Tag Archives: Nietzsche

Demonic or Nietzschian Economics

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

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Nietzsche is perhaps the most misunderstood of philosophers, he is remembered for the praise of the ‘blood beast’ of his declining years, not the insights of his philosophy in his early years. As a skeptic philosopher he criticised his fellow philosophers for failing to understand the subject the nature of the subject they studied, man. His most potent criticism that all grand philosophies were fallible as they went contrary to the nature of man. One of his most trenchant attacks was on the notion of free will, he demonstrated that so many acts of criminals were predetermined so to punish them as if they had freely committed a criminal act was wrong. Similarly I want to conduct a skeptical or Nietzschian analysis of economics

What I want to contribute to the study is ‘satanic or demonic economics’, a new reading or interpretation of economics. The devil or Satan offers a wonderful tool for explaining the true nature of economic analysis. While I prefer to believe that we as individuals have sufficient potential for evil within ourselves; I cannot deny the value of having a demonic figure to explain the evils committed by men. Previously I have written of economists adopting a devil substitute to explain the failure of the perfect economic system, the free market. What I have realised since then is that it is the economist’s failure to recognise the existence of evil that has lead them to blunder into creating the most inhumane of human sciences.

There is a novel which demonstrates all too clearly the problem with contemporary economics. That novel is James Hogg’s ‘The Private Memoirs and Confessions of a Justified Sinner’. Robert Colwan the anti hero of the novel fails to see that his companion and friend Gil-Martin is the devil. He is so blinded by his sense of self righteousness, that is his own sense of goodness, that he fails to see that Gil-Martin is leading him into committing acts that become progressively more and more evil, culminating in the murder of his brother. While James Hogg is poking fun at the intolerant lowland Scot’s Calvinists who would abolish fun if they had the power, his book contains a fundamental truth. Those who don’t acknowledge the existence of evil usually go on to commit evil, because they are blind to the existence of evil. The German bureaucrats who sent millions to the gas chambers could do so because their only concern was to make the German railway system run efficiently. The fate that awaited millions of Jews was irrelevant. What Bauman discovered about the behaviour of German railway officials could not unfairly be applied to the current generation of economists. They as with the German bureaucrats only want to make the system run efficiently, they have no concern about the consequences of their actions for their fellow men.

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Economists have always argued that their subject is a social science not a moral science. They claim that by excluding value judgements from their analysis they can offer the objective analysis which delivers the answers to the problems that bedevil mankind. What they fail to recognise by committing themselves to a self declared moral blindness they cannot recognise the inhumanity and evil of their language and practice. The only fair comparison I can make is the psychopath who is unable to develop human empathy because they have been damaged so severely by their dysfunctional upbringing that they are incapable of moral empathy. Economists similarly have so damaged by their study and practice of economics that they are also incapable of moral empathy.

The model that economists wished to emulate was that of the natural sciences. Its success had been due to the adoption of the scientific method and the exclusion of any value judgements that predetermined the answer. Scientific study had progressed little until religion stopped determining the answers to any scientific investigation. Bishop Usher had calculated that the earth was created in 4004 BC from his study of chronology of events listed in the bible. This effectively prevented the development of earth sciences until non-Christian scientists such as Darwin and Huxley demonstrated this was untrue as the earth evolved over millions of years. Economists wished to achieve the same standard of impartial enquiry that prevailed in the natural sciences. What they ignored was that economics is a human science and that if considerations humanity are removed from the study all that is left is a science of inhumanity. The consequences of which can be appalling.

One subject that has been a constant topic for study by British economists has been the low productivity of the British economy. By excluding any considerations of human welfare, they were able to come up with a number of ‘objective’ solutions. They identified the cause of low productivity as an under performing and dysfunctional labour market. There were too many restrictions on the use of labour which limited its efficiency. Employment protection legislation, health and safety legislation together with over powerful trade unions prevented its efficient use. What they saw was not a people who had legitimate rights as regards fair wages and a safe working environment, but a multitude of dysfunctional workers who needed to be subject to the harsh realities of the market to turn them into productive human resources. People are not people, they are the labour and they only right they should have is to be used productively. Fortunately for economists all governments since 1979 have seen the benefit of a utilitarian approach to labour. Employment protection and health and safety legislation have been so effectively emasculated that employers need have little concern about them impeding their exploitation of their workers. Trade unions have been so weakened that with a few exceptions they are of no concern to employers.

