Tag Archives: Ayn Rand

Weimar Britain 2010 – ?

There seems to be a gathering darkness in our society, unreason seems to increasingly be the language of our times. The darkness of unreason is said to have come from outside the political process, from  the extremists of the right who have been increasingly successful in infiltrating the political mainstream. Although there success is not entirely down to their own efforts, as they have been aided by collaborators from within the political mainstream.

Perhaps the most obvious example of this darkness is the increasing harassment of immigrants. All to often there are stories such as that of the grandmother of Singaporean origin who was sent back to her homeland, despite having a family in the UK. She was sent back penniless to a homeland where she had no family. Indifference often bordering on cruelty so often governs the actions of our politicians.

When I see the flourishing of unreason in society, I look to the past for explanation. One obvious parallel is the German Weimar Republic that was destroyed by the forces of unreason. One writer that tried to explain the rise of the forces of unreason was Ernst Junger. I find his book ‘On the Marbles’ particularly apposite. There exists within his narrative a wild uncivilised  family of huntsmen who live deep in the dark forest. This family breeds an exceptionally vicious and violent breed of dog, who are breed for nothing but fighting. In the climax of the book this pack of barbarous dogs takes on the hunting dogs of the foresters and destroys them. Now this barbarous family has control of the forest. There is one futile attempt later by the politicians to come to terms with the barbarians of the forest, but it ends badly in their death.

There is a darkness in the souls of us all, but a darkness that is suppressed by civilisation. Norbert Elias wrote of the significance of etiquette in making organised society and social  progress possible. When people started treating each other with courtesy and respect organised society becomes possible. These etiquette codes of behaviour or rituals are passed from generation to generations giving society its shape but once they are disregard or disrespected society begins to resemble a shapeless mass and loses its civilising aspect.* Football without rules is a meaningless undignified scramble and even the most aggressive and competitive of footballers who will resort to cheating to win a match, still accepts the need for rules. They know that if there were no rules to break there would be no game of football. Politicians increasingly resemble the cheating footballer but unlike them they don’t just want to break the rules to their own advantage, but they want to destroy the rules and reshape the game in their own image.

Ernst Junger’s allegorical tale was very prescient, there are dark groups in society who while they remain isolated and excluded from the mainstream, pose little threat to the larger society. If they are isolated in the depths of the forest they are little threat to the civilised whole. However once this dark group is welcomed into the mainstream of the body politic, their very ruthlessness enables them to rise to the top. Just like Junger barbarous dogs they destroy the opposition, an opposition that has not been breed for fighting.

This dark group existed within German society, they were the German nationalists. The most extreme of which were the Nazis. Mainstream politicians thought there ideas insane, such as wanting to return the bulk of the population to the land. Farm work and rural life they believed led to the cultivation the manliness virtues that the Nazi’s admired. Too many German men lived soft easy lives in the town and had lost the Aryan virtues that the Nazis admired. Having such crazy ideas led to the political elite believing that such simpletons could be easily managed.

When the economic crisis of 1929 lead to widespread unemployment, which many blamed on the government. The discredited ruling coalition thought that by incorporating the increasingly popular Nazi’s into government they come benefit from their popularity. They would be a useful counterweight to the powerful communist party. The conservative intellectuals such as Franz Von Papen thought that they could easily manage the ‘unsophisticates’ of the Nazi Party. Instead these conservative politicians lacked the ruthlessness of the Nazis and were out manoeuvred by them. The well behaved dogs of the conservative right proved no match for the wild dogs of the Nazis.

Once the Nazis gained control they removed those civilised constraints that kept those dark instincts of the German personality suppressed. Soon civilised Germans were treating there Jewish neighbours in the most cruel of manners. Once those civilised rules of social interaction were removed the darkest of behaviours become common. Millions of Germans knew of the existence of the death camps, yet only a small number of German opposed their use. Ordinary German citizen if they knew of Jews hiding form the authorities would not hesitate to betray them.

