Adonis Diaries

Posts Tagged ‘Adam Smith

How colonial powers handled sovereign debts of “weaker nations”?

Wars: Uncanny connections to Sovereign public debts

In the 20th century, USA went on a rampage of conquering and occupying nations under colonial powers (Spain) in Cuba, Philippines, Puerto Rico…  and practically controlled nations under French and English  powers until sovereign debts accumulated in WWI and WWII were restituted. 

The motto is a fundamental capitalist system that war is the quicker default alternative to resolving matters with weaker nations.

France, England, the Netherlands, Belgium, Portugal, Spain, Italy and Germany conducted their raids around the world to maintain “exclusive” trade facilities in each country they occupied militarily.

The direct connections among exorbitant levels of accumulated public debts and wars have been recognized for centuries, on black and white.

We witnessed that war is one of the preferred defaulting mechanisms on outrageous contracted debts, particularly when the creditor nation is weaker militarily.

In the last two centuries, the world witnessed 320 defaulting decisions by debtor nations.

Is it a coincidence that the last two centuries experience as many wars?

If you compare the two graphs of dates on defaulting and the timing of subsequent wars then, you realize that there are direct interrelations between the two factors.

1. In 1770, (England sovereign debts amounted to 140% of its GNP)

Adam Smith wrote: “At a level of accumulation of national debts, there are no examples that the debts have ever been repaid.  Public revenues were always freed to be spent, but never to paying off any debts. Governments prefer to default, occasionally admitting the debts, occasionally pretending to have paid off debts, but always incurring a real debt.”

2. In 1716 France, after the monarch Louis 14, was totally bankrupt:

The Scottish John Law convinced the French Regent to issue paper money covered by gold for easy circulation of money and internal trade.  To entice the public into accepting paper money, interests were added, secured by a special perpetual fund called the “General Bank“.

This bank was to be supplied by financial resources converging from the America’s colony of greater Louisiana.  The Mississippi Company, (later renamed the “Western India perpetual company“), was collecting indirect taxes for France.  Speculation by French nobility transformed the central bank into a machine for printing worthless paper money and the collection from Louisiana stopped to converge to France.

In 1748, Montesquieu in  “Of the spirit of laws” wrote:

“There are a few financial specialists disseminating the concept that public debts multiply wealth and increase circulation of money and internal trade.  Facts are, the real revenues of the State, generated by the activities of industrious citizens, are transferred to idle classes.  The consequences are that we make it more difficult on the industrious citizens to produce profit and worst, extending privileges to the passive classes.”

In 1781, Jacques Necker, France minister of finance, proclaimed that “There can be no peace in Europe unless public debts are reduced to the bare minimum:  Public debts are sources for increasing the military capabilities designed for destructive activities; and then more debts are accumulated for the reconstruction phase.  A devilish cycle that is anathema to prosperity and security.

Necker was the first financial official in France to present a transparent statement sheet of all the revenues and expenses for the budget and he encouraged the French monarchy to emulate England by submitting complete budged so that investors and lenders be informed of the financial situation and be encouraged to considering France as a viable country to invest money in.

At the time, England had replaced Holland as the financial center of the world and the central Bank of England was already established.

All indicate that trends in growing sovereign debts in the richer and developed nations are not going to change till 2014.

In that year, it is expected that Japan public debts (mostly internal) will reach 250% of its GNP, Italy 130%, England 100 %,  the USA 100% (or $20 trillion, the interest alone representing 400% of its fiscal yearly revenues), France 95%, and Germany 90% of GNP.  The US will have to reimburse $850 billion in 2012 and finance one trillion.

The emerging States and most of Latin America countries are experiencing steady drop of their public debts to an average of 40% of GNP by 2014.

My question is:  If almost all States have incurred public debts then, who are the creditors?  

China economy has saved 2.5 trillion and Brazil and Turkey less than 500 billion.  All these savings cannot cover the amount of necessary public debts required by the debtor nations.

Fact is, world finance is functioning on worthless paper money and other financial tools transmitted here and there to give the illusion that the system is functioning.

So far, the IMF and the World Bank are controlled by the G8 who can withdraw at will from these supposed to be international financial institutions.  This situation of relying on magical financial illusions cannot persist for long.

A third World War will be created intentionally by superpowers in order to starting from scratch before establishing sustainable financial institutions, rules, and regulations.

If you carry a credit card at an interest rate of over 20% then, you know that the principal could never be paid since the credit limit is 50 times your real annual income  in order to finance a purposeful inflationary policy to give the illusion that the ratio of public debts to GNP is being reduced.

Not only 20% interest rate is exorbitant, but adding unpaid monthly installements to the principal is what all ancient customs forbade.

For example, if people of “independent means”, (called rentier) in French, could invest in a productive businesses generating profits of over 20% they would not have lent their money.  It is imperative that payments on interest should not last more than 7 years and further monthly payments automatically directed to paying off the principal.

Thomas Jefferson recommended, and then imposed his view when he became President to the new Independent America, that loans should never be contracted out by States for longer than 19 years so that future generations do not have to suffer decisions of the living ones.

As life expectancy is increasing, I suggest that Constitutions should force governments and official institutions to restrict the life of any loan to be 5 years shorter of the lower number of the average life expectancy or the age of retirement of citizens in the creditor nation. 

Anyway, if the loan is a private one, the lender should be able to enjoy his placement while alive and not suffer from defaulting decisions.

Note:  Reviewing the history of public debts since antiquity, the consequences of incurring huge public debts are the same:  Whether the dept is contracted out to a person (the monarch) and the debt is cancelled once the individual is dead, or the public debt is shouldered by a sustainable “immortal” entity such as a State, the weaker creditor will be punished.

The militarily weaker creditor will suffer now or later; it is a matter of delayed punishment for loaning a more powerful debtor whether voluntarily or after coercion.

How Marx observed Capitalists at work: Read former Greek finance minister Yanis Varoufakis

Before he entered politics, Yanis Varoufakis, the iconoclastic Greek finance minister at the centre of the latest Eurozone standoff, wrote this searing account of European capitalism and and how the left can learn from Marx’s mistakes

Wednesday 18 February 2015

In 2008, capitalism had its second global spasm. The financial crisis set off a chain reaction that pushed Europe into a downward spiral that continues to this day.

Europe’s present situation is not merely a threat for workers, for the dispossessed, for the bankers, for social classes or, indeed, nations.

No, Europe’s current posture poses a threat to civilisation as we know it.

If my prognosis is correct, and we are not facing just another cyclical slump soon to be overcome, the question that arises for radicals is this: should we welcome this crisis of European capitalism as an opportunity to replace it with a better system?

Or should we be so worried about it as to embark upon a campaign for stabilising European capitalism?

To me, the answer is clear.

Europe’s crisis is far less likely to give birth to a better alternative to capitalism than it is to unleash dangerously regressive forces that have the capacity to cause a humanitarian bloodbath, while extinguishing the hope for any progressive moves for generations to come.

For this view I have been accused, by well-meaning radical voices, of being “defeatist” and of trying to save an indefensible European socioeconomic system.

This criticism, I confess, hurts. And it hurts because it contains more than a kernel of truth.

I share the view that this European Union is typified by a large democratic deficit that, in combination with the denial of the faulty architecture of its monetary union, has put Europe’s peoples on a path to permanent recession.

And I also bow to the criticism that I have campaigned on an agenda founded on the assumption that the left was, and remains, squarely defeated.

I confess I would much rather be promoting a radical agenda, the raison d’être of which is to replace European capitalism with a different system.

Yet my aim here is to offer a window into my view of a repugnant European capitalism whose implosion, despite its many ills, should be avoided at all costs.

It is a confession intended to convince radicals that we have a contradictory mission: to arrest the freefall of European capitalism in order to buy the time we need to formulate its alternative.

Why a Marxist?

When I chose the subject of my doctoral thesis, back in 1982, I deliberately focused on a highly mathematical topic within which Marx’s thought was irrelevant.

