Category Archives: Philosophy

Billionaires and the Scrooge Factor

November 28, 2016Economics, Philosophy, Politics#Scrooge, Apple, Bill Gates, Capital Controls, Dickens, Koch Brothers, Microsoft, Tax havensangrytunbridgewells

Dickens’ Scrooge is treated as an agreeable story to be told to children at Christmas, yet this is to misunderstand Dickens intention. This was a book for adults one that was intended to show the destructiveness to the human personality of acquiring money for money’s sake. There was a real life Scrooge, a John Ewles who went so far as to sleep with the horses in the stable as he used the warmth generated by the horses so he would not have to light a fire in his house. There is no doubt that the CEO’s of the largest business corporations have read or at least are familiar with the Scrooge story, but what they fail to realise is that their behaviours mirror that of Scrooge.

A friend told me that the largest business corporations in the world have cash assets totalling three times the world’s GDP. Checking with the internet I find that the cash reserves of Apple and Microsoft combined exceed those of the British Treasury. Apple has the world’s largest cash reserves of £95 billion. Although I cannot confirm my friends figures, I know him sufficiently well to know that he has not made them up. (The source I think was Oxfam but I could not find the figures I wanted on their website). The usual reason given for these huge holdings of cash being stored in overseas tax havens to avoid losing their cash to the taxman. Not paying tax is one of the moral imperatives of the new Scroogian morality.

(The following text only makes sense with an economists understanding of money. Money has no intrinsic value, it is only a claim on wealth and its value is determined by how large a share of wealth can be claimed by each unit of money. If the total sum of money to spent is greater than the monetary value of the goods and services produced in an economy, then when that money is spent those who have the greatest sums of money will outbid those who have least for the available goods and services and so push up prices. This is in essence is inflation, if the price inflation is modest people will retain their faith in money and will continue to treat it as a store of value. If as in Germany in 1926 if price increases are high and of ever greater frequency, people lose faith in the currency and a hyper inflation develops as money becomes increasingly worthless.)

However what I want to suggest is that such holding such vast sums of cash is an act of stupidity. The first thing to realise is that these companies can’t use this money in any productive way. The sums held are so vast that if these companies decided to spend that money, it would significantly increase the rate of inflation and reduce the cash value of their holdings. The London property market until recently demonstrated this effect, it was a market where billionaires and multinationals seeing it as a safe haven for their money have successively bid up the price of London properties to astronomical levels. If they started to spend their cash piles other sectors of the world economy would experience similar levels of inflation.These businesses are trapped by their piles of cash, they cannot do anything that would reduce their value. If Apple for instance spent £10 billion from its vast cash pile on investing in a new business venture, the shareholders would be up in arms, as that reduction in the cash reserves would be matched by a reduction in the value of their shares. Apple, Microsoft and the other cash rich multi-nationals are held prisoner by their money, they can do nothing which might diminish their cash stock piles as in doing so they would risk the wrath of their shareholders. Rather than these CEO’s being the giants of the world of business, they are reduced to rather pathetic figures do all they can to protect their cash hoards. They are held captive by their money.

I do wonder if this practice of hoarding and nurturing their cash piles does not make the owners more risk adverse. I own an Apple Iphone but instead of planning to upgrade to a newer model at the end of the contract, I might just instead keep my current model. It does seem that the innovative flair that made Iphone a ‘must buy’ is now lacking in the company. Has the desire to hoard cash diminished the funds for innovation?

When this cash is spent it not only devalues the currency but also the politics of a country. One example is the Koch brothers, millionaire oil traders who have spent billions backing those candidates who do their bidding or who have an agenda similar to theirs. In consequence in the Koch influenced US Congress the majority of the Congressmen oppose any action that would effective ameliorate the effects of climate change and reduce oil sales. It is possible to say that the melting of the Arctic ice is a consequence of the action of the Koch brothers. What happens when this occurs is a narrowing of the political agenda to such an extent that Congress and other political institutions come to represent the views of their financial backers rather than the people.

One consequence of this is that these companies spend some of their cash pile on ‘economic toys’. Such toys have very little productive value but whose ownership brings status and prestige to their owner, they do little for the companies bottom line. However the sums spent on such toys are but a minuscule proportion of their cash piles. Nobody ever made money from owning a Formula 1 racing team, but the money squandered on such an enterprise is merely the small change from these huge cash piles.

The problem for the owners of these vast money mountains is that they dare not risk moving them out of their havens for fear of devaluing the value of these cash reserves. The Bill Gates foundation that does so much good in the developing world, is a ring fenced fund, quite separate from the Microsoft business, which has its own huge cash pile. The Dicken’s solution to the Scrooge complex is for the rich man to give his money away. While such a move would be welcomed because their cash holdings are so vast, any such spending would risk destabilising the world economy. They just have too much money for their own and the world’s good.

Unfortunately just as with Scrooge their desire to protect their money forces them into many anti-social acts. The British press barons have campaigned relentlessly to leave the EU. One of their main motives for doing so was to prevent any future European wide body from organising a more effective system of tax collection. It was said by the IMF that Britain is the largest tax haven in the world and these group of anti social men will do anything to prevent any action that would lead to them paying more tax. The fact that leaving the EU would do tremendous damage to the British economy is of no consequence to them. Even the threat to their wealth from a fall in property prices consequent of Brexit is a price worth paying to protect their tax exemptions. Just like Scrooge these men care only for their money and little for their fellow men. Aristotle said a nation governed by the rich was a plutocracy, however that term does not do justice to spirit of meanness that prevails in contemporary Britain, a better word to describe the country is a Scroogocracy.

There is a solution to this problem. When I first studied economics in the 1960s the top rate of income tax was 79%. Now it a wealth tax of a similar rate was applied to these cash piles they would be reduced to an amount that was insufficient to destabilise the world economy. It would also reduce the attractiveness of acquiring these cash piles. One curious fact that would result is that the governments of the world would face restrictions on how they used this cash. They could spend some to alleviate their budget problems, but if they spent all this windfall at once, hyper inflation would result and there would be a major destabilisation of the world economy. Most of that money would have to sit untouched in the treasuries of the world’s central banks.

One objection to my proposal is that all this money is hidden in tax havens beyond the reach of the world’s governments. However these tax havens are little more than the foreign branches of the major banks. The money might appear on the balance sheet of a Bahama’s bank, but in reality it is banked in London. If the banks and the owners of these cash piles wanted to keep up the pretence that this money was really in the Bahamas, capital controls could be imposed preventing this money being transferred to London or New York. There is little that the vast sums that are banked in these tax havens could be spent on locally. They would just harmlessly rot way. What I am recommending is the destruction of these cash piles, as they do little for the world economy and they create a risk adverse culture among the super rich, which means economic growth rates are much lower than would be otherwise. I would recommend a policy in which either the holders of these vast cash piles adopted a voluntary ‘potlatch’ in which they destroyed their useless cash piles or they surrendered them to government where they could stored as part of the national reserves, where they could do little harm.

A REPLY FROM AN ECONOMIST TO THE ANTI-INTELLECTUALISM OF DONALD TRUMP AND MICHAEL GOVE

November 9, 2016economic history, Economics, Philosophy, Politics, United KingdomAdam Smith, Anne Pettifor, Anti-intellectualism, Aristotle, Ayn Rand, Brexit, Donald Trump, Financial House of Cards, First World Debt Crisis, Friedrich Hayek, Gordon Brown, Keynes, Long term economic decline, Michael Gove, Neo-Liberalism, Teresa May, The speculative economyangrytunbridgewells

(There were many errors in my first draft, it was written in anger and published without a thorough checking for error.)

Contention

Economists don’t always have the right answers, they can be wrong at times, but their answers to problems are better than those of ill-informed politicians and journalists. There are plenty of never-never land politicians selling an unreal picture of the world to the electorate. There are many fewer such economists because there work would have undergone informed scrutiny by their peers and much that is dubious would have been discarded. The overwhelming majority of economists believe that Brexit will inflict significant economic damage on the economy, while a significant number of politicians and most journalist believe the reverse (who are lacking any evidence apart from their misguided optimism in the rightness of their beliefs).

Confession of interest

I am one of those experts that Michael Gove spoke abouto he said people are fed up with and who they should be ignored by the people when making decisions about the future, such as how to vote in the EU referendum. I am one of those people who following Aristotle’s advice have dedicated the best part of their life to study. What Michael Gove is trashing is the value of learning, I cannot accept that my years of study have been wasted. How can such small minded person go against centuries of a tradition that values learning? He is a graduate of an elite university but he seems to dismiss the value of what he learnt there. I can say to Michael Gove that when teaching in a tough secondary school I never demeaned myself to pretending that I lacked learning. What young people can identify is the phoney, the teacher that pretends to be like them. Michael Gove’s attempt to pretend to be one of the people is as phoney as my colleagues who adopted a fake working class accents and mimicked the words and manners the young in an attempt to win their favour. Behaviour as phoney as that of the Dad who to tries to impress by claiming a knowledge of and love for garage music and rap.