What I believe is that once the barbarous dark forces in society are admitted into the mainstream of the body politic they corrupt the political process and take it over. There barbarous belief systems cannot tolerate any diversity opinion or difference, so must they destroy it. That destruction as in Weimar Germany will be the destruction of the democratic system.

While the dark forces in Britain remained isolated and excluded from the mainstream, they could be tolerated as the harmless indulgence of a tiny minority. However in Britain as in Weimar Germany changes occurred within the governing elites that made possible the introduction of the barbarous views of the extremists. Within the conservative political spectrum there had always been a significant minority that hated the post war settlement. High personal taxation and the tax revenue used to fund of social welfare programmes and the health service they saw the illegitimate action of government. They saw the economic crisis of the 1970s as an opportunity to destroy the social democratic state. Whether it was the free market economics of Milton Friedman or the Neo-Liberalism of Hayek and Rand, they had a brutal philosophy. What they wanted was the re-create the society that pre-dated Hobbes ‘Leviathan’. They wanted a society of in which ‘nasty brutish’ men, were not restrained in their actions by the state. It was human competitiveness not social organisation they believed was the motor for economic and social progress.

As this philosophy increasingly took hold on the Conservative party, its policies became more and more brutal as it sough to recreate the society of ‘nasty and brutish’ men. Although policies were couched in morally virtuous terms such as taking people out of the dependency culture and making them self sufficient, all but the most deluded of Conservative must have realised they were practising a policy of cruelty. This policy was corrupting of the people making the policy, as implementing cruel social policies is not a morally neutral activity, it corrupts the mind. The poor become defined as a subhuman species unworthy of the decencies of human society.

With this degradation of moral sensibilities conservative politicians have not hesitated to exploit the those dark atavistic sentiments on race and ethnicity to win support. However what they fail to realise is that they these sentiments are not something that can used when needed for electioneering and then forgotten. Once they have been imported into the political dialogue they remain there. These politicians so resemble so many Franz Von Papen’s  who thought that they could use the extremists for their own ends.  Similarly these conservative politicians are offering extremists access to power, an access that they will exploit.

Again Ernst Junger’s allegoric tale offers a useful explanation of the current situation. Bad as the current conservative politician are, there are the much more dangerous extremists who are beginning to enter the political mainstream. The conservative politicians are like the hunting dogs in his tale, they are trained to hunt herbivores and not to fight other dogs. I liken them to they hunting dogs because they are trained to hunt weak herbivores of society, the poor and less well off majority. Neo-liberalism of the Ayn Rand type has schooled them in how to attack the less well off majority to benefit of the billionaires class, but it has not schooled them in how fight off the extremists. I fear that our conservative Neo-liberal politicians, will be as with Weimar’s conservative politicians little more than a conduit to power for the extremists. 

  • I must confess that my summary of Norbert Ellias thinking does not do justice to him. His ideas are far my complex that my summary would suggest.
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The British Army a metaphor for Britain’s economic decline

When you wish to understand what is happening in an economy, the answer comes from the small things. Not from the micro-economics of the classical economist but from stories repeated about events in the real world. The source of inspiration for this essay was a comment from my daughter who has friends who are married to soldiers. Their husbands are very discontented, as they seem to waste their time on a series of seemingly meaningless tasks. It seems as if the bad of practices of national service days are being reinvented when soldiers could be told to do such meaningless tasks as cut the grass with nail scissors. If they are correct the British army seems to be at present an organisation without purpose or meaning.

This I can contrast with the attitude of a former pupil of mine who served with the army in Northern Ireland. I thought that he would have hated service there because of the dangers. Instead he loved it, he had two posting there and was considering leaving the army because his next would be an action less posting to Germany. Anybody with even the briefest knowledge of the British army knows that it can do mindless routine like no other organisation. He as did many others join the army for the excitement, a life out of the routine. I cannot describe in words the excitement he told me he experienced on an active mission hunting an IRA unit.

