Tag Archives: Friedman

Philosophical scepticism the antidote to Neo-Liberal fantasies

economic history, Economics, Philosophy, Politics, , , , , , , , ,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

—Ayn Rand, Atlas Shrugged[11]

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

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

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

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

Is George Osborne the greatest economist of the 21st century

Economics, politics, short term ism,, Politics, society, , , , ,

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Describing George Osborne as this century’s greatest economist, is to choose a deliberately provocative title. While it is intended to be a title that catches the eye, I do have a more serious purpose in drafting this essay. There from the perspective of this writer a certain admiration for George, he is the supreme Machiavellian politician. He can persuade others to accept that black is white, even if they know he is wrong. As Chancellor he has set the agenda for the political debate. Labour politicians have responded to his agenda, rather than trying to set out their alternative approach. There are differences but these are intended magnify the difference in the eyes of the beholder (electorate), for an economist they are but trifling differences. Last week’s political debate illustrates this all too clearly. George Osborne announced that because of budgeting restraints that all NHS staff other than receiving annual increments would not get an increase in their pay. In his eagerness to appear responsible he said that if he became Chancellor he would follow George’s lead and implement a pay freeze.

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There are two types of great economist, the first are economists such as John Maynard Keynes or Milton Friedman who revolutionise economic thinking and change the way governments approach economic policy. Secondly there are those such as Mao Tse Tung who set the economic agenda and policy making through sheer force of personality. (Often accompanied by the threat or use of violence.) Both are great in the sense that they revolutionise the practice of economic decision making and policy implementation. Communist China experienced several changes in the direction of economic policy under Chairman Mao. He tend to favour a razing to the ground of the economy and to be followed by a remaking of the economy in a purer communist mode. By doing so in the Great Leap Forward in 1958 he intended to take the control of the economy out of the hands of the bureaucrats and return control of the the economy to the workers and the peasants. The policy was disastrous which according to one source caused 60 millions deaths through starvation caused by reducing agriculture to a state of chaos. This use of greatness has no moral dimension, but views greatness as the power to revolutionise and change economic policy making for decades.

George Osborne is one of the Chairman Mao type economists. While knowing little about economic policy making he has through sheer force of personality changed the way economic policy making is viewed and discharged. He has made deficit reduction the central plank,of his economic policy. Unlike previous Chancellors he has made this the priority, other targets such as reducing and ending child poverty have been scrapped as being incompatible with this end. He has sold to the nation the belief that a continued and possibly constant programme of national austerity is necessary for national well being. Ed Balls I initially opposed this policy (as having a better understanding of economics he should have known that the policy was flawed from the start), yet after a few more squeals of protest he fell into line. He has promised that he will continue the programme of national austerity if Labour is elected. Quite an achievement for a ‘no nothing’ economist to dictate the direction of economic policy for at least 10 years and possibly more.
Having called George Osborne’s thinking flawed it is necessary to demonstrate these flaws. In 2009 Paul Tucker, Deputy Governor of the Bank of England produced a highly significant but little read report. He expressed concern not about the size of the government deficit but the size of the deficit in the banking sector. Then as now the deficit in the banking sector was just over 500% of GDP, while even today the government budget deficit will peak at 80% of GDP. George has closed his eyes to the potential crisis in the banking sector, where a ‘run on the pound’ will cause a catastrophic economic crisis that has the potential to reduce the incomes of British citizens to less than that of the impoverished Greeks. Is George hoping along with the entire Parliamentary community that nobody will notice this omission in his deficit reduction programme?

There other great flaw is his belief in ‘expansionary fiscal contraction’, one of the most nonsensical phrases coined in the debate on economic policy. His argument is that if the government to fund its deficit has to borrow large sums from the banks, it deprives industry of the money it needs for investment. Therefore if government borrowing is cut it will free funds for investment and the economy will grow and all will benefit. There has been no evidence of this ever happening (except in wartime), what has reduced the flow of money for investments, is the banks preference for speculative financial activities over long term investment. Banks prefer to lend money for speculation in the commodities, financial, equities and property markets. It this speculation that reduced the money for investment in industry. In fact 80% of all bank loans are to the property market, that is why they have no money to lend to industry for investment. A problem ignored by George Osborne who has preferred to give the banks £200 bn. A programme in quantitive easing, while announcing just £1 bn. for investment in the national infra structure.

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George Osborne’s success recalls to mind that other great non economist who rewrote the economics agenda and that was Ronald Regan. His rival George Bush Snr. denounced his economics as ‘voodoo’ economics, only to eagerly embrace it as Regan’s Vice President. Despite all the evidence to the contrary Ronald Regan’s economic policy was hailed as a success by politicians. He as with George Osborne preached the virtues of small government and he cut taxes and claimed to cut government expenditure. While he cut domestic spending on welfare he exponentially increased defence spending. Billions were wasted on his Star Wars programme. He funded this excessive expenditure through government borrowing and when he finally left office, the USA had its greatest budget deficit ever. George by comparison will by the time of the next election leave Britain with an ever spiralling banking deficit, leaving Britain at the mercy of predatory financiers.

However this essay is written in praise of George Osborne, so I must remain to central theme of why he is a great economist. While I could write about his Machiavellian skills in manipulating political friends and foes, there is a more interesting approach.

Economics is a subject that lends itself to charlatanry, because politicians are desperate for that one policy that will deliver success. When in conversation with economists their normal degree of scepticism is abandoned, they are so willing to believe that the proposed policy is the one that will deliver success. George Osborne must have realised early in his career that any well packaged and presented economic nonsense would sell. He would have had as a prominent politician have seen close up how the Treasury manipulated economic statistics and how whatever sleight of hand the Treasury used there would always be a coterie of economists praising the Chancellor’s policies. The reason economic charlatanry is so widespread is that economists only have the vaguest understanding of how the economy really works. To admit this as an economist would be to invite ridicule and so everybody pretends black is white even if they suspect that black really is black. Modesty is never a characteristic of any economist, bluster is the more usual characteristic. I am not suggesting that economists are ignorant of the working of the economy, so much as that they vastly overstate their understanding of the economy. If I can use an analogy into this pool of preening fish a predatory shark arrived, who realised how easy it would be to manipulate the consensus of views to suit his ambitions.

He would have found that politicians such as Ed Balls who play by the rules of the economic game were easy to manipulate. What any economist knows is that the future is uncertain, so predictions for the future have to be hedged around by ‘maybes’ and ‘perhaps’. Yet George Osborne has torn up the rule book, he knows what the future holds. He has set limits to future spending, including a welfare cap all of which Ed Balls as shadow chancellor has signed up to. If events turn out differently, George Osborne will happily abandon all his pledges giving some plausible explanation. While if Ed Balls becomes Chancellor he will be the hapless acolyte following the master, whatever happens he will stick to George Osborne’s targets.

At it’s worse economics as practiced in the UK is an invented game and those who stick to the rules in this imaginary game will always be at a disadvantage compared to those who have a complete disregard for the rules.