A GUEST POST
I’m delighted to present a guest post today, prepared by Carlos. You may recall that in my previous post (Almost Time to Look to the Positives) I made reference to Carlos and some of the views that he holds which (on the face of it, anyway) are quite contrary to my own. Carlos (and others) might be surprised to learn that I agree with a substantial amount of what Carlos is saying here, but let’s leave that to a future post. Without further ado, I’m delighted to introduce Carlos’s views …
This little piece, the first post I’ve ever written on a blog, and which, thanks to the munificence of Mr Moraymint, is appearing in the hallowed web-space of his very own pages, came about after I wrote him a Facebook message. In it I chastised Moraymint for being so relentlessly negative about the economy, the country, even future of the human race itself, that if I kept on reading it, I’d be forced to grow a beard and take to the hills. Or top myself.
Appreciating the urgent nature of the situation, Moraymint sprung into action and, a mere 6 months later, offered his dear readers Almost Time to Look to the Positives. At the risk of oversimplifying Moraymint’s many and well-made points, I will now do exactly that.
Moraymint’s premise is that an ‘out of control’ consumer society, which is too complex for anyone to understand, let alone control, married to exponential population growth and the clear inability of the world to feed all these extra people, linked to depletion of natural resources, is inevitably leading to global catastrophe and, I dare say, the breakdown of society as we know it.
Of particular significance are fossil fuels which he proposes have been key to the very long boom that began in about 1750, with the advent of the Industrial Revolution. He insists that with ‘Peak Oil’ almost upon us, and the doubling of national income every 25 years that we, in the advanced economies, have enjoyed for over 250 years, was a blip that is now over. And, thanks to the loss of that key resource, Moraymint claims we are going to revert to the almost flat-line growth that characterised the economic history of mankind before 1750.
Additionally, Moraymint takes a pot shot at Economics, and its exponents, and suggests that orthodox theory has no answers to the world’s predicament. Particularly in the area of banking and debt, we have been let down by our leaders (guided by these naughty economists) and that imminent collapse is rushing headlong at us from another direction as well.
It’s a double whammy, in other words, and it’s happening now. Our generation is the one that’s really in the shite and for the high jump. To use a cliché favoured by the media, we’re all going to hell in a handcart – hopefully with the politicos in a tumbril.
My aim, if I can, is to demolish some of Moraymint’s fondest misapprehensions, ‘fess up about the failings of economics, acknowledge where we have gone wrong, offer a different way of looking at some issues and, finally, set out some possible solutions. But, more than anything, I want to throw into the cake-mix some positive thinking …
Consumer Society? What Other Kind is There?
The Consumer Society has always existed – at least for some lucky bastards. Think of the Pharaohs, Roman Emperors, Nebuchadnezzar, Louis Quinze; they loved consuming and they were notoriously good at it.
All the Industrial Revolution did was make it available to more people. Pepys, according to his journal, was constantly slipping out to buy a sheet of music, a silk ‘kerchief, a jar of rose water, catch a show at the theatre. The streets he frequented – Holborn, Poultry, Old Bailey, were lined with prestigious shops selling ‘luxuries’. The stuff he ‘needed’, like food, was sold in the market or from barrows.
The first murmurings of global trade, the oceanic explorations of the Portuguese, the opening of the Silk Route and so on, were motivated by a desire in Europe for spices, silks, tea, and fancy porcelain cups to drink it out of (items you’d find in the Tesco ‘Finest’ range rather than in the ‘Value’ bin).
Current thinking by archaeological anthropologists is that farming first developed, and was eagerly pursued, not because early tribes needed a reliable source of grains to make bread, the ‘staff of life’ or wholesome pies or even dainty scones. Oh no, they farmed in order to brew beer, so they could all get pissed.
Consumption – often of ‘non-essentials’ – almost always was the driving force of the economy. May be even the whole point of the economy. The line between ‘fripperies’, that are apparently a sign of a consumer society gone mad, and ‘necessities’ ie ‘good’ consumption, is one that’s impossible to draw. When some wit (Oscar?) quipped, “I can live without the essentials. It’s the luxuries I can’t do without”, the writer was describing Homo Economicus more accurately than was probably intended.