A dysfunctional army and discontented soldiers is a metaphor for so much of contemporary Britain. There are countless business organisations that demonstrate the same lack of purpose, due to poor leadership and with a discontented workforce. What the British army demonstrates is how state and private sector organisations become increasingly dysfunctional in a society that appears to be in decline.

Britain has been in decline since it lost its Empire and in the words of Dean Acheson it ‘has lost an empire and has not yet found a role’. In the post war period many politicians attempted to find a new role for Britain. At first it seemed its future lay with Europe and the country joined the EU. However being one of the leading nations in the EU did not satisfy the political class, as it had not injected the hoped for dynamism into British economy and society. What the political class wanted was the great shock that would electrify the economy and restore it to economic health and they found the needed great shock they needed in the practice of Neo-Liberal economics.

One of the great ideas of the Neo-Liberal revolution is the idealisation of the private sector business model. In consequence much of the public sector was transferred to private ownership and that included much of the defence department. Now procuring weapons for the army is in the hands of a private sector organisation called the Defence Procurement Agency. This department was intended to be a commissioning agency, that would outsource the design and production of defence equipment to private sector companies, so getting the best deal for the armed services from the competing defence contractors.

It was assumed that by outsourcing expertise to the private contractor the government would cut out the expense of employing its own specialists and it could leave the difficult decisions about  design and production to the private sector companies. Unfortunately these very same companies also practised cost cutting and reduced the most expensive labour costs, which were the design engineers. Outsourcing of design has led to a multiplicity of contractors involved in producing a product that usually fails to serve its purpose. The new army automatic rifle (SA80) costing more than a £470 million is an example of the abject failure of this policy*. It tends to jam when used in action. Special forces units who are constantly in action never use it because of its unreliability, instead preferring to use the American alternative. Having to make do with inferior and unsuitable equipment is destructive of morale and it is said that in the Royal Navy service morale has never been lower, as it is the service most affected by having to operate with poor and inadequate resources.

Generals and politicians have with enthusiasm adopted the cost cutting practices of Neo-Liberalism. This means that in consequence the cost of having realistic large scale training exercises is too great in terms of men and resources. There is just not the money to keep the army trained in is a state of readiness for war. All to often soldiers are given home leave, as this is the least expensive option. One way politicians and the generals have tried to overcome this problem is by cutting the numbers of serving soldiers and instead relying upon the cheap part time reserve solder to fill the gaps in the time of crisis. Forcing experienced soldiers to leave the army because they are too expensive is destructive of morale.

Warrant officers are the unsung heroes of the army. These non-commissioned officers are the men who make the regimental system effective. They have years of service and are the men that keep the regiment operating at maximum efficiency. Officers come and go, but they are always there. However they are expensive and the government and generals decided that they should reduce their numbers in a cost cutting exercise.  A number of warrant officers who received their redundancy notices were on active service in Afghanistan. Many private and state organisations have suffered similar drops in service effectiveness, when they have got rid of much of the middle management.

Neo-Liberal theory emphasises the great value of the entrepreneurial leader, societies movers and shakers, whom Ayn Rand states the billionaire class. This has been applied to the army as the cost cutting has been at the expensive of the junior ranks, not the generals. It is believed that all is needed is the great man who will meld the disparate units that make up an army unit into an effective fighting force at the time of crisis. Skills, training and experience are almost irrelevant in the junior ranks, as what matters is the genius of the leader. Therefore whatever cuts are made they should not apply to the generals, as they are the key personnel who will make the army great in the times of war. In consequence the British army is one of the most ‘over generalled’ in the world. The British army is about the size of the American marine corps which has only a third of the generals.

The great weakness of current British army is that it does not have a large cadre of outstanding leaders. Too many of the current generals are quite undistinguished and there are too many duds amongst them. When an American general addressed a conference of senior British army staff to discuss the lessons learnt from the conflict in Afghanistan he said gentlemen you have failed. It is an open secret that the Americans have a very poor opinion of the British army or more particularly its generals.