When, later on, I embarked on an academic career, as a lecturer in mainstream economics departments, the implicit contract between myself and the departments that offered me lectureships was that I would be teaching the type of economic theory that left no room for Marx.

In the late 1980s, I was hired by the University of Sydney’s school of economics in order to keep out a leftwing candidate (although I did not know this at the time).

Yanis Varoufakis: ‘Karl Marx was responsible for framing my perspective of the world we live in, from my childhood to this day.’ Facebook Twitter Pinterest

After I returned to Greece in 2000, I threw my lot in with the future prime minister George Papandreou, hoping to help stem the return to power of a resurgent right wing that wanted to push Greece towards xenophobia both domestically and in its foreign policy.

As the whole world now knows, Papandreou’s party not only failed to stem xenophobia but, in the end, presided over the most virulent neoliberal macroeconomic policies that spearheaded the eurozone’s so-called bailouts thus, unwittingly, causing the return of Nazis to the streets of Athens.

Even though I resigned as Papandreou’s adviser early in 2006, and turned into his government’s staunchest critic during his mishandling of the post-2009 Greek implosion, my public interventions in the debate on Greece and Europe have carried no whiff of Marxism.

Given all this, you may be puzzled to hear me call myself a Marxist.

But, in truth, Karl Marx was responsible for framing my perspective of the world we live in, from my childhood to this day. This is not something that I often volunteer to talk about in “polite society” because the very mention of the M-word switches audiences off.

But I never deny it either. After a few years of addressing audiences with whom I do not share an ideology, a need has crept up on me to talk about Marx’s imprint on my thinking.

To explain why, while an unapologetic Marxist, I think it is important to resist him passionately in a variety of ways. To be, in other words, erratic in one’s Marxism.

If my whole academic career largely ignored Marx, and my current policy recommendations are impossible to describe as Marxist, why bring up my Marxism now?

The answer is simple: Even my non-Marxist economics was guided by a mindset influenced by Marx.

A radical social theorist can challenge the economic mainstream in two different ways, I always thought.

One way is by means of immanent criticism. To accept the mainstream’s axioms and then expose its internal contradictions. To say: “I shall not contest your assumptions but here is why your own conclusions do not logically flow on from them.” This was, indeed, Marx’s method of undermining British political economics.

He accepted every axiom by Adam Smith and David Ricardo in order to demonstrate that, in the context of their assumptions, capitalism was a contradictory system.

The second avenue that a radical theorist can pursue is, of course, the construction of alternative theories to those of the establishment, hoping that they will be taken seriously.

My view on this dilemma has always been that the powers that be are never perturbed by theories that embark from assumptions different to their own. The only thing that can destabilise and genuinely challenge mainstream, neoclassical economists is the demonstration of the internal inconsistency of their own models.

It was for this reason that, from the very beginning, I chose to delve into the guts of neoclassical theory and to spend next to no energy trying to develop alternative, Marxist models of capitalism. My reasons, I submit, were quite Marxist.

When called upon to comment on the world we live in, I had no alternative but to fall back on the Marxist tradition which had shaped my thinking ever since my metallurgist father impressed upon me, when I was still a child, the effect of technological innovation on the historical process.

How, for instance, the passage from the bronze age to the iron age sped up history;

how the discovery of steel greatly accelerated historical time; and

how silicon-based IT technologies are fast-tracking socioeconomic and historical discontinuities.

My first encounter with Marx’s writings came very early in life, as a result of the strange times I grew up in, with Greece exiting the nightmare of the neofascist dictatorship of 1967-74.

What caught my eye was Marx’s mesmerising gift for writing a dramatic script for human history, indeed for human damnation, that was also laced with the possibility of salvation and authentic spirituality.

Marx created a narrative populated by workers, capitalists, officials and scientists who were history’s dramatis personae. They struggled to harness reason and science in the context of empowering humanity while, contrary to their intentions, unleashing demonic forces that usurped and subverted their own freedom and humanity.

This dialectical perspective, where everything is pregnant with its opposite, and the eager eye with which Marx discerned the potential for change in what seemed to be the most unchanging of social structures, helped me to grasp the great contradictions of the capitalist era.

It dissolved the paradox of an age that generated the most remarkable wealth and, in the same breath, the most conspicuous poverty.

Today, turning to the European crisis, the crisis in the United States and the long-term stagnation of Japanese capitalism, most commentators fail to appreciate the dialectical process under their nose.

They recognise the mountain of debts and banking losses but neglect the opposite side of the same coin: the mountain of idle savings that are “frozen” by fear and thus fail to convert into productive investments.

A Marxist alertness to binary oppositions might have opened their eyes.

A major reason why established opinion fails to come to terms with contemporary reality is that it never understood the dialectically tense “joint production” of debts and surpluses, of growth and unemployment, of wealth and poverty, indeed of good and evil.

Marx’s script alerted us these binary oppositions as the sources of history’s cunning.

From my first steps of thinking like an economist, to this very day, it occurred to me that Marx had made a discovery that must remain at the heart of any useful analysis of capitalism.

It was the discovery of another binary opposition deep within human labour.

Between labour’s two quite different natures:

i) labour as a value-creating activity that can never be quantified in advance (and is therefore impossible to commodify), and

ii) labour as a quantity (eg, numbers of hours worked) that is for sale and comes at a price.

That is what distinguishes labour from other productive inputs such as electricity: its twin, contradictory, nature. A differentiation-cum-contradiction that political economics neglected to make before Marx came along and that mainstream economics is steadfastly refusing to acknowledge today.

Both electricity and labour can be thought of as commodities. Indeed, both employers and workers struggle to commodify labour.

Employers use all their ingenuity, and that of their HR management minions, to quantify, measure and homogenise labour. Meanwhile, prospective employees go through the wringer in an anxious attempt to commodify their labour power, to write and rewrite their CVs in order to portray themselves as purveyors of quantifiable labour units.

And there’s the rub. If workers and employers ever succeed in commodifying labour fully, capitalism will perish.

This is an insight without which capitalism’s tendency to generate crises can never be fully grasped and, also, an insight that no one has access to without some exposure to Marx’s thought.

Science fiction becomes documentary
In the classic 1953 film Invasion of the Body Snatchers, the alien force does not attack us head on, unlike in, say, HG Wells’s The War of the Worlds.

Instead, people are taken over from within, until nothing is left of their human spirit and emotions. Their bodies are shells that used to contain a free will and which now labour, go through the motions of everyday “life”, and function as human simulacra “liberated” from the unquantifiable essence of human nature.

This is something like what would have transpired if human labour had become perfectly reducible to human capital and thus fit for insertion into the vulgar economists’ models.

Invasion of the Body Snatchers. Facebook Twitter Pinterest
Invasion of the Body Snatchers. Photograph: SNAP/REX
Every non-Marxist economic theory that treats human and non-human productive inputs as interchangeable assumes that the dehumanisation of human labour is complete.

But if it could ever be completed, the result would be the end of capitalism as a system capable of creating and distributing value.

For a start, a society of dehumanised automata would resemble a mechanical watch full of cogs and springs, each with its own unique function, together producing a “good”: timekeeping.

Yet if that society contained nothing but other automata, timekeeping would not be a “good”. It would certainly be an “output” but why a “good”? Without real humans to experience the clock’s function, there can be no such thing as “good” or “bad”.

If capital ever succeeds in quantifying, and subsequently fully commodifying, labour, as it is constantly trying to, it will also squeeze that indeterminate, recalcitrant human freedom from within labour that allows for the generation of value.

Marx’s brilliant insight into the essence of capitalist crises was precisely this: the greater capitalism’s success in turning labour into a commodity the less the value of each unit of output it generates, the lower the profit rate and, ultimately, the nearer the next recession of the economy as a system.

The portrayal of human freedom as an economic category is unique in Marx, making possible a distinctively dramatic and analytically astute interpretation of capitalism’s propensity to snatch recession, even depression, from the jaws of growth.