That consumption is the whole point of an economy was the fundamental misapprehension of the Soviet Union´s economic masters. The commissars in the 60s and 70s were, I’m sure, proud to be building a new steelworks in Magnitogorsk precisely because it would make tractor cogs, railway track and T-62 tanks. It felt right that their Stakanovichian efforts were all about … well, serious stuff. They weren’t making trivial gewgaws like beach buggy body panels, ball-bearings for pinball machines or ice-buckets for chilling alcopops, like those decadent capitalists would be. Alas, they failed to pursue the thought to its logical conclusion.
The only point of any production is for it to be consumed or ultimately to make further consumption possible. Cogs for tractors enabled the collective farms to grow crops for people to eat so they had enough energy to do crazy, un-socialist, things like listen to smuggled Beatles records or print samizdat leaflets.
Railway track isn’t laid so trains can carry coal and iron ore to the steelworks. That was their secondary function. The ultimate point of the rails was to make it possible for people to consume stuff according all their individual desires, tastes and requirements howsoever they may see them.
The only rational purpose of a T-62 tank, if we pursue the point relentlessly, was to defend the Motherland so the consumers of Minsk, Sebastopol and Leningrad could keep on doing all that self-indulgent consumption without interference from the NATO forces massed on the East German border.
Who is qualified to say exactly what consumption is petty, trivial or unnecessary? It’s a value judgment, an impossible call. On this I insist.
It all depends on your preferences, doesn’t it? Do any of Moraymint’s followers want to have someone else deciding – a busybody, a bureaucrat, a priest – what they can consume, what they can buy or sell? Are there any volunteers amongst the readership of this blog willing to subject themselves to such a regime? Come on, stand up, and make yourself known.
No, I thought not.
Neo-Classical Economics says the market will decide what is made and what is consumed. With a few essential caveats covering obvious no-nos like certain kinds of pornography, bomb-making equipment etc, in a liberal democracy there’s actually no alternative to the freedom the Neo-classical model requires and supplies.
There’s nothing surprising about the exponential nature of the growth of economies or population – it’s the nature of compounding. We all know the story of the king agreeing as a reward to the man who invented chess, to give him one grain of rice in the first square, two on the next and so on, until square 64 – more grains of rice than molecules in the universe.
That’s the reason a market economy, when it’s on the growth path, can transform the lives of people significantly. But does the same phenomenon present us with the direst of problems when it comes to population growth? By a fortuitous symmetry, exponential growth of an economy is the very thing that dampens down exponential growth in population.
There’s a clear correlation between falling birth rates and economic development, thanks to a process we saw ourselves in Victorian England. The country gets richer. Nutrition, public health (ie drains and drinking water) and medical care all improve, so more babies survive beyond five.
People leave hidebound, traditional villages to live in liberal, anonymous, and crowded, cities. Women get better education, are less influenced by village elders and can access modern contraception. There’s less room for a large family anyway. Result: fewer children per woman. It takes a couple of generations to work through to stable population levels, but it always happens.
To paraphrase Matt Ridley in the Wall Street Journal, birth rates go down because of prosperity, not poverty. Even in Africa, the over-population lobby’s favourite nightmare scenario, rates of population growth are plummeting. And this, from The Economist, tells us that 6 of the 10 fastest-growing economies in the world last year were in Africa. Sounds pretty positive to me. Without claiming any expert knowledge, I’d be very surprised if we even reach 9 billion.
My Grandfather, The Peasant
My mother’s dad, Samuel Lambert Brennan, who lost a leg at the Somme, and lived until I was 12, was born near Limerick in Ireland in 1889. Only 45 years before his birth, almost one million Irish peasants (15% of the total population) died because a blight called Phytophthora Infestans destroyed the potato crop upon which the peasants subsisted. Over the following years, a further 2 million Irish emigrated to the USA to find a better life.
I mention this personal snippet because it is astonishing to me that I knew someone who, in turn, must have known someone who came from a subsistence farming society and lived through an event that today we can only imagine happening in some god-forsaken part of Afrique Profonde.
