Category Archives: Economics

There is an alternative – moral economics and economists

Economics, politics, , , , , , , , , , , , , , , , , , ,

Economists see the free market economy as the end point of social evolution. Industrialisation and the market economy are but inevitable stages in the development of society. Sophisticated developed societies are market economies. They are the high point of social evolution, a belief best demonstrated in Francis Fukuyama’s claim that history ended with the development of liberal democracy. All these democracies were of course free markets. Human freedom has reached it’s zenith in the free market. (Milton Friedman even thought the killing and imprisonment of thousands in Pinochet’s Chile, as a price worth paying for the restoration of human and economic freedoms.)

This triumphalism of the market economists is a recent phenomenon. In the period after the second world war and as a consequence of the Great Depression, free market economists were a small discredited minority. Instead economists such as Karl Polanyi, Nicholas Kaldor and John Maynard Keynes who supported the state management of the economy were those held in the highest regard. However with the economic crisis of the 1970s, these economists fell out of favour to be replaced by the free market economists, who persuaded governments institute the new era of neo-liberalism.

Karl Polanyi is now one of those unfashionable economists that is now being studied again after the collapse of the market economy. What makes him so different from the free market economists is that he did not believe that free markets were a product of social evolution. He sees the economy as part of an integral part of a network of social institutions. Changes in the economy were a consequence of changes in wider society and changes in the economy in its turn changed the society in which it was located.

Polanyi traces the origins on the free market industrial society of today to Tudor society. The old military aristocracy was losing power to a new rising class comprised of small landowners and the merchants in the towns and cities. It was the demands of these two groups that kick started the social and economic change that led to industrialisation and development of the free market. Landowners wanted the rural peasantry off the land, so they could introduce new and more profitable farming methods. This was enclosure of common lands. Legislation made it almost impossible for the poor ‘inefficient’ peasant farmers to continue to farm the land. They could not afford the costs of enclosing their farmland. . The great merchants in the cities wanted the end of the guild system, which they believed restricted their ability to make money. Guilds imposed regulatory controls on their members, which the great merchants believed placed unfair restrictions on their ability to trade. These two groups were over represented in parliament. Also the great merchants (Wolsey and Thomas Cromwell) were the source of loans for a government that was always short of money. Consequently the government introduced measures to help both groups.

Once example was the vagrancy laws which could be used to control the landless peasantry. Landless peasants without work and no support within the community could be whipped and driven out of the community, so relieving the landowners of the obligation to support them. E.P. Thompson about the Black Laws introduced in the 18th century) which further disempowered the working poor. These acts introduced capital punishment for offences such as trespass or for destroying a farm gates. These had the effect speeding up the exodus of peasants from the land. Formerly the rural peasantry could collect fallen branches from the woods, now this was illegal. Similarly poaching as means of supplementing a poor diet was now a hanging offence. This created a new class of landless proletariat who would supply the labour for the new industries that were developing in the towns and cities.

This breaking of the link between the poor and the land, created the flexible and mobile workforce that the new industries would need. Obviously there were other important factors that facilitated the industrial revolution such as advances in technology.

If I understand Polanyi correctly the free market and industrialisation, were accidental changes following on from a power grab by the landowning and merchant classes.

Social and economic change produced a new ideology, that of capitalism. In the new social environment, people thought differently. What now ensured societies well being was Adam Smiths ‘invisible hand’ of the free market. Now the price system would be responsible for distribution of wealth, and consequent responsibility for people’s well-being. Poverty now was not deserving of amelioration, it was a consequence of a personal failings. However even Adam Smith was shocked at the brutal way the new capitalists were treating there employees in Glasgow. However the moral coda that he inserted at the end of ‘The Wealth of Nations’ stating that employers owed a duty of care to there employees was ignored. Capitalist ideology dehumanised society, people and land were now valued according to their utility. They were now things, society was commodified, people and land were things that were bought. Valued only according to their usefulness. This was according to Weber the process of disenchantment. What today has become known as financialisation. Society was an inhuman affair in which people only had value in their functionality.

Perhaps the best illustration of the new way of thinking is represented in the writings of those twentieth century economic historians who wrote that the introduction of the Factory Acts were responsible for the slowing of economic growth in the 19th century, as the money that should have been reinvested in the business was instead spent on wages or improving the welfare of the workers. This was the cause of Britain’s relatively poor economic performance compared to foreign rivals. There spokesman was the liberal MP John Bright who argued that the country’s continued prosperity was dependent on the continued exploitation of children in the Mills. An attitude that still prevalent today. During the 2015 election campaign Ed Milliband was criticised by a member of the audience for not understanding that the success of his business depended on his continued ability to continuation of that exploitation of his workers through the zero hours system. Some employers certainly in the medieval period treated their workers equally badly, but they did not boast of the fact, or claim that their behaviour had moral sanction from the nations code of ethics. Then the prevailing Christian code of ethics would have condemned such behaviour. The stocks were often occupied by tradesmen who had cheated there customers. Whatever the failings of the Middle Ages a different and anti capitalist ethics prevailed.

Polanyi writes that the unregulated free market is a threat to social order. The example he uses to demonstrate this is the Speenhamland system which was introduced in the late 18th century. Until industrialisation there was a thriving cottage based textile trade. With the introduction of new technology and the growth of the factory system, these people faced impoverishment. Trade was lost to the new mills taken and payment for whatever they produced was reduced to the price paid for such products by mills. In France the impoverished peasants together with the urban proletariat provided the foot soldiers that made revolution possible. This was avoided in Britain, because the poor could apply to the parish for relief. They never became as desperate as the working poor in France. The parish money enabled these workers to remain in their homes and provided them with sufficient money to satisfy there family’ basic needs. Unlike their French counterparts desperation did not drive them to revolution. There were no equivalence in England of the Chateau burnings of France.