When Marx was writing that labour is the living, form-giving fire; the transitoriness of things; their temporality; he was making the greatest contribution any economist has ever made to our understanding of the acute contradiction buried inside capitalism’s DNA.

When he portrayed capital as a “… force we must submit to … it develops a cosmopolitan, universal energy which breaks through every limit and every bond and posts itself as the only policy, the only universality the only limit and the only bond”, he was highlighting the reality that labour can be purchased by liquid capital (ie money), in its commodity form, but that it will always carry with it a will hostile to the capitalist buyer.

But Marx was not just making a psychological, philosophical or political statement. He was, rather, supplying a remarkable analysis of why the moment that labour (as an unquantifiable activity) sheds this hostility, it becomes sterile, incapable of producing value.

At a time when neoliberals have ensnared the majority in their theoretical tentacles, incessantly regurgitating the ideology of enhancing labour productivity in an effort to enhance competitiveness with a view to creating growth etc, Marx’s analysis offers a powerful antidote.

Capital can never win in its struggle to turn labour into an infinitely elastic, mechanised input, without destroying itself.

That is what neither the neoliberals nor the Keynesians will ever grasp. “If the whole class of the wage-labourer were to be annihilated by machinery”, wrote Marx “how terrible that would be for capital, which, without wage-labour, ceases to be capital!”

What has Marx done for us?

Almost all schools of thought, including those of some progressive economists, like to pretend that, though Marx was a powerful figure, very little of his contribution remains relevant today. I beg to differ.

Besides having captured the basic drama of capitalist dynamics, Marx has given me the tools with which to become immune to the toxic propaganda of neoliberalism.

For example, the idea that wealth is privately produced and then appropriated by a quasi-illegitimate state, through taxation, is easy to succumb to if one has not been exposed first to Marx’s poignant argument that precisely the opposite applies: wealth is collectively produced and then privately appropriated through social relations of production and property rights that rely, for their reproduction, almost exclusively on false consciousness.

In his recent book Never Let a Serious Crisis Go to Waste, the historian of economic thought, Philip Mirowski, has highlighted the neoliberals’ success in convincing a large array of people that markets are not just a useful means to an end but also an end in themselves.

According to this view, while collective action and public institutions are never able to “get it right”, the unfettered operations of decentralised private interest are guaranteed to produce not only the right outcomes but also the right desires, character, ethos even.

The best example of this form of neoliberal crassness is, of course, the debate on how to deal with climate change.

Neoliberals have rushed in to argue that, if anything is to be done, it must take the form of creating a quasi-market for “bads” (eg an emissions trading scheme), since only markets “know” how to price goods and bads appropriately.

To understand why such a quasi-market solution is bound to fail and, more importantly, where the motivation comes from for such “solutions”, one can do much worse than to become acquainted with the logic of capital accumulation that Marx outlined and the Polish economist Michal Kalecki adapted to a world ruled by networked oligopolies.
In the 20th century, the two political movements that sought their roots in Marx’s thought were the communist and social democratic parties. Both of them, in addition to their other errors (and, indeed, crimes) failed, to their detriment, to follow Marx’s lead in a crucial regard: instead of embracing liberty and rationality as their rallying cries and organising concepts, they opted for equality and justice, bequeathing the concept of freedom to the neoliberals.

Marx was adamant: The problem with capitalism is not that it is unfair but that it is irrational, as it habitually condemns whole generations to deprivation and unemployment and even turns capitalists into angst-ridden automata, living in permanent fear that unless they commodify their fellow humans fully so as to serve capital accumulation more efficiently, they will cease to be capitalists.

So, if capitalism appears unjust this is because it enslaves everyone; it wastes human and natural resources; the same production line that pumps out remarkable gizmos and untold wealth, also produces deep unhappiness and crises.

Having failed to couch a critique of capitalism in terms of freedom and rationality, as Marx thought essential, social democracy and the left in general allowed the neoliberals to usurp the mantle of freedom and to win a spectacular triumph in the contest of ideologies.

Perhaps the most significant dimension of the neoliberal triumph is what has come to be known as the “democratic deficit”. Rivers of crocodile tears have flowed over the decline of our great democracies during the past three decades of financialisation and globalisation.

Marx would have laughed long and hard at those who seem surprised, or upset, by the “democratic deficit”. What was the great objective behind 19th-century liberalism?

It was, as Marx never tired of pointing out, to separate the economic sphere from the political sphere and to confine politics to the latter while leaving the economic sphere to capital. It is liberalism’s splendid success in achieving this long-held goal that we are now observing.

Take a look at South Africa today, more than two decades after Nelson Mandela was freed and the political sphere, at long last, embraced the whole population.

The ANC’s predicament was that, in order to be allowed to dominate the political sphere, it had to give up power over the economic one. And if you think otherwise, I suggest that you talk to the dozens of miners gunned down by armed guards paid by their employers after they dared demand a wage rise.

Why erratic?
Having explained why I owe whatever understanding of our social world I may possess largely to Karl Marx, I now want to explain why I remain terribly angry with him.

I shall outline why I am by choice an erratic, inconsistent Marxist.

Marx committed two spectacular mistakes, one of them an error of omission, the other one of commission.

Even today, these mistakes still hamper the left’s effectiveness, especially in Europe.

Marx’s first error – the error of omission was that he failed to give sufficient thought to the impact of his own theorising on the world that he was theorising about.

His theory is discursively exceptionally powerful, and Marx had a sense of its power. So how come he showed no concern that his disciples, people with a better grasp of these powerful ideas than the average worker, might use the power bestowed upon them, via Marx’s own ideas, in order to abuse other comrades, to build their own power base, to gain positions of influence?

Marx’s second error, the one I ascribe to commission, was worse. It was his assumption that truth about capitalism could be discovered in the mathematics of his models.

This was the worst disservice he could have delivered to his own theoretical system.

The man who equipped us with human freedom as a first-order economic concept; the scholar who elevated radical indeterminacy to its rightful place within political economics; he was the same person who ended up toying around with simplistic algebraic models, in which labour units were, naturally, fully quantified, hoping against hope to evince from these equations some additional insights about capitalism.

After his death, Marxist economists wasted long careers indulging a similar type of scholastic mechanism.

Fully immersed in irrelevant debates on “the transformation problem” and what to do about it, they eventually became an almost extinct species, as the neoliberal juggernaut crushed all dissent in its path.

How could Marx be so deluded?

Why did he not recognise that no truth about capitalism can ever spring out of any mathematical model, however brilliant the modeller may be?

Did he not have the intellectual tools to realise that capitalist dynamics spring from the unquantifiable part of human labour; ie from a variable that can never be well-defined mathematically?

Of course he did, since he forged these tools!

No, the reason for his error is a little more sinister: just like the vulgar economists that he so brilliantly admonished (and who continue to dominate the departments of economics today), he coveted the power that mathematical “proof” afforded him.

Why did Marx not recognise that no truth about capitalism can ever spring out of any mathematical model?
If I am right, Marx knew what he was doing. He understood, or had the capacity to know, that a comprehensive theory of value cannot be accommodated within a mathematical model of a dynamic capitalist economy.

He was, I have no doubt, aware that a proper economic theory must respect the idea that the rules of the undetermined are themselves undetermined.

In economic terms this meant a recognition that the market power, and thus the profitability, of capitalists was not necessarily reducible to their capacity to extract labour from employees; that some capitalists can extract more from a given pool of labour or from a given community of consumers for reasons that are external to Marx’s own theory.

Alas, that recognition would be tantamount to accepting that his “laws” were not immutable. He would have to concede to competing voices in the trades union movement that his theory was indeterminate and, therefore, that his pronouncements could not be uniquely and unambiguously correct.

That they were permanently provisional. This determination to have the complete, closed story, or model, the final word, is something I cannot forgive Marx for.

