Posts Tagged ‘economics’

THE BILLIONAIRES’ BIBLE

August 17, 2022

What Dunces preach and Neoliberals believe

The OLD TESTAMENT of the Neo-Liberal right-wing economists is THE ROAD TO SERFDOM by Alexander von Hayek, a lecturer at the London School of Economics, published in 1944.Von Hayek, who was raised in Vienna, saw himself as a close observer of Prussian and later German planning which turned, inevitably as he saw it, into Nazi tyranny. At the time it was an easy case to make when he also had Mussolini and Stalin as co-exemplars.

Von Hayek looks back to a Golden Age of British Liberalism under Lord Acton and J S Mill when only the Price Mechanism and the Perfect Market governed the interactions between individuals, organisations and states.. And like so many preachers he is full of dire warnings about what will happen if we deviate from the straight and narrow path – with chapter headings like ‘The End of Truth’ and ‘The Totalitarians in our Midst’ And it feels persuasive because everything is heavily cloaked in apparently unanswerable ”Logic” – which gets emphasised again and again and again.

ALAS IT IS COMPLETELY WRONG for 3 main reasons:

  1. Logic only works in a CLOSED system or game where all the possible moves and rules are defined in advance (like Chess). Economics is most certainly not of this nature Why don’t presumably educated people understand that?
  2. Von Hayek’s Golden Age never existed .It is sufficient to point out that in per capita GDP the UK’s in 1820 was two and a half times higher than anywhere else’s whilst by 1910 there were a dozen nations higher. The British working class in von Hayek’s Golden Age had to emigrate or starve ( 30% of volunteers for the British Army in 1914 were rejected on the grounds that that “their constitutions had been wrecked by malnutrition.” )
  3. Planned economies do NOT inevitably lead to tyranny – his central argument; viz Attlee’s and Scandinavian governments shortly thereafter.

The NEW TESTAMENT of the Neo-liberals or ‘Chicago Boys’ was written by

MILTON FRIEDMAN: ‘Capitalism and Freedom’ by Milton Friedman (1962) “the most influential economist of the second half of the 20th century” (Fortune magazine). How this very bad book can remotely be thought of as ‘science’ defeats me. Near the beginning (p4) he writes: “….the great advances of civilization, in industry, or agriculture, have never come from centralized government”. This is complete and utter nonsense, as factually wrong as stating ‘The Earth is Flat’. [Think only of sewage systems, clean water, roads, computers, space-satellites, anti-biotics, astro-navigation, jet engines, radar, the Internet, broadcasting, machine-tools, anti-scorbutics, satellite navigation, and so on and on.] To call it ‘naïve’ is far too polite – either the author was a complete fool or a deliberate liar. Certainly he was an enthusiastic apologist for the worst excesses of Capitalism ( Reagan and Thatcher were fans). And the fact that he was awarded a ‘ Not-the-Nobel Prize’ in Economics highlights the fraudulence of that particular award. von Hayek also got it.That prize is not awarded by the Nobel Foundation, who were furious that the prestige of their own Prize, with its name, was misappropriated by the Bank of Sweden, who ‘invented’ the tawdry ‘Economic’ variety. It should be called “The Dunce’s Crown” in honour of such a ‘Confederacy of Dunces’.

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TIDAL POWER MADE CIVILIZATION WITHOUT SLAVERY POSSIBLE FOR THE FIRST TIME

November 14, 2020

Before all, dwelling in cities – which is what civilization literally means − requires massive amounts of cheap and reliable transport. A household requires roughly ten kilos of raw food, and ten kilos of fuel a day. If it is to come from twenty kilometres or more away, as most of it must, we are talking very roughly of one Unit of Transport required per household, where one Unit corresponds to one ‘ton-kilometre-per-day’. This is a sensible unit because an extremely fit man could carry on his back forty kilograms for 25 kilometres if he marched all day. In other words every city-household would turn its menfolk (or womenfolk in Africa where most men don’t deign to carry things) into beasts of burden, leaving nobody left to create the very culture the city was supposed to promote. Horses and carts could help, but not by much when you take into account the effort needed to build roads and supply fodder. Athens and Rome got by only because they were brutal slave states dependent on constant conquest to resupply the poor devils whose backs and spirits they then broke. They deservedly passed into oblivion because they never remotely solved the Transport Problem and so instead imposed endless cruelty on their fellow men and women. Almost the first act of the Romans after they landed in Britain was to crucify some locals.