There is a very revealing story from Afghanistan which reveals the poor quality of British generalship. There was an airbase in which was the responsibility of a British and American general. The British general was responsible for the defence of the perimeter. He left some watch towers unoccupied.The Taliban spotted this and crept in and destroyed a number of American aircraft. The American General who was responsible for the defence of the aircraft was sacked, although he was comparatively blameless, while the British general was not only not sanctioned but he was promoted to a higher grade. Incompetence does not seem a bar to seniority in the British army.

This is why my daughters friends husbands find that they are doing no real soldiering, it is because they belong a dysfunctional organisation that is unable to effectively utilise their talents. Recently the government was criticised for failing to respond adequately to Hurricane Irma. The Americans and French evacuated their citizens from the islands in the before the hurricane struck, the British did nothing. While much of the blame for the inaction must rest with the politicians, it is also likely that if the defence minister had asked for immediate action, the armed services would have struggled to respond.

What the British army demonstrates is the current British vice, over investment in a poor and undistinguished leadership and underinvestment in its workforce. Almost all British companies have experienced a ruthless weeding out of middle management and of its more expensive and skilled staff. Once the British Atomic Energy Authority was one of the world leaders in nuclear engineering, but since privatisation the new company disposed of the expensive engineers and became largely a commissioning organisation. Now when Britain needs to build new nuclear power stations it lacks the expertise to do so and instead relies upon outsourcing the task a French company EDF. The leadership of the nuclear industry is so poor that it is not concerned that the two nuclear power stations that EDF is building in France and Finland are so delayed by construction problems and cost overruns that are years behind schedule. Just as in much of British industry a poor leadership makes poor decisions.

*The initial model of this rifle used by the army was so poor that it had to be modified and re-engineered by the German manufacturer Heckler and Koch.

*The branch of the armed services that has suffered most from the lack of in house expertise and poor leadership is the Royal Navy. Its new £1 billion Daring class destroyers are so badly engineered that they are prone to break down. The only solution is cut large holes in the sides of the ships so engineers can install new power units. A ‘patch up’ job that will be extremely expensive and could double the cost of equipping the navy with these new ships.

The Cult of Neo-liberalism and the bizarre beliefs and practices of its believers

Cult movements are supposed to appeal only to the marginalised in society, that is the losers desperate to find a way of out the dire circumstances in which they find themselves. Yet evidence shows that cult movements are as equally likely to appeal to the rich and powerful. The Orange movement with its emphasis on sexual freedom was a movement that appealed largely to the young and wealthy. However a cult movement of the rich and powerful can avoid being labelled as disparagingly as such because they have control of the media. Cult like movements redefined as mainstream political or social ideologies much like established religious practices. In a secular society such as ours cult movements will lack the mystery and religion usually associated with such and instead claim ‘realism’, to be a practical movement for individual and societal improvement. The cult that currently grips the imagination of the rich and powerful is Neo-Liberalism.

Believers in Neo-Liberalism as with all cult members have a fervent belief in the rightness of the message and reject any evidence to the contrary. To paraphrase George Orwell it central belief is ‘private enterprise good, public or state enterprise bad’. Currently in Britain all our prisons are being transferred to private management. Despite reports from the prisons inspectorate that such prisons are poorly managed, largely due to cost or staff cutting measures intended  to turn prison’s management into a profit making activity, political leaders seem oblivious any problems arising from the privatisation of the prison service. Riots, rising prison suicides are not the things to turn the political leaders away from their belief that prisons can only be run successfully, if they are under private management. There is nothing to match the fervour of the converted for their cause. When criticised they will say that the reforms they have introduced will take time to take effect and what is being witnessed now are the painful birth pangs of a new society coming into being. Without wishing to name politicians I feel they are so similar in nature to the Jehovah’s Witnesses that come to my door promising me salvation if become a member. A salvation promised on as little evidence as that provided by the cultish Neo-Liberals.