One writer rightly describes Polanyi as a moral economist. All new economics students in the U.K. are taught that moral preoccupations have no place in the study and practice of economics. It is a science different in nature from ethics. Even today economists and writers prefer Polanyi without the moral dimension. Threats to the social order posed by the economy are said to bring forth a reaction, societies develop protective measures that seek to minimise the disruptive effects of the free market. Anybody who has read ‘The Great Transformation’ cannot fail to note his suppressed anger when he describes the impact of the Great Depression on people in Europe.

Polanyi is important today not just because he offers an alternative vision of economics and society; but because he was one of that great generation of economists, who persuaded governments that a new way of managing the economy was possible. A way that would prevent a recurrence of both the crash of 1929 and the Great Depression. Unfortunately a later generation of economists have persuaded governments to abandon the policies of these economists and revert to the failed economic policies of the 1920s.

One last point Polanyi makes and that is that the market based price system is only a recent historical development. Only in the last two to three hundred years have households satisfied a majority of there needs by exchanging money for goods and services in the market. Prior to take the market only provided a minimum of a households needs. There is no reason why the price system and free market will always be the means by which goods and services are distributed. When the managing director of the IMF warns of another Great Depression, all that can be certain is that the free market so beloved of the Neo-Liberals will disappear.

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A Remembered Country Childhood 2

Economics, Philosophy, , , , , , , ,

Growing up in the countryside you experience a sense of intimacy with nature. There is no feeling that nature is something alien or distant from your lived experience. Then my world was that limited by the distance I could walk. Even the occasional trips to distant towns by bus did not change this perception. The slowness of motion meant that I was constantly observing the environment in which I travelled. In spring I knew where to go to pick primroses for my mother, in summer I knew of the best places to pick wild strawberries and blackberries, in autumn hazel nuts and in winter where to look for frozen puddles on which to skate. As a country child you have a sense of oneness, you are part of countryside. Family visitors from the town were different to us, as they were alien to the ways of the countryside. They were missing a vital part of the human experience.

Although as a child you saw the countryside as a friend, you were also aware of the dangers. Never drink black water that gathered in the hollows within tree trunks, that was a warning given by my father. He told by me of two brothers who died from drinking such water. The first when thirsty on a hot summers drank it to assuage his first. He soon died from a bacterial infection and his brother out of remorse committed suicide by doing the same. Usually warning tales were less threatening. Never eat blackberries with the morning dew on them, as it would give you diarrhoea. As the folk tale had it they had been ‘pissed on by the devil’, which is why they made you ill. It was the latter which always stuck in my mind, not the former. These tales were suggestive of an easy going familiarity with nature.

One tradition I remember was the beating of the parish boundaries, something which I always wished to attend, as it sounded fun. I thought because it fell on a school day, that was the reason for which I could not attend. However it was because whenever the men stopped to beat the boundary, they passed around the flasks of spirits. It was an occasion of adult merrymaking which boys were forbidden from attending.

This familiarity extended to the names given to features and places. There was Tom Miles’ pool, so named after the Tom that fell into it. A field given the name the lump of dirt explains itself. There was North America, that part of the farmland which was so named, because it was so remote from the home farm. Later as a teenager I thought no such part of the local landscape could be so named. It must be a joke name known only to the local farmhands and gamekeepers. However a map of locality revealed an area named North America.

There was certain magic to this name giving. There was the fairy glen. A glen created within woodland at the express orders of the lady of the manor. We children were told that it had been made to provide a home for the fairies on the estate. In springtime it was ablaze with colour with, the various yellows of primroses and daffodils. An imaginative child such as myself could easily be persuaded that such a beautiful place was the home of fairies. Often when passing the glen my sister and I argued about whether not we had a spotted a fairy amongst the daffodils and ferns.

What I felt in the villages of my childhood was a sense of ‘at homeness’. Names given to easily identifiable sites gave you a sense of place and belonging. A certain ‘oneness’ with nature. I loved dusk when the darkening sky changed the landscape, when growing shadows changed the shapes of things. Old trees bent over and distorted with age took on new shapes, shapes that I could associate with the stories I heard. The dark hollows beneath the trees became entrances to another world. One of the themes of the many children’s stories and folklore was the luring of people by the fairies down to their magical underground kingdoms. Only returning as old men to there former homes as strangers finding that all the people that they knew had died. As an imaginative child I never feared nature, even at night. Nature to me was a friend somebody or thing with which I identified.

There was a mystery to nature, I was aware of a greater something or presence that was the spirit of nature. Heraclitus explained what I felt when he stated that nature is hiding within plain sight. Despite the evidence of nature being all around us, we don’t really know nature. Nature is that eternal something that gives shape and form to the nature we can see, we can know nature by its appearance but not its essence.

This is an understanding developed by the Czech philosopher Erazim Koháv*. Nature to him as is that mysterious being we cannot know but of which we cannot but be aware. We exist he states at that point in which our temporal being intersects with that eternity which is nature. That eternity has a place for us within its order, a place superior to all the other fauna. This superior position in nature comes with responsibilities. the duty of care. Given the ephemeral nature of our existence, it is our duty to pass nature undamaged to those millions of beings that in the future will be dependent on it. The nameless Saxon noble who compared the human timespan to that of the time spent by a sparrow passing through the Great Hall, understood human existence. Nature is there to be used, but it must be used correctly, exploitation of the type practised today agri-business is to be condemned.