So how did mankind first solve ‘The Transport Problem’? The short answer is by harnessing Moon-power. My grandmother lived at Leigh-on-Sea on the Thames estuary, where it is about ten miles across. In the nineteen forties and fifties one could usually see from there a dozen Thames Barges with their tan spritsails working the wind and tide or waiting patiently, sails furled, anchors down, crew asleep, for the next favourable stream. In 24 hours there are two tides running in the same direction for 6 hours each at an average speed of around 2 knots. So that’s 24 miles a day in your desired direction. And given they had a crew of only two men (and a boy) and could carry a hundred tons, each Thames sailing barge could transport more than a thousand fit men. No wonder London became the greatest commercial city on Earth. The tides running down and up the estuary as far as Tower Bridge were the great pulsing heart of modern civilization.

A Thames sailing barge, the Alamy taking part in a sailing race in 2020. She could carry up to 200 tons of cargo, had a shallow draft and could take to the bottom when the tide receded, yet because of her lee-boards (see one raised on the side) had fine sailing qualities enabling her to range between Cornwall and the Baltic. Her sail plan could be handled by a crew of only 2 men and a boy, and enables her to manoeuvre in and out of tidal streams in the merest zephyr of wind. You are looking at what is the most revolutionary form of transport ever invented,( see Table below) but you won’t find it mentioned in most history books. Copyright Powell/ Alamy Livenews.

With that insight a vital chapter of history becomes explicable for the first time. Big tides are uncommon – none to speak of in most oceans, the Mediterranean or the Baltic. But in North Western France, the Low Countries, and Britain in particular, they are immensely powerful, reaching a height of fifty feet at the headwaters of the Bristol Channel. And that is most likely why civilization, stable enduring civilization, first developed there. London, Antwerp, Amsterdam, Liverpool, Rouen, Glasgow, Rotterdam, Bruges, Bristol….and their hinterlands, didn’t need slaves. They flourished on Moon-power. Food and fuel, building stone and timber, sand and salt, leather, iron-work and bricks, slate, night-soil, fodder and road-stone, flax, wool and beer…..all the necessities and luxuries of a civilized life could glide long distances on tide and wind….thanks to the tidal sailing barge.

The problem with tidal waters is that they don’t generally get very far inland – or stay there for long if they do. But it didn’t take much for someone to think of closing a gate or barrage to hold the tide up and allow vessels to take their cargoes to the utter extremities of tidal reaches. Then of course someone had to build locks in the barrages to allow the captive barges out and back down to the sea without letting too much of the precious water out. But once you have such a lock for letting vessels down why not reverse its action and lift vessels up? Thus in 1300 near Bruges was born what is perhaps the most ingenious contrivance of the human mind: the lock. Ships could now travel up hill by the aid of rainwater – and a little horse-power. Thus the prosperous, and sustainable modern world was born – without the need for a single slave. Tides led to barrages, to canals, to locks and so to industrial cities like Birmingham, far, far inland.

All would have been well if prosperous Tidal Man could have restrained himself . But he didn’t. Temporarily provided for by waterborn wealth he bred like the proverbial rabbit. In a couple of centuries the tidelanders, and in particular the Brits, had cut down most of their trees, precipitating a catastrophic firewood crisis. There was nothing for it but to turn themselves back into slaves and dig coal from underground like blind worms. But if it hadn’t been for the canals and barges, that life-giving coal would never have made it to the shivering cities. The entire South Wales Coal and Steel Industry, which once (1880) ruled the world, was entirely enabled by a pair of lock gates 60 feet high built in Cardiff to hold in the tide. They’re still there.

Coal mines and rain water obviously don’t mix. Steam power had to be invented to pump out the mines and with steam, eventually came the steam train with a transport capability greater than either the tidal or the canal barge. Their gentle days were numbered.

