Tag Archives: J.S.Mill

Tearing it up by the roots – a new approach to economics

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Michael Gove dismissed the profession of economists, as one of those unnecessary groups of professionals, who stopped the common sense will of the people from prevailing. Although Michael Gove knows little of economics and the value of his statement can be questioned, he is right to suggest that something is rotten within the economics profession.

Just as Karl Popper looks back to Parmenides (early 5 BCE) as the originator of the modern scientific discourse, I believe that the same philosopher can be used to demonstrate the failings of contemporary economics. Parmenides has a vision in which the Goddess reveals to him two separate worlds that of truth which is known only to the Gods, and the world of shadows and falsehoods known to man. Man can only glimpse but shadows of truth, he can never know. Certainty is only known to the Gods. What Popper understands from this is that scientific inquiry can never know certainty, truths known today will be demonstrated as false tomorrow. Scientific truths are conjectures which should be in a form that makes capable of refutation. It is this verification process that makes possible the advance of science as new and better truths replace those of today and yesterday. However he does suggest that these founding fathers are giants on whose shoulders we stand to advance. They make the initial discoveries that make possible the advance of science. Today Newton’s cosmology and theory of gravity are regarded at best partial truths. Yet without Newton’s discoveries Einstein and the advances of modern cosmology would be impossible.

What Karl Popper believes is that there can be no certainties only probabilities. The latter being an admission that we don’t know. Contemporary economics ‘does know’ it knows certain truths about the economy. There are two fundamental truths and they are those of the market economy and modern monetary theory. These are the two foundational principles that underpin all contemporary economics..

Market theory is often referred to as Neo-liberal economics. This theory asserts that the free market is a self regulating organisation, which if subject to minimal government interference will find its own level of equilibrium. Governments that interfere and over regulate the economy risk upsetting the balance of forces in the economy, that determine the best of all possible outcomes for all. It was Alfred Marshall (1840 – 1924) who demonstrated the truths of market economics with the supply and demand theories with which all students of economics are familiar today. Familiarly known the diagrams that demonstrate the ‘Marshallian Scissors’. Nearly all economic theory is a derivation of market economics.

Perhaps the most notorious is Says’ law of incomes. This states that it is self defeating to try to maintain wage levels during a recession, as this will merely increase unemployment through making workers to expensive to pay. Far better to let wages fall to a level at which it becomes profitable for firms to employ workers. These newly employed workers will spend the wages they receive, which will increase demand and kickstart the recovery. With the economy growing wages will return to their former high levels, as newly profitable firms bid against each other through paying higher wages to attract workers from the diminishing pool of unemployed labour. No government will ever admit to following Say’s law, but it is implicit truth, as they are always concerned to avoid the situation in which high wages make workers unaffordable to employers. When Tony Blair introduced the minimum wage he took great pains to ensure that it was not set at a too high a level, as that would make labour too expensive to employ.

A common sense truth which seems obvious to all. However there is very little economic evidence to demonstrate the truth of this ‘common sense’ theory.

The other great truth of orthodox economics is modern monetary theory (now associated with Milton Friedman). This quite simply states that the level of economic activity is determined by the quantity of money in the economy. Increasing the quantity of money in the economy increases the number of purchases people make, so increasing the level of economy activity. However if the quantity of money is increased too much, there is too much money chasing too few goods and so inflation occurs. All the government needs to do to control the level of economic activity is to either change interest rates or the supply of money (so called Quantitive Easing). Although this theory is associated with Milton Friedman he was merely putting the ideas of Irving Fisher (1867-1947) into a more modern format. This school of thinking in fact has a long history, as it’s origins can be traced back to Copernicus who first gave it form 1517.*

Unfortunately modern monetary theory has one flaw, if if the government is to control the supply of money, it must know what it is controlling. Unfortunately it does not. When the Treasury introduced this policy in the 1980’s, I think they came up with seven different definitions of what constituted money. In practice they adopted one definition, M4 as the most likely one. Despite this flaw in the theory, governments have since the 1980’s all been practitioners of modern monetary policy. Never in academic circles will you hear this criticism mentioned.

J.M.Keynes and the economics named after him is regarded as an aberration and no longer regarded as one the foundational truths of economics. The British Treasury the fount of all economic truth has long since dismissed his ideas as irrelevant.