As a father and grandfather I wish that my children and grandson will know something similar to the nature that I knew as a child. Then butterflies were not seen in ones or twos, but as a moving colourful moving mass that swarmed over the green verges of the roadsides. Not so rare that butterfly collecting Fields that were not subject to today’s monoculture, hosted a variety of flora. Wildflowers such as buttercups, milk maids, poppies, birds eyes and lords and ladies slippers gave colour to the dull greens and yellows of the cultivated hay meadows and cornfields.

This philosophy of nature which I share with Heraclitus and Koháv can be dismissed as mysticism. When Koháv speaks of the mystical experience he undergoes with the coming of dusk, when senses the presence of God; his philosophy of nature can be dismissed as mere romanticism. However anyone who has experienced the coming of the dusk in the countryside know that he speaks of a real experience. With the coming of dusk perception changes, certain senses such as hearing become strengthened, while others such as sight become weakened. What were once prominent features of the daytime landscape slowly disappear and the landscape of sound becomes more prominent. I have experienced the same magic to which Koháv has become subject to, it’s a wonderful moment when the world slowly takes on a new shape.

The lived experience of a country childhood has made me a deist. I was aware of a greater presence within nature, which as Heraclitus states is hiding within plain sight. Unlike Koháv although I love the religion of my fathers, I cannot call myself a Christian. Nature for me is still in essence the great unknown, the indescribable. Codifying it, enclosing it with a framework of beliefs merely diminishes it. All the criticisms of my rural mysticism I can understand and find difficult to refute. The only justification is that my country upbringing left me in awe of nature and deism is the only way I can express that awe. It is that sense of the presence of a greater something within nature.

Jaspers wrote that myth is the only means of expressing truths that cannot be expressed in any other way. If my deism is a only a myth or story well told, I can accept that as it an expression my respect for the natural order. Industrial farming that I have witnessed is disrespectful and damaging of that natural order. When I read that with current farming methods that there are only 65 harvests left before the soil becomes too impoverished to support agriculture, I see this as a justification of my deism. No deist would wantonly destroy the natural order for profit our values a very different.

* Erazim Koháv The Embers and the Stars

The dogs opinion – letter to my daughters 1

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

I have reached that time in my life when I find it impossible not the look back on my life and reflect on it. What I don’t intend to do is pass on my wisdom to a younger generation, all too often age is confused with wisdom. There are plenty of foolish seventy year olds around, certainly in sufficient numbers to disabuse me of any notion that age might in some way equate to wisdom. Instead passing on my tenets of wisdom, I make will some observations on life in general.

Kierkegaard is one of the most profound observers of humanity. One of my favourite sayings of his, is that public opinion is the dogs opinion. What is often claimed to be received wisdom is often nothing more than a series of fallacious understanding believed by the majority to represent truth. There are many occasions when society is swept by new and compelling misunderstandings of society and human behaviour. I say swept because even the most intelligent of people feel obliged to subscribe to the current nonsense that will now pass as accepted wisdom. Brexit Britain and Nazi Germany can be used to illustrate how public opinion can be corrupted

National socialism was the passion that gripped Germany in the 1930s. Jews, Jewish thinking and Jewish ways of behaviour were held have corrupted Germany society and to be responsible for the malaise into which Germany had sunk. Germany to recover its national health and natural vitality had to rid itself of this alien virus. A return to the Germany of folkloric heroes, men and women the becoming equals of the heroes Nibelungenleid. Once Germany was freed of the alien virus of Jewish cosmopolitanism this happy result would be achieved.

Brexitism is a nationalism similar to nationalism which swept through Germany in the 1930s, both identify an alien virus as being responsible for national decline and decay. Although in this example the alien virus is Europeanism, our national spirit Brexiteers believe has been sapped and fatally weakened through contact with European cosmopolitanism. Just as with the Nazis the solution is to eradicate this virus from U.K. society. What is proposed is a violent break with the greater Europe or the EU. Britain will be returned to splendid isolation on the of an island situated on the edge of Europe. Geographically European but politically anything but.

Not surprisingly the government’s of both countries adopted similar solutions to this problem. Expel those responsible for spreading the virus. Although the expulsion policy was less brutal in Britain, it is in essence it is similar to that of the Nazi’s. If people are denied to right to work and reside in the country, they will leave. In Britain it has been this has been enforced through the hostile environment which denies Europeans the right to remain in this country, while in Germany it was the violence of the brown shirts.

Brexitism is a nonsense, but a nonsense that is increasingly held by the political elite. A nonsense that is beginning to permeate all levels of society. In the 1960s it was believed that the quality of parliamentary democracy would be improved by the influx of educated graduates as MPs. Yet it is these very people that have become enthusiasts for Brexit. It is as if are governing classes are gripped by a religious fervour, a fervour that prevents them accepting anything contrary to their belief system.

The parliament of local squires and trade unionists of the past so derided by political commentators in the 1960s; was the one that withstood the fascism of Mosley and his blackshirts and resisted Hitler in the dark days of 1940. Today’s parliament of graduates (often educated at the elite universities) have surrendered their integrity to nothing more than a media campaign led by a group of populists.

Nietzsche despite being claimed as one of there own by the Nazis was nothing of the kind. He was a fierce critic of German nationalism seeing it correctly as yet another non thinking belief system of the majority. It was for him the wisdom of sheep, the herd instinct, the wish to fit in and be the same as the others. An unquestioning desire to live like others. This is why he opposed democracy, believing that it would give power to the undistinguished middle classes. As today’s parliament is drawn overwhelmingly from the middle classes, it is worrying to think that Nietzsche might be right. The next Prime Minister is criticised for being a follower of public opinion. In the words of one critic he sees which way public opinion is going, and then rushes to the front saying follow me. If this critic had been brutally honest, he would have said that the same is true of the majority of MPs. Unfortunately we are led by a parliament of sheep that are constantly looking for somebody or something to follow. Prior to the referendum of 2016 the parliamentary sheep believed that public opinion favoured remaining in the EU, now although by a small margin public opinion was demonstrated to be the contrary, these sheep switched sides. Truth they believe resides in majority opinion.