What has been created in Britain since 1979 is a low cost flexible labour force that is attractive to business. Consequently Britain has recorded one of the sharpest rises in employment in Europe during the economic recovery that has occurred since the crash of 2009. Labour is cheap to hire and easy to dispose of, so employers are willing to take on staff, knowing that they cost little and can be disposed of easily if the market takes a downturn. All this increase in employment has been at the expensive of productivity as its has lead to the growth of low cost industries, warehousing, call centres that require little investment as plentiful cheap labour is available. Cheap people rather than expensive investment. The misery of zero hours contracts, split shifts or low wages is of no consequence to the economist, as they are merely signs that the market is working efficiently in making good use of unemployed labour. What is most matters for them is that the employer able to use labour as cheaply or efficiently as possible.

Economists never speak of the need for fair wages, security of employment, good housing or free health care. As the value of the sense of well being from a fair income etc. cannot be priced so the
Its ignored. The economic calculus that is calculating the benefit derived from human activity can only calculate benefit in quantitive not qualitative terms. The economist has an opt out from moral judgements, it the market can make decisions about what people want and need, so such decisions about health care provision should be left to the market. However this ignores the dysfunctional nature of the market, as billionaires can pay more for their health care than can the poor, the market will provide excellent health care for the rich and minimal health care for the poor as the latter will make little money. Yet as economics is a subject devoid of morality economists would never be concerned with the poor being deprived of health care, as with the German railway officials human misery caused by their actions are not their concern.

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Lacking any understanding of morality economists are prey to a diverse number of Gil-Martins. that economists have no conception of morality, I mean public morality, they lack any conception of the common good. They are not lacking any conception of private morality,I’m sure many economists are good fathers and mothers.) These Gil-Martins are the wealthy businessmen and large corporations that endow university professorships or fund think tanks. As economists lack any moral sensibility they are easy to corrupt, promoting schemes that will benefit their benefactors. While there are numerous economists advocating the benefits of free enterprise, that is a lack of regulation which benefits the large corporations, as treating people well costs money, there are few that argue the benefits of a strong regulatory state.

Perhaps it would be wrong to call economists the ‘devil’s spawn’, such harsh language is not suitable for these civilised times. Yet economics is the ‘demonic science’ as the policy recommendations of its practitioners always increase human misery. Can anybody recall any economist ever speaking out for fair wages or security of tenure for private rental tenants. In fact the latter is anathema to economists as they believe that security of tenure impedes the mobility of labour as people are reluctant to give up the security of their existing tenancy for uncertain accommodation prospects in an area were there is work. If secure social housing tenancies are destroyed in Newcastle, there will be nothing to prevent the unemployed in Newcastle moving to jobs in the prosperous Thames valley, as they will be swapping one insecure tenancy for another. Ever since its inception economists have been campaigning against the National Health Service (NHS) as its providing of free care care at the point of use, which is contrary to the fundamentals of good economics. Free service encourages over use they claim,* if a service is priced people will only use it if they really want it, that way the correct distribution of resources is achieved as only those willing to pay for a service will use it. Services free of price are used wastefully, therefore the NHS must go. Economists are like so many Robert Colwans plotting the demise of a much loved health service, rather than a much loved brother. From the point of view of this theologian any human science that lacks any conception of the good can only practice evil. This is why using the concept of the devil as an explanatory tool is so useful in understanding contemporary economics, as evil infects all its economic analysis, medieval Christians were wiser than use in seeing the devil constantly at work in society.

*It is intriguing that economists tend to view ill health as a product of free service revision at not a risk that occurs naturally to human beings.
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Osborne-oenomics explained

Economics, Politics, society, , , , , , , , ,

Nietzsche’s dictum is that philosophers are in error because while they write about man they never study real man, only their idealised construction of him. They construct ethical systems but never look at the source of those ethical systems, man. He demonstrates how the concepts free will and moral responsibility are of little use in explaining human behaviour. His psychology demonstrates that much of human behaviour is pre-determined, it is their physiological makeup that determines people’s actions not rational thought. Criminal behaviour is more likely to derive from an individual’s biological drives which they cannot control than from conscious decision making. Commentators would do well when commenting on George Osborne’s economic policy to observe Nietzsche’s dictum. Most would see his policy being derived from his reading of the Neo-Liberal commentators of whom they assume he is familiar with. This ignores two key facts, one is that he studied history and probably had but a nodding acquaintance with Hayek etc. and that he is a son of a baronet and it is this latter fact which provides a key to understanding George Osborne.

The baronet is at the lowest level in the aristocratic pecking order and being aware of their nearness to the masses, they have always been the most zealous in defending their privileges of social rank. They are all too aware of what a fall from social grace means. It is these people who have provided the backbone of the Conservative party. The defence of their position often led them to developing the most reactionary of principles. Any improvement in the lot of the servile classes is a threat. A guest at the dining tables of the baronetcy would be aware of the servant problem. The insolence of the lower orders making them such poor servants and the difficulty of recruiting servants as most of the lower orders rejected a life of servitude.

The greatest threat was progressive taxation, particularly taxes on capital. The latter threatened their holdings of wealth and they saw around them the break up and disappearance of many large estates. The social order of which they were part seemed to be disappearing. Since social democracy is dependent on progressive taxation to fund its activities; they hated social democracy as it was that progressive tax system that threatened their existence. They also hated the public services which made such taxation necessary. One service that attracted their ire was the National Health Service. Why should they make such a large and disproportionate contribution to a service that they use but only occasionally. As they would resort to private health care so as to avoid contact with the masses. Is it at wonder that coming from such a background the guiding principle of all George Osborne’s policy is the destruction of what remains of the social democracy of former years? The privatisation and destruction the NHS being the iconic government policy that by which it will be known in history.

Self interest lies behind the desire for a small state, rather than the desire to free enterprise from the the burdens and regulations of the nanny state. A small state does not require large tax revenues to fund its activities. Any policy which shrinks the tax burden on the better off will meet the approval of a baronet’s son. Is not likely a man from his cultural back ground would want to cut taxes? It is no coincidence that one of the first acts of this government was to let Vodaphone of it’s £6 billion tax bill and it is now letting the self same company avoid tax on the multi billion profit from the sale of its shares in Verizon. Tax avoidance is no longer an activity to be discouraged by government but one to be encouraged by the Chancellor. He has decided that multi-nationals that have off shore subsidiaries can channel any profits they make in the UK through these subsidiaries to avoid tax.

One cannot underestimate the impact of the culture of the baronetcy on George Osborne’s thinking. Some members of this social grouping in the heyday of the Social Democracy feared their extinction through a loss of their wealth and position because of what they saw as a penal tax system. Growing up in the sixties on a country estate with family friends in service; I could not but be aware of how this group saw the state as the author of their misfortunes. Any society will suffer periodic crises and the UK society suffered from an economic crisis in the 1970’s culminating in the extraordinary high annual inflation rate of 1974 which topped 27% . It was the OPEC inspired rise in petrol prices which largely caused this spike in commodity prices which caused the high level of inflation. Taking advantage of the weakness of the state in this crisis, the political right forced/persuaded the government to adopt Neo-Liberal policies that would ultimately lead to the demise of the social democratic state.

It is probably no coincidence that the doyen of Neo-Liberals Joseph Schumpeter was an aristocrat. Neo-Liberalism as espoused by George Osborne is the guise through which the baronetcy and others wreaked their vengeance on social democratic state.

The Austerity Myth or the Great Lie

Economics, Politics,

The Austerity Myth or the Great Lie

I apologise for any typo’s as it was written in anger after George Osborne’s speech

There is a consensus amongst the governing classes and that the overriding crisis of our times is that of excessive government debt. No matter what the price to be paid in terms of rising unemployment, increasing poverty, there is not too a high price that can be paid for eliminating that debt. However unlike most myths which have some truth in them, this is one founded on the ‘Great Lie’. The real crisis that of over indebted banks and the high price that is paid to keep them in existence. In Europe and the UK that price is large scale unemployment amongst the young, in the UK 1 in 5 young people are unemployed and in Greece it is 1 in 2. Europe is sacrificing the futures of its young to preserve the wealth and status of a particularly unpleasant group of people, the bankers and the financial elite.

The media constantly reports on the growing national debt which had risen to 85.8% of GDP in March 2012. With an economically illiterate media, political elite and population it is easy to run scare stories about the dangers of such a large debt. The fact that this figure is not historically high, is temporary and the fact that high levels of such debt can coincide with periods of high growth as well as low growth is lost in a miasma of media untruths. What is never mentioned in the media is the high level of indebtedness of the UK banks. Paul Tucker in 2009 brought out a report suggesting that the debts of the banks equalled 5x the size of UK’s GDP, more recently Morgan Stanley suggested that figure was 6x the size of UK’s GDP. Critics have rubbished the latter figure suggesting its only 2x GDP. Since the banks have not ceased the reckless behaviour they indulged in before the crisis, I suspect a figure of 2x GDP is too low. What has happened is that the banks have successfully deflected the story from being one about the problem of massively over indebted banks to a focus of the less significant problem of government debt.

What is most surprising is that the best educated parliament in our history (a legislature dominated by graduates many with good degrees from the best universities) has never questioned this narrative, they have accepted the bankers story as the true one. There are interesting parallels with the past. Germany of the Weimar Republic had the best educated population, yet in fell prey to the follies of Nazism. What is interesting is the that intellectual elite in both countries fell for a brutualist philosophy, which derided the current morality of society as being a bar to progress. In Germany it was the philosophy of ‘sturm un drang’ and the moral scepticism of Nietzsche’s superman philosophy and in England the ‘Neo-liberalism of Hayek and Alyn Rand. What both taught was a contempt for the masses of humanity and a culture that pandered to their needs, a culture of weaklings. The superior beings who should dictate mankind’s future were Nietzsche’s superman, the ‘blond beast’ or Alyn Rand’s billionaires. Both of these types of super beings were denied their potential by a culture that denied them their place at the forefront of humanity. Rand even advocated the mass starvation and death of the millions of useless humanity. What these philosophies created was an ethical waste ground, where a mass murderer could become leader or one in which predatory financiers could thrive by looting businesses of their wealth, making thousands unemployed and yet be lauded as successful kings of finance. What the Nazis wanted was to remake their nation as a dynamic state which under the leadership of the Aryan supermen, would come first in the competition between nations. Neo-liberals similarly wanted to revitalise English culture by destroying the welfare state and the culture of dependency it engendered. For the Germans the superman was the SS Officer and for the Neo – Liberals it is the financier, both would remake society the first through violence and the second through financial muscle. Since the British Parliament is largely drawn from the intellectual elite, who see financiers as the saviours of British society they could not comprehend why the banking system failed, they were all too willing to put it down to a once in a life time crisis caused by events external to the UK and not the greed, incompetence or recklessness of bankers. Is this not why George Brown, despite all the evidence to the contrary, engaged bankers to direct the financial recovery?

The state cannot be absolved of all blame for the crisis as the government during the Chancellorship and Premiership of Gordon Brown did its utmost to encourage the speculative frenzy in the financial markets. Such frenzy provided a lucrative source of revenue through taxes such as s tamp duty and capital gains tax. Not the first government to become over dependent on tax revenue from such a volatile source as gambling. Economic history is the most neglected subject in the curriculum of our university educated elite.

What did the banker’s want most of all? To carry on as before and to avoid that what should happen in any crisis, the closure unsound businesses of which they were the most prominent example. What classical economists taught was that recessions were an economic Darwinism that weeded out all the weak businesses leaving only the strong surviving. In this crisis the weakest of the weak were the banks. What they had to avoid was paying the price of their recklessness, that is bankruptcy. Fortunately for them the government of UK would do all that was necessary to prevent that happening. The National Audit Office estimated that the government had paid £123.93 billion to bail out the banks and at the height of the crisis had stood guarantor for banks liabilities to the tune of £1.2 trillion. In 2009 the value of GDP was £139.26 trillion, so the UK had guaranteed debts equal to 86% of GDP or National Income. In the unlikely event that all those liabilities had to be met UK plc would have become bankrupt.

What was it that would enable the banks to remain solvent and continue as before? Low interest rates, what is called a cheap money policy. The many loans they had given out to borrowers to finance their speculative activities in the property or asset markets could only be financed by those borrowers if the interest they had to pay on these loans was small. As gambling on future speculative gains meant that what mattered, was not the current return on their investment, but the large sum to be made selling on the business at an inflated price. When the market stopped moving upwards such borrowers were in trouble, as they had borrowed far too much to buy these businesses and falling sales meant they had difficulty in financing their loans. In addition in a depressed market they were unlikely to find a buyer a d recoup their initial investment. One such example was Guy Hands who took over EMI hoping to reorganise it and sell it on at an inflated price. The market for EMI’s products collapsed and Guy Hands had difficulties in financing his borrowing. Eventually he disposed on the various parts of EMI to other private equity firms at a loss.

It was a similar situation in the property market, as there individuals and property developers had over borrowed on the anticipation of continually rising prices in the property market, as a large loan could easily be paid off by selling the property at an inflated price. since between 70 and 80% of bank loans are to the property market, financial catastrophe threatened.

Whether consciously or not Mervyn King was the saviour of the banks. He presided over a cheap money policy at the Bank of England, the Bank of England rate fell to an unheard level of 0.5%. Since the Bank of England rate was the base rate on which all lenders based their interest rates, all interest rates would fall in the market. The rationale for this policy was that low interest rates would make it cheap for businesses to borrow and this would encourage economic growth. Also low interest rates would enable over indebted British households to continue to pay their mortgages and avoid eviction. What he knew but did not say, was that a cheap money policy would be the saviour of our over indebted banks, who would not face a collapse of their loan books.

However it is not sufficient just to set the rate; there has to be a means by which all other financial institutions can be persuaded to follow that lead. The government did this by committing itself to end its spend thrift ways. A little digression is needed here bank rate is the rate of interest at which the government sells it borrows money and lenders will only lend money at low rates if they think it is a sound investment. As history shows when markets judge governments as unsound borrowing rates will be very high. Essentially they want to know that the government will have the wherewithal to repay its loans. Consequently the Labour government announced plans to cut its budget deficits. The market was satisfied and rates kept low.

This is a very simplistic account of the current situation, but it without parody summarises the thinking of the bankers. When the IMF or World Bank lent funds to countries, they inevitably only lent money to governments if they cut spending. In reality the cuts imposed on these countries invariably did little to help them out of the mess they were in, all these countries gained was the finance to pay off some of their foreign creditors. Surprisingly the cuts they imposed always seem to benefit foreign investors who could invest in the newly privatised state businesses. The blue print for aid was always drafted in a way to benefit rich foreign multi- national companies. What was always evident was has the self interest of the foreigner lenders motivated their actions.

Similarly with the City of London, they were able to have their cake and eat it. The banks and the city traders benefitted from low interest rates, as it meant that they had cheap money which made it easier that ever to speculate, as if money cost next to nothing to borrow, the costs of speculation were minimal. Those potentially rotten assets held by the banks would never be revealed as such, because the rates of interest were so low, that even the most indebted speculator could finance his borrowings. On top of that the government initiated a huge programme of quantitative easing which gave the banks vast amounts of practically free money, at present it totals £375 billion. In addition the programme of spending cuts have given them new opportunities to make money, as was accompanied by a programme of privatising state assets or services. One such example is the forthcoming privatisation of the probation service. There are fees for arranging privatisation and endless consultancy fees for advising on ever ingenious ways to scale back the size of government. Perhaps without too much exaggeration what Harold MacMillan’s said in 1959 about the UK applies to the banks, they ‘have never had it so good’.

There is a much darker side to the picture which is never discussed, except obliquely. If the economy picks up the demand for money will rise (money required for investment in new equipment, stocks etc.) and so interest rates will rise. Interest rates are low only if the demand for money is low, that is supply is greater than demand. Banks are continually claiming that there is no demand for loans from business, so the supply of money exceeds demand. While rates are low there is no chance of the insolvency of the banks being exposed, as borrowers won’t be forced to default on their loans. How conscious is the demand amongst bankers for demand in the economy to be suppressed is hard to tell. Certainly the wiser heads amongst them realise a depressed economy works in their interest. Bankers certainly represent an influential voice in government. What ever the self knowledge of bankers, they all know it is in their interest to continue the policy of cheap money, even if it means keeping the economy in a state of continual depression.

One of the wisest of the current generation warned of the dangers of growth. In a report published on the 27th June 2013, Mervyn King spoke of the dangers of increased growth even if his language was very guarded. He said increased economic growth would lead to an increase in interest rates, which require over indebted households to find additional sources of income to fund their mortgage repayments. What he did not say was that there would be the risk of increased insolvencies among indebted households and businesses. Depending on the level of insolvency this could have very serious consequences for the banks. His solution is to reduce the restrictions on banks so they would have more money at their disposal which could then be used to finance another speculative asset boom. Rising prices in the housing market would offset the rise in interest prices. He never spoke about the speculative boom but its safe to assume that this is what he meant.

Having written far more than I intended, what I have demonstrated is that the current policies of the government are of benefit to only the banks and the City of London. The whole country is paying the price for the follies of the super rich (aided by the naïveté of government). The banks can only remain solvent if the UK continues almost indefinitely in a state of semi depression or if the UK indulges in yet another frenzied housing and asset boom. The greatest losers are the young, years of depression means reduced job opportunities and lower incomes, continued job insecurity and for many long periods of unemployment. Another lost generation similar to that of the 1920 ‘s when the City of London demanded a policy of financial retrenchment which served its interests and those of nobody else. The alternative is hardly any better, economic growth generated by another speculative boom, which will lock millions out of the housing market and inevitably end in a speculative bust.

One final point should be made if banks had gone bankrupt had in 2009, the greatest losers would have been the super rich. It was they who had invested millions in speculation. There would have been a repeat of 1929, when in America failed financiers in despair threw themselves out of windows of Wall Street. The lesson of the years since 2009 is that there is never too high price that the super rich expect the rest of us to pay to protect their wealth.