What the economists ‘who know’ have in common, is that they possess what that they believe is a bag of tricks from which the appropriate tool can be chosen to fix any crisis. At present the favoured tool is a combination of reducing interest rates and increasing the supply of money through quantitive easing.

Karl Popper influenced me in my choice of names, he does as do I, belong in the school of ‘don’t knows’ or to put it more accurately we believe our respective subjects consist of a series of probable or possible truths which for the present have great utility. As Karl Popper writes that to state that something is a probability is to admit to doubt. Probably the best known advocate of this school is J.K.Galbraith.* As he had no grand theory linked to his name and was dismissive of such theories. Academic economists tended to regard him as not one of them. He was an agricultural economist, who caught the eye of Franklin Roosevelt and who drafted him in to help manage the wartime US economy. He was one of the authors of the post war report into the effectiveness on allied bombing on Germany. They as a group were surprised to discover how little impact it had on the German economy. A fact conveniently overlooked in the Vietnam war.

What discredited him in the eyes of other economists was his prioritising the human factor over any grand theory. While Hayek claimed that the mad speculation that led to the Wall Street crash of 1929 was due to a drying up of legitimate investment opportunities, Galbraith lays the blame squarely on the shoulders of the financiers. The bosses of Goldman Sachs and the other major banks were both reckless and irresponsible. They made huge profits from the foolish and reckless investments made on the Stock Exchange and had no incentive to discourage them. This is illustrated in the example of the Florida property developer who bought swamp land claiming to to be prime real estate. The authorities on the New York Stock Exchange saw no reason to prevent the sale of stock in this fraudulent enterprise. It was just too profitable. In Galbraith’s words the great crash was 1929 was due to the activities of a group of rogue financiers.

Not surprisingly it turned out that Goldman Sachs was involved in similar activities in the events leading up to the crash of 2008. They were fined millions of dollars for selling what they knew to be worthless bonds to their clients.

When I studied economics at university, I was disappointed to discover it avoided the big questions. The issue of distribution of wealth was redefined as the optimum output curve. Any point on that curve represented the best possible distribution of resources within a given community. This as an exercise in logical thinking was impeccable, but it had no relevance to world outside the seminar room. While this ‘economic scientism’ dominates the subject of economics it remains detached from the real world. When Russians during the ‘Moscow Spring’ came to study economics or more precisely free market economics; they expressed disappointment about how little it taught them about the real economy.

After a number of years teaching economics I came to realise that the teaching of economics was about developing the ‘economic imagination’. This was not so much learning the economic theory that relates to a particular scenario, but being creative within the parameters of economic thinking. A Socratic economics in which reasoning is used to disabuse the student of the ‘truths’ of orthodox economics. The conventions of orthodox economics often stand in the way of developing a real solution to the problem. Only the most unimaginative can think that changing interest rates, increasing or reducing money supply is the answer to everything. Any study of the post war management of the economy would surprise today’s readers.Realising a shortage of houses meant that this could lead to a rapid rise in house prices and inflation in the housing market, the government took action to prevent this happening. The annual in increase in house prices was subject to a tax. This of course meant house owners had a disincentive to the over valuation of houses and house prices remained low in this period. This made the majority of houses affordable unlike today.

Again J.K. Galbraith provides an illustration of this in his work in managing the US wartime economy. One of the problems of the wartime economy is inflation. With so much of the nations output requisitioned for the war effort, a shortage of goods in some parts of the economy would lead to a rapid rise in prices and inflation. Galbraith realised that it was not necessary to introduce a national system of price controls, but instead to control prices with the cooperation of the great corporations. Since they accounted for a majority of the nations output, if they could be persuaded to keep prices down there would be no price inflation. All the other medium and small businesses would follow suit, particularly if they were suppliers to the major corporations.

Economics suffers from one problem that is unique to it. What is true yesterday may not be true today. The economy is a dynamic institution that is constantly changing. Evidence about what is happening in the economy is from yesterday. There is no evidence, apart of the most impressionist kind about today and none about tomorrow. This is why J.S.Mill said there can be no science of of economics. Given this uncertainty governments prefer to use the old tried and tested methods, fearing that any policy innovation will make things worse rather than better. This Conservative mind set explains why governments never get to grips with the problems that plague the economy.

The consequences of adopting the ‘economics of don’t know

Universities would change, economics departments would have to teach students to think creatively. Old dead economists, the founding fathers of the subject would no longer dominate the curriculum. The subject would become more open ended, there would now be no arbitrary limits to subject knowledge. All the old certainties associated with this subject would go. Current academic economists would resist any change, as the knowledge they hold so dear would no longer be valued. University departments of economics would revert back to the liberal humanism of the past.