Returning to Kierkegaard he believed that it did not matter, if only one man believed the truth. The truth was the truth no matter how many believed it. Therefore it was of no consequence, if what the majority believed was wrong. He took this belief to extremes, believing that the Danes were insufficiently Christian lived a life contrary to the mainstream, provoking controversy about his person hoping his example would lead Danes into changing their lives. His appearance helped in his task as he looked distinctly physically odd. One leg seemed shorter than the other, his badly fitting trousers gave that impression. He tried to be a Danish Socrates button holing people in the street and engaging them in a conversation through which he demonstrated the unsoundness of their beliefs. As a figure of controversy and mockery, he certainly was a lone speaker of Christian truths. The isolation and mockery made him convinced that he was a martyr for the truth. He found this martyrdom unpleasant, but thought it necessary to bring Danes to a sense of the truth. Although his martyrdom failed to change any minds, his books did for so later generations, who appreciated his unique approach to truth.

What Kierkegaard and Nietzsche shared was a scepticism of the received truth. This isolated them from there fellow men. Truth is often more offensive to people that the accepted lies by which live their lives. A knowledge of the thinking of the sceptic philosophers is the best protection against the fallacious enthusiasms that periodically sweep through society which carry others away. I cannot believe that anybody schooled in scepticism can believe in nonsense, such as that preached by our Brexiteers.

Brexit explained by a sceptic

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What must be understood is that Brexit (Britain’s leaving the EU) has no economic justification? All post Brexit scenarios will leave the British people poorer and in the event of a ‘no deal’ substantially poorer. Instead it best understood an expression of the political classes  ‘amour propre’ or self worth. Politicians want to be participate in some history changing event, so they can demonstrate there ‘greatness’ of spirit. This is why they remain so nostalgic about 1940, they want also to be known for their membership of a great and noble generation of politicians, that saved their country. Reputation counts for everything amongst the political class. Being members of a community of nations greatly restricts their scope for leadership and individual distinction. Free of the shackles of EU membership they will be freed to demonstrate their leadership qualities. Theodore Roosevelt demonstrated this when he expressed regret that during his time as US President, the US had not participated in any war. He was denied that opportunity to distinguish himself and earn glory for himself and his country.

While it may not be true that most British politicians want to wage war on their neighbours, they do want the bully pulpit from which all US President’s operate. This is why since 1945 Britain has been eager to demonstrate that it is the major power in Europe. Unfortunately they have never been able to demonstrate this, as Germany and France have been unwilling to play second fiddle to Britain. Free of EU membership these politicians believe (misguidedly) that they will as leaders of an independent nation able to play the great game of international politics. Reality will strike on leaving the EU and these politicians will discover that as leaders of a small nation off the coast of mainland Europe, they will be relegated to being just another group leaders from a small nation, shooting from the back of the room hoping to attract the attention of the great powers at the front of the room.

There is another compelling reason for Brexit. Britain has been in relative decline since the late 19th century. In 1914 Britain was still a great power, but by 1945 exhausted by two wars it was reduced to being a minor player in world affairs. In 1949 Britain became bankrupt, ruined by a run on the pound, and only to saved from the ignominy of bankruptcy by a large US loan. Politicians have recognised that this decline has robbed them of their power to play a significant role in world affairs. As a consequence politicians have resorted a number of increasingly ploys to arrest this decline. These ploys have become increasingly desperate, the latest being Brexit. The shock of leaving the EU will revolutionise British society and economy. Europe with its rules and regulations they believe stifles individual creativity and enterprise. Freed from them Britain will enjoy a new industrial renaissance and become an economic power house. Unfortunately history demonstrates shocks such as Brexit have the reverse of the intended effect. The Neoliberal experiment of the early 1980s destroyed 20% of British manufacturing industry, if Professor MInford is to be believed Brexit will destroy the rest. As a British citizen all I can hope that is the last desperate gamble of a political class obsessed with dreams of past Imperil glory and that the reality of Brexit will finally destroy any such illusions they hold about Britain being a great power.

Why do we constantly choose men who we would reject as friends as our leaders?

Economics, Neo-Liberal economics, politics, , , , , , , , , ,

As somebody with a keen interest in history, I often see in past times leaders who resemble those of today. I see in the last three Caesars, Caligula, Claudius and Nero men who embody the characteristics, so often demonstrated in the behaviours of contemporary politicians. Caligula was mad and brutal, once slaughtering a senators son and forcing that same senator to share in his jokes about his dead son. This senator having one surviving son was forced to participate in this charade to preserve that son. He was reputed to have wanted to make his horse a senator and to have declared war on the sea. Claudius was a vindictive mediocrity, who ordered an invasion of Britain, so he could have a triumph in Rome. He believed this would establish his right to the throne. Claudius was poisoned by his wife, so her son Nero could become Emperor. Nero was a vainglorious man who believed that he was a talented poet, musician and playwright. He was neither, but his courtiers out of fear flattered him by praising him as a talented artist. Madness, mediocrity, charlatanry and vaingloriousness are personality traits that I can identity in so many of contemporary leading politicians.

Although contemporary political leaders no longer have the power or right to kill their enemies, they as so many vindictive Caesars try to destroy them. The media can be relied upon to indulge in the character assassination of their rivals. Any right wing politician can expect the media to conduct on their behalf the most vituperative and vile attacks on their left wing rivals. Intimidation is their weapon of preference. It is no coincidence that so many politicians are poor public speakers. They don’t need to employ reasoned speech, as they have much more effective means of silencing their critics.