The dangers of contempt for learning

If Michael Gove’s lead is followed as experts such as myself as regarded as just another self interested individual with an agenda to promote, a lot is lost. Economists such as myself are in possession of or can access a body of knowledge about the economy not available to others. Acquiring and understanding the store of economic knowledge takes years and to be honest a life time of study, because the subject is always changing and developing. What Michael Gove is saying is that my learning is of no consequence. I cannot accept that the anti intellectualism of todays politicians will stand future scrutiny. Without wishing to be too unkind Michael is an insignificant figure compared to Adam Smith, Ricardo, Keynes, Hayek, Polanyi and Robinson. With time his anti intellectual populism will be a but a minor blip in the progress of humankind. In studying economics I developed a critical faculty which makes it possible to make reasoned judgements about government policy, rather than relying up prejudice and common sense on which to found my judgements. Paraphrasing a much greater thinker than myself who used this phrase in the context of religious belief, those who don’t believe in God are likely to believe in anything; similarly those who don’t believe the truths of economics are likely to believe any nonsense about the economy.

One such nonsense is the current belief that there is a real knowledge of the world, which is only possessed by men of business, who deal every day with the complexities of the real world, as opposed to the unreal world of academia. One such person held to possess this knowledge is Donald Trump, the next President of the United States. I would question the breadth of his knowledge, he is a real estate developer. Yet one who has failed in several business ventures and has only been saved from bankruptcy by the protection afforded by US law to such people. If you wished to buy and develop a property you would go to a real estate agent or property developer, but one with a better track record than Donald Trump. Apart from his deal making in which he has a very mixed record I cannot see how Donald Trump has a better understanding of the world than me. As a teacher I would be criticised for living and working in an unreal world, which is a silly phrase as the school is as real as the boardroom. One other silly untruth is that teachers lack the toughness to cope with the real world, all I can say is that these people who say that have little understanding of the difficulties of teaching a group of adolescents. One of the most telling examples of the falsity of this stance is a video on Youtube, where Michael Gove is addressing a group of teenagers. They show complete disdain for his lecture and indulge in all the behaviours of disaffection typical of teenagers. What I am saying is that my experience as teacher of economics is as valid as Donald Trumps as a property developer, although if I’m honest I think mine is the superior knowledge of the world.

When politicians deny the truths of learning they became prey to the teaching of messianic and charismatic charlatans such as the novelist – Ayn Rand author of ‘Atlas Shrugged,’ whose followers include Sajid Javid and all politicians of the Neo-Liberal persuasion. Her book paean to billionaires who she believes are the heroic figures that make our civilisation great. The central figure of the book John Galt a man of independent means who is puzzled as to why billionaires keep disappearing from society. He is taken to a mysterious canyon remote from Washington, where the billionaires are hiding, seeking sanctuary from a rapacious Washington. These billionaires are fed up with being oppressed by a government that so taxes and regulates them, that they are denied their role as the creative driving force of society, a rapacious government has reduced them to impotence. It does not realise that without their enterprise, society would fall into stasis and decline. When these billionaires go on strike society collapses and thousands of the useless poor die as a poor and weak government is forced to withdraw the income on which they depend for their survival. Eventually a discredited government is forced to welcome back the billionaires on their terms and these billionaires put society back on its feet and society develops and prospers. Many politicians of the new right are followers of Ayn Rand and her influence can be seen on government welfare policy. The Ayn Rands in government believe in a policy of brutalising the poor to the extent that they are forced to work at any price for anybody. It’s a cure for the wasteful culture of dependence, to such as ‘Sajid Javid’ homeless and misery is a just punishment for the useless poor. When governments ignore the truth tellers they are prey to the charlatans and other paddlers of fantasies and falsehoods.

Economists do possess a knowledge of the economy which is invaluable for the effective running of government. One such economist is Anne Pettifor who is constantly ignored by governments because she tells them truths they don’t want to hear. Economists such as her can be compared to the Old Testament prophets who were constantly ignored by the rulers of Israel.

Anne Pettifor -is the author of ‘The First World Debt Crisis’. While most politicians are aware that economic growth is driven by consumer spending and debt, such as the popular car leasing system, they have little awareness of the dangers of this policy. The growth of consumer debt is so large that it has created a credit or debt mountain of unsustainable proportions – UK bank debt in 2009 – 586% of GDP it falling to around 400% of GDP in 2009 (Dominic Raab), but has since risen. Even Germany has similar problems the collective debts of its banks are over 300% of GDP (much of the money lent to Greece was recycled back to the German banks who had made too many ill-judged loans to the Greeks, so as to prevent them experiencing a liquidity crisis).The UK vies continually with Japan for the title of most indebted country of the industrial developed world.

David Cameron was right that Britain was maxed out on its credit card, he was just wrong about which credit card.

Rather than tackle the problem the government spends billions on quantitative easing to provide the cash to keep the banks afloat. At the height of the financial crisis in 2008/9 Gordon Brown was willing to spend a sum equivalent to the almost the total national income to keep the banks afloat. The official policy is to kick the problem can down the road leaving it to a future government to tackle the problem.

Why do governments fail to tackle this problem? They fear the electorate reaction, if they brought the credit boom to an end. Loans of various kinds account for a significant proportion of people’s spending and to reduce lending would in effect to reduce people’s incomes in that they would be unable to spend as much as previously on various consumer goods. What they are most scared of is cutting spending in the housing market which would lead to a fall in house prices. The belief amongst politicians is that falling house prices equal lost election.

The best informed of politicians know that the risk is that the whole financial house of cards will come tumbling down in a crash as bad as that of 1929, yet they prefer the risk of a future catastrophic crash to taking action now.

The right and wrong of economics

Although I can as an economist make more accurate predictions about the future than any politician there are limitations to the usefulness of my predictions. I cannot say exactly when a predicted event will occur or how great will be its impact on the economy. The economy is a dynamic social institution that is constantly changing and changes can maximise or minimise the impact of the predicted event.

Last year The Observer published one of my letters in I which predicted an economic downturn in 2017. I made my prediction on the basis that all free and largely unregulated markets are liable to exuberant booms that always end in a crash. Past history shows that such crashes occur every nine years, that is 1990, 1999 and 2008/9.

This contention is supported by the economist Hayek. What he stated was that there is a period when the benefits of innovation are exhausted and economic growth falls and the economy falls into recession. This has happened to the UK as the benefits from the mass production of consumer goods begin to tail off. Since the mid 1980s there has been too many car manufacturers in Europe, making cars that were needed. The consequence was retrenchment in the car industry and in Britain the disappearance of the native car industry. When industry fails to deliver alternative sources of income need to be found. In the UK, USA and Western Europe that has been the development of the speculative industry, increases in income no longer come from employment but from the increase in the value of assets, such as houses. A speculative economy is particular prone to booms and busts, as there become periods when it is generally believed that prices have peaked and they can only go down. These downs are quite spectacular and cause widespread distress.

However although I can predict with confidence that a downturn will occur, there are a number of proviso’s that I must make about prediction:

There is no iron law that states a downturn will occur every nine years, but evidence from the past shows that this is likely, it is events that may change the date of the crash.

Brexit – if Teresa May calls an early election the uncertainty generated by that can bring the date of the crash forward to whatever she makes that announcement.

Events may occur that halt the downward trend – if the government panics at the thought of there being held responsible for the negative effects of Brexit and states that it will do whatever deal is is necessary to ensure that Britain remains in the single market, this could result in a boost to business confidence with businesses now rushing to make the investments that they had postponed due to the uncertainties of Brexit. This rush to investment will lead to a temporary boost to the economy that will delay the economic downturn. However it will only postpone the crash.

Conclusion – Economists are not infallible but they are closer to infallibility that most politicians. What economists possess that politicians do not is an understanding of the workings of the economy.

The Immorality of Current Economic Practice

September 22, 2016Economics, Philosophy, Politics#economics, #utilitarianism, Ayn Rand, BHS, jeremy bentham, Laws of supply and demand, Sir Phillip Green, supply side economics, The Great Depression, Welfare economicsangrytunbridgewells

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

Economic utilitarianism can now rewritten as follows,

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

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

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

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

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

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

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

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

Is a Christian economics either desirable or possible?

