that the propertied classes of Victorian London lived in constant fear of the mob. A similar fear seems to be developing now with the spread of gated communities in London whose intent is to keep out the violent feral underclass of popular imagining.

If economists were also philosophers they would be familiar with philosophical scepticism, which teaches that all schools of philosophy are flawed and blind faith in one such system is an error. Neo-liberal economics as one such grand theory of everything is flawed. Human knowledge is at best limited, they are unaware of Socrates dictum that he as the cleverest Athenian knew that he knew nothing. The practice of economics would be improved if it’s dictums were subject to a healthy degree of scepticism.

What economics lacks is any understanding of ethics, which is essential for any human science. In the 1960’s, Says Law was discredited because of its very lack of humanity (and because of the existence of better alternatives). Says law states that governments should never control wage rates, as if wages are allowed to fall to their natural level, employers will start to employ this new cheap affordable labour. Employment will pick up and competition between employers will push up wage rates and all will be well. Without openly acknowledging it the British government has been an advocate of this law. By removing all protections from the labour market they have allowed wage rates to fall to such a level that employers can buy lots of this new bargain priced labour. It matters not a jot that many of these new jobs pay less than the living wage and the recipients of the new poverty wages live a life of misery. This is why in the UK there is a recovery that few experience as they are stuck on poverty wages with no chance of increasing them. Rather than the recovery pushing up wages, employers will use agency workers who they can employ at less than minimum wage, by adopting various legal subterfuges. The government and the community of economists are unaware that an economy which fails to work for the majority of people in reality works for no one. Having a childlike or naive faith in Neo-liberalism and lacking the perspective of a philosophical sceptic they will also mistake the fantasies of Neo-Liberalism for reality.

Why the privatisation of health care is wrong

Economics, Politics, society, , , ,

Political leaders in the UK are enthusiasts for Neo-Liberalism they are committed public services to the out sourcing of public service provision to the private sector. The latest folly is the desire to privatise much of the state run and funded National Health Service. Our political predecessors who nationalised health care in 1948 had a shrewder grasp of the economics of health care than do today’s politicians. What I will argue is that the politicians of 1948 were correct in their understanding that the free market mechanism was ineffective in providing universal health care.

At the heart of free market economics is the belief that society is best served if individuals freely enter into exchanges of goods and services. They, the people know what they want, it is wrong for the state to second guess the consumer. Certainly the free market is an unrivalled mechanism for the buying and selling of cars; but just because the free market works well in the consumer goods market does not mean it will work elsewhere. What makes the car market work is the approximate equality of knowledge, the customer knows how a car functions and what they want from that particular car. The salesman understands the customers needs and can supply a car that meets the customers specifications. Obviously this is an over simplification as the seller is usually better informed that the buyer, but any fraudulent action by the seller is subject to severe legal sanction. This market is completely unlike the market for health care, which is characterised by ignorance rather than knowledge. There can be no equal exchange when cash is exchanged for a service of which the buyer is almost totally ignorant of the product (Pharmaceutical drugs) that they are buying. This relative inequality in which all knowledge resides with the seller (medical practitioner) means that the buyer is totally dependent on the seller’s knowledge and good intent, which means that the free and equal exchange of goods and services that is experienced in car market is impossible.

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Blame must also be apportioned to economists who believe that any free universal service will be misused, if it’s free people will over use it, as it costs them nothing. They believe in some principle of charging as it would compel people to make a rational decision about whether or not they really need medical care. What they ignore is that the NHS devised a much fairer system of rationing health care, in which front line practitioners, general practitioners acted as gatekeepers, only allowing those who needed intensive medical care access to hospital services. It did mean queues developed for some services, but better that than cash be the criteria by which access to health care was decided.

What else is unique in the health care market is that it is contracts are based on a mixture of desperation and hope. Illness makes the customer (patient) so desperate that they want a cure at almost any cost. This gives the medical practitioner the opportunity to exploit that person’s desperation or to use an economist’s term they charge what the market can bear. Therefore in a free market the poor are priced out of medical care. Prior to 1948 doctors could get a good income from treating the relatively few well off who paid well for their services. Medicine then was an occupation for gentleman, a well brought up young man would not have to sully his hands dealing with the poor. People such as my grandmother depended on charity, when my mother was being born it meant a call on the services of ‘The Sisters of Mercy’.

There can be no equality in the bargaining process when the client is largely ignorant of the product or service they are buying. People of my grandmother’s generation believed that Beecham’s pills taken once a day, were essential to maintaining good health. Not realising that none of the pill’s ingredients helped maintain good health. One ingredient was detergent. Pharmaceutical companies and ‘medical practitioners’ have always been able to exploit the gullibility of people. Health care is perhaps the only market in which the characteristic feature is ignorance.

