I said that in this book I’d be talking to you about the economy, but you’ll have noticed by now that it’s impossible to talk about the economy without talking about politics.
Prologue
But books that popularize science are important in a world where the president of the United States wages open war against it and our children eschew science courses. Cultivating a broad public appreciation of science throws a protective shield around the scientific community that must produce the experts society needs. In this sense, the small volume here is quite different from those books.
As a teacher of economics, I have always believed that if you are not able to explain the economy in a language young people can understand, then, quite simply, you are clueless yourself.
Following swiftly on the heels of another book, Adults in the Room, which was exceptionally painful to write, documenting as it did the traumatic events of 2015, reworking this book into its English incarnation has been therapeutic: an escape from the trials and tribulations of one caught up in the vortex of a collapsed and sinking economy. It has allowed me to return to a long-lost self who once wrote in peace and quiet, without the constant assaults of the press, doing what I have always loved: seeking ways to disagree with myself in order to discover what my true thoughts are.
and novelist Margaret Atwood’s Payback, which I recommend unreservedly as perhaps the best, and most entertaining, book ever written on debt.
1 Why So Much Inequality?
More recently you asked me, ‘Why so much inequality, Dad? Is humanity that stupid?’ My answer didn’t satisfy you– or me, for that matter.
The only reason humans learned to cultivate the earth was that they were starving. Once they had hunted down most of their prey with savvy hunting methods, and multiplied in number so rapidly that produce from the trees was insufficient, humans were forced by dire need to adopt methods for cultivating the land.
The answer is: by cultivating an ideology which caused the majority to believe deep in their hearts that only their rulers had the right to rule. That they lived in the best of all possible worlds. That everything was the way it was destined to be. That the situation on the ground reflected some divine order. That any opposition to them clashed with that divine power’s will, threatening to send the world spinning out of control.
And why does this matter? Simply because African societies that developed agricultural economies (current-day Zimbabwe, for example) found it much harder to expand, since their crops didn’t travel well, refusing to take root further north, by the equator—or even worse, in the Sahara. On the other hand, once the peoples of Eurasia discovered agricultural production, they expanded west or east almost at will. Their crops (wheat in particular) could be planted further and further afield, forming a single fairly homogeneous farming realm from Lisbon to Shanghai. It was the perfect terrain on which to mount invasions—with one farming people hijacking another’s surpluses and adopting their technologies– and to fashion entire empires.
Our minds automatically equate ‘I have X’ with ‘I deserve X’. When our eyes fall on those who lack the bare necessities, we immediately sympathize and express outrage that they do not have enough, but we do not for a moment allow ourselves to think that their deprivation may be the product of the same process that led to our affluence. This is the psychological mechanism that convinces the haves and those in power (who are usually the same people) that it is right, proper and necessary for them to have more while others have much less.
Don’t be too hard on them. It’s incredibly easy to convince ourselves that the order of things—especially when it favours us—is logical, natural and just.
2 The Birth of the Market Society
Just as my dad used to do to me when I was young, I turn to you and start explaining in scientific terms why the sun appears red as it disappears behind the horizon. Your moment is ruined.
The sunset. Your annoyance at me. Paris’s jokes. The joy of diving into the sea just because Captain Kostas asked you to. This is the stuff of your summer’s joy. By definition, they are ‘goods’—the opposite of ‘bads’ such as the feeling you get when a friend is hurt, when you have to do boring homework, when you feel lonely or uncertain about life. Now notice the great difference between these goods, which fill life with a deeply satisfying happiness, and the goods referred to in economics—the stuff that you find on the shelves of shops, that are sold on Amazon, that the TV keeps insisting you need.
This of course does not necessarily mean that the world was a better, more ethical place. For centuries if not millennia, women were given the worst tasks within patriarchal, sexist households, not to mention the serfs and the slaves who did all the drudgery in real or virtual shackles. The very fact that most work, most production, took place within the confines of the extended household gave rise to the word oikonomia, which comprises two words: oikos (‘household’) and nomoi (‘laws, rules, constraints’). This is the etymology of ‘economy’, which literally means something like the ‘laws of running, or managing, a household’.