June 13, 2016christianity, Economics, PhilosophyAristotle, Christianity, Jesus Christ, John Milbank, Karl Barth, Liberal Theology, pentecostalism, Radical Orthodoxy, Says Law, St Francis, St.Dominicangrytunbridgewells

A recent survey demonstrated that the majority of the UK population are now atheists. However there is another change which goes against the trend to a more secular society. Liberal theologians such as myself are seen increasingly as being in error and the new movement in theology is a return to what can only be termed pre-modern Christianity. A Christianity in which the Bible is seen as the last word, the ultimate expression of God’s will. A rejection of theologists such as Bultman who described the New Testament as a mythical expression of the essential Christian truths. This new movement in the protestant church is associated with the theologian Karl Barth. Within the church system this return to Christian roots is mirrored in the growth of the pentecostal church movement, which is led by its members and dispenses with guidance of intellectual theologians. In fact I was taken aback when one Christian philosopher described Liberal theologians such as myself as being misled by demons.

Now this movement to return to the Christian roots is increasingly taking over the churches, if it becomes more successful it could result in a radical rethink of the approach to the all the sciences that deal with humanity. In England the Christian philosophers and theologians who advocate this approach believe that Christian philosophy should be at the centre of all thinking or as one philosopher said, ‘theology is about everything and philosophy is about one thing’. Philosophers such as John Milbank believe that God’s creation of universe was not just a physical creation but a creation of everything. One part of creation is the spiritual and all the truths about human existence and the nature of the universe are part of this spiritual creation. Truth is not found through rational enquiry but it recovered from the spiritual world created by God. The people best placed to discover these truths are the theologians, as those who seek a knowledge of God are best able to uncover God’s created truths. This philosophy is as John Milbank writes is a reversion to pre-modern Christianity, that is Christianity as it was before the renaissance.

John Milbank and his fellow radical orthodox Christians don’t want the abandonment of all the post renaissance disciplines such as economics, sociology and Cartesian philosophy, but rather a redrafting of them. The practices of these subjects should be informed by an understanding of God’s truths. This can be achieved in two ways, either economists, philosophers undergo an initial training in the truths of Christianity as discovered the theologians or Christian truths become part of the warp and woof of the subject. Universities in the 19th century were overwhelmingly Christian institutions and the economists of the period can be said to have been practising the first method of inclusion. The second would involve a radical redrafting of subjects such as economics if the practice of economics was to include Christian concepts and understandings.

Although the universities of Oxford and Cambridge were in the 19th century Anglican Christian institutions the practice of Christianity was limited to a knowledge and understanding of the ‘Thirty Nine Articles’ which were considered the essentials of the Anglican faith. If the student could recite them it was considered sufficient to warrant membership of the two universities. However if the radical orthodox Christians had control of the curriculum all students of economics would have go undergo a course of study in Christian doctrine. Economics would become a subsidiary of the department of theology. Once considered to be sufficiently imbued with Christian doctrine students would be allowed to study economics. Possibly if the radical orthodox christians had there way, the Philosophy, Politics and Economic degree (PPE) would become Theology, Politics and Economics (TPE).

However there is the warning from Aristotle when he writes at the beginning of ‘The Ethics’ that although he knows the meaning of the word good, that does not prevent him from doing bad actions. What he recommends is the instillation of virtue through habit, so good actions become habitual. In 2000 years of history Christianity has a very mixed record. There is for every compassionate and loving St. Francis, a St. Dominic, who use power and violence (in this example through the threat of and use of burning at the stake against heretics) to prevent error. George Bush’s war in Iraq was in part a Christian Crusade against the barbaric muslim regime of Saddam Hussein. In all probably compelling all economists to undergo a training in theology would at best have very mixed result, there would be a few St. Francis’s but many St.Dominic’s. Misunderstood and misguided Christian zealotry could cause as much distress as the misguided and malign doctrine of Neo-Liberalism.

A more fruitful approach would be to incorporate the key concepts of Christianity into economic practice. An economics which incorporated Christian ethics would make it if not impossible, make it less likely that an economics such as Neo-Liberalism with its disregard for human life and dignity would ever become the dominant economic philosophy. In the gospels Christ says that the supreme commandment is to ‘love the lord God’; a moral injunction which the theologian Caputo states is best demonstrated by loving your fellow man. What he advocates is agapé the disinterested love of our fellow men, or in the words of the Old Testament, ‘love your neighbour as yourself’. If agape was accepted as the ‘summum bonum’ of economics, practices such as Says Law would be removed from the subject. What Says states is that in the time of a recession any legislation that seeks to prevent incomes being cut is self defeating as it only creates more unemployment as employers lay off expensive workers. The same goes for the actions of trade unions as who try to protect workers wages in a recession. What for Says is the correct remedy is to let wages fall until they become so low that the struggling businesses can now afford to take on the newly cheapened workers. These newly employed workers will spend their incomes and generate increased demand which will kickstart the economy into a recovery. Although no politician or economist would ever say that they are a follower of Says, they do put his ideas into practice. The response of all governments to the crisis of 2008/9 was to cut incomes. In Britain this was achieved by freezing the pay of all public sector workers and by transferring many workers from permanent employment to lower paid self employment. The starkest example of this cruel policy is the austerity policy forced on Greece which saw pay reduced to levels that reduced many workers to poverty.

What so many politicians forget is that the practice of economics should aim at maximising the welfare of the people. (There is a section in economics textbook entitled ‘welfare economics’ , a section conveniently ignored by most practising economists.) Today so many economic policies do the reverse, they aim to minimise the welfare of the many so as to maximise the welfare of the privileged few. Policies such as increasing government expenditure in the times of recession (to offset the fall in demand and incomes caused by the recession) would be prioritised over those which recommend the cutting of the coat to fit the cloth. The problem of austerity policies is that the suffering they cause the great majority is rarely justified. Only in exceptional circumstances should the harsh austerity policies of today be applied, in such circumstances occurred at the end of World War II, when the government needed to direct the nations income into rebuilding a war damaged economy.

What economists most need is an ethical code built into their subject. Economists as with all people will only act in the best interests of mankind, if constrained to by the rules. Without such constraints they will not be inhibited from selfish policy recommendations that benefit them and their sponsors. Far too many economists are employed by consultancies (funded by wealthy individuals) or work for financial organisations that want to see economic policies drafted to promote their own selfish interests. When for example the government increased income tax for the wealthiest to 50%, there was a howl of protest from the economists who work for these self interested organisations. They all claimed that the increase in tax would be a disincentive to enterprise. Only the writing of a strict set of ethical rules into the subject would prevent its abuse at the hands of self interested individuals. At present the very lax approach of economists to ethics leaves it open to abuse, disinterested economic analysis all to often means disregarding the normal ethical rules that govern human conduct.

What skills does a good economist need?

May 23, 2016economic history, Economics, Neo-Liberal economics, Philosophy, Politics, Uncategorized#MiltonFriedman, Ancient Rome, General Pinochet, George Osborne, J.S.Mill, Keynes, Mikhail Bulgakov, Mrs Thatcher, Neo-Liberalism, Nigel Lawson, Slavery, The Brothers Karamazov, The Great Depression, The White Guard, Winston Churchillangrytunbridgewells

Humility and the willingness to change their minds

Winston Churchill when speaking of Maynard Keynes (the greatest British economist of the 20th century) said that when four economists are gathered together you will get five opinions and two of them will be from Keynes. What this illustrates is that what the good economist recognises is that economics is dogged by uncertainty. The economy and its host society is so complex that any unexpected change can result in the policy measures undertaken producing contrary results. When Nigel Lawson in his budgets in the 1980s cut taxes he overstimulated a rapidly growing economy. All that extra money from the tax cuts had no outlet except in for investment in the property market, causing a housing boom that ended in a crash in 1990. Policy recommendations should be made in the spirit of cautious optimism. With the recognition that policies might need to be changed if circumstances change, as there is no certainty in the practice of economics.

When Mrs Thatcher said, ‘that the lady is not for turning’, she made a terrible mistake. Her policy of using high interest rates to squeeze inflation out of the economy through depressing demand had the unfortunate consequence of driving the exchange rate. This high exchange rate made large sections of British manufacturing industry uncompetitive. The consequence of this was that British manufacturing industry lost 20% of its capacity, which had the long term consequence of Britain developing the largest trade deficit in the developed world. A problem that still persists today.