Without exception the person who abuses, exploits and intimidates people is recognised as the person best qualified to be leader. These are people who amongst our friendship groups, we would reject recognising them as unpleasant dysfunctional individuals. Today power and the ability to use and exploit power are seen as the only political virtue required of a politician. What we worship is the abuse of power. Bad behaviour by our leaders is excused as being necessary to get the job done.

Contemporary politics lacks any great motivating belief or ideology. The politicians who govern us today have grown up in what is an age of relative plenty*. They and the people found the great ideologies of the past unnecessary, as no great change was needed in society, all were well fed and housed. The great anger at the injustices of society of which gave rise to the great reforming and revolutionary ideologies of the past was no longer there. The left grew complacent and abandoned socialism and was negligent in the protecting the rights of the people.

Whether it be called individualism or something else, people saw the life as being the acquisition of material goods, the securing of a comfortable lifestyle. However in this complacent society, there were the malcontents. These malcontents were of the right, the wealthy right. They wanted a return to the unequal society of the past. A society that gave them a unique set of privileges of wealth and status. They wanted back a society that deferred to wealth and privilege.

All societies have periods of crisis, any organisation created by fallible mankind is prone to periods of failure. When the economic crisis of the 1970s occurred, rather than take action to remedy the most obvious failings of a society that served most people well; the right seized the initiative and implemented a series of changes that would create not a society that served all well, but one that served to benefit a small group of the most privileged.

They also had an ideology, Neo-liberalism which claimed that by dismantling the regulatory state it would free the economy to create more wealth for all. These regulations which they were so eager to destroy were those that protected the well being of the people. Soon even the political left adopted this philosophy believing it the only means of attaining political success. Neo-liberalism is a belief system empty of any moral code. The only moral value that can be ascribed to this philosophy is a belief in success to be achieved at any cost.

What Neo-liberalism created was a moral waste ground, a society in which the old social contract was destroyed. No longer did the political leaders govern in the interests of the people, so the people no longer gave there consent to be governed by their current leaders. Dissatisfaction with the political leadership has grown, increasingly people have turned to political groupings outside parliament which promise change. Change that will benefit them the people. Although these leaders are charismatic, what they offer is unreal solutions to real problems. Solutions such as leaving the EU as the means to restore national prosperity and pride. These political groups are so like the millennial cults of the past, that offered magical but unreal solutions to real problems. Since they preach the impossible, they don’t employ reasoned argument, but the tactics of the advertising industry to sell there set of impossible truths. Criticism of such movements only attracts hostility and threats. The British Brexiteers constantly make threats about what will happen if they are denied. A threat left unspecified.

Returning to my main argument since the onset of the Neo-liberal revolution we have been taught that the only people that count are the ‘movers and shakers’ of society. Such people can be identified by their abrasive personal style and there contempt for the ordinary people. The billionaire heroes of Ayn Rand’s ‘Atlas Unchained’. Even politicians that are far from being characterised as movers or shakers feel they have to adopt this mode of behaviour. A politician would feel insulted if they were described as principled and of good character. Unless of course it was in their election literature and being used as a means of winning votes.

There is also the self fulfilling prophecy. Our expectations of the political class are so low we expect them to behave in an unprincipled manner. Any politician that behaves differently is an object if suspicion.

* This has become increasingly less so since the Neo-liberal reforms of the late 20th century and the financial crash of 2008

Reading Thomas Aquinas gives a better understanding of human society, than does a reading of the works of Friedrich Hayek

christianity, Economics, Philosophy, , , , , , ,

Just recently I have been reading and studying Thomist philosophy and works of other medieval Christian philosophers such as William of Ockham. The thinking and is usually regarded with contempt by contemporary philosophers. When I studied philosophy at university, the only philosophy of this period we studied was Augustine of Hippo and he was regarded with interest, because his work was a reworking of Plato’s philosophy. However what I discovered in these philosophers was a clarity of thought and elegance of writing lacking in so many contemporary thinkers. Anybody familiar with the writing of contemporary post modern philosophers will be perplexed by the obscurity of expression in their writing. They seem to believe that the difficulty one has in reading in there is a demonstration of their intelligence.

What particularly interested me was the question that these philosopher’s struggled to resolve, which was in God created the world, and he was a God of good intent, why did he allow evil to thrive in the world he created. There is a similar problem with contemporary economics. Nero-liberal economists have created there own best possible of world’s, the free market. They believe that the free market represents the epitome of collective human endeavour. The free market they believe possesses the mechanism to ensure the fairest distribution of wealth between members of society. When problems occur such as the lack of housing provision in the housing market, it is not the fault of builders or property developers, but some factor extraneous to the market. One favourite culprit is the local authorities who fail to release enough land for housing. Another is green belt regulation that also limits the amount of land available for housing. Never to blame are the suppliers of housing, they are the victims of foolish and vindictive governments.

What these economists are guilty of is dishonesty. They cannot admit to there being no fault with that creature of their imaginings, the free market. In fact in all economics textbooks,* there will be a section devoted to perfect competition. This is the idealised free market with all the imperfections of reality removed. Medieval Christian philosophers unlike free market economists face up to the problem of evil, in what should be the best of all possible worlds. Unlike contemporary economists they don’t blame some extraneous agency for failings within human society. As this was an age of belief they could easily have blamed all human failings on the devil. Instead face up to the problem as how a good God could allow evil to exist. They employ sophisticated logical reasoning to demonstrate that evil actions are a consequence of the choice made by human actors, nothing to do with God. It is in fact a turning away from God that leads to evil acts.*

This naivety has not always been a characteristic of economics teaching. When I started teaching economics in the 1970s, I taught my students both the failings and strengths of the free market. In particular how natural monopolies were unsuited to the free markets, as monopoly power of the suppliers would always enable them to exploit their customers. Monopolists because they lack any effective competition, maximise their profits by either charging exorbitant prices for their products and services, or by minimising costs by providing the minimum service possible. British rail companies do both, offering the customer a very poor deal.