All cults have a charismatic leader, one who have a message one which points out the failings of current society and the way to a brighter and better future. Scientologists had Ron Hubbard, Neo-Liberals have three Friedrich Hayek, Ayn Rand and Milton Friedman. Followers of each cult treat the writings of the founders as holy texts and try to follow to the letter their writings . It helps if the charismatic leaders as death sanctifies their writings, much as earlier death gives pop stars that aura of specialness and which boosts their record sales. All these leaders were persecuted and vilified in their own societies. Ron Hubbard was dismissed as a fraudulent science fiction writer and the prophets of Neo-Liberalism were persecuted by the liberal social democratic establishment of their time, who dismissed their writings as lacking merit. As all of these prophets are dead there writings cannot be subject to revision making it much easier for them to be seen as the unalterable holy writ.

One of the holy writs of Neo-Liberalism is that any state intervention in the market is hateful and destructive. For British Neo-Liberals the very personification of this hateful state intervention is the  European Union (EU). Any damage inflicted on the economy or social fabric of the nation occurring from a precipitate exit from the European Union is a price worth paying. When the Global Institute for Economic Affairs states that leaving the EU will diminish national income by 10% they dismiss it as a mere trifle. A valid comparison is with the regime of Pol Pot, they have a wish to return the economy to year zero so they can remake it according to the collective scripture of Ayn Rand, Milton Friedman and Friedrich Hayek. Fortunately for this group of very rich and powerful Liberals the martyrs that will be sacrificed are the less rich majority, not the rich minority.

A cult movement also sanctities its members and demonises outsiders. Ayn Rand writes that the saviours of mankind are the rich and powerful or more precisely the billionaires. All the powerful Neo-Liberals imagine themselves part of this class whether they are or not. This also makes them very greedy for money, as wealth demonstrates that they are one of the elect. Ayn Rand characterises the poor and desperate as the undeserving poor, who when they die in their thousands in ‘Atlas Unchained’  meet a fate they deserve. This makes tax avoidance a moral cause as by paying taxes the rich are merely giving money to the undeserving poor on whom it is wasted. Politicians can claim high taxes on the rich are immoral, as it takes money away from the rich who will use it well and gives it to the poor who will squander it. A morality given common sense expression by the Surrey woman who wrote that the rich have greater need of money than the poor as they have more things on which to spend their money. The wants of the rich are many according to her reasoning, whereas the wants of the poor are few, so they only don’t require much money.

Media commentators who write about the death of Neo-Liberalism misunderstand the persuasive power of a cult. Believers are immune to rational argument, the collapse of the economy on Brexit will leave them unmoved. There is a tribe in New Guinea who worship Prince Phillip as a God and who believe that one day he will come and distribute to them the wealth that was unfairly stolen from them by the Europeans. All they have to do is to await the arrival of Prince Phillip and the prosperity that he will bring. Neo-Liberals are as rational in their beliefs as this New Guinea tribe. They will believe that whatever economic disasters occur during Brexit, are unrelated to their practice of Neo-liberalism. The failures in the economy be a consequence of the government failing to implement Neo-Liberal policies properly, if only they had been more Neo-liberal in their approach to policy making all the problems that afflict the economy would never have occurred.

Neo-liberalism will only die when all its powerful proponents are removed from power. Until then Neo-liberal policy making will be practised by our government.

Bankers the unruly and uncontrollable children in the family

Politicians seem to think that as they can manage their own family budgets, they have all the knowledge necessary to manage the economy. This results in statements such as the government needs to balance its books or that the country has maxed out its credit cards. Such statements demonstrate an appalling ignorance of the economy and how it works. However there is a competence that is lacking at the most elementary of levels,  as too many MPs are appalling at managing their own finances. Disraeli one of the greatest leaders of the conservative party was always on the verge of bankruptcy because of his extravagant lifestyle. Fortunately he had a rich wife and friends ready to bail him out. Politicians are as likely to follow his example as they are that of his prudent rival Gladstone. The recent expenses scandal when it was demonstrated that most MPs used their expense account to finance their comfortable lifestyle. People still remember the MP who used his expense account to pay for a duck house. If financial rectitude is not characteristic of many MPs This should give pause to any claim that they are capable of managing the economy.