Resistance to this change would not just come from current academics, but also government. University education is now a commodity that is bought and sold. All the current means that are used to measure a universities output would cease to work. Creative and innovative thinking does not lead itself to the current system of box ticking. Governments would lose the main means through which they control what is taught in the universities.

The two greatest employers of economics graduates the investment banks and the Treasury don’t want graduates who think. They want them versed in the ways of the old economics, together the statistical skills acquired in the study of the old economics. This is the problem already known of, when Manchester students demanded a radical change in the economics syllabus, they had to contend with the fact that they would denying themselves lucrative employment in the world of banking.

Economics can be one of those subjects has to be endured and best soon forgotten on leaving university. What I am suggesting would lead to a revolution in the teaching of economics, it would now be a subject that valued creativity, rather than conformity amongst its students. If instead of discouraging students from continuing an interest in the subject, economics would be one of those stimulating subjects whose students would now retain a life time interest. Since so many MPs have studied PPE at university, those MPs would be better informed and rather than parliament collectively demonstrating an ignorance of the subject and debates on the economy and its management would be better informed and enlightening.

Politics would have to change, Chancellors such as Rishi Sunack and the Treasury itself would have to adopt evidence based economics. Rishi Sunak could no longer quote the truths of the founding fathers as justification for his policies. In constructing economic policies real thinking would be required, as real answers to problems would be required. I look forward to the day when any politician is laughed at when they turn to the old economic pieties to justify there ill thought out policies.

* J.K.Galbraith would probably be horrified to know that I consider him the doyen of the economists who don’t know. I include him because he is one of the few economists, unlike many economists does not know the answer before he starts the investigation. He possesses no ready made answers.

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What skills does a good economist need?

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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.

How to spot a bad economist

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What cannot be doubted is that if a mysterious plague had wiped out all living economists twenty years ago, the world would be a better place than it is now. Economists despite their supposed understanding of the economy have consistently failed to predict any of the major crises that have occurred. Just before the crash of 2008/9 economists were speaking of a new paradigm in which the old rules no longer applied. The huge debt or credit mountains that had developed in the financial sector were no a cause for concern but a welcome development. It was evidence of the efficiency of the banking sector in creating credit to meet the needs of industry and consumers. Banks were at the forefront of the technological advance, an example for the rest of the business to follow. The new paradigm was of course no such thing, old fashioned credit bubbles had built up within the financial sector and would inevitably burst as they did causing a near melt down of the banking sector. There were a few economists that spoke against the new paradigm but the majority  were in favour of it. Since the few perceptive economist were ignored by governments it only goes to demonstrate that we would have been much better off without the profession of economists. What is most worrying is that economists have become cheerleaders for the worst economic practices and behaviours instead of being its critics. Very few economists wanted to spoil the party, most choose to go along with the partying.

As one of the few economists (letters published in the national media), who predicted the bust of 2008, I think the role to which I am best suited is to identify those traits in an economist which clearly identify them as a bad economist. While I am not in a position to advise ministers on the choice of economist, what I can hope is that my advice will get wider dissemination and over time and will eventually reach the political classes, so enabling them to make a better choice of economist to advise them.

A bad economist can be identified quite simply, they claim to have the answers, they just know. They never express any doubts ,they are unique in that they always know what will happen in the future. Usually they are one trick ponies, they  have learnt and rehearsed the arguments for their particular brand of economics and see no need to ever change their views. What these economists lacked was what I experienced, student’s on my economics course were pointed in the direction of  J.S.Mill in the 19th century philosopher, who argued for  the impossibility of there being a science of society and in particular a science of economics. His argument was that it was impossible to make sound predictions about what would happen in the future, as there were too many variables (people) who behave unpredictably, unlike the natural sciences where the subjects studied do behave in predictable ways.

The British Treasury as one of the doyens of economic forecasting has spent a century or more proving J.S.Mill correct. The Treasury has never produced one correct forecast about the future of the British economy. They at the best make predictions in line with what has been the trend of the past few years. The only accurate forecasts they make are those that are revised after the event, when adjustments can be made to the forecast on the basis of what really happened. Despite its massive  investment in technology the British Treasury has always been caught by surprise whenever a crisis occurs. It failed to predict the financial crash of 2008/9, the bursting of the dot com bubble in 1999 and the property crash of 1990.