For much of human history, a household economy mainly produced goods, but only occasionally produced commodities.
Today there is hardly a castle, painting or yacht that won’t be sold if the price is right. In the triumph of exchange values over experiential values, as societies with markets evolved into market societies, something else happened: money was transformed from being a means into an end.
3 The Marriage of Debt and Profit
That’s why I’m telling you that the story of Faustus and Mephistopheles is no fairy tale; it marks a painful moment in human history, the moment when debt and profit partnered up.
4 The Black Magic of Banking
‘From thin air!’ I know: however often I may have used this expression, you will continue to find it weird, puzzling, unsettling. Most people, if not everyone, feel the same, and many assume that this is a new phenomenon—that before the technology arose which allows bankers and governments simply to type extra numbers on their digital ledgers, money was something more real, more tangible, more honest. This is a badly mistaken view.
What is, however, terribly modern and only true for market societies is the fact that private bankers and not just the authorities now have the same privilege of conjuring up money from thin air as well.
But people forget that market societies survived the crashes and the slumps of the nineteenth century only because the law was changed to ensure that not all debts are sacred. Why was this done?
the law had to be rewritten so that if a business went bankrupt it was only the property belonging to the business that was lost; the personal savings, home and belongings of the person who ran it were not confiscated. This is what came to be known as limited liability. (It is something of an irony that entrepreneurs who own companies should be allowed this protection from the bailiffs while little people who do not own companies are not.)
And yet, when a crash occurs brought on by their actions, those who have delivered the fieriest of speeches vehemently opposing substantial government intervention in the economy suddenly demand the state’s aid. ‘Where is the government when we need it?’ they yelp.
Seen from this angle, the state has always provided the rich with a magnificent insurance policy. And the rich have returned the favour by doing all they can to avoid paying their premiums.
Given that the rich refuse to cough up the kind of taxes that would make government borrowing unnecessary, the state issues bonds and ‘sells’ them to banks and rich people in order to pay for the things that keep the whole show on the road: roads, hospitals, schools, police and so on. By spending this money on its various projects—buying supplies, paying salaries—the government directly boosts the whole recycling process of the economy from which everyone benefits, including the banks.
You can begin to see why public debt is something much, much more than ordinary debt. It is a manifestation of our market society’s power relations, the necessary response to the refusal of the rich to pay their share. It is also a shock absorber that allows accident-prone bankers to avoid many of the major mishaps that would otherwise occur in its absence. It is like an elastic band holding everything together, capable of stretching during the bad times to prevent the system from breaking.
5 Two Oedipal Markets
Eventually completely disillusioned, he wrote to me in Australia, to where I had recently moved from the UK, telling me, ‘The worst thing that can happen to a person is to become so desperate that you decide to sell your soul to the devil only to discover that the devil isn’t buying!’
Nothing adds more insult to injury than blaming the victim for their victimhood. It is the favourite tactic of the bully and one that women have suffered for aeons.
Setting aside the intolerable meanness of such arguments, they contain a serious flaw in practical, objective terms. To understand why, we need to differentiate between the cases of Andreas selling his house and Wasily selling his labour.
But if Wasily and other jobless people were all to drop their wage demands and were prepared to work for pennies, there is every likelihood that the result would be even fewer jobs available.
6 Haunted Machines
We may no longer chain children to factory looms, but just as every employer is forced by competition to adopt the latest innovation, so most of us feel chained to our technology, increasingly harassed by the need to keep pace with its demands.
The Luddites are among history’s more misunderstood protagonists. Their quarrel was not with the machines themselves, even though they wrecked quite a few of them; they were opposed to the fact that so few owned the machines. It was the social arrangement not the technology they objected to.
Judging by the continued existence of sweatshops at the same time as futuristic robotic factories, Marx seems to have been right, at least in one respect: our market society’s particular take on technological innovation is not just a question of replacing workers with robots, it also involves mechanizing human workers when their wage makes them more attractive than robots.
