The British Labour Party and economic decision making

It appears the British are getting ready to elect a Labour Party government which is hoping to introduce some “structural” changes to economic decision-making.

This blogger believes economic changes are urgently needed but also figures the changes proposed by the Labour Party will only change the faces making decisions and will do nothing to change the well-being of English people.

0*V_sRwC4Rvi4GfN3ZWhen socialists realize that central planning does not accomplish what they want they try to reform by decentralizing the central planning. To see how the British are likely to try this, see this article in The Economist.

The main issue in capitalism versus socialism is who gets to make decisions about what economic projects are undertaken and who gets to do them.

There are three main ways in which this decision-making can be done.

The first is that major decisions are made by bankers who get to do this via their control over money creation. Fractional reserve banking means bankers create money when they make loans and this gives them a great deal of power to decide what projects go ahead and by whom. The capital in capitalism comes from the money created when loans are made. Even small decisions like who gets to build housing and who gets to buy the houses are made by bankers when they approve the loans and mortgages. Any meaningful reform will require changes in the way in which money is created. There are ways to do this. Not only will bankers object to the loss of power but a lot of people have an emotional committment to money and will fiercely oppose changes. Another strong feature of this system is that governments pass legislation that restricts competition and allows some people to make profits. This system we call capitalism.

The second approach to decision-making is called socialism or central planning. Decisions are made by political leaders or their bureaucrats. Socialists like to use words such as “democratic” and “public interest” but in reality make decisions according to their own values and interests. Because of this socialist economies tend to be an inefficient use of resources. Decision making is still made by a few people even if they claim it is on behalf of others.

The third way of making decisions is a true market or perfect competition. We like to think our economy is based on markets but a lot of it is based on legislation that restricts competition such as patents, copyright,licensing and tariffs. In North America one area of life in which competition is allowed is religious services. As we are committed to freedom of religion the government does not interfere. One often hears of people who go church shopping.

Greens often say they want an economy based on small business but they also automatically reject everything said by economists. This is unfortunate because economics has worked out the theory of small business and can say exactly what to do.

In order to have perfect competition all participants in a market, sellers and purchasers, must be so small that no one can influence the price by increasing or decreasing the amount they buy or sell. There must also be perfect knowledge. All participants need to know all prices. Entry to and exit from an industry needs to be easy which means there can be no patents or copyright.

For the purposes of this post decision-making is made by customers who vote with their buying decisions. Price changes are signals to producers to increase or decrease production.

One of the reasons this blogger likes the true market economy is that it allows a lot of decisions to be made by individuals. One of the problems is that individuals to not have a lot of power. People with common vested can form powerful lobbying groups and can get governments to pass legislation which restricts competition and provides them with excess profits.

Socialists talk of giving workers influence over economic decisions, but their proposals give decision-making to boards or councils. Workers are also consumers and with a market system they will have the same influence as all consumers. A market system also allows for a great variety of products. For example, if schools were based on a market there could easily be schools based on different educational philosophies and parents could choose which they wanted for their children. A voucher system could ensure that all children got an education.

Socialists also argue that capitalism encourages greed. This may be true when decisions are made by bankers, but in a true market there are no profits, just wages and a return on investment. If there are profits being made in an industry, more people will go into it until there are no profits.

If the British Labour Party gets elected and is successful in changing the “structure” of their economy, they may change the size of a few of the units for which decision are being made. However, they will still be steering the same ship in the same ocean. Jeremy Corbyn is not radical or brave enough to change the way in which money is created or to drop a committment to economic growth, both of which are urgently needed to protect people from an economic collapse.

 

 

 

 

 

 

 

 

 

 

 

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Let’s put some ‘civil’ in civilization

Over the past few weeks I have been reading some anthropology about hunters and gathers and have decided these so-called primitives are really the most civilized Peoples of all times.  I absolutely do not want for myself or anyone else to go to that life style but I do think we should evaluate their cultures for ideas we could adopt.  We need to put the civil in civilization.

In this post I propose to look at some of the things that make our society uncivilized and contrast these with what we know about hunters and gathers. A lot what makes us uncivilized are sources of in justice –  overpopulation, forcing people to do things according to the values and morals of others and exploitation of people and resources.  Generally these injustices are not a part of the lifestyle of hunters and gatherers.

59889This guy used to think that violence was a natural part of human nature and we  just have to live with it.  After reading about hunters and gatherers I am not so sure.  These people are generally known for being peaceful and non-violent.  One group, when threatened by some war-like neighbors just disappeared into the forest.
It would be interesting if an anthropologist would do a detailed study of this aspect of their lives.