If the analogy of family finances is to be made it should be said that the government resembles the nominal head of an unruly family, whose views are largely disregarded by the family members. The unruly children in the family take little notice of the head of the family, only listening to them and accepting their authority when they get into trouble. The banks are the obvious example as they pay minimal heed to the authority of the government except in times of crisis such as during the financial crisis of 2008.Once the crisis passed the banks forgot their need for government support and showed a lack of gratitude to the governments actions for bailing them out during the crisis. They successfully prevented the government from introducing a reform which would have separated their retail banking activities from those of investment banking. If a bank fails  in future the government is still on the hook, as it can’t protect the individual customers of the bank without bailing it out for the much larger losses incurred by its speculative investment banking arm.

This is no small matter as the combined assets of the banks are in total ten times the value of our national GDP.    Our national GDP is the country’s national income. There are four large banks in the UK and it is not unreasonable to suggest that the assets of each is in total a sum near to, equal to our GDP or greater than it. In the event of a failure of one of the large banks the government could be called on to raise a sum equivalent to our national income to bail them out. At one time during the crisis of 2008/9 the government of Gordon Brown had to pledge a similar figure to our banks creditors to prevent a run on their finances. Fortunately the banks creditors did not call on our government to make good this pledge, they were satisfied with the the pledge alone. When the next crisis occurs the country may be less fortunate.

When I describe the banks as unruly children over whose actions their parent has little control, there are numerous examples I can cite of such behaviour. Britains biggest bank is HSBC and Standard Chartered is its branch in the US. This bank almost lost its licence to conduct banking in the USA because of its money laundering activities. Only the pleas of the British Chancellor of the Exchequer prevented the American financial authorities from withdrawing its banking licence. It had lost its licence to bank in the USA, its parent bank HSBC would have been in serious financial trouble and it would have had to ask the British government for financial support to enable it to cope with the crisis.

The family finance analogy of which so many politicians are so fond of using describes so well the activities of the banks. The banks are the prodigal children who can behave as badly and irresponsibly as they wish as they know that their parent the British government will always come to their aid no matter how badly they behave.

In Britain as in most countries the politicians are content to remain in ignorance of these unpleasant truths. They believe that their homespun economics all they need, or they are ideologues who believe that the great prophets of economics Hayek, Friedman and Rand said all there is to be said about economics and the managing of the economy. This last group believes that all the answers to matters economic are to be found in books such as ‘The Road to Serfdom” (Hayek) or ‘Atlas Unchained’ (Rand).

There are a small group of politicians who understand the problems of which I have written, but they are only too willing to pretend that all is well in return for government office or employment as well paid lobbyists for the financial sector. Money is incredibly effective balm for soothing fear.

I am not the first person to express concern about the appalling ignorance of our politicians. Leo Amery looking around at his fellow politicians in the 1920’s said that the country would be better served, if there was  separate parliament consisting of industrialist and trade unionists to manage the economy and industrial policy.

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

(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

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.

Why does our government seem to be determined to increase the levels of criminality in our society

claudeduval

The famous incident in which Claude Duval the notorious highwayman tells a lady  whose coach that he has just held up that in exchange for a dance he will refrain from robbing her.