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Health care is the one market that needs regulation and in the UK there is an effective system of self regulation. If a medical practitioner wishes to be recognised as an M.D. they must undergo training at a college recognised by the British Medical Association and then be accepted as a doctor by the same body. This means the sick person can get treatment from a health professional, who will not administer ineffective or harmful treatment. However that leaves plenty of scope for practitioners of alternative medicines to sell treatments to the desperate. The BMA’s self regulation is only effective because it has the support of the government. A truly free market in health would mean that the market would be free to any new entrant who claimed to be a doctor, which would be harmful to the nation’s health. At least the present system excludes dangerous practitioners from the market.

However ignorance of the means and the effectiveness of treatments is not confined to the patient. Unfortunately the doctor also displays a degree of ignorance about his trade which you would not find with the car dealer. One estimate is that there are 10^34 pathologies than can affect modern man, while the GP will have a good knowledge of the more common pathologies there are many of which they will be ignorant. One recent study of post mortems revealed that 40% of the deceased had been misdiagnosed. A market in which relative ignorance of the practitioners is prevalent needs to be regulated. Consider this, arsenic was used in treating syphilis until the 1950’s and earlier in the twentieth century it had been used to treat arthritis. Unlike in the car market where the bad dealer loses out to better performing rivals, the ill informed medical practitioner has little to fear because of the ignorance of his patients (customers) because they have now way of judging his competence.

Good medical practice has been ensured in the UK through the following government funding for a system of universal health care and the high quality of care being maintained through a combination of the public service ethos and the Hippocratic oath. Now there will be with the proposed privatisation of the NHS there will be added a new commercial ethos, profit maximisation. Adding the profit maximisation imperative into the medical practitioner ethos will do little for patient care, as reducing costs to maximise profits does the reverse.

Politicians have assured us that it does not matter who Is the service provider whether it be the state managed NHS or a private health care corporation as the same service will be delivered to the patient. Naively this is what politicians believe despite evidence to the contrary. A private health care corporation has an incentive to perform those medical treatments that are straight forward and involve short term stays in hospital, as this will increase turnover and profits. The long term and difficult treatments will receive a much lower priority as they involve long and expensive treatments that reduce the profitability of the business. If cancer treatment is for instance delayed more people will be entering hospital at an advanced stage of cancer with the likelihood of a reduced life span and a shorter period of expensive treatment. The private health care corporations that are poised to take over large parts of the health service will inevitably prioritise profit making over health care.

In countries such as the USA where health care is in the hands of private corporations there is an incentive for over treatment, that is advising surgery where treatment is straight forward and recovery certain, whether or not the patient needs it. Once such procedure is hysterectomy and health economists can always get a laugh at conferences by trotting the old joke about no woman in America over forty still possessed her own womb. Treatments that maximise profits will get priority over those that are costly and which yield little profit.

What our political leaders fail to realise that in a free market an approximation to equal power in the buyer and seller is needed to make the market work well for both buyers and sellers. When as in the example of the health care market the is an asymmetrical power relationship between the doctor and desperate patient the market cannot work well. In 1948 it was decided for that reason most people should be removed from the free market in health care, as they would never be able to get fair treatment in a market where the odds where stacked against them. The only exceptions were to be the rich and powerful, as they were not at a disadvantage when bargaining for health care, doctors desperate for money would ensure that they received the best possible treatment. Unfortunately the low income majority did not have that power, they were liable to exclusion from the health care market. Having known of the evidence of market abuse when doctors worked in practice with one or two partners now having GP’s contracted to a large private corporation can only lead to greater market abuse. The post code lottery will work with a vengeance in health care, there will be excellent health care for the rich citizens of Mayfair and poor health care for the Inhabitants of Newham in East London (England’s poorest borough).

While the National Health Service has been subject to unfair criticisms in parliament and the media, in which all blame for failure is attached to health care professionals and none to political mismanagement, commercial confidentiality will protect the new worse and privatised health care service from proper scrutiny. It must also be added that politicians knowledge of medical care is little better than that of the average citizen, which means they are not qualified to oversee these changes in health care.

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Blame must also be apportioned to economists who believe that any free universal service will be misused, as if it’s free they will over use it, as it costs them nothing. They believe in some principle of charging as it would compel people to make a rational decision about whether or not they really need medical care. What they ignore is that the NHS devised a much fairer system of rationing health care, in which front line practitioners, general practitioners acted as gatekeepers, only allowing those who needed intensive medical care access to hospital services. It did mean queues developed for some services, but better that than cash be the criteria by which access to health care is decided.

How to resist the unpleasant culture of Neo-Liberalism

Economics, Philosophy, Politics, , , , ,

This essay is my answer a question posed to me by my 22 year old daughter. She asked me what can I do to help change this cruel Neo-Liberal society in which we live. I suggested that she get involved with a extra parliamentary campaigning group, extra parliamentary because the parliamentary parties are too compromised in their politics. All in the UK are practitioners of Neo-Liberal politics, none could consider any alternative. However a short conversation between my daughter and myself is not an adequate answer to the question she posed; this is my considered response.