A capacity for scepticism

There is no ‘economic cure all’ that can solve all problems, although many economists and politicians foolishly believe that there is such a policy. The latest ‘economic cure all’ is Neo-Liberal economics. In the 1970s the post war economic settlement seemed to be falling apart. In 1976 inflation hit the unheard of high of 27% in Britain. A group of economists the Chicago School claimed to have the answer, they diagnosed the problem as being one of excessive government borrowing to finance its spending programmes. This borrowing increased demand to a level beyond that which the economy could meet and as supply could not be increased prices rose, as consumers entered into bidding war to get these relatively scarce goods and the consequence was rising inflation. This problem was made worse they said by all the restrictions on the market which prevented industry responding to change by increasing supply to meet increased demand. These restrictions were such as the managed exchange rates, trade unions, employment protection laws and health and safety legislation. If government spending was cut and the restrictions to the market were removed, inflation would fall and the economy would grow ending what was a period of ‘stagflation’. What these economists ignored was the massive increase for the world’s oil etc caused by the American participation in the Vietnam war. There was such a massive expenditure of material in this war that it seriously distorted the world economy. More bombs were dropped in this short war than during the whole of World War II. When Nixon negotiated an end to the Vietnam War that decision did more than any economic policy measure to end the malfunctioning of the world economy.

Whether its called the monetarist or the Neo-Liberal economic school of economics, it has failed.There have been three world wide recessions since 1990 each one worse than the previous one. Growth remains minimal, the growth in incomes has stalled yet economists (the majority in the universities and those employed by government and international institutions) and politicians refuse to change their policies. They have invested too much prestige in the Neo-Liberal revolution to abandon it now. A little scepticism about the policies of the present would not come amiss. There are plenty of alternative policies that can be used, it’s only stubbornness and ignorance which prevents them being used.

When politicians and economists state ‘that things have changed’ and that we are in a new economic paradigm, it a sign things are going badly. It’s a weak defence offered for a policy that is failing and for which no better defence can be thought of. It is the wisdom of parrots as politicians repeat this mantra endlessly without understanding that these phrases are completely meaningless.

A good economist will be well versed in literature, in fact English literature should be an essential part of the course of study undertaken by a trainee economist.

Economics has the potential to be the dullest of subjects. I remember that in the second year of my university course all the second year students had to attend a series of lectures given by one of the world’s greatest monetary economists. They were so boring that students did all kinds of things to distract them from the tedium of the lecture. One particular incident sticks in my mind and that was when a group of bored students launched a giant paper plane from the balcony which soared over the lecture hall.

Literature should be an essential part of the course, because a great novel can better than anything else explain the impact of economic and social change on a people. One of my favourite novels is “The White Guard” by Mikhail Bulgakov. This novel details the impact on one Ukrainian family of the Russian civil war. The play on which the novel was based was Stalin’s favourite play, even although he was on the opposite side of the conflict. The reading of such novels will hopefully lead to the development of some sensitivity towards the human condition in the trainee economist and hopefully led them when qualified and employed by government to hesitate before recommending policies that cause unnecessary economic and social hardship. One cannot impose a test on economists for the possession of those essential qualities that go to make a wel rounded human being, but hopefully immersion in a course of literature will be a good substitute.

Milton Friedman the Chicago economist provides an example of the extreme insensitivity of which economists are capable. General Pinochet launched a coup to overthrow the socialist government of President Allende. The aftermath of the coup involved the torture and killing of many of those people opposed to the coup. Milton Friedman lauded the actions of Pinochet as necessary for the greater good of society, as the imprisonment and killing of these socialists made possible the introduction to Chile of the free market economy. Only a person of extreme insensitivty would applaud the killing of people as the best means to achieve some ultimate end. I tend to agree with Ivan who at the end of the novel “The Brothers Karamazov” asks God why does he permit the death of a child. (when being shipped of the Labour camps of Siberia he witnesses the pain and a suffering of a woman holding her dead baby). Any economist should ask does my policy proposal cause unnecessary suffering and is there a better alternative that will minimise human suffering. Killing may be necessary in fighting a war but never in imposing economic change on a society.

It may also hopefully prevent economics students suffering from too many dull and boring lectures, as the lecturer will have a better grasp of the English language and human nature than would otherwise be the case.

A good economist will be schooled in philosophy

Any economist must recognise that any policy proposal will be flawed or wrong in some measure. J.S.Mill in the 19th century stated that there could be no science of the humanities because human society was so complex. There were so many possible causes of a particular social or economic event and so many possible unintended effects of a policy measure that the one essential requirement of a science could not be fulfilled and it was impossible to have a science it which it was impossible to demonstrate cause and effect. Mills’ words seem to have been forgotten in the twenty-first century. It is believed that computers that can overcome this problem, as they can make calculations involving thousands if not millions of variables. However what politicians and economists at the world’s Treasuries fail to recognise is that the output of the computer findings are only valid if the calculations on which the predictions are based are valid. What politicians fail to recognise and economist ignore, is that the model of the economy used in the computer does not work, there is something missing. Treasury economists have to insert an ‘x’ factor into the calculations, a reality factor to enable the computer to deliver a realistic prediction. This x factor is little more than an informed guess. This is why the Treasury computer can only make a correct prediction about economic growth after the event when the necessary corrections can be made to the computer model.

Any student of philosophy learns the limits of human knowledge in the first year of their course. It was a shock to this particular student that philosophy provided few of the answers to the questions that he wanted answering. One such question is what is good, Plato tried to answer this question in this question in his book ‘The Republic’ written in 380 BC and it is a question which philosophers ever since have struggled to answer. Now analytic philosophers tend to think it is an unanswerable question and not one contemporary philosophers should waste time on answering. Instead the quests of past philosophers to understand the nature of the good are to be seen to provide a good schooling in the techniques of philosophy but little else. Students such as myself had instead to look to theology to provide some answers. The point that I am trying to make is that philosophers understand the frailty of human nature and its limitations. A true philosopher can only laugh at the claims of Neo-Liberal economists who claim to understand the workings of the economy, as the evidence from philosophy demonstrates the continued failure of man to have a complete and full knowledge of human nature let alone human society. The problem with so many economists today is that although they have studied PPE, they compartmentalise the philosophy they learn and think that its findings do not apply to economics.

Diogenes Laertes in his history of the philosophers recalls how visitors to Democritus frequently found him laughing in his garden. A thing he frequently did when considering the follies of mankind. If the effects of the wrong economic policies were not so disastrous, I would join Democritus in his laughter.

A good economist is aware of the past and does not think today’s events are unique and without parallel in the past and is prepared to recognise the similarities between today’s events and those of the past.

One extreme example springs to mind, both the governments of the Roman Empire and contemporary Britain regard the provision of cheap food for the people as a priority. Rome was able to supply cheap bread to its people through conquering the countries that were the bread baskets of the Mediterranean and then by supplying low cost labour for the farms in the form of slaves. Contemporary Britain by contrast encourages the production of cheap food through the provision of subsidies to farmers, one estimate is that now 50% of farmers incomes now comes from EU subsidies. Most of this money goes to towards subsidising what is termed industrial farming, which produces large quantities of food at low cost, but in an environmentally damaging manner. Unfortunately there is evidence that British food suppliers are adopting some of the practices of the Romans. Some of migrant workers on Uk farms adopted in work in slave like conditions.

What the government could learn from Rome is that using low cost labour methods of production discourages investment and innovation in industry. If there are endless supplies of cheap labour employers see no compellilng reason to invest in expensive machinery, if there are endless supplies of cheap labour. Studies of slave labour have demonstrated how slave labour acted as a deterrent to industrial innovation. A government and business class that believes the only solution to problems in the economy is to make labour as cheap as possible have a lot to learn from the slave economies of the past.

While the one lessons that can be learnt from Rome’s history are negative, much that is positive can be learnt from the actions of the government in the 1930s. This government tried to stimulate an economic recovery after the devastating crash that was the Great Depression. The government then recognised the importance of getting new investment into manufacturing industry so as to kickstart a recovery. Recognising that the banks were unwilling to do this, it set up an industrial investment bank which would lend money to manufacturing industry. Today one of the issues that is delaying the recovery is the comparative lack of investment in industry and manufacturing industry in particular. A recent study showed that only 15% of bank loans went to investment in industry most when into speculative trading in property etc. There is nothing to be lost and much to be gained by setting up a new industrial investment bank and it could be financed through a levy on commercial banks, as happened in the 1930s.

This list of criteria for judging what is a good economist is not intended to be exhaustive but suggestive.

Why are our leaders so stupid?

