Tag Archives: Thomas Malthus

Why our times desperately need the economics of optimism

Economics can be categorised and divided in a number of ways, but one the most fundamental divisions in economics is between that of the economics of optimism and that pessimism. Quite simply the first tells you how to do things and the second why should not attempt to do things. The former is the economics of change, the latter is the economics of no change. Usually the first is associated with left of centre politics and the latter with right of centre politics. Possibly the best example of the latter is the current policy of austerity practised by the Conservative government. They can say no too many desirable things such as more spending of health care on the grounds that there is no extra money to finance such spending. In the words of the Prime Minister Mrs May,  there is no ‘money tree’. They prioritise sound finance over other social goods. In contrast the social democrats or socialists would ask the question, how can we raise more money to finance increased spending on health.

Usually the economics of pessimism holds sway in economics, so I will explain that first. One of the earliest exponents of this school was the clergyman Thomas Malthus. The originator of the theory of diminishing returns. He stated quite simply that there was a finite quantity of productive resources and if the population increased indefinitely the same quantity of wealth would be divided between more and more people and so each successive generation would have less than the previous. There was he believed a  saviour which prevented the mass impoverishment of all, a natural system of checks and balances that kept the population numbers in check. These were disease, famine and war.

Today’s economists of pessimism believe that there is a similar limit on to the good things in life and for the sake of the well being of society the poor must be denied a fair share of these good thins. There is just not enough to go around.  Far better that wealth is restricted to the deserving few, the wealth creators, without whom we would all go hungry. These are the billionaires that the popular right wing novelist  Ayn Rand lauds in her books. Wealth is the just reward for their zeal and enterprise. She does not deny that the masses deserve some share of the  wealth. However all they are entitled to are the ‘crumbs’ that fall from the rich man’s table. What these economists call the trickle down theory.

In the simple story told by Ayn Rand, if the super rich were prevented from enjoying their obscene wealth, they would cease in their work of wealth creation. In one of her books she describes how the billionaires disappear from society and go into hiding. Without their enterprise societies collapse and thousands of the poor starve to death. Only when the billionaires cease their strike do things return to normal and the surviving poor are now able to benefit from that minimal income that the generous billionaires think they deserve.

There is interestingly another strand to this economics of pessimism, traditional Catholicism of the Catholic ultras. This although a Christian philosophy of life and economics, is in practical terms is little different from that of Ayn Rand. Mankind they believe is corrupted by original sin and human society is but a corruption construction made by sinful man. Any attempt to reform or improve this damned and corrupt society is doomed to failure. Only God has the power and knowledge to create the good society, or heaven on earth. Any attempts to redistribute are income doomed to failure by the very nature of this dysfunctional society. They are likely to have the unintended consequence of making things worse for all as increased taxes to will add to the costs of production so making businesses inefficient so reducing output making all poorer.  All that is permissible is individual acts of kindness or charity. In a corrupted society inequality is inevitable, as are the vast inequalities of wealth and income. Changing or improving a society of people damned with original sin is impossible and should not be attempted.

Although the economics of pessimism has usually been the dominant mode of economics, there was a brief period during the 1950s and 60s, when the reverse is true. Usually this philosophy is associated with J.M.Keynes, but there were others such as Michael Polanyi. Briefly economic practice was directed to making and preserving the good society or the welfare state. Economic policy making was intended to  five combat what William Beveridge defined as the “Giant Evils” in society: squalor, ignorance, want, idleness, and disease. Perhaps for the first time in its history the economy was directed in a manner which benefited the majority of people rather than the lucky minority.

Then when the economic crisis of the 1970s hit the Western economies it was easy for the economists of pessimism, to demonstrate that the crisis was caused by the profligate spending urged on governments by the economists of optimism.   Since then the pessimists have prevailed.

Now when faced with a crisis in Western economies, economies that fail to generate sufficient employment and income to meet the needs of their people, government policy can be summed up as either ‘can’t do’ or ‘won’t do’. As the governments have shown little interest in the welfare of their peoples, populist movements have developed. Movements that threaten governments with their ideology of economic pessimism. European right wing populist movements with the exception of the British, are threatening to intervene in the economy to protect and maximise the welfare of the people. If governments persist with their policies of ‘can’t and won’t do’, they will be replaced by those that can. What the populists of both the right and the left espouse is an economics of optimism or more simply the economics of ‘can do’. While some doubts must be expressed about the politics of the populists, what they do believe is that governments need an activist economic strategy. If the National Rally of Marie Le Pen ever attain power they will find that they need to intervene in business to protect the welfare of the people of France. Employment protection measures will be re-introduced, employers will find it impossible to pay less than a living  wage. Taxes will be increased on business to finance health and social care. Policies that are normally associated with the left. Societies may become less free and more intolerant but people will accept that if it means a better standard of living. What is forgotten is that the popularity of Hitler in Germany came improving the material well being of the German people. In return they tolerated the cruelties and barbarism of the Nazis.