Neo-Liberalism appears impregnable it has captured the commanding heights in British society. All three main parliamentary parties are adherents of this hateful ideology. The example of the private rental housing market demonstrates this; private tenants especially in London endure squalid housing conditions, have little security of tenure and pay exorbitant rents, but all parties do not see this this as a problem requiring urgent remedial action, instead see it as one for inaction, leaving it to the free market to solve the problem. There is not one major politician who is not a free market proselytiser. Changes imposed by various governments have removed from the political scene any organised extra parliamentary opposition. First of all the trade union movement was emasculated and now even the rights of charitable organisations to campaign are being severely limited through government censorship. Gradually Westminster is slowly suppressing any dissenting voices. Governments are reverting back to the bad old practice of inserting police spies into dissenting groups, who then often act as agent provocateurs to goad them into actions that bring discredit on to these groups. However this seemingly impregnable Neo-Liberal edifice of the combination state and big business still remains vulnerable to ideas of an alternative world from the society below.

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What I am trying to suggest is that the very limitations of the cultural values of Neo-Liberalism will be its undoing. There cannot be an immediate overthrow of this culture of the elite, a culture that excludes most human values, but its incompatibility with civilised life will lead to its constant clash with other cultures which will undermine it and inevitably lead to its demise. Today’s papers illustrate this point, communities in constituencies held by loyal Neo-Liberal MP’s are in revolt against the cracking which will be undertaken by the oil industry in their area. Residents of England’s green and pleasant land are horrified by the environmental damage that cracking will cause in their area. Yet the Neo-Liberals in government have given the oil exploration industry carte blanche to do whatever they please in these areas, believing what is good for business is good for society.

Stifling, dull and oppressive are the words I associate with Neo-Liberalism and as such it cannot contain within its boundaries the vitality that is human life. This stultifying dullness is demonstrated in the new university curriculum. Vocationalism, relevance to industry and commerce are the buzz words that are used to describe the new curriculum. But what they hide is a dullness, the emphasis on the non thinking curriculum, a curriculum from which ideas that challenge the orthodoxy are banned. Economists that challenge the orthodoxy are either forced out of the faculty or forced to find work in departments such as geography. One Keynesian economist told me how he had been silenced; he could only get published in economic journals if articles expressed Neo-Liberal ideas any hint of Keynesianism meant it would not get published. As an academic it was essential he got work published, as his continued employment depended on his getting work published. Academics that don’t get published lose out on preferment and are liable to dismissal. This dullness in the academy has begun to produce the stirrings of a student revolt. Students at Manchester University have begun the revolt by demanding the economics curriculum be changed to accommodate alternative economic doctrines. While the complacency of entrenched of the academic economists will enable them to initially resist change, they will have to change if they they not wish to lose the brightest and best of their students to the other social sciences. Once economics becomes seen as the cultural backwater, economists will lose influence and prestige in society.

Theology in the medieval university was the Queen of subjects, but due to the refusal of theologians to do other than cling to the orthodoxy, it got left behind and by the 19th century was an intellectual backwater. All the arrogance of today’s professional economists cannot prevent a similar fate befalling economics.

The only value recognised by Neo-Liberalism is cost benefit, it’s an updating of Oscar Wilde’s line about the cynic who knows the price of everything and the value of nothing. A culture that only values arts according to its market price is an incredibly shallow culture. This shallowness is being demonstrated by the culture of the super rich, which is one of excess. What achieves admiration is the conspicuous consumption, what gains the most respect is not the best but the most expensive. To rephrase a biblical expression man cannot live by cash alone, as the example of the Jazz Age shows. In the 1920’s the super rich needed to inject some excitement into their lives, there was only so much over priced champagne that they could buy. It was the music of these poor black musicians that gave them the excitement they craved.

A culture such as Neo-Liberalism lacks creativity it has to be parasitic on other cultures. The music and culture of the young rich is but imported from other more creative social groups. They can produce musicians but their music is derived from other lower income groups. These are Social groups who have to create their own entertainment as they can’t buy it from somebody else. Through importing the music and ideas from the non dominant cultures, Neo-Liberalism will fry at the edges. The edifice will start to crack as they import alien cultural values.

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What I am trying to suggest is that the very limitations of the culture of Neo-Liberalism will be its undoing. There cannot be an immediate overthrow of this culture of the elite as it is too powerfully entrenched, but its incompatibility with civilised life will lead to its constant clash with the culture of alternative and humane values of other groups in society which will undermine it and inevitably lead to its demise. Today’s newspapers illustrate this point, communities in constituencies held by loyal Neo-Liberal MP’s are in revolt against the fracking which will be undertaken by the oil industry in their locality. Residents of England’s green and pleasant land are horrified by the environmental damage that fracking will cause. Yet the Neo-Liberals in government have given the oil exploration industry carte blanche to do whatever they please in these areas, believing what is good for business is good for society.

History also demonstrates that any culture that celebrates the greed of the super rich as its prime moral value ultimately fail. A society that impoverishes the majority and enriches the minority always be inherently unstable, being held together only by a repressive and authoritarian government. It is forgotten that many of the barbarians that sacked Rome were in fact its former disenfranchised citizens of whom many were former slaves. The empires that disappeared from Europe in the twentieth century such as that of Austro-Hungary and the Soviet Union, have not been made anew by their former subjects. Such change takes time but I would encourage all cultural wood worms to continue eating away at the fabric of this rotten society, so it collapses of its own volition.