There are many economists who have written about how it is possible to combat the abuses of the free market. The majority of them were writing in the 1940s and 50s. All these economists are hardly known by politicians today, in consequence a wealth of knowledge on how to manage the economy equitably in the interests of the majority has been lost. It’s a situation similar to that of the great Christian philosophers of the medieval period, apart from a small minority all knowledge of their works has been lost. If only our rulers would consult these ‘old’ books, they would find solutions to many of the problems that now bedevil our economy.

* Friedrich Hayek is the doyen of free market economists, who in his ‘The Road to Serfdom’ gives the best account of the virtues of the free market economy.

* This brief summary does little justice to the thinking of Thomas Aquinas and the other medieval Christian philosophers. Perhaps the best explanation of the thinking of these philosophers, can be found in Etienne Gilson’s ‘The Spirit of Medieval Philosophy’

Why the economic crash of 2008 will not be the last such financial crash.

Economics, Philosophy, Politics, , , , , ,

As an economist I know of several explanations of why economies experience sudden and unexpected down turns, the usual explanation is the bursting of a credit bubble as happened in 2008. These downturns or crashes are always claimed by our political leaders to be unpredictable events, once in a life time happenings, even an ‘act of God’. Even when as in 2008 when the crash was caused by both human folly and greed. This misunderstanding is only possible because politicians have never understood the economics associated with John Maynard Keynes. He stated that economies are inherently unstable and these sudden and unexpected collapses in economic activity are part of of natural economic cycle. Unfortunately politicians act as if the good times will continue forever, a dangerous self delusion.

Although an economist by education, I am a philosopher by interest. Unlike Keynes I want use the techniques employed by the Greek philosopher Plato to explain the instability of the economy. He used myth to explain those aspects of reality that were not easily given to rational explanation, myth could make understandable, what reason could not easily explain. Perhaps the myth of the cave is the best known. A myth he uses to explain the ignorance of mankind as to the true nature of reality. He says imagine mankind as a group of individuals chained up in a cave. These chains prevent them moving and force them to look in one way only forwards.. In front of these men is a wall behind which is a fire. Now behind that wall images of things are passed backwards and forwards, so all the chained men see is a series shadows, which they take to be reality. Mankind for Plato could only see the world of appearances, which obscured the true nature of reality. However as I’m a 21st century economist who does not believe in myth, I will use metaphor as a substitute for myth.

The economy can be seen as a jigsaw puzzle in which the pieces seem to fit together to form a picture,. It’s seems to be composed of a series of interlocking pieces that fit together to form an integrated whole. However closer inspection of the puzzle reveals that the pieces do not fit easily together. There are gaps between the pieces they don’t easily fit together. Now if the tray on which the pieces are resting is moved, the puzzle immediately begins to lose shape and the picture eventually disappears from sight. The economy can be seen as a badly formed jigsaw puzzle that is likely to falling apart at any disturbance. Politicians ignorant of economics constantly make foolish decisions, that disturb and disrupt the economic policy. Occasionally they make disastrous decisions that cause the economic puzzle to fall apart,

There have been in our recent history a series of such foolish policy making from our political leaders. The most common fallacious policy is to promote speculative boom in either the property or stock markets as the main driver of economic activity. It is the fools gold of a policy. If economic growth is dependent on a constant inflation in house and property prices, there will be a time when market confidence fails and asset prices collapse and with it the economy. Unfortunately this simple understanding of the economy is beyond the political classes. Politicians seem predisposed to believe that everything in the garden is rosy and nothing bad will occur. A recognition of the fragility on which economic well being is based is too disturbing and unsettling to be accepted as a truth by our blindly optimist politicians.

The jigsaw metaphor can be used to explain how policies should be made to fix an economy, once a downturn has occurred. The broken puzzle can be put together through decisive political action and the economy rebuilt. There might have to be some reshaping of the pieces to make them fit together better, so making the economy more resilient to future shocks. Obviously the one piece that needs to be reshaped is the property and financial markets. Action needs to be taken to limit the activity of speculators in each. This action is a system credit controls and taxation that chokes off any foolish speculative activities. Unfortunately the politicians seem to believe that remaking the economy is an impossible task. What they prefer is the maladroit tinkering that is called Neo-Liberalism or leaving the market to fix itself. This is akin to asking these malformed pieces that remake up the economic puzzle in their own image. As a consequence the speculative economy that caused the collapse of 2008, has been rebuilt by the dominant players in the market, bankers and financiers with minimal interference from the government.

I must confess to one failing which is typical of all economists, I find it much easier to explain why economies go wrong than why they go right. My jigsaw metaphor cannot explain why the economy is subject to exuberant and unexpected periods of rapid economic growth. Perhaps if economists such as I could explain this economic fact, the economy would be in a better position than it is now.

Donald Trump is a symptom not the cause of our current malaise

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Authors such as Erasmus are little read today. Once his ‘Adages’ were the bedside reading for statesman. In this book he uses a series of Adages or popular saying as the source for coded attacks on the follies of the great and the wise of his time. In placing his criticisms in stories about the great men of classical Greece and Rome, he avoided offending the great and good of his day. He was even resorting to publishing the first edition of his book was not published under a pseudonym to avoid the wrath of the powerful. The princes and dukes of Renaissance Italy squandered the wealth of their states in a series of pointless wars. It was this folly which he highlighted time and time again in ‘The Adages’. He despaired of these men who saw the only good as being their personal glory, which they could only be achieved on the battlefield.