Our current government claims to be one that is tough on crime, yet in practice it seems to being doing the opposite. What I am going to suggest that the government through its policies is reverting back towards an earlier model of society, one similar to that of the 18th century. In that century policing was massively under resourced. Crime prevention and detection was in the hands of the Parish Constable. A man who had to rely on the support of his parishioners to arrest criminals. Policing was so ineffective that the government had to resort to the extreme measure of making most offences capital offences as a means of deterring crime. The Black Act of 1723 tried to compensate for the lack of an effective police force by making some 50 offences punishable by hanging, for example the punishment for breaking a farmer’s gate was hanging.The only way the to keep one’s household safe was to ensure that all the doors where secured by good locks and a variety of loaded guns where at hand to fend off any intruders. Ominously I was told by a member of the police force that his recommendation was to secure one’s house with good locks and stay in at night, he thought the policing levels were inadequate to guarantee the public’s safety. One senior police office ventured the opinion that he would not go into the centre of Manchester at night because it was not safe.

The combination of weak governments and under resourced policing is all to evident in Eire. Even before the financial crash and the austerity programme that forced large cuts on the Garda (Eire’s police force), this force was struggling to cope with the criminal activities of both terrorist groups and criminal gangs. These gangs were then so powerful that they could shoot a campaigning journalist at a busy cross roads and get away unhindered. Now an even more depleted police force is unable to prevent tit for tat killings that are occurring between these criminal gangs. Yet in spite of the evidence of the evident dangers of relying on an under resourced and undermanned police force to contain these dangerous criminal gangs the government is insistent on following the unwise path already trodden by Eire.

There is ominous evidence from my home city that this is already happening. Cuts to the number of the police have meant the ending of an effective pro active drugs strategy. The teams that were used to break up and disrupt the drug dealing gangs have been disbanded and the remaining police officers used to street patrols. The police will now only react to evidence of drug crime and only if it is thought that the individual in question has drugs in excess of a street value of £10,000. This means that the street dealers which are the bread and butter of the organised drugs trade are given a relatively free hand.

Why despite all the evidence of the dangers of allowing the drugs gangs to flourish has the government adopted policies that will encourage these gangs to flourish.

Why?

There are several possible answers but the most likely is the change in the philosophy of the government. The adoption of the brutalist philosophy of Neo-Liberalism, which emphasised the supremacy of free market, competition and the end of regulation. Regulation it was argued did not prevent wrong doing so much as impose additional and unnecessary burdens on business. However Hayek (The Road to Serfdom) who was the founding father of Neo-Liberalism did not argue for the extreme Neo-Liberal system of today. He believed in the good society, a society in which all paid tax for finance those items that made up the common good. He never once in his writings claimed that the ideal state is one in which the tax authorities collaborated with the rich in a programme of tax avoidance. He would have been horrified at the programme of tax cuts that reduced the effectiveness of the police and other public services.

Rather than looking to Hayek it is the writings of a novelist and minor philosopher called Ayn Rand that are the inspiration for the new Neo-Liberal State. In her influential novel “Atlas Shrugged” she wrote that the billionaires are the saviours of society. It is their energy and drive that moves society forward. Any restrictions on the activities of these people negatively impact on society as it prevents them fulfilling their primary purpose which is wealth creation. Therefore in her good society there are to be few regulations imposed on the billionaires or the businesses they run. Regulations that protect workers at their place of work are no more an unnecessary increase in costs as they disproportionately increase the costs of labour far beyond the contribution labour makes to wealth creation. All these high labour costs do is reduce the number of goods and service produced as what might have been produced if labour was fairly priced is now uneconomic. Similarly high rates of taxation on the rich do little more than reduce the amount of money that they have available for investing in the economy. In contrast the poor and the great majority contribute little to the economy, they are merely the simple tools that the billionaire uses to create wealth. Only if the billionaire class is freed from all restriction will they be able to use their energies creatively to add to the wealth of society. It is this author who is the inspiration behind the new Neo-Liberal State, that is the Britain of 2016.