Possibly this is not the answer my daughter wanted, but my reply in essence is retain an independence of mind and not to be fooled by the propaganda of the Neo-Liberal state. J.S.Mill the great liberal philosophy, defined liberty as being the liberty of thought. His critics dismissed this as a small minded liberty, want they wanted was liberty of speech, freedom of assembly etc. What they failed to realise is that all these follow on from the independence of mind. Why else have autocratic regimes such as the North Korea of Kim Jong-un and the China of Mao Tse-Tung taken such great efforts to control the minds of their subjects.

Neo-Liberalism the latest of a long line of pseudo philosophies that plague mankind

Economics, Philosophy, Politics, religion, , , , , , , , ,

Isaiah Berlin once remarked that there could be no such thing as a right wing philosophy. This at first puzzled me as the philosophers I studied were generally to the politically right of centre. What I then realised was that although these philosophers were of the political right their philosophies were not. Their philosophies were too enlightened to be confined within the bounds of conventional right wing thinking. A truly right wing philosophy would be founded on the principles of personal aggrandisement, the abuse and exploitation of fellow men (a contempt for the majority of mankind), the extolling of social inequality and social privilege. To express it more simply there cannot be a philosophy of nastiness; it is contrary to the understanding of the that the Greeks gave to this word, which that it is the love of wisdom. Praising greed or inequality cannot be the basis of any philosophy as it is a paean to unpleasant form of self interest.

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Having introduced the term pseudo philosophy I need to explain what I mean by the term. A pseudo philosophy is a one that serves to justify the self interest of a particular group. This self interest is always described in terms of a higher idealism, always a theft of universally admired ideals, but ideals that were redrafted to serve a particular narrow self interest. The medieval knight was at his worst was a killer, a rapacious looter and rapist yet this brutality could be justified by chivalry. This knight was a Christian knight, who spent the night before knighthood in prayer at a chapel. A knight who promised to use his strength to protect the poor and weak, treat women with courtesy etc. Somehow those killed by the knights did not fit into any of the protected categories, they were non people excluded by the code for a variety of reasons, for example when the Christian knights stormed Constantinople, the killing of Christian priests and monks was justified as they were heretics.

Pseudo philosophies unlike philosophy have the intention of stopping the advance of human knowledge, they want to stop the clock on change. They want to preserve the contemporary society in aspic or in the most extreme cases regress to a less enlightened age. The militants of Isis in Iraq practise the pseudo philosophy of violence, their rise to power is justified by the need to purge society of non Islamic elements. The barbarity of their regime can only be justified if they remove and destroy the enlightened elements of modern Islam society, as their existence is a constant and compelling criticism of their regime and a reminder that there is an alternative. Barbarity and the lust for power cannot tolerate learning whether it be culture or education as it is in opposition to their barbaric ethos. An ethos best expressed in the words mistakenly attributed to Goebbels, ‘when I hear the word culture, I reach for my revolver’.

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What these pseudo philosophies have in common is a disregard for majority of humanity, who they class as inferior beings, full membership of humanity is limited to elite groups, the medieval knight or the contemporary billionaire. Possibly the cruelest of pseudo philosophies is National Socialism which classified whole groups of people as sub human, such as the Jews, the Roma, homosexuals, the disabled and proceeded to exterminate them. Contemporary pseudo philosophies such as Neo-Liberalism embody this same inhumanity. Ayn Rand a leading prophet of this philosophy also demonstrates a contempt for the masses of humanity. In her novels mankind is divided into two groups the ‘producers’ and ‘looters’, with corresponding physical characteristics. Her producers are square jawed of an angular physique, her looters are weak chinned and have flabby physiques. A caricature of humankind that could almost have been borrowed from the Nazis, with their comparisons of the magnificent physique of the Aryans with the grotesque bodies of the Jews. One critic said that there was the whiff of the gas chambers in her novels

Rand as with all pseudo philosophers is able to dress up her ideas with a moral grandeur suggestive of utilitarian philosophers Jeremy Bentham and J.S.Mill.

My philosophy, in essence, is the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute.

—Ayn Rand, Atlas Shrugged[11]

Unfortunately such grandeur can be deconstructed into the belief that greed is the motor that drives the world. Evil gets redefined as the attempt by the ‘looters’ to deny the ‘producers’ through legislation and its evil begetter over mighty government to rein in and control the wealth producers and creators. Billionaires are her heroes the poor are ‘lice’ and ‘maggots’. Unsurprisingly Ayn Rand is popular with the right, particularly the Republican Right in America. She seems to have been almost as influential as Friedrich Hayek and Milton Friedman in recasting the USA and the UK in the Neo-Liberal mould.