April 26, 2016christianity, economic history, Economics, irony, Philosophy, politics, religion, Uncategorized#austerity, #classical greece, #economics, #Isis, #St.Augustine, #UKIP, Avveroes, Bonhoeffer, Boris Johnson, Brexit, Columbus, Derren Brown, Donald Trump, expansionary fiscal contraction, George Osborne, Muslim Fundamentalism, Protestant Evangelical Preachers, Rumi, St Francis, Tea Party, Walter Benjaminangrytunbridgewells

What puzzles me is why are people such as Donald Trump and Boris Johnson so popular. The first advocates the policies of a clown and the second pretends to be a clown to achieve political success.

When I was at school in the 1950s I remember being told about Columbus’s voyage to America. The Headmistress told us that it was a particularly daring adventure, as people at the time believed the world was flat and thought that Columbus was in danger of falling off the edge of the world. The truth was very different as I discovered later. Columbus was an experienced sailor who knew about the fishing grounds off North America that European sailors visited each year that the Atlantic Ocean was bounded by a large landmass to the West. Also it was known at this time that the earth was round. The classical Greeks had realised that the earth was round because they knew there was a horizon, beyond which the eye could not see, therefore the earth surface must be curved.If was the geographer Eratosthenes (276BC to 195/4 BC) who calculated with an incredible degree of accuracy the earth’s circumference. It is highly unlikely that Columbus was unaware of that the earth was round. My teacher was typical of those of the time that believed that people of the past had a childlike understanding of the world, whereas in fact the opposite was true.

We assume today that our knowledge and understanding is superior to that of the past. Yet our politicians constantly disapprove this notion. In the USA Donald Trump is likely to become the Republican Party’s candidate for the Presidency and Boris Johnson possible future Conservative Party leader What both these leading politicians have in common is an anti-intellectualism, both of them in their campaigns seek to appeal to most primeval of voters instincts. Trump blames the Mexicans for crime and wants to erect a wall to keep them out, and Johnson believes that Obama’s part Kenyan ancestry makes him anti British, because of the injustices the British inflicted on Kenyans during the days of Empire. To say that both these politicians are intelligent men who are just using anti immigrant and anti foreigner feeling to win support and that they don’t really believe what they are saying does these two men a disservice, they believe what they are saying. They are both populists who believe in simple solutions to difficult and complex problems, both of them personify the anti-intellectualism which is dominant in the our society. The political dialogue in both countries is dominated by the anti-intellectualism of those such as the Tea Party whose policies are moving closer to the mainstream in both countries. UKIP a party that gets much media coverage seems to be campaigning for things such as ending the smoking ban in pubs. Sam Goldwyn once said a movie never lost money for underestimating the intelligence of the average cinema goer, now in politics the belief is that no politician ever fails for underestimating the intelligence of the average voter. There is a change in society that has made stupid politics the dominant strand. Possibility it is linked to Walter Benjamin’s insight (when writing about the cinema) that contemporary media leaves little time or scope for reflection, as the media image is all involving leaving no opportunity for distancing necessary for reflecting on the projected image.

If I was to compare contemporary England with medieval England, I would say that the former is technically sophisticated but intellectually unsophisticated. This is not to say that there are not a community of intellectuals whose thinking is far superior to that of those of the medieval era, but these people are excluded from the public debate, which is dominated by the advocates of stupid politics. Obviously Trump and Johnson are not stupid men, they just find a politics of idiocy the most effective means of self promotion. What is most disturbing is that these men intend to pursue the policies they advocate, without regard to the damage caused to society through the introduction of their simplistic policies.

As an economist I can see the dangers of practising stupid politics. Britain has endured years of austerity because the government believes in a nonsense called ‘expansionary fiscal contraction’, that is cutting government expenditure will increase growth. Despite this policy having no economic credibility the opposition’s chief economics spokesman, a man who had a top class degree in economics from Oxbridge immediately signed up to the policy. Knowing it was fallacious economics made no difference, he did not want to appear out of step in with all the others who were practising stupid politics. Bonhoeffer said that the success of the Nazi’s was due to fact that good people did not speak up, similarly stupid politics is prevailing because the intelligent do not speak up. In England it is the noise and abuse made by the practitioners of stupid politics that scares of the intelligent when we most need them.

Intelligent women for example are put of entering the English Parliament because of the sexist behaviour in the bear pit that is the House of Commons. When female opposition MPs speak, male MPs on the government benches often make crude sexual gestures with their hands and shout sexist abuse. Also any show of intelligence is likely to get a politician pilloried in the tabloid press as a geek, as happened to the last leader of the opposition. Anti-intellectualism is rife in the English political culture and it’s preventing intelligent government.

What really provoked me into writing this article was a tweet by the illusionist Derren Brown, in which he referenced a You Tube in which two evangelical preachers explain why it is necessary for them to own private executive jets. One says it is so he can get some quiet time in which to talk to God, as he would be unable to do that on a flight with other passengers who would disturb him. Christ when he wanted a quiet place for meditation found a quiet spot in a garden or in the countryside, surely these two men could have done the same. These two men are Christian literalists they believe that the bible is the word of God and that all should to obey the word of God as explained in the bible. These two Christian literalists are following a practice condemned as being wrong as far back s the early Middle Ages. St. Augustine in his book on Christian teaching explained that the bible should not be taken literally, the word of the bible required explanation by the Christian teacher. Following St. Augustine’s advice all medieval bibles contained commentaries on the page side by side with the biblical text. These commentaries were there for the preacher to help him explain the text to the people. What these evangelical preachers are doing is practising a type of Christianity that even the least educated of medieval priests would have recognised as wrong. If these men had been medieval clerics they would have been relegated to some obscure rural parish where they could have done little harm. Yet these men are seen as representative of true Christian belief, religion seems to mirror the practice of stupid politics.

This simplistic religious view of the world that divides the world up into good and bad guys is very influential. George Bush’s crusade against the evil of Saddam Hussein’s Iraq is representative of good versus bad guy politics. Isis and other Islamic fundamentalist groups embody the same good bad guy philosophy. A philosophy that justifies the cruel treatment of all unbelievers whether they be Christian, Yazidi or Shia Muslim, as they are already condemned by God for rejecting the true religion and as such are wordless people. One of the main targets for Islamic fundamentalists are the Sufi Muslims who practice a more sophisticated and humane religion. The simplistic belief of the fundamentalists contrasts unfavourably with the sophisticated Islam of the medieval period as demonstrated in the poetry of the Rumi (1207-73) or the philosophy of Averroes (1126-1198). Christian thinkers owed much to these men, Francis of Assisi’s thinking was greatly influenced by the poetry of Rumi. Depressingly anti-intellectualism is not only a feature of Western politics but also in the politics of much of the Muslim world.

There are many sophisticated and intelligent clerics today but they do not get a hearing in today, because their speech is too subtle and nuanced for a world that wants simple truths. Rowan Williams the very intellectual former Archbishop of Canterbury was pilloried in the press as a bearded weirdy. They were not interested in the message from an educated Christian, for them Christianity is that of the simple minded fundamentalists.

There is no doubt that the public appetite is for stupid thinking, there is a wanting for people offering a few simple homespun truths that they claim will solve the world’s ills. Does not the constant diet of super hero films coming out of Hollywood demonstrate that something is very wrong in our culture? Hollywood appears to have opted out of making adult films, as it has correctly judged that the audience for its films want simple child like stories. The only hope is that the world particularly the Western world will tire of simple childlike stories and politics. When politicians such as Donald Trump and Boris Johnson get chance to put into practice their childlike policy solutions and those policies prove to be a resounding failure, the pendulum will surely swing in favour of a more grown up politics.

Ugly economics an explanation of why we are in a mess

March 29, 2016economic history, Economics, Greek Drama, Philosophy, Uncategorized#classical greece, #Greece, #Plato, Alcibiades, Athenian Democracy, free market economics, George Osborne, Gordon Gecko, Neo-Liberalism, Neo-Platonism, poverty, Theory of the Forms, Ugly economicsangrytunbridgewells

Plato developed the theory of forms which stated that all the virtues such as good and beauty were but mere copies of their ideal forms that existed beyond the sphere of life inhabited by humanity. In Plato’s creation myth the demigod who creates mankind makes mankind from the only material available, clay. A being made up of inferior materials unlike the Gods could never see the virtues in their true forms and would never able to appreciate true Good or Beauty. These inferior beings could only apprehend what were in effect rough and ready copies of the true virtues. Men could only know an approximation of the virtues. Although Plato was writing two thousand years ago his theory of the forms describes accurately the state of current economic knowledge, it is but a very imperfect copy of what might constitute true economics.