It proved, after all, responsible for a great deal of error and, more significantly, authoritarianism. Errors and authoritarianism that are largely responsible for the left’s current impotence as a force of good and as a check on the abuses of reason and liberty that the neoliberal crew are overseeing today.

Mrs Thatcher’s lesson

I moved to England to attend university in September 1978, six months or so before Margaret Thatcher’s victory changed Britain forever.

Watching the Labour government disintegrate, under the weight of its degenerate social democratic programme, led me to a serious error: to the thought that Thatcher’s victory could be a good thing, delivering to Britain’s working and middle classes the short, sharp shock necessary to reinvigorate progressive politics; to give the left a chance to create a fresh, radical agenda for a new type of effective, progressive politics.

Even as unemployment doubled and then trebled, under Thatcher’s radical neoliberal interventions, I continued to harbour hope that Lenin was right: “Things have to get worse before they get better.”

As life became nastier, more brutish and, for many, shorter, it occurred to me that I was tragically in error: things could get worse in perpetuity, without ever getting better.

The hope that the deterioration of public goods, the diminution of the lives of the majority, the spread of deprivation to every corner of the land would, automatically, lead to a renaissance of the left was just that: hope.

The reality was, however, painfully different. With every turn of the recession’s screw, the left became more introverted, less capable of producing a convincing progressive agenda and, meanwhile, the working class was being divided between those who dropped out of society and those co-opted into the neoliberal mindset.

My hope that Thatcher would inadvertently bring about a new political revolution was well and truly bogus. All that sprang out of Thatcherism were extreme financialisation, the triumph of the shopping mall over the corner store, the fetishisation of housing and Tony Blair.

Instead of radicalising British society, the recession that Thatcher’s government so carefully engineered, as part of its class war against organised labour and against the public institutions of social security and redistribution that had been established after the war, permanently destroyed the very possibility of radical, progressive politics in Britain.

Indeed, it rendered impossible the very notion of values that transcended what the market determined as the “right” price.

The lesson Thatcher taught me about the capacity of a long‑lasting recession to undermine progressive politics, is one that I carry with me into today’s European crisis.

It is, indeed, the most important determinant of my stance in relation to the crisis. It is the reason I am happy to confess to the sin I am accused of by some of my critics on the left: the sin of choosing not to propose radical political programs that seek to exploit the crisis as an opportunity to overthrow European capitalism, to dismantle the awful eurozone, and to undermine the European Union of the cartels and the bankrupt bankers.

Yes, I would love to put forward such a radical agenda. But, no, I am not prepared to commit the same error twice. What good did we achieve in Britain in the early 1980s by promoting an agenda of socialist change that British society scorned while falling headlong into Thatcher’s neoliberal trap? Precisely none.

What good will it do today to call for a dismantling of the eurozone, of the European Union itself, when European capitalism is doing its utmost to undermine the eurozone, the European Union, indeed itself?

A Greek or a Portuguese or an Italian exit from the eurozone would soon lead to a fragmentation of European capitalism, yielding a seriously recessionary surplus region east of the Rhine and north of the Alps, while the rest of Europe is would be in the grip of vicious stagflation.

Who do you think would benefit from this development? A progressive left, that will rise Phoenix-like from the ashes of Europe’s public institutions?

Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? I have absolutely no doubt as to which of the two will do best from a disintegration of the eurozone.

I, for one, am not prepared to blow fresh wind into the sails of this postmodern version of the 1930s.

If this means that it is we, the suitably erratic Marxists, who must try to save European capitalism from itself, so be it. Not out of love for European capitalism, for the eurozone, for Brussels, or for the European Central Bank, but just because we want to minimise the unnecessary human toll from this crisis.

What should Marxists do?

Europe’s elites are behaving today as if they understand neither the nature of the crisis that they are presiding over, nor its implications for the future of European civilisation.

Atavistically, they are choosing to plunder the diminishing stocks of the weak and the dispossessed in order to plug the gaping holes of the financial sector, refusing to come to terms with the unsustainability of the task.

Yet with Europe’s elites deep in denial and disarray, the left must admit that we are just not ready to plug the chasm that a collapse of European capitalism would open up with a functioning socialist system.

Our task should then be twofold.

First, to put forward an analysis of the current state of play that non-Marxist, well meaning Europeans who have been lured by the sirens of neoliberalism, find insightful.

Second, to follow this sound analysis up with proposals for stabilising Europe – for ending the downward spiral that, in the end, reinforces only the bigots.

Let me now conclude with two confessions.

First, while I am happy to defend as genuinely radical the pursuit of a modest agenda for stabilising a system that I criticise, I shall not pretend to be enthusiastic about it. This may be what we must do, under the present circumstances, but I am sad that I shall probably not be around to see a more radical agenda being adopted.

My final confession is of a highly personal nature: I know that I run the risk of, surreptitiously, lessening the sadness from ditching any hope of replacing capitalism in my lifetime by indulging a feeling of having become agreeable to the circles of polite society.

The sense of self-satisfaction from being feted by the high and mighty did begin, on occasion, to creep up on me. And what a non-radical, ugly, corruptive and corrosive sense it was.

My personal nadir came at an airport.

Some moneyed outfit had invited me to give a keynote speech on the European crisis and had forked out the ludicrous sum necessary to buy me a first-class ticket.

On my way back home, tired and with several flights under my belt, I was making my way past the long queue of economy passengers, to get to my gate. Suddenly I noticed, with horror, how easy it was for my mind to be infected with the sense that I was entitled to bypass the hoi polloi.

I realised how readily I could forget that which my leftwing mind had always known: that nothing succeeds in reproducing itself better than a false sense of entitlement.

Forging alliances with reactionary forces, as I think we should do to stabilise Europe today, brings us up against the risk of becoming co-opted, of shedding our radicalism through the warm glow of having “arrived” in the corridors of power.

Radical confessions, like the one I have attempted here, are perhaps the only programmatic antidote to ideological slippage that threatens to turn us into cogs of the machine.

If we are to forge alliances with our political adversaries we must avoid becoming like the socialists who failed to change the world but succeeded in improving their private circumstances.

The trick is to avoid the revolutionary maximalism that, in the end, helps the neoliberals bypass all opposition to their self-defeating policies and to retain in our sights capitalism’s inherent failures while trying to save it, for strategic purposes, from itself.

This article is adapted from a lecture originally delivered at the 6th Subversive Festival in Zagreb in 2013

Follow the Long Read on Twitter: @gdnlongread

How long is the reach of reason? Pretty slow and forgotten in the shorter terms?

Here’s a TED first: an animated Socratic dialog!

In a time when irrationality seems to rule both politics and culture, has reasoned thinking finally lost its power?

Watch as psychologist Steven Pinker is gradually, brilliantly persuaded by philosopher Rebecca Newberger Goldstein that reason is actually the key driver of human moral progress, even if its effect sometimes takes generations to unfold.

The dialog was recorded live at TED, and animated, in incredible, often hilarious, detail by Cognitive

Steven Pinker. Psychologist
Steven Pinker questions the very nature of our thoughts — the way we use words, how we learn, and how we relate to others.
In his best-selling books, he has brought sophisticated language analysis to bear on topics of wide general interest. Full bio

Rebecca Newberger Goldstein. Philosopher and writer
Rebecca Newberger Goldstein writes novels and nonfiction that explore questions of philosophy, morality and being. Full bio
Filmed in Feb. 2012

[“Rebecca Newberger Goldstein”] [“Steven Pinker”] [“The Long Reach of Reason”]

Cabbie: Twenty-two dollars.

Steven Pinker: Okay.

Rebecca Newberger Goldstein: Reason appears to have fallen on hard times: Popular culture plumbs new depths of dumbth and political discourse has become a race to the bottom.

We’re living in an era of scientific creationism, 9/11 conspiracy theories, psychic hotlines, and a resurgence of religious fundamentalism.

People who think too well are often accused of elitism, and even in the academy, there are attacks on logocentrism, the crime of letting logic dominate our thinking.