Since the philosophy of Rand, the economics of Hayek and Friedman gives a moral camouflage to the activities of the predatory financier class, it is not surprising that Neo-Liberalism has become the moral philosophy of this class. They by using their financial clout have manipulated the political classes into accepting Neo-Liberalism as the philosophy of the political class. In the UK politicians as in the USA have become totally subservient to the ‘producers’, government now is principally run to facilitate the interests of the producers. Public service (big government) has been diminished through the wholesale privatisation of public services. In their latest act of obeisance they are about the agree the Transatlantic Trade and Investment Programme (TTIP) which will enshrine in legislation the dominance of producers over the political class. If in the future any government has the temerity to force the big corporations to adopt environmental or labour protection policies which they claim could reduce their profitability, they can reclaim those lost profits from the government. Usually when a political class legislates itself into irrelevance it is under the threat of violence as in Nazi Germany, the signing of the TTIP treaty is unusual in that our legislators are wiling signing themselves into irrelevance.

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Practitioners of pseudo philosophies such as National Socialism and Neo-Liberals in their anxiety to give their philosophy a more secure cultural underpinning, drift into turning their philosophy into a religion. Towards the end of the Nazi regime the SS tried to reintroduce the old pagan Gods as a cultural reinforcement of Nazism. Neo-Liberals have already made that change. There is for them a superhuman entity that creates, controls and remakes life and that is the free market. All human societies should be modelled on the free market and Neo-Liberals believe that their role is to remake society into the perfect free market, a behaviour that can be compared to those followers of millennial religions. They thanks to Ayn Rand have a belief in a non-rational world view that is not subject to critical analysis, it is just true.

The purpose of my essay is to explain the nature of the enemy, that people such as myself oppose. If you understand your enemy you are better able to fight it. The philosophy that guides the Rand’s producers is a kind of disturbed masculinity and is a threat to the good society. All the sex in Rand’s novels display this disturbed masculinity, it always violent, suggestive of rape. Not a bad metaphor for the financiers who have raped society through their greed, living a damaged broken social world in their wake.

Lies told by economists 2 – the economy is always managed so as to maximise the welfare of all

Economics, Politics, , , , , , ,

One of the constantly repeated stories told by economists is that the current programme of austerity is for the good of us all. The austerity programmes adopted by Western governments are necessary to root out from the economy of the excesses of the past spendthrift governments. The austerity programme will restore the economy to health and all will benefit from a new era of economic prosperity. A story that is so untrue, as acute observers will have noticed that it is the less well off who have suffered disproportionately in this recession, while the incomes of the better off have hardly been touched. Despite the recession, London for instance is home to a record number of billionaires.

There is another story that needs to be told and that is that economies very rarely work in a way that maximises the welfare of the majority of the population. They instead maximise the welfare of those groups with the greatest market power, who use that power to gain the largest share of wealth for themselves. Only very rarely does market power reside with the majority as happened in the social democracies of Europe after the Second World War.

This is demonstrated in the current time period which its one characterised as the time of Neo-Liberalism. A misnomer as it is a period that has seen the ever increasing accumulation of market power by the owners of capital at the expense of those who depend on earned incomes. Neo Liberalism is a political doctrine that these wealth holders have cleverly exploited to aid their rise to power. This doctrine states the the greatest impediments to the free market and the maximisation of wealth are over powerful governments and power trade unions, both of which impede the workings of the free market. Strong Governments and trade unions are the two factors that place obstacles in the path of those who wish to acquire unlimited wealth.

Growing up among the serving classes in the 1960’s, I observed close up the anxieties and fears that gave rise to the putsch against the strong governments and trade unions of the social democratic state. The 1960’s were a period of relative prosperity, there was full employment, constantly rising incomes and people were well housed, yet the rich hated this period. All they could see was the threat to their social and economic status from the newly prosperous working and middle classes. It seemed to them that all the barriers that preserved their social exclusiveness were under threat. Students from the working class now attended the two bastions of educational privilege, Oxford and Cambridge. Working people could own cars and more threateningly rise up the social and occupational ladder and threaten to displace the previous incumbents.

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Tunbridge Wells and its environs where I grew up were home to exiled European aristocrats forced into exile by the communist revolutions of Europe. Travelling on local buses you would come across impoverished Eastern European aristocrats talking about their lost estates and wealth. I lived near a family of White Russians who were so worried about the possibility of a communist uprising that they were only family locally permitted to keep fire arms. It was this anxiety that fed into the paranoia of the wealthy who feared for their social position.

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One of the most frequently expressed concerns was that people no longer knew their position. Servants would talk back to their masters and mistresses. The relative prosperity of the times meant it was difficult to get servants, as who would want the demeaning job of servant when a job a sales assistant in a shop gave gave greater freedom and a better wage. It was this newly acquired power to be no longer beholden to The Lord of the Manor for employment, that empowered servants. This group looked back to the horrors of the Great Depression as a ‘golden age. Then servants were plentiful and people knew their place. On the estate in which I lived prior to World War 11, it was a dismissal offence to talk without being first addressed by old Lord ***, now the very real shortage of estate workers and servants meant at worst all that could be done was reprimand the worker. I can remember a servant at the castle being reprimanded for being cheeky to her ladyship, an offence that would have warranted instant dismissal in the 1930’s. How the rich hated the prosperous sixties, with their indolent and independent minded workers.