Moraymint might say something similar awaits us lot in the comfy West in the coming years. On the contrary, I think the story of my grandpa will help illustrate several points I will be making next, about farming, complexity and the significance of the ‘Now’ which will put the kibosh on such thinking.
The End is Nigh? Er … No
It’s a common fallacy to view one’s own times as in some way ‘Special’. It’s nice to be ‘Special’, I understand. Indeed, every generation seems to succumb to the same seductive illusion. But there again, if everyone’s special, then … well, I don’t need to go on.
Charitably, you could call it proximity bias or, to be blunt, isn’t it just a form of vanity? Hey, Morayboy! Don’t get the ‘ump! It’s not personal vanity I mean, but generational vanity. Same as saying ‘In my day, pop music had tunes’ or ‘The clothes kids’ wear today look ridiculous’. I mean, do you remember Loons? Showaddywaddy?
My point is, one needs to be very careful about saying this time, THIS time, THIS TIME, I mean THIS TIME its the big one, the breakdown of society, End of Days. Frankly, its not helpful if one is hoping to cook up useful plans to solve current problems. If someone really is sure it is this time, then they need to start laying down a store of tinned food and buying a subscription to Guns and Ammo. Seriously, have the courage of your convictions.
I guess my grandfather’s parents felt the world was coming to an end when they were down to their last sack of King Edwards and their neighbours were actually dying in the street of their village from starvation. But it wasn’t, was it?
To put it another way: ‘Calm down dear, it’s only an economic crisis’
Feeding 9 million? No Problemo
A fact you can prove in 5 minutes with simple maths on the back of an envelope, is that, if the poorest farmers in the world could reach UK levels of productivity, (by adopting GM, fertilisers, mechanisation and modern methods of food storage and distribution), then the planet can easily feed 9 billion souls.
Yes, that means integration into national and international markets, agribusiness, food miles, packaging, advanced distribution systems, hypermarkets, brands, the Full Monty. Of course, most of them would no longer be farmers – they’d have moved to the city. Boo hiss say the lefties, eco-loons and sentimentalists.
But there’s nothing more tragic than subsistence agriculture. It’s an idiotic, heartbreaking, boring way of life. Believe me, I’ve seen it at first hand, in Mexico. And forget the romantic, Haywain or Renoir version of traditional agriculture. The grinding poverty of subsistence farming is not picaresque either.
That’s why my grandfather’s dad left Ireland to go and dig railway cuttings (more of which later) in England. And that’s why people in China can’t wait to quit the paddy fields and head for the Great Wen to make Nikes or iPhones. Don’t feel sorry for them. It’s a step up.
The foundation of all economic growth is that farming has to raise its productivity (output per head) to free up labour so it can be more productive making other products and providing other services. The process has been sweeping through humanity since the Stone Age.
With First World levels of productivity, and by saving the 50% of Third World food that is currently lost to bad storage, pests, transport delays and other third-worldishness, there’ll be more than enough food to go around, using less land.
Doom-mongers have been predicting world famine at least since Malthus. Funny that the world is better fed today than ever in history.
The reason all those people died in Ireland was because they were subsistence – read existence – farmers who, if they were lucky, were forced to eat the seed for next year’s crop.
And because they only grew the humble spud, rather than a wide portfolio of crops.
And because they weren’t hooked up to world trade, importing mange tout and kiwi fruit and exporting four-leaved clovers and leprechauns, for example.
But at least their world was simple. Not complex. That’s good isn’t it? Hmmm …
What’s So Wrong with Complex?
The Complex Society Containing Within Itself the Seeds of its Own Destruction trope is a favorite amongst lefties, back-to-the-landers and the aforementioned eco-freaks. There was a thread of the same fear-of-the-complex running amok in Adolf’s thinking (Blut und Boden) not to mention Pol Pot’s and Mao’s. Not appropriate company for Moraymint to be keeping, I say.
Let’s look at complexity for a minute.
I’ll lay my cards on the table. I think complexity is what makes everything work better! To me, complexity is almost a synonym for better. How so?