What these men lacked was an understanding of how the states they governed functioned to produce the wealth necessary for the well being of the people. Wealth for them was what they used to demonstrate and display their power. Perhaps the best example of such folly was the behaviour of Charles the Bold of Burgundy. His army of elite knights wore armour that appeared to be gold, probably from the gold plate on steel. They made a magnificent spectacle. However this arrogant prince and his armoured knights were destroyed in battle by the peasant pikemen of Switzerland. His now ruined and defenceless state was taken over by his astute neighbour Louis of France and who added it to his kingdom.

The horrors of war were certainly demonstrated in the ‘forty years’ war that devastated Germany in the 17th century. Unparalleled acts of barbarism occurred during this war. As usual the victims were the people who suffered from hunger and the deprivations inflicted on them by the soldiers of the various states that fighting this war. One of the states that suffered most was Saxony, yet it’s Duke and his court enjoyed the luxuries of courtly life untroubled by war. The only inconvenience they suffered was from having to relocate occasionally to avoid being victims of this war.

This horrific war was one of the factors that gave rise to the enlightenment ; philosophers believed that mankind had to be re-educated into a better way of living. If mankind was taught that a better way of life was possible, the bloody wars of the past would not reoccur. They believed that if reason was elevated into being the principle governing all human behaviour, the horrors of the past could be avoided. Leibniz a German philosopher stated that God created the best of all possible worlds and if people lived life according to the laws dictated by the rational God, the best possible of lives would be available to all. Although the enlightenment philosophers were accused of naivety, in that they failed to understand the cruelty inherent in human nature. They were in fact all to aware how easy human society could lapse into barbarism. They wanted to convince people and princes that a better life than that of the brute was possible.

The enlightenment gave rise to an academic industry that generation after generation turned out volumes on how to create a better society. One such philosopher was Adam Smith, who realising the importance of commerce and industry to the well being of the people produced ‘The Wealth of Nations’. While there has always scepticism about the influence philosophers and the teachers of the humanities had on the behaviour of politicians and people, there was a time when politicians deferred to academia. When I was young politicians believed that economists possessed a body of knowledge that if followed would maximise the well being of people. This is the now derided Keynesian economics. Similarly politicians sought the advice of other experts, the Plowden report that led to the transformation of education in the 1960’s was drafted by educational sociologists.

However the politicians can be said to have turned there back on what can be best termed the enlightenment project. A series of economic crises in the 1970s led politicians to believe that any attempt to manage the economy and society to maximise the well being of the people was doomed to failure. Academic economists did not possess the knowledge essential necessary for the management of the economy. Such a role was best left to the collective wisdom displayed by the free market.

Now the circle appeared to have turned, politicians no longer believe that an informed knowledge of the society and economy is necessary. Events for them have proved that it does not exist. Now our politicians behave like some latter day renaissance prince, seeing personal glory as the only ambition worthy of a politician. Managing the economy and society to maximise the well being of the people, is no longer the task of politicians. In Britain politicians regularly demonstrate an ignorance of the society and the economy. Boris Johnson when he said ‘bugger business’ is an exemplar of current political thinking. While Donald Trump is derided for his ignorance of the wider society and countries beyond the American shore, he is little different from leading U.K. politicians. They disguise their ignorance in politer phrasing of their words, they may even eager resort to what appear as learned comments, but their thinking comprises little more than a rote learning of what are deemed the political essentials needed for any politician. In the U.K. as in America ignorance no longer a barrier to high office.

Why our times desperately need the economics of optimism

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Economics can be categorised and divided in a number of ways, but one the most fundamental divisions in economics is between that of the economics of optimism and that pessimism. Quite simply the first tells you how to do things and the second why should not attempt to do things. The former is the economics of change, the latter is the economics of no change. Usually the first is associated with left of centre politics and the latter with right of centre politics. Possibly the best example of the latter is the current policy of austerity practised by the Conservative government. They can say no too many desirable things such as more spending of health care on the grounds that there is no extra money to finance such spending. In the words of the Prime Minister Mrs May,  there is no ‘money tree’. They prioritise sound finance over other social goods. In contrast the social democrats or socialists would ask the question, how can we raise more money to finance increased spending on health.

Usually the economics of pessimism holds sway in economics, so I will explain that first. One of the earliest exponents of this school was the clergyman Thomas Malthus. The originator of the theory of diminishing returns. He stated quite simply that there was a finite quantity of productive resources and if the population increased indefinitely the same quantity of wealth would be divided between more and more people and so each successive generation would have less than the previous. There was he believed a  saviour which prevented the mass impoverishment of all, a natural system of checks and balances that kept the population numbers in check. These were disease, famine and war.

Today’s economists of pessimism believe that there is a similar limit on to the good things in life and for the sake of the well being of society the poor must be denied a fair share of these good thins. There is just not enough to go around.  Far better that wealth is restricted to the deserving few, the wealth creators, without whom we would all go hungry. These are the billionaires that the popular right wing novelist  Ayn Rand lauds in her books. Wealth is the just reward for their zeal and enterprise. She does not deny that the masses deserve some share of the  wealth. However all they are entitled to are the ‘crumbs’ that fall from the rich man’s table. What these economists call the trickle down theory.

In the simple story told by Ayn Rand, if the super rich were prevented from enjoying their obscene wealth, they would cease in their work of wealth creation. In one of her books she describes how the billionaires disappear from society and go into hiding. Without their enterprise societies collapse and thousands of the poor starve to death. Only when the billionaires cease their strike do things return to normal and the surviving poor are now able to benefit from that minimal income that the generous billionaires think they deserve.