When I read economics what is striking is the lack of beauty in the subject, unlike for example physics there is no beauty in its formulations. Physics reveals the beauty of the universe, whereas all economics does is to reveal the ugliness of human society. The words of Gordon Gecko that ‘greed is good’ can be taken as the principle from which all current economic analysis derives. Our current Chancellor of the Exchequer believes that rewarding greed through tax cuts for the wealthy is good, whereas helping the poor through welfare payments is bad, as it merely rewards a group of losers who are deprived of the incentive (compulsion) to work to provide for themselves and their families.

As a NeoPlatonist I recognise that although all the human sciences cannot be one or another form of moral philosophy; I do believe that a good social science should be informed by at least some of the virtues. Whenever I read an economic text it is very rare that I am grabbed by the beauty of the writing. All too often it is a struggle to get through some poorly written text. A text that is peppered with difficult to understand economic terms, words that disguise the emptiness of the written text. I believe that a text that is ugly in its construction can only create something that is ugly.

Good writing is that which contains understanding of beauty and as such moves the reader bad or ugly writing lacks any of the other virtues and as such has lost touch with humanity. The government by constantly referencing ugly economics to justify all forms of unpleasant policy measures. One of the hidden scandals is the number of disabled and ill people who have succumbed to sudden death, as a consequence of sudden and unexpected benefit cuts. There are those ill and disabled who have resorted to suicide in consequence of the sudden loss of the income on which they depend. Normally in such situations policy measures that have caused death would produce some contrition within political classes. The harsh welfare polices of the past few years have produced no such reaction. Instead ugly economics gives the justification to such measures, as what counts is the effectiveness of the whip that compels people to work. Government policy seems to a perverted inversion of Plato’s theory of forms. The supreme good is the balanced budget and subordinate policies such as welfare cuts are intended to make possible the attainment of this supreme goal. If this is the supreme good of human society it must be a very poor or mediocre society that sees this as its supreme good, a society which has rejected any sense of the grand vision that society’s of the past embodied. Athen’s with the construction of the Parthenon is one example of the grandeur of the human vision, contemporary Britain in which the only large constructions are shopping centres or malls sense to represent the very rejection of the grandeur that is humanity.

If Britain is to be judged by it’s leaders it is a nasty society bereft of any of the virtues that make a great society. A society which uses hunger as a scourge to make the poor work lacks any of the virtues that make a great society. All it’s leading politicians are like Socrate’s Alcibiades, a physically beautiful young man in appearance but in an inversion the Silenus dolls were ugly only on the inside he was ugly on the inside. Physical beauty concealed an ugly soul. It is not a true demonstration of the ugly society that politicians take great pains over their appearance, maintaining their youthful image through jogging or other forms of exercise and cosmetic surgery, What matters is their image, how they appear on the media. All our leaders tend to exhibit that fatal Alcibiades trait, beautiful on the outside ugly on the inside.

Perhaps it is being too unfair to blame the proponents of ugly economics for the mess that we are in. Could it not be equally possible that it is the ugly society which has created an ugly economics to match its essential ugliness. If economists are merely responding to the demand from the major power holders in society for a theory to justify their existence, they are culpable of devising a message that enables the ugly society to thrive. Their privileged role as the sanctioned intelligentsia serve to suppress any alternative voices. They are like the garden weed that denies those food plants we desire the space in which to grow and thrive.

Astrologers, soothsayers and pseudo economists

February 25, 2016economic history, Economics, Philosophy, Politics, UncategorizedAstrology, Capitalism, Communism, Elizabeth 1, Financial crash 2008/9, John Dee, Keynes, Liberal Democracy, Neo-Liberalism, Nostradamus, Phillip Gould, Pseudo economics, Soviet Union, Tony Blairangrytunbridgewells

All political leaders share one common weakness and that is desire to know the future so as to be one step ahead of their rivals. This makes them susceptible to the practitioners of the various pseudo sciences that can give them both a knowledge of future events and how to use that knowledge to their advantage. These pseudo scientists that in the past practiced this spurious futurology were the astrologers and soothsayers, today these people are more likely to be economists and psephologists. It is the lust for power that makes politicians so susceptible to the machinations of soothsayers of various kinds. There is not one political leader today who does not have an in house psephologist on hand to read the political runes. This is a common practice that runs through the ages, as one contemporary leader Tony Blair had the psephologist Phillip Gould to hand while Elizabeth I had the astrologer and alchemist John Dee.However I intend to focus this essay not on psephology but on the new pseudo economics.

Soothsaying and astrology as with pseudo economics claim to know the future and can offer policy prescriptions to obtain the best possible future outcomes. These economists claim to possess a unique knowledge of the world, a knowledge that only they understand. Soothsayers or astrologists could state from there understanding of the future when it would be a propitious time for action. There knowledge of the future and future events came from they understanding of the fundamental forces that determined the course of human history. Pseudo economists also claim a knowledge of those planetary forces of economics that will determine the future. In this case it is rather than the movements of the planets determining history it is the movement of market forces that determine history. They will claim that communist leaders wilful ignorance of these market forces will resulted in the collapse of the Soviet Union. Following the lead of these economists historians began to see the future as being one in which the capitalist liberal democratic model was dominant. Possibly the most notable was Francis Fukuyama was perhaps the most notable with his essay and book entitled ‘The End of History and the Last Man’. In both the essay and book he predicted that history would end in all countries becoming capitalist liberal democracies.

Nostradamus pales into insignificance in comparison with these pseudo economists, he could only predict the collapse of great empires in the most elliptical and obscure of terms, he was not granted the knowledge that enabled him to name those empires that would collapse. Economists had a more secure knowledge they knew exactly which empires would collapse, that is the Soviet Union and the China of Mao. If economists know the future and they have the means of introducing the future now, they will do so. They have persuaded politicians throughout the Western World that the future is the free market capitalism system and their role is introduce the reforms that will make the future happen now. This all political leaders have done through a series of measures known as supply side reforms. All regulations such as employment protection laws have been removed because they prevent the free operation of the labour market, similarly health and safety regulation has been emasculated because that also prevents businessman doing what is best. There is an underlying and naive assumption that businessman are well intentioned and will work for the good of all. However the various scandals in the food supply industry show that this is not true.

The apparent success of those societies economists that follow the new free market system as compared to the old communist command economies has led to an over claiming of the success of the new economics and their over confidence has resulted in the practise of the worst kind of pseudo economics. These new economists and the politicians are guilty of creating a new economics that is almost childlike in it’s understanding of the economy and the wider society.

Evidence of this child like science is the introduction of simple moral terms into economics analysis. In its most simplest this new economics states that all government actions are bad, while all action of the free market are good. Obviously it is usually disguised by more complex language, as is demonstrated by the economics of the British Treasury. All economists of my generation that is the ‘Old Keynesians’ understood that all spending by the government increased demand in the economy and the level economic activity. Therefore in a recession the obvious policy was to increase government spending to stimulate economy. Old economists called this process by which spending increased the multiplier as government spending would lead to an increase in spending which was a multiple of the original sum spent. Now the Treasury has decided this no longer happens as it cannot conceive of any situation in which government spending is beneficial, instead it has decided that all government spending reduces overall demand and the level of economic activity. The Treasury has given the multiplier a negative value of 0.6 so if the government spends an additional £100 million pounds it will instead of increasing spending reduce it by £40 million, the Organisation for Economic Development gave the multiplier a value of 1.5, so that the same spending would increase demand by an additional £50 million. When economic policy is determined by such a child like morality such as this it becomes bad economics.

Why I prefer to call bad economics pseudo economics is because it is science that is as fallacious as astrology.

There are some disturbing consequences of the practice of pseudo economics, perhaps the worse is the belief is that governments should give up on most areas of governance in society and transfer their role to the private sector and the market. A belief that the economy works best when left free of government controls and regulations had disastrous consequences the manifested themselves in the great crash of 2008/9. Banks by this time were no longer subject to controls that required them to hold large reserves to protect themselves against a possible bank run that could occur in a financial crisis. Consequently when the crisis happened the banks held such small reserves of cash that they struggled to pay their customers who wanted to withdraw their money. Northern Rock was the first to fail and only a massive injections of government money prevented the failure of two of the big four banks, that is NatWest and Lloyds. Now eight years after the crash the banks are still largely unregulated and hold cash reserves that are again likely to prove inadequate in the event of another financial crash, so that they are likely to again need government cash to fund bail out. Their reserves are now 3% of assets as opposed to 2% of assets at the time of the crash.

Banks have resisted increasing their reserves to what many would regard as a safe level, that is 5% of assets, because money held as cash earns nothing for the bank. Keeping their reserves as low as possible enables them to maximise their profitability but at the expense of security of the institution.