1:07 SP: But is this necessarily a bad thing? Perhaps reason is overrated.

Many pundits have argued that a good heart and steadfast moral clarity are superior to triangulations of overeducated policy wonks, like the best and brightest… that dragged us into the quagmire of Vietnam.

And wasn’t it reason that gave us the means to despoil the planet and threaten our species with weapons of mass destruction? (Kind of needing a taxonomy for defining various basis for reasons?)

In this way of thinking, it’s character and conscience, not cold-hearted calculation, that will save us.

Besides, a human being is not a brain on a stick. My fellow psychologists have shown that we’re led by our bodies and our emotions and use our puny powers of reason merely to rationalize our gut feelings after the fact. (All kinds of biases?)

Patsy Z and TEDxSKE shared a link.
ted.com|By Steven Pinker and Rebecca Newberger Goldstein

 RNG: How could a reasoned argument logically entail the ineffectiveness of reasoned arguments? Look, you’re trying to persuade us of reason’s impotence. You’re not threatening us or bribing us, suggesting that we resolve the issue with a show of hands or a beauty contest.

By the very act of trying to reason us into your position, you’re conceding reason’s potency. Reason isn’t up for grabs here. It can’t be. You show up for that debate and you’ve already lost it.

SP: Can reason lead us in directions that are good or decent or moral? After all, you pointed out that reason is just a means to an end, and the end depends on the reasoner’s passions.

Reason can lay out a road map to peace and harmony if the reasoner wants peace and harmony, but it can also lay out a road map to conflict and strife if the reasoner delights in conflict and strife. Can reason force the reasoner to want less cruelty and waste?

 RNG: All on its own, the answer is no, but it doesn’t take much to switch it to yes. You need two conditions:

The first is that reasoners all care about their own well-being. That’s one of the passions that has to be present in order for reason to go to work, and it’s obviously present in all of us. We all care passionately about our own well-being.

The second condition is that reasoners are members of a community of reasoners who can affect one another’s well-being, can exchange messages, and comprehend each other’s reasoning. And that’s certainly true of our gregarious and loquatious species, well endowed with the instinct for language.

 SP: Well, that sounds good in theory, but has it worked that way in practice? In particular, can it explain a momentous historical development that I spoke about five years ago here at TED?

Namely, we seem to be getting more humane. Centuries ago, our ancestors would burn cats alive as a form of popular entertainment. Knights waged constant war on each other by trying to kill as many of each other’s peasants as possible. Governments executed people for frivolous reasons, like stealing a cabbage or criticizing the royal garden. The executions were designed to be as prolonged and as painful as possible, like crucifixion, disembowelment, breaking on the wheel. Respectable people kept slaves. For all our flaws, we have abandoned these barbaric practices.

 RNG: So, do you think it’s human nature that’s changed?

SP: Not exactly. I think we still harbor instincts that can erupt in violence, like greed, tribalism, revenge, dominance, sadism. But we also have instincts that can steer us away, like self-control, empathy, a sense of fairness, what Abraham Lincoln called the better angels of our nature.

RNG: So if human nature didn’t change, what invigorated those better angels?

4:41 SP: Well, among other things, our circle of empathy expanded. Years ago, our ancestors would feel the pain only of their family and people in their village. But with the expansion of literacy and travel, people started to sympathize with wider and wider circles, the clan, the tribe, the nation, the race, and perhaps eventually, all of humanity.

5:02 RNG: Can hard-headed scientists really give so much credit to soft-hearted empathy?

5:07 SP: They can and do. Neurophysiologists have found neurons in the brain that respond to other people’s actions the same way they respond to our own. Empathy emerges early in life, perhaps before the age of one. Books on empathy have become bestsellers, like “The Empathic Civilization” and “The Age of Empathy.”

5:25 RNG: I’m all for empathy. I mean, who isn’t? But all on its own, it’s a feeble instrument for making moral progress. For one thing, it’s innately biased toward blood relations, babies and warm, fuzzy animals.

As far as empathy is concerned, ugly outsiders can go to hell. And even our best attempts to work up sympathy for those who are unconnected with us fall miserably short, a sad truth about human nature that was pointed out by Adam Smith.

 Adam Smith: Let us suppose that the great empire of China was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe would react on receiving intelligence of this dreadful calamity. He would, I imagine, first of all express very strongly his sorrow for the misfortune of that unhappy people. He would make many melancholy reflections upon the precariousness of human life, and when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure with the same ease and tranquility as if no such accident had happened. If he was to lose his little finger tomorrow, he would not sleep tonight, but provided he never saw them, he would snore with the most profound security over the ruin of a hundred million of his brethren.

6:38 SP: But if empathy wasn’t enough to make us more humane, what else was there?

6:43 RNG: Well, you didn’t mention what might be one of our most effective better angels: reason. Reason has muscle. It’s reason that provides the push to widen that circle of empathy. Every one of the humanitarian developments that you mentioned originated with thinkers who gave reasons for why some practice was indefensible. They demonstrated that the way people treated some particular group of others was logically inconsistent with the way they insisted on being treated themselves.

7:17 SP: Are you saying that reason can actually change people’s minds? Don’t people just stick with whatever conviction serves their interests or conforms to the culture that they grew up in?

7:27 RNG: Here’s a fascinating fact about us: Contradictions bother us, at least when we’re forced to confront them, which is just another way of saying that we are susceptible to reason. And if you look at the history of moral progress, you can trace a direct pathway from reasoned arguments to changes in the way that we actually feel. Time and again, a thinker would lay out an argument as to why some practice was indefensible, irrational, inconsistent with values already held.

Their essay would go viral, get translated into many languages, get debated at pubs and coffee houses and salons, and at dinner parties, and influence leaders, legislators, popular opinion. Eventually their conclusions get absorbed into the common sense of decency, erasing the tracks of the original argument that had gotten us there. Few of us today feel any need to put forth a rigorous philosophical argument as to why slavery is wrong or public hangings or beating children. By now, these things just feel wrong. But just those arguments had to be made, and they were, in centuries past.

8:45 SP: Are you saying that people needed a step-by-step argument to grasp why something might be a wee bit wrong with burning heretics at the stake?

8:52 RNG: Oh, they did. Here’s the French theologian Sebastian Castellio making the case.

8:58 Sebastian Castellio: Calvin says that he’s certain, and other sects say that they are. Who shall be judge? If the matter is certain, to whom is it so? To Calvin? But then, why does he write so many books about manifest truth? In view of the uncertainty, we must define heretics simply as one with whom we disagree. And if then we are going to kill heretics, the logical outcome will be a war of extermination, since each is sure of himself.

9:19 SP: Or with hideous punishments like breaking on the wheel?

9:22 RNG: The prohibition in our constitution of cruel and unusual punishments was a response to a pamphlet circulated in 1764 by the Italian jurist Cesare Beccaria.

Cesare Beccaria: As punishments become more cruel, the minds of men, which like fluids always adjust to the level of the objects that surround them, become hardened, and after a hundred years of cruel punishments, breaking on the wheel causes no more fear than imprisonment previously did. For a punishment to achieve its objective, it is only necessary that the harm that it inflicts outweighs the benefit that derives from the crime, and into this calculation ought to be factored the certainty of punishment and the loss of the good that the commission of the crime will produce. Everything beyond this is superfluous, and therefore tyrannical.

SP: But surely antiwar movements depended on mass demonstrations and catchy tunes by folk singers and wrenching photographs of the human costs of war.

RNG: No doubt, but modern anti-war movements reach back to a long chain of thinkers who had argued as to why we ought to mobilize our emotions against war, such as the father of modernity, Erasmus.