There is interestingly another strand to this economics of pessimism, traditional Catholicism of the Catholic ultras. This although a Christian philosophy of life and economics, is in practical terms is little different from that of Ayn Rand. Mankind they believe is corrupted by original sin and human society is but a corruption construction made by sinful man. Any attempt to reform or improve this damned and corrupt society is doomed to failure. Only God has the power and knowledge to create the good society, or heaven on earth. Any attempts to redistribute are income doomed to failure by the very nature of this dysfunctional society. They are likely to have the unintended consequence of making things worse for all as increased taxes to will add to the costs of production so making businesses inefficient so reducing output making all poorer.  All that is permissible is individual acts of kindness or charity. In a corrupted society inequality is inevitable, as are the vast inequalities of wealth and income. Changing or improving a society of people damned with original sin is impossible and should not be attempted.

Although the economics of pessimism has usually been the dominant mode of economics, there was a brief period during the 1950s and 60s, when the reverse is true. Usually this philosophy is associated with J.M.Keynes, but there were others such as Michael Polanyi. Briefly economic practice was directed to making and preserving the good society or the welfare state. Economic policy making was intended to  five combat what William Beveridge defined as the “Giant Evils” in society: squalor, ignorance, want, idleness, and disease. Perhaps for the first time in its history the economy was directed in a manner which benefited the majority of people rather than the lucky minority.

Then when the economic crisis of the 1970s hit the Western economies it was easy for the economists of pessimism, to demonstrate that the crisis was caused by the profligate spending urged on governments by the economists of optimism.   Since then the pessimists have prevailed.

Now when faced with a crisis in Western economies, economies that fail to generate sufficient employment and income to meet the needs of their people, government policy can be summed up as either ‘can’t do’ or ‘won’t do’. As the governments have shown little interest in the welfare of their peoples, populist movements have developed. Movements that threaten governments with their ideology of economic pessimism. European right wing populist movements with the exception of the British, are threatening to intervene in the economy to protect and maximise the welfare of the people. If governments persist with their policies of ‘can’t and won’t do’, they will be replaced by those that can. What the populists of both the right and the left espouse is an economics of optimism or more simply the economics of ‘can do’. While some doubts must be expressed about the politics of the populists, what they do believe is that governments need an activist economic strategy. If the National Rally of Marie Le Pen ever attain power they will find that they need to intervene in business to protect the welfare of the people of France. Employment protection measures will be re-introduced, employers will find it impossible to pay less than a living  wage. Taxes will be increased on business to finance health and social care. Policies that are normally associated with the left. Societies may become less free and more intolerant but people will accept that if it means a better standard of living. What is forgotten is that the popularity of Hitler in Germany came improving the material well being of the German people. In return they tolerated the cruelties and barbarism of the Nazis.

There are none so blind as those who choose to be blind. A comment on contemporary journalism

Economics, Politics, , , , , , , , , , ,

This essay was prompted by an article in the left of centre daily newspaper that I read. In it the journalist (who is an economist) claimed that Brexit would be a non event similar to the millennium bug. It was an article I thought so typical of contemporary journalism, a well written article with a simple story line that ignored inconvenient realities. He dismissed those experts such as the Governor of the Bank of England, stating that they had constantly misread the economic runes and their predictions were always proved to be wrong, so why should we take their warnings of a bad Brexit deal seriously. Instead he preferred to trust the politicians, the realists who would deliver a good Brexit deal. In colossal misreading of history he said that the good guys, the politicians would deliver the best possible of Brexit deals. One can only believe he is ignorant of history, a history in which ill informed and incompetent political leaders led their country into disaster. 

There is one disturbing feature of this article which in so characteristic of contemporary journalism. That is the disparaging of experts and expert knowledge. What he is suggesting is those who know a something about their subject are to be distrusted and instead we should listen to the politicians who know little or nothing about the subject. He trashes the idea that there is something that can be called  human knowledge. As Mark Carney and the British Treasury have so often got things wrong, he claims that this proves that there is nobody who knows what is really going to happen in the economy, least of all the experts. Therefore it is just as well to trust the ‘know little’ and ‘know nothings’, as their sense of realism will prevail and they will deliver a good deal on Brexit.

Just as with so many who have studied economics, he can see no role for human folly in history. Unlike him I cannot consider the current generation of political leaders who have demonstrated serial incompetence in their roles, as the best people to be in charge when the country faces the existential threat that is Brexit. Can anybody really claim that any of our leading politicians have actually improved the performance of the departments in which they ran. The list of there failures is endless, transport, prisons, schools etc. This is why one minister has the unkind nickname of ‘failing Grayling’.In this government the good minister is the one that fails to made the department of which they are in charge worse.

However fairness demands that this journalist be judged as an economist. He bases his article on the claim that Mark Carney and the other expert economists got it wrong, when they said that Brexit would be bad for the economy. In his article he writes of several examples that demonstrate that the economy is sound and prospering, in spite of the referendum vote. Yet as an economist he should know that Mark Carney once the Brexit referendum was announced immediately pumped money into the economy to prevent the crash he warned against. This created cheap money and as interest rates were so low people borrowed to supplement their low incomes. Economic growth or what he terms prosperity has been founded on a rapid and unsound expansion of consumer borrowing. Such borrowing cannot continue for ever and the economy is rapidly coming to resemble that of 2008, when an over indebted economy crashed, with dire consequences for us all.

What this left wing journalist also fails to mention is inequality. The prosperity that he sees demonstrated in his local supermarket, excludes the millions on low pay. Those millions in the gig economy suffering the twin evils of low pay and insecure employment would have a very different view of the economy to his.

Possibility John Ford in his film ‘The Man Who Shot Liberty Valance’ had it correct, when his newspaper man confronted with an awkward truth, says it is better to print the myth than the truth. Similarly too many journalists prefer as does John Ford’s newspaperman to print the myth. In this case it is the myth of British exceptionalism.