We humans are the most complex animals to have evolved. Dinosaurs, for example, were much less complex. Worms are a further degree less complex than T-Rex. Or even Showaddywaddy.
Sexual reproduction, on the other hand, is complex. It’s ludicrously complex. Biologically bonkers complex. Think of the courting rituals, all the pizza and glasses of wine, the tubes, the eggs, the sperms, and the sheer unpredictability of the outcomes.
Wouldn’t it be much easier if we humans just kind of divided into two parts, and wiggled away? Well I guess so, and yet the world is dominated by organisms that make their offspring using sexual reproduction. How do we explain that? Maybe because complexity offers advantages.
Another angle: just right click on an object on your computer screen. Chances are one of the menu choices will be ‘View page source’. Click on that, and you’re confronted with reams of incomprehensible, complex, type. The elegant, streamlined icon, screen object would not be possible without all that complex html gubbins under the hood.
Looking under another hood, today’s motorcars are vastly more complex than they were when I was a lad. My dad used to whip out the carburetors or the water pump out of his Triumph every weekend, rain or shine. Partly for fun and partly because … OK, just for fun.
The complexity of today’s cars would surely baffle most weekend car mechanics. But, more importantly, these Sunday spanner-botherers are a dying breed because our complex, computer-controlled, fuel-injected, modern cars are so reliable they don’t need weekly, or even monthly, attention.
Then there’s natural selection. F**k my old boots, what a palaver. Why couldn’t the big guy in the sky have just stuck with Lamarckism as a system for evolving life? Much less complex.
Trouble is, it’s the long-winded, eon-defying, ultra-complex, brutal process of natural selection that has created the splendour, diversity and joyous complexity of the world we live in.
And, incidentally, provided us with brains capable of writing and reading blogs.
It’s the complexity, and ‘wasteful’ duplications, of a modern airliner’s triple-redundancy fly-by-wire controls, the world market for gold futures, Bombay’s tiffin wallah system, the UK electricity grid, Tokyo’s urban transit system, the internet or US Military’s cyber battlespace, that makes them work more elegantly, suffer fewer cock-ups and be less prone to existential failure.
It was the lack of complexity of the Irish peasant diet, the lack of complexity of the Dublin government’s reaction to it, the lack of complexity of Irish trade in 1845 that led to the catastrophic famine that forced my great-grandfather, and millions of others like him, to flee the Emerald Isle.
The complexity of natural selection also involves an enormous amount of what we shall have to call ‘waste’ (I heard Christopher Hitchens, may his name be praised, say that 99% of species that ever existed are now extinct.) Well the handmaiden of the moan that ‘Our Modern World is Too Complex’ trope is that it is also too wasteful.
To me there’s waste and there’s waste. That sentence, for example, was wasteful. Throwing away leftover mashed potato and old boiled cabbage is also, to my mind, wasteful.
(Even after several days in the fridge those 2 ingredients are peerless, all mixed up with freshly ground pepper, a little powdered Parmigiano-Reggiano, grated garlic, pinch of Maldon, then fried in XV Olive Oil. A dash of thick cream in the mix is worth considering, too. The oil needs to be really hot. In fact, one might prefer to use a less noble oil – and I don’t mean Castrol GTX, I’m talking to you, Dad – to achieve a higher frying temperature. The result, if you can resist the temptation to turn the mouth-watering mixture over too much, will be a delicious semi-burned crusty layer. You can turn over once you got one of those layers because that way you’ll more of them. Finally you tip it out on a plate, topped off with the two soft fried eggs that you’ve been supervising on the other ring. A dash of cream on top and more cheese sprinkled and you’re made in the shade, baby).
That elaborate recipe for bubble and squeak is only there to exemplify once again the wonder of complexity. Admit it, Men who Cook. Aren’t you turned on by that level of intense detail especially about something so trivial? I would hazard that as well as being pattern-seeking mammals we are complexity-seeking too.
What’s Wrong with Economics?
Sit down. Take a deep breath. I’m going to agree with Moraymint for a moment. There is definitely something amiss with Economics.