And here we encounter another irony that should provide some hope for humans in the race against machines. Employing humans always comes with the advantage that workers, unlike machines, recycle their wages, however small they may be, helping to ensure there is a market for the T-shirts and other products they assist in producing. By the same token, if those wages fall– as happens when work becomes more mechanical and less skilled– there will come a point when they are too low to support the sales of the goods they help produce.
On the contrary: resistance is never futile!
7 The Dangerous Fantasy of Apolitical Money
In the POW camp it was the Red Cross which was in control of the ‘money’ supply, although their staff probably knew nothing about any of this. They simply delivered what goods they could to the POWs, going about their humanitarian work without a thought for the camp’s economy. In this sense the ultimate authority that ruled over the camp’s money system was genuinely impartial.
Alas, in our market society, this is far from being the case.
and yes, it was and remains mostly men who have stuck their snouts into the common trough.
If money were to be depoliticized, if its supply were to be separated from the world of politics, then we can now see that all of the following decisions would have to be made independently of politics: how much government spends and on what; how much tax the state collects and from whom; what bankers should be allowed to get away with; how to deal with bankers when they go bankrupt. To the extent that these decisions are the very definition of politics, then they can be undemocratic if they are taken by the oligarchy, but they can never be apolitical.
Once more let me remind you why money in Radford’s POW camp was apolitical: because its supply came from an independent source, the Red Cross, which did not know it was providing Radford and his fellow POWs with a currency. Everywhere else the authorities in control of the money supply know full well the power they have over our economy. In such a position, given that they know the likely consequences of their decisions, the question is not whether they should act dispassionately– they cannot– the question is whether they should act in the interests of the many or the few.
What Bitcoin supporters would not like, however, is what I am going to say next: that money can be kept separate from the state and from the political process leading to the formation of our governments and their policies is a dangerous illusion.
‘No,’ your grandfather said. ‘We shared whatever packages each of us received. Once, despite the fact that I didn’t smoke, I asked my aunt to send me cigarettes. As soon as I received them, I passed them on to others who smoked without expecting anything from them in return. That’s how it was. We helped each other out.’
8 Stupid Viruses?
I might even go so far as to say that he’s being particularly lenient on us. After all, there are some viruses that do not destroy their host cells, whereas we seem wholly intent on destroying our host environment. We’ve driven plants and animals to mass extinction, destroyed two thirds of the planet’s forests, created acid rain that poisons its lakes, eroded the soil and dammed or drained rivers completely, pumped our atmosphere full of carbon dioxide, which is acidifying our oceans and killing its reefs, melting the ice caps, raising sea levels, destabilizing the climate and endangering entire peoples. We’ve so jeopardized the biosphere, our only refuge, that we resemble—and in a literal sense actually are—astronauts who poison their own oxygen supply. Who can doubt that Agent Smith is right?
The Great Barrier Reef to the continent’s north—formerly the world’s largest living structure—is now dying.
If this is not a prime example of orchestrated stupidity I do not know what is.
I said that in this book I’d be talking to you about the economy, but you’ll have noticed by now that it’s impossible to talk about the economy without talking about politics.
Epilogue
Over the course of this book, while I have been going on and on about the economy, my greatest fear is that all along you’ve been wondering, How can Dad have confused me with someone who gives a damn?
Today’s economic experts are not much different. Whenever they fail to predict properly some economic phenomenon, which is almost always, they account for their failure by appealing to the same mystical economic notions that failed them in the first place. Occasionally new notions are created in order to account for the failure of the earlier ones.
Fellow economists, as you can imagine, get very cross with me when I tell them that we face a choice: we can keep pretending we are scientists, like astrologists do, or admit that we are more like philosophers, who will never know the meaning of life for sure, no matter how wisely and rationally they argue. But were we to confess that we are at best worldly philosophers, it is unlikely we would continue to be so handsomely rewarded by the ruling class of a market society whose legitimacy we provide by pretending to be scientists.