When the government withdraws its governance from the various sectors of the economy it allows bad behaviour to flourish. The banks are not alone in behaving badly, many other sectors of business show evidence of wrong doing.

Despite the evidence politicians remain believers in the new pseudo economics, whenever its suggested that the imperfect markets of the real world need regulation the politicians throw their collective hands up in horror and resist any attempt at regulating these markets. They seem to be in thrall to the contemporary economic Nostradamus’s that believe they have discovered the secret to the future well being of the country is in free market system. If we want a good tomorrow all we have to do is let the markets work unhindered and they will deliver the good tomorrow. However as housing provision is increasingly being transferred to the private sector, the market seems increasingly distant from delivering that good tomorrow. The economic soothsayers are the many consultancies that advise the government. Unfortunately our political leaders are unable to see that these soothsayers and astrologists of the economic world are as misguided and ill informed as their medieval predecessors.

There is a hint of bitterness in my essay as I am a believer in good economics, the practice of which brings benefit to society not the pseudo science of today for most creates insecurity, misery and impoverishment in the name of creating a better tomorrow.

In Memoriam – a tribute to a feminist sister

February 4, 2016Feminism, Philosophy, Politics, religion, UncategorizedAge of Aquarius, Arab spring, Feminism, Feminist theologians and philosophers, Grace Jantzen, Hannah Arendt, masculinity, materialism, Natality, Neo-Liberalism, Revolutionangrytunbridgewells

Awesome-Yellow-Rose — The Yellow Rose a symbol of joy and gladness

A recent personal tragedy made aware that philosophies of kindness are regarded more highly than is widely assumed, many remain impervious to the worse excesses of our materialistic culture. The values associated with a more traditional culture still exist within contemporary culture, values such as friendship, compassion and caring. The respect shown towards my sister by her many friends demonstrated how these highly these values are still regarded. The turnout at her funeral and the grief expressed showed how much people value this individuals whose life demonstrated these principles in practice. She was a woman who worked in the caring services, most recently teaching children that had been excluded from school because of behavioural problems. Even accepting back into her class a violent teenager who had made an attack on her. She was a central figure in many friendship groups and social activities such as the book club. These friends all supported each other through the problems that life throws up, illness and death for example. Men seem to lack these support groups as we seem much more one dimensional in our relationships.When I started my last job I made friends with Keith, yet it was a number of years before I knew he had two children in their teens. We just talked about work, philosophy and politics, never our families. One sociologist made a study of language use and she came to the conclusion that women make much more use of relational language. Going back to my example if we had been women, we would asked each other about family and known almost immediately how many children each had. I think one writer wrote that it is woman kind that civilises mankind. Perhaps illustrated by a remark made by my wife. When hearing that the British army was to allow women to engage in combat on the frontline, who said that, ‘I thought we were capable of better than that’. What the life of my sister reminded was that there is a different culture within our society of which I as man was unfamiliar.

Feminist philosophers and theologians believe that their gender gives them a very distinct life, which makes the dominant male oriented philosophies and theologies of our society irrelevant to those who don’t have the male experience of life. Grace Jantzen is one of these writers. She in her book ‘Becoming Divine”,redrafts Hannah Arendt’s philosophy of natality to give it a distinctly feminist context. For Arendt natality is a philosophy of rebirth, a philosophy of revolution and change. There are times when the power exercised by the dominant group in society weakens and falters.This is becomes a time of opportunity, a time when a public space opens up which allows all those feelings and ideas that had been repressed to be expressed. It is a brief moment of time in which change in the social order can occur as new ideas are given the time and space to take root. The Arab spring briefly appeared to be one such moment of natality, it seemed as if Arab societies could be reborn on more egalitarian lines, when fairness established as one of the founding principles of a new society. Unfortunately, in all but Tunisia the old repressive forces reasserted themselves with renewed vigour.

People of mine and my sister’s generation thought the 1960s was such a time of rebirth and the remaking of society. A time of the ‘the Age of Aquarius’, certainly it was for many individuals, who in response to the times entered into the caring professions or adopted an alternative lifestyle. Unfortunately this brief spring time of liberation was crushed by the forces of reaction. Not the cruel reaction of a repressive police state, but the overwhelmingly seductive power of the consumer society. Potential revolutionaries were bought off by the promise of wealth. I can remember conversations between avowed Marxists in which the main topic of conversation was house prices and how they would benefit from the rise in these prices. The wealth on offer was so much greater than any of our parents knew so young people it easily seduced into becoming willing participant in the consumer society. What remained of the revolution of ideas and behaviours, quickly metamorphosed into a revolution of style and appearance. Revolution was to be expressed in liking a particular type of music or through dress, revolution segued into glam rock, it was a revolution of style. This revolution left intact the very fundamentals of the old unequal society, the power of the old order was never really challenged. When the opportunity came in the mid 1970s this group savagely reasserted its claim to wealth and privilege. The welfare state was slowly dismantled, poverty appeared again on our streets in the person of the beggar.
One interview I saw on television encapsulated this change. A representative of a country landowners association said how the fashion for large country houses had changed. In the 1960s these great houses were being knocked down, whereas in the ‘noughties’ there was a renewed interest in building great country houses. He failed to mention that this was a consequence of increasing inequality of wealth and income in the country.

Grace Janzten was part of new rising group of feminist thinkers who reacted against the philosophy of the times, that of Neo-Liberalism in its many forms. These new patriarchal philosophies were as the old male religions the philosophies of anti-life given new guises. These old new philosophies for her sprung from the inability of men to directly experience the act of creation, that is giving birth. It was the experience of or the potential experience of this that gave women a different understanding of life. Central to women’s lives are the acts of creation and nurture, as without nurturing that created thing, life would not thrive. Masculinist philosophies such as Neo-Liberalism make the nurturing society impossible. Its very Darwinism emphasis on winners and losers is anti-nurture, as in such a society only the winners thrive. Rather than thrive the great majority of society, that is the losers languish and flounder. The number of children in poverty is rising and those malnourished children lose out in the academic race that is now schooling. They cannot compete with their better fed and resourced rivals. Neo-Liberal Britain is the society of the precariat and the underclass, where only the possession of wealth is celebrated. A Jantzenist society would be very different, in that all its children would be nurtured and all have an opportunity to succeed. This would mean the removing of those barriers to aspiration, that is the many barriers placed in the way of the children of the poor by low income and poverty. Motherhood would be the basic principle around which society would be structured, rather than the very masculinist one of power.

Jantzen never really develops how her philosophy/theology in the context of remaking society, her interest is in power. How to grab back power from the patriarchy. Her solution is the development of a feminist philosophy of natality and life as a counterweight to dominant masculinist philosophies of power and violence. She wants equal recognition in society for the very different life experience of women. This in turn brings me back to my sister and I, as our childhood experiences demonstrate the two very distinct philosophies of life. She would work as a volunteer for the St.Johns Ambulance Brigade, which meant giving up her spare time to work in the wards of the local hospital. While I went out with my friends fishing or shooting, more usually the former, inflicting pain and suffering on the local wildlife. Although Grace Jantzen can justifiably be accused of presenting a very idealised view of women’s life experience, it does not diminish her claim for the need for a powerful feminist philosophy of natality to oppose and limit the predatory masculinist Social Darwinist philosophies of today. It is the latter that have wreaked havoc on society reintroducing to it, poverty, insecurity and ill health all the evils of the societies of the past.

The Philosopher and the Economist

January 9, 2016economic history, Economics, Philosophy, Politics, UncategorizedAstrology, Equitable Life, Essay on Human Understanding, free market economics, Housing market, John Locke, Law, Legal System, Neo-Liberalism, New Keynesian, Property Booms and Crashes, trade deficitsangrytunbridgewells

Over the last twenty plus years their have been a series of financial crisis each inflicting damage worse than the previous on the world economy. Yet economists see no need to change there understanding of economics as they believe that in the years before 2008/9 they had discovered the ‘holy grail’ of economics, that is the free market economy. The two schools of British economics Neo-Liberalism and its free market cousin, New Keynesian have an enthusiasm for the largely unregulated market system, seeing it as the best possible of all possible economic models. Yet evidence suggests otherwise and as an avid student of philosophy I would say that all understandings of human behaviour and society are imperfect and that no one understanding of the nature of the economy is without significant flaws.