But first off, lets kick this ‘Dismal Science’ thing (by the way, a rather unfair ad hominem argument against all economists) into touch. Economics, as I have always understood it, is not a science. It’s more a branch of philosophy mixed with psychology. It’s certainly one of the humanities.
Sure, the subject of the humanities, us humans, can sometimes be dismal. But we can also be optimistic, ambitious, ingenious and energetic. Particularly when it comes to money, trade and resource allocation, which are, after all, the meat and 2 veg of economics.
But, at the risk of being melodramatic, there has long been a battle for the soul of economics; a battle that, against all odds, is still going on.
In my days as a student, Economics was divided into two main areas. Economics and Econometrics. The former being mainly about writing essays and building arguments, and the latter being all numbers, formulas, maths, predictions. And never the twain met. This was a seriously false dichotomy – and not the only one that infested my alma mater’s Economics Department.
I distinctly remember being taught – and this was at a Russell Group university as recently as 1975 – that there were 2 possible economic systems, both of which merited serious study. Capitalism, on the one hand and Communism, on the other. Compare and contrast, we were instructed, they’re both valid. Indeed, it was even proposed that the latter was possibly better, especially by the Econometrics’ professors who were instinctively more left-leaning.
Econometrics, (and in those days all calculations were done with slide rules and logarithmic tables) was, amongst other things, the solution to the resource allocation problem. A bureaucrat in Moscow, even with the inadequate tools to hand, could calculate how many fridges, bath mats or high-heeled shoes to make this year. He could even offer two or three different styles.
Fast forward 25 years and the same bizarrely faulty thinking resulted in Scholes and Merton winning the 1997 Nobel Prize for Economics for their fancy-ass derivatives algorithms. They went on to form Long Term Capital Management and we all know what happened to that. If you don’t read this.
Despite its uncountable failures, the strange appeal of Economics as a mathematical and predictive, rather than a literary and descriptive, discipline still holds many clever, highly qualified and powerful people in its sway. It was this very cognitive error that contributed to the 2008 world banking crisis we’re still enduring.
So I concede Moraymint’s criticism of Economics, but only of one side of it, Dark Side Economics. This is the place where the Darth Vaders of Economics, who want to boss us around and control everything, hang out. The unreconstructed lefties who still believe in central planning, the climate change nuts who want to tell us how many flights to take a year, and casino bankers with their scary financial IEDs are all cuddled up under the same duvet. Strange bedfellows …
They all believe that economic activity can be controlled, planned and predicted. And with precision. To me that idea is about as convincing as tomorrow’s weather forecast. Let alone next week’s forecast, or one for 50 years hence. Be it with regard to weather, or economic activity, I’m 100% not convinced. In fact, I’m 0% convinced. Recent meteorological and financial events seem to support such scepticism.
So what have economists – especially the ‘Jedi’ ones – got to say about the market system? Economists invented it, so they should know how to fix it, yes?
My view is that the market system is not an invention of man. It’s an instinct, like language is an instinct. Or it’s a force, like gravity is a force. Put people together, set them free, and you’ll get a market economy.
My 7-year-old son didn’t need a seminar from his dad to start trading his Halo space troopers with his schoolmates. It just happened, and unless the teacher, or some other Leviathan or force majeure – and that includes monopolists and rent-seekers – prevents it. Sorry that should be tries to prevent it.
The market, the trading instinct, is like water. You can’t squeeze it or crush it. You can try, but it’ll squirt out, under force, or destroy the container. That’s exactly what happened to the Soviet system, as a matter of historical record.
All a ‘Jedi’ economist can do is describe what is happening, interpret events and, with the benefit of a historical perspective, have a go at proposing possible solutions. Over time, mainly by means of looking at the world and how people behave, and then thinking about it rather a lot, can we gain insight. Economists should be, to our rulers, the way the Robert Duval character was to the Marlon Brando character – Consiglieri. No more.
But that was a digression. We were talking about waste. Evolution is wasteful which is bad enough, but our complex modern world even more bloody wasteful, isn’t it? The theory seems to be: Complex + Wasteful = Bound-to-Collapse + Baaaaad.
I beg to differ.
The free-market system that prevails in our world has been criticised by Moraymint for being worryingly complex and implicit in that view is that it’s also wasteful. Why, oh why, oh why, do we need 50 different kinds of breakfast cereal? Why are there dozens of fridge manufacturers? Do we really need all this stuff? All this choice? WTF?
Up in my neck of the woods, SE Cheshire, Derbyshire Peak, is the route of the Great Central Main Line Railway. Magnificent viaducts, York stone platforms, steep plunging cuttings, heroic embankments, long, long tunnels. Even aqueducts to carry canals over the line.
All now abandoned, derelict, and weed-infested – the Permanent Way given over to walkers and mountain-bikers.
This railway was the swan song of the Victorian railway boom, opening in 1899. It’s quite possible my great-grandfather helped build it. The humongous investment involved is obvious. As the last of 4 lines built from London to the North of England, it never made any money or carried many passengers. We now have 2 lines from London to the North. The other two are cycleways.
I quite like abandoned, anachronistic, superannuated buildings. I’d be delighted to spend a couple of days wandering around Detroit’s crumbling downtown, checking out this beauty, for example. But there’s an important point to be made here.
The ‘waste’ of building the Great Central Main Line Railway is an essential part of the market system. What better way is there to find out which is the best route from London to God’s Own Country than to build several and try them out? And it encourages them all – no, forces them – to be as good as they can be.
What better way for us to work out which is the best internet browser than to have Chrome, Safari, Firefox, Opera, IE all slogging it out?
There’s a reason Boeing engineers have been running around like blue-arsed flies trying to fix the batteries in the Dreamliner. And that’s because they know that Jean-Claude from Toulouse is already on the phone to airline chiefs worldwide inviting them over for a Grande Bouffe followed by a tour of the A320 production line.
Lefties, eco-crazies and Neo-Puritans would say, well if people must bloody well fly, why on earth don’t we have just one major airliner manufacturer? Why do we need two – isn’t that a waste? Duplicating the research, testing, manufacturing plants, not to mention all that marketing expenditure. I mean, the aeroplanes are almost indistinguishable, especially on the inside, which is the only part most of us ever see.
But it is the supposed ‘waste’ of competition that drives innovation, pulls standards up, encourages technological advances, and keeps prices down. The time to be afraid is when there’s only one supplier of an important product or service. And even more afraid if that monopoly supplier is an apparatchik with an office overlooking Red Square. Or Whitehall.
Waste. A Philosophical Aside
What is ‘waste’ in a profound sense anyway? We are mammals, which means we are animals. Like ants, for example.
We wouldn’t say, look at how wasteful those darned ants are moving all that soil from this side to that side. And then back again. And look, there we can see a couple of anthills too close to each other. Should we desire them to combine their anthills so as to reap the benefits of economies of scale?
Does that make sense? Or is it complete bollocks? Well, perhaps we are just ants writ large.
The world’s biggest building (in Bucharest) was by any measure a complete waste of human endeavour. By the same token, so were the Pyramids of Giza. But is it really a shame the Pharaoh didn’t, instead, divert resources to building mud and wattle sure start centres and maternity clinics for the underprivileged farmers of the Nile Delta?
The viaducts of the Great Central Main Line Railway can be viewed the same way. They now stand as testaments to folly, you might say. But they are also monuments not only to the market system, but also to human achievement.
Don’t we need some wonder and awe in this life, as well as the quotidian and mundane?
Peak Oil? Too Crude For Me
I don’t believe in ‘Peak Oil’, I honestly don’t grasp the concept! My basic reason was quoted by Moraymint in his piece, the point being that Nothing can ever ‘run out’ because the market system evolved precisely to stop that happening.
That point naturally applies to all resources on the planet in any scenario of population and economic growth one could reasonably propose. The excellent Tim Worstall makes the point better than I could in his Telegraph blog Infinite growth on a finite planet? Easy-peasy!.
I can’t really add much to the great man’s words apart from the observation that so many of the new products that we are consuming so ‘recklessly’ involve almost no resource degradation.
Attending the Hay-on-Wye Book Festival is no less an act of ‘consumption’ than driving an SUV through the Mojave Desert with the windows open, the aircon set to max and a chilled Bud in your hand.
Ditto seeing a play in the theatre, using the new version of the iPhone iOS, eating in a fancy restaurant rather than a cheap one, spending an afternoon at ‘Go Ape’. These are the kinds of products that we will be consuming more of in the future.
Equally, even without the impetus of anthropogenic climate change, (an extremely dodgy concept) I think we humans have a natural appreciation of things done elegantly, intelligently and not wastefully (that word again!). So efforts to get people to conserve resources, use them carefully, to ‘care’ for the planet, are surely pushing at an open door.
What’s To Be Done About the Current Balls Up?
This post has dragged on a bit, so let’s get to the beef.
Since I have comprehensively rejected the idea that we face an impossibly BIG problem requiring an awesomely BIG solution, then all I can offer are small, incremental, at-the-margin ideas. No rabbit, no hat. Anyway, as we know, most big world-shattering policy changes are hard to get through the democratic process, so small ones are usually the most practical option.
As is clear, I’m fundamentally an optimist. All previous crises have resolved themselves because if they hadn’t have we wouldn’t be here sitting in our comfy homes using our fancy computers, glass of 25 year old Glen McSporran to hand.
Some modest proposals:
1. We must arm ourselves against catastrophic thinking and recognise that history, especially economic history, does have a habit of repeating itself. In due course, we will emerge, blinking, into the sunlight of the next economic uplift, and sooner than we all think. Always happened before, why would this time be any different? Sorry, but those who still think We are the Special Ones will have to ignore this point.
2. Thanks to this crisis we will have gained new insights; knowledge that should help us avoid making the last lot of mistakes again. We will of course make lots of new ones! We need to keep on learning. That doesn’t mean crunching stats. It means thought experiments, debate, argument, mulling.
3. Accept that banking is not a ‘normal’ industry. It is the basic utility of the economy. It should be cunningly regulated to ensure that market forces are able to keep banks on the straight and narrow. And big banks have to be broken up – we need banks that are not so big we are scared of them.
4. This regulation should include strict rules about banks’ capital. I was taught that banks typically need to keep 10% of total deposits in the vault to maintain confidence in the banking system. I can’t understand why some figure around that isn’t enforced by law.
5. In other respects, banks need to be treated like any other capitalist entity. They need to be allowed to go bust – there’s no better way to be ‘Keepin’ em Honest’. Ordinary depositors should not be protected against bank failure by the government. That way, market forces will relentlessly push banks to refocus on prudence and rectitude in order to compete for the trust of depositors.
6. Start believing in the Laffer Curve. Laffer showed that lower taxes result in a higher total tax take. We can cut the deficit by cutting taxes.
7. Further to that end, have a flat rate for all taxes. For example, a £10,000 personal allowance, then 15% on all other income, to infinity. And 15% VAT. Don’t ask what is the rate of any tax? Its 15%. This would instantly end all tax avoidance, almost all tax evasion, and put most tax havens and tax lawyers out of business. And almost certainly increase total tax revenue. Flat taxes are already in force in some Baltic states and working well.
8. Abolish Corporation Tax (paid for by Points 6 and 7 above). Companies don’t really pay taxes anyway, the people who buy their products do. That would instantly make the UK the most attractive location for world business.
9. Believe in the power of human ingenuity to solve all possible problems. Always happened before, why would this time be any different? The We are the Special Generation group is excused this point as well. For them, for the next decade or so, the human race is suddenly going to stop inventing things, is going to forget how to devise solutions, cease being ambitious, stop dreaming and stop being creative.
Can anyone really believe that?
Me again! Thank you very much indeed for that post, Carlos, and I look forward to reading the comments that follow. Please bear in mind that although there are only so many openly declared ‘commenters’ and ‘followers’ of this blog, the unseen analysis shows that almost 35,000 viewers from all over the world choose from time to time to visit Moraymint Chatter and read what’s being said here …