Erasmus: The advantages derived from peace diffuse themselves far and wide, and reach great numbers, while in war, if anything turns out happily, the advantage redounds only to a few, and those unworthy of reaping it. One man’s safety is owing to the destruction of another. One man’s prize is derived from the plunder of another. The cause of rejoicings made by one side is to the other a cause of mourning. Whatever is unfortunate in war, is severely so indeed, and whatever, on the contrary, is called good fortune, is a savage and a cruel good fortune, an ungenerous happiness deriving its existence from another’s woe.

 SP: But everyone knows that the movement to abolish slavery depended on faith and emotion. It was a movement spearheaded by the Quakers, and it only became popular when Harriet Beecher Stowe’s novel “Uncle Tom’s Cabin” became a bestseller.

RNG: But the ball got rolling a century before. John Locke bucked the tide of millennia that had regarded the practice as perfectly natural. He argued that it was inconsistent with the principles of rational government.

John Locke: Freedom of men under government is to have a standing rule to live by common to everyone of that society and made by the legislative power erected in it, a liberty to follow my own will in all things where that rule prescribes not, not to be subject to the inconstant, uncertain, unknown, arbitrary will of another man, as freedom of nature is to be under no other restraint but the law of nature.

11:54 SP: Those words sound familiar. Where have I read them before? Ah, yes.

Mary Astell: If absolute sovereignty be not necessary in a state, how comes it to be so in a family? Or if in a family, why not in a state? Since no reason can be alleged for the one that will not hold more strongly for the other, if all men are born free, how is it that all women are born slaves, as they must be if being subjected to the inconstant, uncertain, unknown, arbitrary will of men be the perfect condition of slavery?

RNG: That sort of co-option is all in the job description of reason. One movement for the expansion of rights inspires another because the logic is the same, and once that’s hammered home, it becomes increasingly uncomfortable to ignore the inconsistency.

In the 1960s, the Civil Rights Movement inspired the movements for women’s rights, children’s rights, gay rights and even animal rights. But fully two centuries before, the Enlightenment thinker Jeremy Bentham had exposed the indefensibility of customary practices such as the cruelty to animals.

Jeremy Bentham: The question is not, can they reason, nor can they talk, but can they suffer?

 RNG: And the persecution of homosexuals.

JB: As to any primary mischief, it’s evident that it produces no pain in anyone. On the contrary, it produces pleasure. The partners are both willing. If either of them be unwilling, the act is an offense, totally different in its nature of effects. It’s a personal injury. It’s a kind of rape. As to the any danger exclusive of pain, the danger, if any, much consist in the tendency of the example. But what is the tendency of this example? To dispose others to engage in the same practices. But this practice produces not pain of any kind to anyone.

13:43 SP: Still, in every case, it took at least a century for the arguments of these great thinkers to trickle down and infiltrate the population as a whole. It kind of makes you wonder about our own time. Are there practices that we engage in where the arguments against them are there for all to see but nonetheless we persist in them?

14:00 RNG: When our great grandchildren look back at us, will they be as appalled by some of our practices as we are by our slave-owning, heretic-burning, wife-beating, gay-bashing ancestors?

14:13 SP: I’m sure everyone here could think of an example.

14:16 RNG: I opt for the mistreatment of animals in factory farms.

14:20 SP: The imprisonment of nonviolent drug offenders and the toleration of rape in our nation’s prisons.

14:24 RNG: Scrimping on donations to life-saving charities in the developing world.

14:29 SP: The possession of nuclear weapons.

14:31 RNG: The appeal to religion to justify the otherwise unjustifiable, such as the ban on contraception.

14:38 SP: What about religious faith in general?

14:40 RNG: Eh, I’m not holding my breath.

14:42 SP: Still, I have become convinced that reason is a better angel that deserves the greatest credit for the moral progress our species has enjoyed and that holds out the greatest hope for continuing moral progress in the future.

14:55 RNG: And if, our friends, you detect a flaw in this argument, just remember you’ll be depending on reason to point it out.

Note: Reason is a continuous process, for individual and generations, and is an integral part of our survival instinct. If the women are taught to reason and reflect early on, the new generations will be inducted to reflect and learn to be pessimistic on many idiosyncrasies.

The educated mothers will generate a developing survival instinct. Those left on their own with truncated and incomplete knowledge of facts and discoveries will generate a disintegrating survival instinct. In all cases, state governments play a central and critical function in developing a mature survival instinct for the species.

Is it Broken? The way we think about work?

Today I’m going to talk about work. And the question I want to ask and answer is this: “Why do we work?”

Why do we drag ourselves out of bed every morning instead of living our lives just filled with bouncing from one TED-like adventure to another?

0:33 You may be asking yourselves that very question.  We have to make a living, but nobody in this room thinks that that’s the answer to the question, “Why do we work?”

For folks in this room, the work we do is challenging, it’s engaging, it’s stimulating, it’s meaningful. And if we’re lucky, it might even be important.

We wouldn’t work if we didn’t get paid, but that’s not why we do what we do.

And in general, I think we think that material rewards are a pretty bad reason for doing the work that we do.

When we say of somebody that he’s “in it for the money,” we are not just being descriptive.

I think this is totally obvious, but the very obviousness of it raises what is for me an incredibly profound question.

Why, if this is so obvious, why is it that for the overwhelming majority of people on the planet, the work they do has none of the characteristics that get us up and out of bed and off to the office every morning?

How is it that we allow the majority of people on the planet to do work that is monotonous, meaningless and soul-deadening?

Why is it that as capitalism developed, it created a mode of production, of goods and services, in which all the nonmaterial satisfactions that might come from work were eliminated?

Workers who do this kind of work, whether they do it in factories, in call centers, or in fulfillment warehouses, do it for pay. There is certainly no other earthly reason to do what they do except for pay.

So the question is, “Why?” And here’s the answer: the answer is technology.

Now, I know, yeah, technology, automation screws people, blah blah — that’s not what I mean.

I’m not talking about the kind of technology that has enveloped our lives, and that people come to TED to hear about. I’m not talking about the technology of things, profound though that is.

I’m talking about another technology. I’m talking about the technology of ideas. I call it, “idea technology” — how clever of me.

2:51 In addition to creating things, science creates ideas.

Science creates ways of understanding. And in the social sciences, the ways of understanding that get created are ways of understanding ourselves. And they have an enormous influence on how we think, what we aspire to, and how we act.

If you think your poverty is God’s will, you pray.

If you think your poverty is the result of your own inadequacy, you shrink into despair.

And if you think your poverty is the result of oppression and domination, then you rise up in revolt.

Whether your response to poverty is resignation or revolution, depends on how you understand the sources of your poverty.

This is the role that ideas play in shaping us as human beings, and this is why idea technology may be the most profoundly important technology that science gives us.

And there’s something special about idea technology, that makes it different from the technology of things.

With things, if the technology sucks, it just vanishes, right? Bad technology disappears.

With ideas — false ideas about human beings will not go away if people believe that they’re true.

Because if people believe that they’re true, they create ways of living and institutions that are consistent with these very false ideas.

And that’s how the industrial revolution created a factory system in which there was really nothing you could possibly get out of your day’s work, except for the pay at the end of the day.

Because the father — one of the fathers of the Industrial Revolution, Adam Smith — was convinced that human beings were by their very natures lazy, and wouldn’t do anything unless you made it worth their while, and the way you made it worth their while was by incentivizing, by giving them rewards. (Exactly like animals in experiments)

That was the only reason anyone ever did anything. So we created a factory system consistent with that false view of human nature.

But once that system of production was in place, there was really no other way for people to operate, except in a way that was consistent with Adam Smith’s vision. So the work example is merely an example of how false ideas can create a circumstance that ends up making them true.

It is not true that you “just can’t get good help anymore.”

It is true that you “can’t get good help anymore” when you give people work to do that is demeaning and soulless.

And interestingly enough, Adam Smith — the same guy who gave us this incredible invention of mass production, and division of labor — understood this. He said, of people who worked in assembly lines, of men who worked in assembly lines, he says: He generally becomes as stupid as it is possible for a human being to become.”