The tidal sailing barge and the canal lock were the miraculous developments which gave rise to true civilization. And if we hadn’t bred so improvidently we might still be living off their backs today. Even by the standards of modern mechanized transport they were pretty efficient as the following table illustrates, where the Units are equivalent to what one very fit man can carry in a day i.e. roughly 1 Ton-kilometre. Attempts have been made to factor in the costs of crews, of forage, of fuel and of the building and maintenance along the ways on which they ran. But that is not easy to do given that governments often tax or subsidize the different factors in haphazard ways. Usage then becomes a vital factor in the relative costs of alternative modes of transport. For instance the British canal system collapsed so rapidly because as railways stole freight away their fixed maintenance costs had to be charged upon fewer and fewer barges (Also railway companies bought up canals and vandalized them deliberately).

TABLE : RELATIVE TRANSPORT CAPABILITIES

In units of 1 Ton-kilometres per day per man required.

PORTER 1

BARROW-BOY (Wheels; common in India still) 4

CYCLE (No track costs included) 10

HORSE WAGON (forage costed but not roads) 8

TIDAL SAILING BARGE (Britain; 2.5 crew) 1200

CANAL BARGE ( 30 Tons; including canal costs) 90

CLIPPER SHIP (limited to trade wind routes) 3000

RAILWAY* (incl track and fuel costs) 2400

TRAMP STEAMER (incl 30 crew and 50 miners) 4000

MODERN TRUCK ( 2 crew, fuel and road costs) 3000

CONTAINER SHIP 8000

JET CARGO-PLANE 600

* I have everywhere converted fuel costs into manpower units by assuming a man can mine about half a ton of coal a day and that oil will be taxed until it is more expensive than coal per unit of energy stored.

In short we can see that it was the tidal sailing barge which first made true civilization possible. The North Western Europeans were blessed with this rare magic, and of course the Brits, as usual, with far more than anyone else.

This was extracted from Chapter 2 of my ‘History of the Brits’ (Amazon 2020)

NB: This has been an entirely quantitative argument (see table). Some arguments are bound to be of this nature. This is why mathematics has to play a significant, sometimes over-riding role in History [Ch.4].

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THE FOLLY OF FREE TRADE

October 23, 2020

         If there is one thing that nearly all economists believe, and preach, it is the benefit of Free Trade. As a result all Britain’s great industries have either closed down, or are in the process: coal, steel, ship-building, cotton mills in Lancashire, woollen mills in Yorkshire, cars, motor-cycles, bicycles, trucks, clocks and pottery in the Midlands, white goods, aircraft, computers, electronics, shoes …….going, going, gone. But it isn’t just Britain. Youth unemployment in France is 25%, 40% in Italy and Spain. And look at America: its great manufacturing centres such as Pittsburgh, Detroit, Cleveland….. are now part of that broken rust belt which rose in despair and voted for Trump. What have we all done to ourselves? I will now argue that what the academic economists proclaim is so good for us is actually a deadly poison.

An imported commodity may be dramatically cheaper at the point of retail sale than its domestically produced equivalent. Unfortunately though imports can also have large Sunken Costs arising from losses in domestic employment, investment and profits. And none of us can afford to ignore such hidden costs because we will all have to stump up for them in the end in the form of extra taxes to pay for unemployment benefits, retraining and relocating workers,  lost capital and wasted infrastructure (factories, roads, schools, shops, hospitals….). And that says nothing of the misery involved in breaking up communities, families and friends. All that should be obvious; but not apparently to our Economist friends.

What needs to be made, commodity by commodity, is a calculation of the benefits of  a particular Free Trade set against the Sunken Costs which we will have to be borne by the wider community as a whole (i.e. the importing nation). That shouldn’t be too difficult – and it isn’t. I won’t bore you with the algebra but it is all in the attached article.

Let’s take just one dramatic example: a motor car imported into Britain; it doesn’t matter where from. According to my calculation it will have to be 64 per cent cheaper at the point of retail; sale  than its domestic equivalent to be a bargain.  Sixty Four Percent ! Most of the foreign cars on Britain’s (Frances’s, America’s…..) roads are thus an absolute disaster for the importing country as a whole because the Sunken Costs far exceed the benefits. Ditto for many other countries and other commodities (though bananas will still be welcome in Britain). The more sophisticated a country is in social terms the less it can afford to indulge in Free Trade because its sunken social costs (mostly investments in people ) are so high – by definition. Free Trade makes far more sense for unsophisticated countries because their people-investments are (equally by definition) so much lower. [China for instance barely has a social  welfare system so, by the same argument, it benefits from a wide variety of free trades.]

      I couldn’t believe this calculation when I first made it in 2016. But it has been checked by several other people with far more commercial background than I. It is  right. But please check it out because it is so important for you and your family.

     So why do Economists still preach the nonsense they do about Free Trade? I’m sorry to say that it’s chiefly because Economists appear to be too simple-minded to recognize the fallacies underlying their own profession. Unfortunately the harm they have done already is almost incalculable.

N.B. My argument is NOT Economics, merely accountancy. The distinction is that Economists have to make assumptions about how humans will react. I have not.

           THE FALLACY THAT ECONOMICS IS A SCIENCE.

         The essential skill of any kind of science is hypothesis-testing.  In my book [ ‘Thinking For Ourselves‘, Amazon paperback, 2020] I demonstrate how such testing works using Common Sense Thinking. But It will only work if the number of possible hypotheses (to explain the evidence) is finite, and indeed very limited in number. Thus dream-interpretation can never become a science because the number of possible explanations (hypotheses) for any dream is unlimited. If there were an infinite number of possible hypotheses  then the initial Odds on any one of them being right would have to be infinitely small, and no amount of subsequent evidence can make something infinitely small finite – that is the obvious logic. Philosophers call this “The Principle of Limited Variety” (PLV for short). The Greeks, the Romans and the biblical Jews were all big on dream-interpretation, but now that we understand the PLV we have (except for psychologists) given the dodgy practice up.

         So what about Economics – can that be a science? For Economics to claim that it is, or could become a science, it must demonstrate that the Principle of Limited Variety applies to it. But how could it do that? Take the recent financial crash of 2007/8. Practically nobody foresaw it, but dozens of books and thousands of learned papers have been written about it since, pointing to different culprits which include: greedy bankers, toxic mortgages, opaque financial instruments, over-leveraging, vast international imbalances (China saving versus US borrowing), auditors in cahoots with the companies that paid them, Fanny Mae and Fanny Mac (you don’t want to know), the scuppering of the 1944 conference on international banking at Bretton Woods, Nixon refusing to back the US dollar in the aftermath of the Vietnam War (1971), over-saving, poor wealth distribution, flash trading, inadequately financed pension funds going in search of unrealistic returns, poor or non-existent supervision of the system by financial supervisors, the Euro, hubris following the collapse of Communism, a naïve belief in ‘perfect markets’, the inappropriate use of ‘The Normal Distribution’ by financial ‘Quants’, insurers ignoring the possibility of correlated market movements, extremely foolish advice given by the actuarial profession, dishonesty on the part of politicians willing to buy votes by offering unaffordable utopias and raising government debts, house owners foolishly believing they were rich because house prices were rising…..and so on and so on. When I read and try to understand the various hypotheses, they all carry a degree of plausibility to me. Moreover they can interact with one another in a whole variety of plausible and dramatic ways leading to an almost infinite number of compounded hypotheses – completely abrogating the Principle of Limited Variety.

Thus it must be true that Economics is not, and never can become, a science!

There is another way to look at the matter. Imagine that Economics   is   a science capable of generating reliable predictions. Suppose that it predicts that farmers will make more money from selling beef than selling milk. Then smart farmers will switch from dairying to beef production. Through scarcity the price of milk will rise; through oversupply the price of beef will fall. The very prediction of the allegedly sound Economic theory has proved to be self-defeating (‘reflexive’ in the jargon). And it seems to me that any ‘science of human behaviour’ would be self-defeating in the same way.

Thus everybody needs to understand that Economics is a church built on quick-sand. However much one might wish it otherwise, nothing can ever be done to rescue that situation. This argument is so simple that one has to wonder why Economists themselves do not understand it. Perhaps they don’t want to.

J.K. Galbraith, the historian of Economics was right when he wrote: “Economics was invented to make Astrology look respectable”.

The good news is that although Free Trade is a paralysing disease it is not  malignant. We could cut it out tomorrow if we wanted to and return to ruddy health. But to do that we first have to convince ourselves that it is bloody unhealthy. So check out the full argument at:

https://mjdisney.org/wp-content/uploads/2020/10/freetrade.pdf

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