Image taken from drury.edu

John Locke in his discussion of the nature of philosophy (Essay on Human Understanding) makes what I believe the most compelling case for the inclusion of philosophy in the economists tool box. He compares the role of the philosopher to that of the under labourer. The under labourer on the 17th century building site cleared the ground in preparation for the building work to come. Similarly the philosopher clears and tidies up the area of study for others, they clear the intellectual clutter from the site making clear to other, making clear the areas of study and highlighting the key questions to be answered. Their role is to dismiss all those questions that prompt research that hinders or obstructs the progress of research. In the science of the 17th century this would mean excluding astrology from the in study of astronomy, as the study of this distracted from the real science of the universe. While it might be argued by economists there is no equivalence of astrology studies in economics today, their still practise their subject in a way that prevents real solutions being found to the current economic malaise.

As a Lockean philosopher I would ask why do economists not recognise that the economy is an integral part of the wider social organisation that is society. What they should be asking is how does the wider society impact on the economy? What are the consequences for the economy in changes of human behaviours and attitudes, do these changes contribute to the current economic malaise? Why leave the builders out of the study, after all the economy is but a human construct?
Just as with the fashion in clothes it is at affected by changes in people’s tastes and attitudes.

Perhaps the most significant change in people’s attitudes and behaviour is the shared undertandin of the purpose of the legal system. Initially lawsand the legal system were seen as indispensable to the working of society, as they prevented those disruptive behaviours that would prevent a settled society from existing. These crimes when committed could attract severe sanctions, in the most extreme cases a life sentence. However there has developed in recent years a new understanding of the role of law. Law is now seen as a means of facilitating certain approved behaviours which are known by the generic term entrepreneurship. Laws aimed at eliminating bad behaviours by this group have been removed or emasculated, as it is believed that the free market is the best means of regulating such behaviours. The assumption is that competition in the market will drive out bad entrepreneurs and the law that by intervening in this Darwinian market will result in interventions that damage the economy. Consequently laws on employment protection and the governance of companies are either abolished or have their impact minimised. Now the legal profession is tending towards the belief that the free market and not law is the best guarantor of good behaviour in business and that their role is to stop groups such as environmental activists interfering in the market. In Britain there any many legal restrictions that can be imposed on such awkward groups.

One such consequence is that company law has been rendered largely ineffective. Originally the public company was developed as a means of enabling businesses to raise large sums of money from the public to finance large scale business investment. This organisation has now evolved primarily into a means of tax avoidance or for the owners a means of avoiding legal responsibilities and liabilities. When companies go bankrupt through mismanagement ,the directors are free to walk away from the company free from any legal sanction. No blame attaches to them. It is the legal entity the public company that has gone bankrupt, not the directors. The structure of the public company encourages irresponsible and reckless behaviour by company directors, as was demonstrated during the crash of 2008/9 when no senior banker was held to accountable for reckless or irresponsible behaviour.

This widespread practice of wrong doing throughout the corporate sector has had very negative consequences for the economy. Increasingly people come to distrust the large business corporations all they see is a group of greedy individuals exploiting their customers for their own benefit. Such people have achieved the impossible in making people yearn for a return of the once much derided nationalised industries. The directors of the privatised rail industry have been responsible for massive increases in rail fares making British railways the most expensive in Europe. Fares on British trains can be six times the price of their equivalent in Italy. This behaviour is producing a reaction in the community at large, in Western Europe groups such as Momentum in Britain or Podemos in Spain are campaigning to end this abuse of the system.

However my intention is to demonstrate how the tolerance of widespread mismanagement, corporate greed and wrong doing impacts on the economy as a whole.This is most clearly demonstrated in the finance industries. In the days of my childhood one of the most trusted figures was the ‘man from the Pru’. He called every month to collect a small payment from my parents for life insurance, savings and house insurance. My parents knew that a reputable firm such as the Prudential would always pay out whatever the circumstance, they had faith in the company. The first sign that all was not well in the finance industry was when England’s oldest insurance company ‘The Equitable Life’ went effectively bankrupt, as it lacked the funds to pay the pensions it had promised. There then followed a long series of scandals in this industry due largely to a combination of mismanagement, individual greed and irresponsible behaviour. The consequence was the development of a widespread distrust of the financial services industry.

This justified widespread distrust of the financial services sector has led to some unfortunate consequences. People began to look for alternatives to saving their money with these institutions; they looked for investments that would offer far better and safer returns than those promised by the financial institutions. The one alternative for most people was property, asset prices rose more rapidly in the housing market than in any other alternative market, so any investment in property appeared to be a win, win situation. There is no other market in which the value of the initial investment would increase so quickly. Many entered the rental market as the returns on rental properties were astronomic, it was a market in which it seemed nobody could lose, except they did. There is the now forgotten property crash of 1990 and the more recent one of 2008/9. The problem was that the increase in house prices was due to a speculative boom, caused by more and more money chasing an ever more slowly increasing supply of homes for sale. A market based on speculation will always be subject to booms and busts. The supply of money for this speculative investment will always slow at some stage, usually due to some downturn in the economy or the realisation that much of the property in which the money is invested is not worth the money paid for it, as in the sub prime market in the USA. Such as downturn is occurring now and there will be a crash in the property markets in either 2016 or 2017. What cannot be predicted is the scale of the crash.

Unfortunately this rise of the property market has coincided with the decline of the manufacturing sector. Manufacturing now only generates 10% of UK’s national income. In the housing market much of the investment is recycled money as the same properties are sold over and over again at ever increasing prices; whereas the manufacturing industry creates new products for sale, which generates ‘real’ extra’ income. With the decline of manufacturing people could look less and less to an increase in income, as most new jobs created were in the less productive service sector. As people could no longer rely on ever increasing incomes that looked to speculative returns to boost there spending. The market that offered huge speculative returns was the housing market.

There are two negative impacts on the economy from the growth of the housing market. Funds are attracted to the higher speculative returns in that market, rather than the lower returns from investment in manufacturing industry. At the time of the crash in 2008 over 80% of bank loans where made to the property market. A manufacturing industry starved of investment funding can only decline. The consequence is that Britain has become increasingly dependent on foreign manufacturers to supply the goods it needs. Britain now has the largest trade deficit as a percentage of national income for any developed industrial country.

This has resulted in a disastrous change in government economic policy. Now as so many people are dependent on speculative booms in the housing market for extra income (loans secured against the increase in property values), the main role of government economic policy is to support the speculative boom by adopting a series of policies that constantly increase house prices. What never occurs to the government is that this is a foolish policy that can only end in tears,as happens when the market crashes. No government minister or Treasury official seems to have noticed that each successive crash requires greater and greater sums of government money to bail out the losers in the crash. Figures for the money used to bail out the bank’s etc in 2009 are notoriously opaque. One figure I came across was that in 2009 the government pledged £1.2 billion to support the bank. This figure was about a 100% of national income, fortunately it was no called on, it remained just a pledge. If the bank creditors had demanded that the money be paid into the banks coffers, Britain would be in a far worst situation than is Greece.

What I am trying to say is that as a philosopher I look beyond the current economic toolkit to try to understand the nature of our current economic malaise. It is by asking different questions that I arrive at different conclusions to those proffered by orthodox economists. The main solution to our problem is to stop the speculative frenzy that is the property or more accurately the housing market. If the banks and other lends could not increase by astronomic sums the amount they lend to the property market, there would be no money to fuel this frenzy. This could be done quite simply by increasing the reserves the banks hold, one economist has suggested that the bank’s reserves should be increased to 10% of total assets (or loans). If this happened banks would have to go to the market to raise huge sums of money to increase their share capital. It would not happen and banks would be forced to withdraw funds from the housing market. There would be a painful crash in that market, but once that the effects of that crash had receded the economy could be rebalanced towards manufacturing. An increase in manufacturing activity would have many beneficial effects, one of which would be the reduction of our horrendous trade deficit, as people rather than buying imported goods bought domestically produced ones.

There would be a price for making this change, there would be a fall in the incomes of many people, as they could no longer rely on loans to boost they’re spending. It is quite likely that there are a number of senior politicians that are aware of this and for that reason they are afraid to end the speculative housing boom. Conventional knowledge states that any government that presides over falling house prices is committing electoral suicide. Instead they hope the great crash will happen on somebody else’s watch. To put it another way fear of electoral suicide makes cowards of all politicians.

What I am saying is that while economists fail to consider factors such as a change in the attitudes and behaviours in the population at large and in particular that of the political and cultural elites, they will never come up with solutions to the current economic malaise. This type of thinking that does take into account these cultural changes was known as political economy, yet this school of economics has long been abandoned by practising economists.

Returning to my initial thoughts on Locke and the under labourer, perhaps what really needs to be cleared away is the current economic orthodoxy, which acts as an intellectual road block to prevent the development of any new approaches to solving the current economic malaise.

An Unusual Economist

After the crash of financial 2008/9, it was obvious that the current model of economic analysis was broken. I want to develop a new approach to economic analysis.