Now, notice the word here is “become.” “He generally becomes as stupid as it is possible for a human being to become.” Whether he intended it or not, what Adam Smith was telling us there, is that the very shape of the institution within which people work creates people who are fitted to the demands of that institution and deprives people of the opportunity to derive the kinds of satisfactions from their work that we take for granted.

The thing about science — natural science — is that we can spin fantastic theories about the cosmos, and have complete confidence that the cosmos is completely indifferent to our theories.

It’s going to work the same damn way no matter what theories we have about the cosmos. But we do have to worry about the theories we have of human nature, because human nature will be changed by the theories we have that are designed to explain and help us understand human beings.

7:02 The distinguished anthropologist, Clifford Geertz, said, years ago, that human beings are the “unfinished animals.” And what he meant by that was that it is only human nature to have a human nature that is very much the product of the society in which people live. That human nature, that is to say our human nature, is much more created than it is discovered.

We design human nature by designing the institutions within which people live and work.

And so you people — pretty much the closest I ever get to being with masters of the universe — you people should be asking yourself a question, as you go back home to run your organizations.

Just what kind of human nature do you want to help design?

Patsy Z shared this link

What makes work satisfying?
Apart from a paycheck, there are intangible values that, Barry Schwartz suggests, our current way of thinking about work simply ignores.
It’s time to stop thinking of workers as cogs on a wheel.
ted.com|By Barry Schwartz

 Perpetual Growth myth killing US: Paul B. Farrell

In the 19th century, the world population was barely one billion, and Adam Smith and Malthus were convinced that Perpetual Grow in population and production were not sustainable.

The United Nations and Pentagon studies predict population growth (the main driver of all economic growth) will create unsustainable natural-resources demands as early as 2020. 

By 2050, global population will explode to 10 billion. 

And yet, traditional economists insist that “If we can’t survive the short, long-term is irrelevant“. The technology gurus claim that technology can overcome and resolve every conceivable shortage and ailments…

Everything you know about economics is wrong. Dead wrong. Everything. The conclusions of economists are based on a fiction that distorts everything else. Economics is as real as one of the summer blockbusters like “Battleship,” “The Avenger” or “Prometheus.”

The difference is that the economic profession is a genuine threat, not entertainment. Economics dogma is on track to destroy the world with a misleading ideology.

Why? Because all economics is based on the absurd Myth of Perpetual Growth. All theories and business plans based on growth are mythological.


Reuters. A stray dog stands on a rubbish dump at the seafront in Sidon, southern Lebanon.

Economists are master illusionist who rely on a set of fictions, fantasies and forecasts that emanate from a core magical mantra of Perpetual Growth that goes untested year after year.

And, it’s used to manipulate the public into a set of policies and decisions that are leading the American and the world economy down a path of unsustainable globalization and GDP growth assumptions that will self-destruct the planet.

Denial? We’re all addicted to the Myth of Perpetual Growth

Economists are addicted to this ideology. Trapped deep in their denial, can’t see the problem, or admit it, or if they do, they are unable to stop themselves, see past their own myopic world view.

 Economists are mercenaries working for capitalists who pay their salaries, and expect them to support the capitalist’s bizarre Myth of Perpetual Growth.

Worse, the public also bought into the myth. You believe everything you learned in college about economic theories, all the textbooks, everything you read in the daily press, the government reports, all those Wall Street analysts’ predictions relying on studies prepared by economists with credentials.

But everything you think you know about economics … is wrong. Dead wrong. And until economics acknowledge this, the discipline is on a self-destruct path.

Why?

The science of economics is not science. It looks scientific with all the fancy math algorithms and computer models that economists use, but all that’s just window dressing to make the economist look scientific and rational.

They’re not. Their conclusions are pre-ordained, fabricated, based on their biases, personal ideologies and whatever their employer wants to prove to manipulate consumers, voters or investors to buy what they’re selling.

‘What do you call an economist with a prediction? Wrong’

Don’t believe me? Go look at USA Today’s quarterly surveys of 50 economists projections of GDP growth. Invariably off by a large margin. And Barron’s Big Money poll? In past reviews we’ve seen a wide gap in forecasts by the bulls and bears.

Bottom line: Whether it’s Roubini or Roach, Kudlow or Krugman, you can’t trust the predictions of any economist. Ever.

Best warning: That famous Business Week editorial several years ago headlined: “What Do You Call an Economist with a Prediction? Wrong.”

We live in a world of capitalists who thrive on the great Myth of Perpetual Growth, endless growth, ad infinitum, forever, till the end of time.

But driving the economists’ growth myth is population growth. It’s the independent variable in their equation. Population growth drives all other derivative projections, forecasts and predictions.

All GDP growth, income growth, wealth growth, production growth…are driven by Population growth.  These unscientific growth assumptions fit into the overall left-brain, logical, mind-set of western leaders, all the corporate CEOs, Wall Street bankers and government leaders who run America and the world.

Just because a large group of illusionists collectively believes in something doesn’t make it true. Perpetual growth is still a myth no matter how many economists, CEOs, bankers and politicians believe it.

It’s still an illusion trapped in the brains of all these irrational, biased and uncritical folks.

No-win scenario: Damned if we grow? Damned it we don’t grow?

Capitalism itself is at a crossroads. Growth is capitalism’s sacred cow. It’s “grow or die” theory doesn’t work anymore.

With us since 1776, “grow or die” theory is being challenged by a “new god of reality” that’s flashing warnings of an emerging new reality from critics, contrarian and eco-economists. This war is pitting old and new economists:

Grow OR Die.

Traditional economists (pro-capitalism): We’re told we need 3% GDP growth to support the next batch of 100 million Americans. We believe it on faith. Drill Baby Drill. Buy stuff. Get new jobs to fuel growth. We’re out of control. Exploding growth fuels demands as the rest of the world adds 2.9 billion new humans, all chasing their “American dream.”

Grow AND Die.

New eco-economists (environmentalists): They see Big Oil’s destruction of our coastal economies, the rape of West Virginia’s coal mountains, the unintended consequences of uncontrolled carbon emissions and they ask: “When will economists, politicians and corporate leaders stop pretending Earth’s resources are infinitely renewable?”

Our world is at a crossroads, facing a dilemma, confronting the ultimate no-win scenario, because the “Myth of Perpetual Growth” is essential to support the global population explosion.

All this “Growth” is also killing our world, wasting our planet’s non-renewable natural resources. “Eternal Growth” is suicidal, will eventually destroy Earth.

We’re damned if we grow. Damned if we don’t.

Future economists will be forced into a No-Growth Economics

Will economists change as long as they’re mercenaries in the employ of Perpetual Growth Capitalists? No.

It will take a new mind-set. The difference between the mind-set of traditional economists and the new eco-economists is simple: Traditional economists think short-term, react short-term, pursue short-term goals. New eco-economists think long-term.

Initially this may seem overly simplistic, but fits perfectly. Here’s why:

Old traditional economists — short-term thinkers: Traditional economists are employees and consultants for organizations with short-term views — banks, big corporations, institutional investors, think-tanks, government.

They all think in lock-step, driven by daily returns, quarterly earnings, annual bonuses. Short business and election cycles are more important than what happens a decade in the future. Their brains are convinced: If we can’t survive the short, long-term is irrelevant.

Environmental economists — long-term thinkers: New eco-economists see, think and plan for the long-term. They know traditional economists’ and capitalists’ thinking is setting America up for more and bigger catastrophes than the Gulf oil spill and the last meltdown.

The “Avatar” film is a perfect metaphor: Soon capitalism will exhaust Earth’s resources forcing us to invade distant planets searching for new energy resources.

Actually something more immediate will force change much sooner. You are not going to like it: United Nations and Pentagon studies predict population growth (the main driver of all economic growth) will create unsustainable natural-resources demands as early as 2020 with global population exploding from seven to 10 billion by 2050.

So expect Depression Era austerity, unemployment and a new no-growth economy.