Although her books are widely read amongst students at our elite universities, there has to be another reason as to why she has been adopted as the political philosopher of choice by our political classes. I think part of the answer is that they identify with her billionaire class. They see themselves as much victims of society as the billionaires of Ayn Rand. These leaders are continually frustrated in their great schemes for change and reform by the opposition of the little people. People of little worth, who lacking the skills or even intelligence for government think they have to right to a say in how policy is made. This contempt for the little people is demonstrated in the distain our leaders show for them. One former leader spoke of constantly being stabbed in back by public sector workers who failed to understand that the policies he was introducing were for their benefit and the good of society. Another continually referred to his opponents as the ‘blob’, abusive terms are the common currency of politicians who want to minimise the role of the people in a democracy.

It must also be mentioned that the political classes believed that the political and economic reforms espoused by Ayn Rand would if adopted would lead to a new political and economic dynamism in what they saw as a moribund society and economy , too rooted in the practices of the past.

Rather than continue with a psychological analysis of the political classes, what I want to demonstrate is the impact of what I shall call ‘Randism’ has on society and crime in particular. If the billionaires and their proxies the great business corporations are to be freed from almost controls and regulations, there are other greater predators the will benefit, which are the organised crime networks.

Changes in the legal system, in that is company law and tax law have created a situation in which the big corporations are largely outside the law (at least in the UK). What has been created is an opaque system of company organisation the will frustrate any attempt at regulation or control. However such a system is open to abuse and it offers possibilities for criminal organisations that had not previously existed. Formerly in the UK criminal groups used small businesses as a front for their illegal activities, such as scrap metal dealing, now they have the opportunity given the opaque nature of company organisations to move into large scale legitimate business. What is to be feared that the change or weakening of company regulation could result in a similar situation to that in southern Italy where the criminal gangs have penetrated legitimate businesses.This has already happened in the meat processing trade, there was a recent scandal in Britain where it was discovered that criminal gangs had infiltrated the food processing industry and were able to pass off horse meat as beef. While a few minor wrong doers were arrested the members of major criminal gangs were never arrested. The abolition of most regulation relating to food production has not freed the large supermarkets from unnecessary regulation but opened up a new field of opportunity for organised crime.
Perhaps the fate of the National Crime Agency illustrates best the dangers of an opaque legal system. The National Crime Agency was set up to tackle organised crime or more particularly the large drug gangs. It was to be a British FBI, with some of the best detectives seconded to it. However it has been largely ineffective in its main purpose which is to seize the assets of the big criminal gangs as a means of rendering them ineffective. Its ineffectiveness is a consequence of legal changes designed to minimise the impact of regulation on the big corporations and it is this lack of legal powers to intercept the flows of cash within big business that means this agency is unable to disrupt the large organised crime enterprises. It is not only in Britain that the law enforcement agencies are unable to confiscate the income of these criminal empires but also in Eire where the crime lords can amass their ill gotten gains without any apparent interference from the legal authorities.

Governments know that the lack of effective financial regulation means that the large income flows that enable the criminal gangs to prosper. What prevents them taking effective action is the corporate interest which is opposed to any stricter regulation of international finance. They see any change as a threat to them, what they want least of all is to be liable for their fair share of taxation. They will continue to work against any effective control of financial transactions, even if it means tolerating the growth of large scale criminal empires.

The political classes in Britain with the belief in Ayn Rand’s Neo-Liberal dream would never countenance any change in law which might disadvantage the billionaires or their proxies the large business corporation. Their rigid adherence this extreme ideology or dogma means that effective action will never be taken against these criminal empires as the consequence of any such actions may have what the big corporations see as negative consequences for them.

This belief is all to clearly illustrated in the actions of the British Treasury who believe that any government spending reduces national income and so the minimum should be spent on public services such as policing. Newspaper columnists can continue to write horror stories about the iniquities of the trades trade but the Treasury would never countenance any increase in spending on the police as they believe it would negatively impact on the nations wealth. They believe that if the price of greater wealth is increased criminality, that is a price worth paying, as its better to live in a dynamic society that has high growth and crime than in one that is the reverse.