Despite their record of failure the British Treasury has no hesitation about advising the government on economic policy. They never feel any sense of doubt and they have been the driving force behind the adoption of free market economics. They were in the 1980s advocating an end to security of tenure (be it home ownership or lifetime tenancies), they argued that there was a problem of accommodation blocking in the areas of economic growth, as people hung on to their accommodation denying them to those workers needed by the growing businesses. The Treasury believed security of tenure was the enemy of economic growth. They were one of the leading advocates in government that led to those policies that effectively led to the end of security of tenure for the majority of people. It was not so long ago that the Treasury were congratulating themselves on the success of their policies, as they claimed that insecure tenancy system of private rentals system had freed up accommodation for the large influx of the migrants from the European Union. The victims of the housing chaos, that is the young professionals and families being priced out of London would disagree.

The next criteria for identifying the bad economist is a wilful forgetting of their past errors, they can never admit that they have been wrong in the past. There are never any failures in their curriculum vitae. Treasury economists despite their mixed record move to senior positions in the finance sector, where the businesses that hire them foolishly believing that they are buying into their unrivalled expertise in economics.

Another of the criteria for judging whether an economist is bad or not, is do they over rely on economic modelling? Do they have an inability to speak in understandable English or do they rely on incomprehensible economic terminology to convince their listeners of  their expertise? When trying to sell a policy that the purchaser (the politician) themselves could have thought of themselves these economists use baffling economic terminology to dress up what is a very simplistic policy proposal.  I can never forgive the tutor who recommended a book on market economics written by an eminent Chicago professor of economics. A book that for all its use of difficult economic terminology taught me nothing that I did not already know. Not only that it was in hardback and cost far too much; however it was a lesson well learnt. I saw my role as an economics teacher to translate the economic texts I gave my students into comprehensible English. Close reading of the texts showed how authors would use economic terminology to cover up gaps in their knowledge and understanding. Now that I am retired I wonder if this use of unnecessarily complex language was not a deliberate ploy to hide their failings as economists.

One other criteria is does the economist sound like so many others in the profession? All to often rather than analyse a problem and make reasoned suggestions, economists will take short cuts and rely upon repeating what is the common stock of economic knowledge. If they repeat it in their reports they know that they are immune from criticism, as no other economist will criticise them for repeating the mantras from the economist’s creed. While the agreed understandings and beliefs of the profession are not quite the holy writ, no criticisms of it will be tolerated by members of the profession. In conclusion it can be stated that a bad economist is a lazy thinker, someone who relies on the knowledge of the herd, one who follows convention.

Einstein once said that to do the same thing over and over again and yet expect different results each time is the height of folly. This happens regularly at the British Treasury which  insists that public services should be put out to tender and run as private enterprises, each year the Treasury finds new sectors of the public service to be farmed out to the private sector. Most recently it was the prison service, individual prisons are now to function as private companies. These new prisons will be judged on there reoffending figures. Incomes for the enterprise will depend on reoffending rates, those with the best record for reducing reoffending will get the biggest bonus payments. Profitability will depend on their success at cutting reoffending.  The only problem is that human behaviour does not respond this profit and loss model in the way the politicians assume.  If an effective method of reducing reoffending had been discovered it would have been introduced to the system long ago, as it would have been the most effective of reducing crime and costs of criminality. What methods of reducing reoffending that have been discovered are expensive to implement and one of the criteria for the new Prisons Ltd is that they keep costs to a minimum. This cost minimisation criteria goes contrary to the demand to reduce reoffending. This demonstrates another criteria naive over optimism, it is seeing the solution to complex social problems as being the adoption of simplistic business models.

When I attended my first philosophy lectures I remember Professor Oakshot talking about the various philosophical models adopted in the past. One was that adopted in the medieval period  was to examine human behaviours from the perspective of a super human being, a God’s eye perspective on mankind. Obviously mankind was found wanting or to use Augustine’s phraseology human behaviour was all too often dominated by the lower appetitive instincts. If today such a super human judged mankind he would recommend the elimination of the tribe of economists. This action would bring immediate benefits to human society and if it did not bring heaven down to earth it would lead to human society becoming much nicer.

How to resist the unpleasant culture of Neo-Liberalism

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

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

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

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

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

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

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

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

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

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