Will we change? In time? Plan ahead? No, we won’t wake up without a collapse.

We know the Myth of Perpetual Growth is pure fiction.

But we also know our leaders, capitalists, economists and politicians all live in a collective conscience that must believe in this bizarre myth in order to justify everything they believe about the future, about progress, about income and wealth increasing, about a better life.

Should we just all hang on … until a catastrophe shocks our world, forces us to wake up and let go, newly aware of the absurdity of the Myth of Perpetual Growth on a planet of finite resources?

And it will happen sooner than you think.

Wars: Uncanny connections to Sovereign public debts 

The direct connections among exorbitant levels of accumulated public debts and wars have been recognized for centuries, on black and white.

We witnessed that war is one of the preferred defaulting mechanisms on outrageous contracted debts, particularly when the creditor nation is weaker militarily.

In the last two centuries, the world witnessed 320 defaulting decisions by debtor nations.

Is it a coincidence that the last two centuries experience as many wars?

If you compare the two graphs of dates on defaulting and the timing of subsequent wars then, you realize that there are direct interrelations between the two factors.

1. In 1770, (England sovereign debts amounted to 140% of its GNP)

Adam Smith wrote: “At a level of accumulation of national debts, there are no examples that the debts have ever been repaid.  Public revenues were always freed to be spent, but never to paying off any debts. Governments prefer to default, occasionally admitting the debts, occasionally pretending to have paid off debts, but always incurring a real debt.”

2. In 1716 France, after the monarch Louis 14, was totally bankrupt:

The Scottish John Law convinced the French Regent to issue paper money covered by gold for easy circulation of money and internal trade.  To entice the public into accepting paper money, interests were added, secured by a special perpetual fund called the “General Bank“.

This bank was to be supplied by financial resources converging from the America’s colony of greater Louisiana.  The Mississippi Company, (later renamed the “Western India perpetual company“), was collecting indirect taxes for France.  Speculation by French nobility transformed the central bank into a machine for printing worthless paper money and the collection from Louisiana stopped to converge to France.

In 1748, Montesquieu in  “Of the spirit of laws” wrote:

“There are a few financial specialists disseminating the concept that public debts multiply wealth and increase circulation of money and internal trade.  Facts are, the real revenues of the State, generated by the activities of industrious citizens, are transferred to idle classes.  The consequences are that we make it more difficult on the industrious citizens to produce profit and worst, extending privileges to the passive classes.”

In 1781, Jacques Necker, France minister of finance, proclaimed that “There can be no peace in Europe unless public debts are reduced to the bare minimum:  Public debts are sources for increasing the military capabilities designed for destructive activities; and then more debts are accumulated for the reconstruction phase.  A devilish cycle that is anathema to prosperity and security.

Necker was the first financial official in France to present a transparent statement sheet of all the revenues and expenses for the budget and he encouraged the French monarchy to emulate England by submitting complete budged so that investors and lenders be informed of the financial situation and be encouraged to considering France as a viable country to invest money in.

At the time, England had replaced Holland as the financial center of the world and the central Bank of England was already established.

All indicate that trends in growing sovereign debts in the richer and developed nations are not going to change till 2014.

In that year, it is expected that Japan public debts (mostly internal) will reach 250% of its GNP, Italy 130%, England 100 %,  the USA 100% (or $20 trillion, the interest alone representing 400% of its fiscal yearly revenues), France 95%, and Germany 90% of GNP.  The US will have to reimburse $850 billion in 2012 and finance one trillion.

The emerging States and most of Latin America countries are experiencing steady drop of their public debts to an average of 40% of GNP by 2014.

My question is:  If almost all States have incurred public debts then, who are the creditors?  

China economy has saved 2.5 trillion and Brazil and Turkey less than 500 billion.  All these savings cannot cover the amount of necessary public debts required by the debtor nations.

Fact is, world finance is functioning on worthless paper money and other financial tools transmitted here and there to give the illusion that the system is functioning.

So far, the IMF and the World Bank are controlled by the G8 who can withdraw at will from these supposed to be international financial institutions.  This situation of relying on magical financial illusions cannot persist for long.

A third World War will be created intentionally by superpowers in order to starting from scratch before establishing sustainable financial institutions, rules, and regulations.

If you carry a credit card at an interest rate of over 20% then, you know that the principal could never be paid since the credit limit is 50 times your real annual income  in order to finance a purposeful inflationary policy to give the illusion that the ratio of public debts to GNP is being reduced.

Not only 20% interest rate is exorbitant, but adding unpaid monthly installements to the principal is what all ancient customs forbade.

For example, if people of “independent means”, called rentier in French, could invest in a productive businesses generating profits of over 20% they would not have lent their money.  It is imperative that payments on interest should not last more than 7 years and further monthly payments automatically directed to paying off the principal.

Thomas Jefferson recommended, and then imposed his view when he became President to the new Independent America, that loans should never be contracted out by States for longer than 19 years so that future generations do not have to suffer decisions of the living ones.

As life expectancy is increasing, I suggest that Constitutions should force governments and official institutions to restrict the life of any loan to be 5 years shorter of the lower number of the average life expectancy or the age of retirement of citizens in the creditor nation. 

Anyway, if the loan is a private one, the lender should be able to enjoy his placement while alive and not suffer from defaulting decisions.

Note:  Reviewing the history of public debts since antiquity, the consequences of incurring huge public debts are the same:  Whether the dept is contracted out to a person (the monarch) and the debt is cancelled once the individual is dead, or the public debt is shouldered by a sustainable “immortal” entity such as a State, the weaker creditor will be punished.

The militarily weaker creditor will suffer now or later; it is a matter of delayed punishment for loaning a more powerful debtor whether voluntarily or after coercion.

The term “performance” is defined to be the scapegoat to firing employees in private and public institutions.  For the daily workers, performance is made very easy to evaluating: “How many units has the worker churned out?”  For the educated and graduate students (or technocrats), performance is evaluated with a rather long list of indices that the various managers in the hierarchy subjectively judge accordingly.  Primarily in the list are keeping on schedule and obeying the rules and regulations of a corporation or a public institution.  In order to fulfill the “mission” (or the  faked lustrous image of an institution), an educated or semi-professional employee has to come 30 minutes earlier than regulation and leave at least two hours later of regulation:  You have to prove to the corporation that the company is your first family to pay allegiance to and to do various chores free of charge.  Competence or creativity is on the list but secondary in value for hiring.

Why competence is not highly valued and performance of routine jobs is given so much priority?  The school system in the US (primary, secondary, and high school) is structured to satisfying corporate value system.  The school system passes every students who showed up on time, kept on schedule, and was obedient to rules and regulations.  Students who proved to be creative might b e on the honor list; but how many students learn to care being on honor list?  Corporations don’t care about creativity when you are first hired; they give priority to how obedient you tend to be to your master. 

The German scientist and educator Von Humboldt wrote:  “When you produce on command, we may admire your product, but we definitely despise the man.” He resumed ” What you fail to choose by your own volition, what you are forced to learn against your inclinations  will remain stranger and never be identified as a trait of your personality.  When an action or a learning process is done mechanically then, it cannot lead to creativity since you didn’t employ your human force and zeal in it.” 

British economist Adam Smith warned:  “State should intervene to preventing chain production by workers that renders them stupid and ignorant.”  The American social reformer and educator John Dewey (1859-1952) considered as “non liberal and immoral to forming kids for the job market in the perspective of just gain.”

Actually, experts and professionals learn that in order to keeping their jobs they should not indulge in “emotional” or ethical considerations in their reports.  What is of value is the end results; the corporation tells them:  “Show me the range of practical methods to bypassing laws and ethical situations in order to reach a winning contract.”


adonis49

adonis49

adonis49

April 2020
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
27282930  

Blog Stats

  • 1,376,507 hits

Enter your email address to subscribe to this blog and receive notifications of new posts by email.adonisbouh@gmail.com

Join 720 other followers

%d bloggers like this: