Home > Greece, The Economics Profession > Rats! History does repeat itself

Rats! History does repeat itself

from Peter Radford

And clearly economists don’t learn from it.

Ponder this:

“It was all very well for the rich, who could raise all the credit they needed, to clamp rigid deflation and monetary orthodoxy on the economy … it was the little man who suffered, and demanded easy credit and financial unorthodoxy.”

That’s the voice of E. J. Hobsbawm in his book, “The Age of Revolution 1789 – 1848″, and he is talking about post Napoleonic Europe.

But how contemporary is that sentiment?

We are stuck in a similar situation. Our elite, both here and in Europe, is managing the economy  for its own ends. The disconnect with everyday folk is astonishing. The hubris and plain meanness of it all is equally astonishing.

Look at Greece: the attempt to impose a teutonic fiscal ‘discipline’ via stringent austerity has simply led to the debt that was the target of the policy becoming an even larger problem. It is an example of epic policy failure. The Greeks, for all their previous laxity and fiscal ineptitude, are to be applauded for calling for an end to the stupidity.

Except it isn’t stupid. It’s cruel.

For policy makers to ignore the human consequences of their initiatives is a monstrous ethical equivocation. Economists, in particular, are prone to sticking their heads in the sand and pretending that what they theorize is simply theory and that real world consequences are somehow not consequences but accidents. That is to say human devastation is not supposed to be a result of a theory that posits happy endings, efficiency, and the nirvana of optimality. Apparently, to those who propose policies based upon such theories, bad stuff is simply a cost of getting to that happy ending. The bigger the human catastrophe the bigger the gap between reality and utopia. And the stronger the argument, so those of such faiths say, for their proposals.

Burn the village to save it?

The economists who propose utopian theoretical constructs need to be held accountable for the human cost of their extreme faith. They are either unethical because they don’t care about the cost of what they propose; or they are complicit with the elite and want to partake in the oppression. Or both.

I find it disheartening that economics has become so insular that history is expunged from it. Not only economic history, but the history of economics itself.

How can that be?

Economics is, after all, supposed to be explaining economies. And economies are in constant flux. So economics ought to be about flux, and it ought to be able to change in step with the economy. A theory that worked in a primitive industrial setting might not do too well in our advanced, more complex, interconnected, and yet highly bureaucratic setting. To expend great intellectual energy on timeless truths is, in my opinion, a waste. Not that there are no constants, it’s just that those constants are usually buried under a pile of more ephemeral and urgent other effects.

And many of those other effects are political, cultural, institutional, geographic, epistemological, or, gasp, just human, in origin.

Anyway, I think that one constant we can all believe in is that the rich will err on the side of deflation. They will preach the virtues of being creditworthy. They will complain about the slightest hint of inflation. And they will do their utmost to steer policy to aggrandize themselves.

One of the common themes of those doing the political agitating back in the immediate aftermath of the Napoleonic wars, whether they were in France, Britain, or these United States, was their desire to follow heterodox economics. Orthodoxy is an intellectual defense of the elite.

Same as now. Right?

  1. Cristi C
    February 10, 2015 at 11:54 am

    The quote should be expanded to give the overall view. It is the top 1% that was hated by everybody else.

    “The first general stumbling of the industrial capitalist economy is reflected in a marked slowing down in growth, perhaps even in decline, in the British national income at this period [1830-40s).

    Nor was this a purely British phenomenon. Its most serious consequences were social: the transition to the new economy created misery and discontent… Nor was the discontent confined to the labouring poor…The great financiers, the tight community of home and foreign “fundholders” who received what all paid in taxes – something like 8% of the entire national income – were perhaps even more unpopular among small businessmen, farmers and the like than among laboureres, for these knew enough about money and credit to feel personal rage at their disadvantage. It was all very well the rich, who could raise all the credit they needed, to clamp rigid deflation and monetary orthodoxy on the economy after the Napoleonic Wars; it was the little man who suffered”

  2. BC
    February 10, 2015 at 4:21 pm

    The Long Wave, ladies and gentlemen, exists and continues to evolve and adapt. We are in a debt-deflationary regime of the Long Wage Trough, i.e., Schumpeterian depression, which similarly occurred in the 1930s-40s, 1890s, and 1830s-40s, with evidence to suggest that the Long Wave rhythm existed going back to the 16th and 17th centuries.

    The desperate actions by central banks (owned by the Rockefeller-Rothschild, Anglo-American and European int’l banking syndicate) are direct evidence of attempts to mitigate, postpone, or prevent the debt-deflationary forces of the Long Wave progression at this juncture.

    The primary factors are peak demographic drag effects; labor returns to GDP at a record low (reducing labor productivity and private investment per employee); excessive debt to wages and GDP; and the associated financial bubbles and the resulting obscene wealth and income inequality from the disproportionate net flows to the financial sector equaling or exceeding GDP growth, precluding long-term growth of real GDP per capita.

    Additionally, unlike during the previous Long Wave Trough regimes, we have global population overshoot resulting in worsening resource (arable land, water, watersheds, forests, and fisheries) depletion per capita; Peak Oil causing structural/permanent net energetic/exergetic per capita constraints; and the sum of gov’t spending (the growth being primarily for war, food stamps, and elder medical services), private health care and education (the former at 18% of GDP, $10,000 per capita, and $26,000 per household), and household and business debt service at an equivalent of well over 50% of GDP.

    Thus we have a kind of Catch-22 situation in which these high-cost, low-productivity, low-multiplier sectors must grow for the economy to grow, but the remaining private sector can’t grow because of the drag effects from the growth of the former.

    Therefore, the world economy will hereafter experience structural/permanent, intractable constraints from peak Boomer demographic drag effects (including hereafter in China and the Asian city-states); Peak Oil (declining net energy/exergy per capita from the primary liquid fossil fuel energy source for civilization); population overshoot and resource depletion per capita; record-low labor returns to GDP reducing labor productivity and real, after-tax purchasing power for the bottom 90%+; and fiscal constraints from falling gov’t receipts and spending per capita from decelerating (or little or no) growth or real GDP per capita hereafter.

  3. Helge Nome
    February 14, 2015 at 2:58 am

    Having established, at length, that we are being sc….ed, where do we go from here?

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