Why economists would benefit from a little Christian sensitivity

Why do economists need a Christian sensitivity? The obvious answer would be to instil in them a sense of compassion, while the suffering caused by economics does not compare to that caused by the most brutal of political ideologies it is on the same suffering causing spectrum. The spirit of the Reverend Malthus has always inspired economists and never more so than today. Population growth he believed would always tend to outstrip the resources needed to food, clothe etc. the ever growing population. Therefore his first conclusion was that there must always be the poor, as there was never sufficient wealth in any economy to enable all to have an adequate standard of living. He also saw disease, famine and war as the saviours of mankind as they kept the population within bounds. While economists particularly those in the British Treasury have persuaded politicians of the need for the first, they have not yet tried to persuade of the need for the second. There is another answer and that is economics is one of the best examples of arrested thinking, so common in contemporary Britain. What concerns me is the immaturity of thinking of contemporary economists, their overly simplistic reasoning.

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The inspiration for my reasoning is Kierkegaard (Fear and Trembling), in that book he bemoans the practice of Christianity in 19th century Denmark. He writes that the Christian intelligentsia regarded an afternoons reading as sufficient to acquaint them with the essentials of Christianity. This he compares unfavourably with the Christian Fathers who spent a lifetime trying to understand Christianity and who even at the end of there life said their understanding was limited and flawed. Just like Kierkegaard’s Christian intelligentsia economists suffer from the same intellectual arrogance. They just know, they have at hand the answer to all society’s problems. The comment that the answer was worked out on the back of an envelope is intended as an insult but with economists as a statement, the truth of economics can be distilled down to a few sentences that could be written on the back of an envelope. The best metaphor that describes contemporary economics is that it arrested thinking that has never really progressed beyond that if the schoolboy. This school thinking is demonstrated in the words of the Shadow Chancellor, who spoke with glee when he said his cuts to public spending would leave the public sector reduced to its bleeding stumps. As with a schoolboy no thought of the consequences of his actions for the people of an austerity hit economy. Military terminology can be applied as for the modern economist the people are unfortunate collateral damage, who suffer for some greater good.

Economics unlike contemporary theology is a closed subject, the truths are already known and its the work of the economist to apply those known truths correctly in their analysis of any given problem. In a closed subject such as economics, no new thinking is needed because all the fundamental truths have been discovered, all that is required is some tinkering to achieve perfection. Theology by contrast is an open subject, all the truths are not known and those that are are but imperfectly known. It would be ridiculous for any theologian to claim to know the mind of God, yet Christianity has been a closed subject many times in the past, when it claimed this knowledge. It has an unfortunate past record of persecuting and killing those who did not accept the acknowledged truth. Galileo Galilee was silenced by the church for challenging the prevailing orthodoxy, that the earth was the centre of the earth, by the simple expedient of showing him the instruments of torture. Unlike my predecessors as a theologian I claim to know little about God, I am a negative theologian a theologian who admits that God is unknowable. However this does not mean negative theologians have no knowledge of God. They have knowledge of the presence of God in human society, the means by which the unknown makes themselves known. They can glimpse aspects of God’s nature and explain it to others. The aspect of God that I know is the good, the good that characterises all good actions. Good can never be explained except through good actions and as a Neo-Platonist I believe that within all these good actions, there runs an indefinable good. It is a good I know but whose essence I can never adequately explain. All I would claim is that I know something of God’s nature as in is known through the medium of human existence. I am looking through a very dark glass which obscures most of the truth, what a much better theologian than myself called the ‘cloud of unknowing’. What I do know is the limits of my knowledge. I only know a little of one aspect of God’s nature and I shall spent a lifetime trying to develop that understanding.This is unlike an economist who does know and they even know what forms of economics are in error, something I would never claim about other religions. To paraphrase Uriah Heep, I am ever so humble, whereas the good economist possesses the arrogance of truth.

A negative theologian such as myself is keenly aware of the limitations of their knowledge, whereas all economists are positive theologians, who are aware that they know everything and have little if anything to learn about the world. Whereas the truth is the opposite the theologians have spent centuries studying the nature of God and the few truths they know are greater than the imagined truth of economics. Economists have discovered one economic truth, the market and having achieved that they think they know all economics. What they need instead is the perspective of the negative theologian, which one of ignorance. The truths of theology are but a small part of the truths of Christianity, and therefore they are open to any approach that might shed new light on the ultimate truths. Economics needs similar enlightenment it needs to seek new ways to go beyond the few truths it has discovered. When doing a thousand piece jigsaw I always try to fit together first the pieces that make up the edge of the jigsaw and give it its shape. Having put together the outline it is tempting to think that the main task has been done, yet the jigsaw remains a hollow square, with most of the content missing. Economists are in the same position they have some awareness of the outline of the economy, but they are largely ignorant of its content. The pieces that make up the content are missing from the jigsaw economy. Only arrogance prevents them from seeing the truth. What economists lack is humility, if they acquired this very Christian virtue the practice of economics would improve immeasurably.