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Even in these social democratic times the rich had begun to regain their former powers. The setting up of trusts encouraged by a friendly judiciary enabled the aristocratic owners of the great estates, meant that these aristocrats could claim that their estates were held in perpetuity by a trust and therefore not subject to estate duties.

The determination of this group should never be underestimated, they worked constantly to weaken their two enemies over mighty governments and trade unions. Rather than going through the details of how they achieved this weakening it is sufficient to say that in their enterprise they were greatly aided by the naivety of social democratic politicians. Today the most powerful groups in society are the financial, business and landowning elites. Given the lack of restrictions on their power they are able to abuse that power to award themselves an increasingly disproportionate share of the nations wealth. In 2000 the average company directors pay in Britain’s top companies was 69 x that of the average employee and by 2009 it increased to 149x that of the average employee. This disproportionality in income take demonstrates why the British economic recovery will be good for the rich and the super rich but less good for the majority.

Economists fail because they see a society as one atomised individuals, who are best off if they can trade freely amongst themselves, as they individuals know what they want. Any intervention by a government no matter how well meaning, could not second guess the wants and wishes of individuals and they whatever they did would lead to people being more dissatisfied that satisfied. The only social group that they recognise are trade unions which they identify as malignant growth which disrupts the efficient running of the business enterprise. They never recognise that owners of capital might group together to abuse their market power to gain a disproportionate share of society’s wealth. For an economist bankers, financiers and land owners only act in a benign way for the benefit of society.

Society in reality is divided up into a number of social groups competing for power and wealth. This power and wealth is distributed disproportionately, the owners of capital compared to the owners of labour have disproportionate power. This disproportionality of power and its potential for harm was recognised in former times. Durkheim in the 19th century wrote of the essential role of the state to protect the individual from local bullies and tyrants. He knew that employers had unlimited power to abuse their workers, with their being no labour protection legislation, they could pay as little as possible, work them for long hours, subject them to unhealthy and unsafe working conditions and dismiss them if they fell sick. The state was needed to regulate conditions of employment and protect the worker against unfair exploitation by bad employers. A lesson forgotten by the current generation of economists and politicians.

I can as a child of the serving classes quote an example. A remember an old servant telling my mother of the bad country house in which she worked. The men of the house if a young pretty house maid took their fancy, they would abduct her and rape her in the cellars. Staff were powerless to intervene and the abusive males never faced any sanction. It is this story that springs to mind whenever I hear a politician or economist advocating the removal of yet more labour protections.

Today Britain is a country that is safe for the rich, but unsafe for the poor. The poor can be housed in unhealthy private rental homes for which they pay exorbitant rents and dare not complain for fear of eviction. A good government would legislate to prevent such tenants as recommended by Durkheim, instead we have a bad government, supported by bad parliamentarians of all major parties who would never countenance such a measure. In contrast the government does its best to make life comfortable for the rich by co-operating in all schemes to protect their wealth, most notably in the emasculation of the tax collecting agencies.

When being wrong is being right, the majority perspective on economics

Economics, Philosophy, Politics, religion, , , , , ,

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One of the greatest of follies is the excitement that is generated over the Bank of England’s announcement of interest rates. Once a month the monetary policy committee meets to decide the bank rate, that is the rate of interest the bank will charge on loans it might make. This committee of the great and good holds the nations future in their hands, holding rates steady as they have done yet again, brings great relief to the nation’s borrowers. In a nation that is as over indebted as the UK even small changes in the interest rate can be of great significance to borrowers, particularly those with large outstanding mortgages. Yet this is an illusion as so much economic policy making is a matter of smoke and mirrors. What matters is what people believe, if they think, as do the nation’s politicians and financiers, that such rate changes are of great importance, they are of great importance. However in moments of great crisis when events spiral out of control, they are almost useless. On Black Wednesday bank rate went up to 15%, 30 times today’s rate of 0.5%, yet it did little to halt speculation against the pound in the financial markets. The speculation was only ended when the pound was effectively devalued by Britain leaving the European Exchange Rate Mechanism and accepting a low market valuation for the pound. Raising interest rates did not stop financial speculators bringing the Bank of England to its knees.

While focusing on bank rate politicians and central bankers can pretend that they are in control of events. Stagnant incomes, over indebted banks (whose debts in 2013 were approximately 500% of GDP or £6.7 trillion), low productivity and spiralling trade deficit (now the highest in the developed world at 5% of GDP) are problems that can be ignored. At least until some future crisis reveals the fault lines in the UK economy. Incompetence in managing the economy despite popular misconceptions to the contrary never results in a lost election, unless it impinges on the popular imagination as in the form falling house prices.

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There is another misconception that a dysfunctional economy such as that of the UK is self correcting or pressures from within society will lead to a correction of the failures within the economic system. Nothing of the kind is true,dysfunctional economies such as the UK’s can function as they are for many years unless some internal or external shock forces traumatic change in society. If the political classes can somehow convey the impression that they are in control of the economy nothing will change. Nonsense if dressed up as sound economic policy will be accepted by the people as a whole in an economically illiterate society. Strangely enough for a subject whose practitioners claim to subject the economic to forensic analysis, artifice and appearance are often what matters.

I am not alone in my analysis as today one economics commentator described the policy of the central banks as applying cosmetics to the mummified economy.

Spoken or written truths are not welcome in such situations as this when the political,class and the supporting cast of economists are all desperately reassuring us that everything is well. The shrillness of the abuse with which they shout down proponents of alternative strategies is an indication of weakness of their grasp of the truth. They are aided in the suppression of the truth by their media allies who through controlling print and media outlets can prevent any alternative strategies being published or becoming known. What matters is that only the same story is told by politicians, economists, industrialists, the media etc.

What should not be underestimated is the staying power of the fictional story that by manipulating the bank rate the government is in control of the economy. Fortunately for all in the governing classes economics is going through the ‘dog days’, when all pretence of critical objective analysis of economic affairs has been abandoned, in favour of just telling the one story. If it is possible to describe one of the social sciences as a dead science, that description is true of economics. There will never be a university economist who will state that the emperor has no clothes.

Given my interest in theology, I can cite a similar example. Belief in the Gods of Olympus persisted for hundreds of years, even through the late days of the Roman Empire, when the educated classes had long since abandoned such a belief. Conservatism and the usefulness of such beliefs to the government, who could manipulate the fears of the population through supernatural portents gave belief in Jupiter and the other Olympian Gods an exceptionally long life. Belier in the efficacy of manipulating bank rate to control the economy started in the 19th century and despite a few short periods of disrepute it continuing to be the main measure of government economic policy.

There will be another financial crisis possibly worse than that of 2008/9 and again economists despite all the evidence too the contrary will again say that it was an event that nobody could have predicted. Policies that were adopted in 2008/9 despite their evident failure will be used again, as to do otherwise would be an admission of fallibility among the ruling class of politicians, bankers, industrialists, economists etc. What is needed is a new governing class with a new set of stories about the economy, hopefully stories that are grounded in reality. That will only result from a major trauma within society that destroys the myth of infallibility that cloaks the governing classes. The last time this happened was after World War 11 when a series of military disasters destroyed the credibility of the governing classes, when they were replaced with a middle class imbued with the ideals of social democracy.

What should we do about the rich?

Economics, Politics, society, , , , , , ,

What to do about the rich, is a question never asked, yet this deviant group with its anti social behaviours is the one that inflicts more harm on society than do the much maligned poor. It is a poverty of resources that limits the harm that the poor can do to others. The most anti social might become muggers or burglars but the damage they can inflict on society is very limited. Usually it is individuals who suffer burglaries or muggings, whereas the rich or super rich can number their victims in thousands or at the most extreme in hundreds of thousands. Wealth gives the rich power, power over people which means they can hurt many more through their anti social or even criminal behaviours.

Having described the rich as a deviant social group, that deviancy needs to be demonstrated. Perhaps the most destructive behaviour is their refusal to pay taxes. A good society is one in which taxes are paid to finance those joint enterprises that benefit of society as a whole. Britain is a bad society as few of the rich, particularly the super rich pay taxes. In fact the higher up the social scale an individual moves, the more tax becomes a voluntary payment. Millionaire footballers and others can reduce the proportion of their income paid in tax to 2% through having their income paid into a company set up to receive their income. Some rich tax payers find even a tax of 2% onerous and become overseas residents to avoid tax. Unlike other countries the tax authorities in Britain aid rich residents to avoid paying tax. Given that some of the super rich find that the requirement to live six months abroad to qualify as an overseas resident is too onerous, the tax authorities allow them to break the six months into a series of extended week end breaks. There is one British millionaire who who qualifies for non residency status by taking to the air for the weekend. One estimate of the scale of tax avoidance is £100 billion (estimate. made by Richard Murphy the anti tax avoidance campaigner) which is just about 10% of national income. This huge tax avoidance is not cost free, public services such as health and education are left short of funds, the ill are delayed treatment and admission to hospital and classes in schools are constantly increasing in size due to shortages of teaching staff.

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Another deviant act are the ways in which the rich and super rich have managed to manipulate company regulation, to turn many businesses from being wealth creators into money harvesting machines. The ways in which this is achieved are numerous, but in essence they are all the same reduce; that is to the costs of production or service to a minimum (usually achieved through wage and staff cuts), if it is a service industry to reduce service to a minimum and to manipulate costs to make it appear that costs are much higher than they really are to justify high prices. There are also the various means used to artificially reduce profits to avoid tax, the most usual being to borrow large sums of money from a another company in the group, usually located offshore, any ‘artificial repayments’ reduce the companies profits and its taxes. The usual way in which this is achieved is through private equity, whereby a public company open to the scrutiny of all is turned into a secretive private business, where these changes can take place away from public scrutiny.

One criticism that could be levied at my analysis is that the majority of business is conducted by large companies which are owned by thousands of people and in some instances millions. However all companies are dominated by a few large shareholders, these large shareholders are often proxy companies owned by groups of the super rich. It is through these proxy companies that rich and super rich are able to manipulate companies to serve their own interests. These large shareholders can nominate their own directors knowing that the others will follow their lead.

In their greed for more money the rich often force these companies to adopt cost cutting measures that can impact very negatively on society. Due to such cost cutting as reducing their in house quality inspection services to a minimum, scandals such as the substitution of cheap horse meat for beef in meat products will occur with increasing frequency. Companies selling these food products are not subject legal redress and can continue with these dubious practices.

The very structure of business in which proxy company is layered on proxy company means the rich owners are never held to account for negligence even if criminal. If a company through an act of negligence caused an accident which lead to the death and injury to hundreds, it could avoid liability for its actions. All has to be done is for the company to be wound up and to the business to be transferred to a new company. This company cannot be held liable for any of the acts of negligence committed by the former company. The new company may be almost identical with the former company, it will have the same business premises and much the same staff, but as a new business it has no responsibility for the actions of the former business.

Usually the rich seek to corrupt the government as a means to protect their interests. Usually corruption is by means of illicit payment, but in Britain its a more subtle form of corruption. Corruption is by ideology, this ideology is Neo-Liberalism an ideology that states societies welfare is maximised if the free market is left free of all state interference. Intervention in the markets is regarded as anathema and so British government refuses to intervene even in the most dysfunctional of markets. They regard the various scandals in the food trade as a small price to pay for the benefits of the free market system, which are principally low prices. This ideology has such a dominant hold on the political,imagination in Britain the government invites businessmen to run services that would normally be undertaken by the state, hence the privatisation mania. They also advise government on the regulation of their industries, for example the manufacturers of pesticides run the service that advises on the use of pesticides. It is a system that is open to abuse, it can be compared to inviting criminals to advise on policing on the grounds that they best understand criminal behaviour.

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What is to be done about this deviant group, how are they to be stopped from doing harm to society? They like the criminal cannot be eradicated from society, their violent removal through revolution never ends well. Wise politicians have known that it is impossible to eradicate crime from society, but it is possible to minimise its harmful effects. The harmful effects of crime are minimised by having laws that outlaw criminal activity and a police force to enforce those laws. The sanctions for being caught are never going to be a deterrent to all criminal activity but they are a sufficiently effective deterrent to most criminal activity. To minimise the harm done to society by the rich, the tactics used by the judiciary and the police should be copied.

One of the most blatant abuses is the avoidance and evasion of tax. What needs to be introduced is a law which makes all tax avoidance illegal. This would remove the majority of the ways by which tax is avoided. Penalties could be introduced to penalise those that devised such schemes. At present accountants who devise tax avoidance schemes suffer no penalty if the scheme is found to be illegal. In such cases the only loser is the client who avoided the tax. As with policing any crime there needs to be an effective policing force, at present the numbers of British tax officials are too few to effectively police the system. Unlike other forms of government increasing the number of tax inspectors would increase and not diminish government revenue. After all there could be as much as a £100 billion in lost tax revenue to be recovered.

There is then the much trickier problem of what to do about the proxy organisations through which the rich rob society. Company law reform would be difficult to achieve, but some of the more obvious abuses could be quickly remedied. Setting up arms length companies in tax havens such as Luxembourg, Dublin or the Cayman Isles to acquire a head office in a tax haven for the purpose of avoiding tax could be made illegal. The argument is that by doing so it would result in a exodus of businesses to countries in which taxes were lower is unlikely. Some footloose companies would move but for most companies Britain is an important market and it is unlikely many would really go. The list of potential changes to the law is almost endless.

Convicted criminals while in prison are subject to education programmes, such an approach should be tried with the rich. Previous generations of the landed aristocracy has a strong sense of noblesse oblige, which meant that they believed that in return for the the privileges and benefits they received they had in return an obligation to improve the lives of the les well off. From my childhood I can give a good example. The Lord of the Manor on the estate on which my father was employed put into practice a welfare system to improve the life of his employees. He saw to it that all his estate staff were well housed, if necessary funding improvements to the housing stock, providing retirement homes for retired workers and treating well those unfit for full time work. There was on the estate a man blinded by gas in the First World War. He was employed to collect eggs from the hen houses and given a house to live on in the estate. If it had of not been for the charitable intent of Lord *** he would have been unemployed and forced to live on benefit. When his son inherited the estate he declared that this welfare system was too costly and brought it to an end. Children of the rich need to be educated in the ways of noblesse oblige, there is a price to be paid for wealth and the price is to behave responsibly. Why not compulsory lessons in civic responsibility for the rich?

What I believe is that until the most powerful deviant group in society is identified as such no action will be taken to reduce the harm they inflict on society. The super rich should not be celebrated, as they are not the ‘movers and shakers’ that are responsible for the dynamism that drives society forward but a group that is moving society backwards to an unpleasant past.