Hunters and gathers must be expert psychologists as they have to teach their young to kill animals while remaining non violent in their human relationships.  There often appears to be a spiritual aspect to their hunting.  Apparently a lot of social control is with verbal tactics such as teasing or ridicule.

In contrast most civilized countries maintain standing armies, sometimes used for social control of populations and in some places it is acceptable for agents of the state to execute innocent people who happen to be in their way. Some people claim the right to force others to live by their values and morals and are often very successful at getting state support in the form of legislation.  Our civilizations are also very tolerant of psychological violence. In spite of all the feminist propaganda we hear, women are very skilled at this type of violence.  Violence is so pervasive in our societies that very few people get through their lives without experiencing some of it.

History tells us that so far all civilizations have failed although many people believe our own will last forever.  As so many civilizations have failed this is a major issue.  One theory is that previous civilizations have failed because they have depleted their topsoil.  If this is true we need to proceed with caution as a lot of our food supply is dependent upon adding chemicals to the soil.  We need to put a lot of effort into studying agriculture.  It is too important to leave to people who make their living from it.

This blogger believes the major threat to our way of life is that we have used up most of the easily accessible energy and mineral resources on the earths crust.  Yes, there are lots of resources left but cost of extracting them is such they are mostly useless unless we have some major technology breakthroughs.
In  contrast there is archeological evidence that the bushmen of the Kalahari desert have maintained their civilization for up to 200,000 years.  They did this by living hand to mouth, seldom  having more than a day or two of food on hand and not over exploiting resources.

A significant feature of hunting and gathering is that most decision-making is by individuals.  Leadership is low-key and individuals can easily move from one small group to another. The bushmen’s  time came to an end when their territory was taken over by farmers and herders with the help of modern technology such as boreholes to provide reliable water supplies.

It is not clear if there was a natural transition from hunting and gathering or if farming and herding developed independently.    What is significant is that the latter made for different social dynamics in that some people could make decisions that affected others.  As these other types of food provision involved food storage they also led to residence mostly in one location, more and more complex tools and a more material lifestyle.  This was probably the start of the decline into our uncivilized history.

Probably the most important of all freedoms is the right to make decisions according to our own values and morals. In our society this is a complex issue with many limits.
The first limitation, shared by hunters and gatherers, is the need to provide ourselves with food and shelter. We must spend some time on this although most hunters and gatherers devote far less time to this than we do. Anthropologists have found that a lot of them devote only 15 to 20 hours a week to this basic activity. The rest of the time they spend socializing, performing rituals, doing crafts or sleeping and being lazy.

The rest of the limits on freedom to make decisions follow from our economic organization often with religious sanctions. Modern technology and the use of oil in agriculture probably means we only need to work two or three hours a week but the work ethic requires us to work 40 to 60 hours a week. If one does not do this much work one is a deadbeat on not doing ones share. This is great for those people who want others to support their empires but not so great for the environment and the resource base and our right to decide for ourselves what we want to do.

Possession of money gives us freedom to make decisions but the way in which it is created is a limitation. Most of the money used in our exchange of goods and services is created when banks make loans in what is known as fractional reserve banking. This is a complex but easy to understand process that is fully explained in many places on the FunnyMoneyArtPowell-finalinternet including this weblog and the e-book by this writer, Funny Money: Adapting to a Down Economy. As money is created by bankers they determine who gets it and what projects are undertaken. Creating money with an income scheme and national exchange trading scheme as proposed in my book would mean a major transfer of decision-making power to individuals.

Another limit on our ability to make independent decisions is the extensive use of marketing techniques by major corporations. I have often thought the best psychological insights come from marketing people and they do not hesitate to use their knowledge to influence how people think and what they do. Sadly, we have got to the point where a lot of people consider exploitive marketing to be normal, legitimate and even desirable. Some major Canadian companies have recently made the news because of the pressures put on their sales people, like to sell expensive internet or phone services to people who will never use them.

It is amazing how easily so many people get hooked into agendas set by others. It is easy to avoid being influenced by the marketers; just avoid television and social media. It is also easy for me to say that as I left home before my parents bought a television.
Not only are hunters and gatherers known for their peacefulness, they are also known for their equality. If people are not trying to aquire lots of material things, then economic equality becomes natural.

In our own culture we are aware of increasing inequality as more people suffer from the falling economy but we do not know how to change things. I believe everyone should have the opportunity to have the same standard of living as everyone else. It is painful to see people homeless and having to rely on food banks.

This writer believes inequality could be corrected with an income scheme and a true market economy. One of the features of a market economy is that competition wipes out the profits that allow some people to become rich.

The books I have read say little about sexuality but it appears most hunters and gathers are casual and accepting. Nor do they appear to have the sexual problems which plague so many people in our societies. It could be that we have something to learn from them about sex .

The key to what we call civilization is the agricultural surplus which is the food production in excess of what the producer needs for his own survival. Generally hunters and gathers do not have an agricultural surplus because once they have enough food for a day or two they stop working knowing that more is easily available when they need it.

The agricultural surplus is a two-sided coin. It releases people from food production to do other things some of which are positive and some of which are destructive. It can be the start of the decline onto the slippery slope into uncivilized behaviors,
The agricultural surplus presents a people with two questions; what to do with it and who makes the decision. These questions open up opportunities for people whose personality is to tell others what to do. This writer believes each of us should have to right to decide how his/her share of the surplus should be used.

Some economists like to tell students consumers control the economy in their spending decisions. This is correct so long as we make the right decisions. Many people want to go off the grid and live the simple life in the bush but that is not easy to do. The people who create the money want the rest of us to work at their projects rather than our own.

We have good material standards of living because our economy has been labor intensive and the demand for bodies has allowed us to extract from the elite a nice portion of the agricultural surplus. As technology increases and robots do more and more of the labor we are losing our bargaining power. The rich get richer and more people become poor. Frightening and uncivilized.

There is a slight ray of hope in our two or multi party electoral system. Some politicians are realizing tha to get votes they have to allow voters some share of the agricultural surplus.

There are lots of anecdotal evidence that our economy is on a down trend. Lots of people are suffering and lots more are likely to suffer. There are many unknowns in the future and most of them are frightening. Our goal should be to minimize the suffering and maximize the enjoyment of living.

We are unlikely to ever get consensus on how to deal with this situation as many people have a strong vested interest in the status quo. However, if we do not try, there will be no progress.

I once heard an engineer say, “If it is working, it is not complex enough.” I was not impressed with his engineering and I do not want to apply his principle to economics. Let us keep it simple. The challenge is to get the best out of technology without the technologists telling us how we should live to meet their goals.

This post has focused on some of the negative features of our civilization. I want to continue to enjoy the positive things, like being able to write this weblog, but I also want to correct some of the injustices and uncivilized behaviours. Genius is 90 per cent plagiarism and we should look for good ideas wherever we can find them.
The hunting and gathering lifestyle appears to be a lot simpler than what we have and it also appears to be a lot more civilized. Let’s put the civil back in civilization.

Note: Once upon a time this blogger took a course in Economic Anthropology and since then I have frequently read books on anthropology and especially economic anthropology. Prior to writing this post I read the following books:

Affluence without Abundance: The disappearing world of the bushmen, By James Suzman, 2017.

Hunters and Gathers: History, Evolution and Social Change, Edited by Tim Ingold, David Riches and James Woodburn, 1988.
Politics and history in band societies, Edited byEleanor Leacock and Richard Lee, 1982

Why we have unemployment

We have unemployment because our agricultural surplus is such that we don’t need for everyone to be “working”.  More important issues are who decides how to use the surplus and how is it distributed.

This post was prompted by a question on Reddit asking why we have unemployment.  It’s an important  question because unemployment can be devastating.

The agricultural surplus is the food produced by workers which exceeds their own needs.   This surplus means some/many people can do things other than produce food.  In our society we have used this surplus to produce a wide range of goods and services which have themselves become a part of the surplus.  Unemployment is an indicator of how rich we are.

Think of a small group of hunters/fishers and gathers on a small island where the living is so easy food and shelter requires only and hour or two a day.  By our terms these people would have a high unemployment rate.  Distribution of food would probably not be a problem as they would probably share their produce but they would have to decide what to do with all the spare time.

This model could get  complicated if they had lots of children and increased their population to the limits of the available food.  It would still take only an hour or two a day to harvest the food even though there wasn’t enough for everybody.

In such a small society distribution of food would be by sharing.  I know an anthropologist who did his field work in such a society and he said you could not buy food there.  Whatever one needed was shared.  What to do with the “free” time would probably be up to individuals with collective activities partly by consensus.

Modern technology, especially that applied to agriculture, gives us the same magnitude of surplus.  We too could be approaching the limits of our ability to produce food.

We too have to decide how to share the produce and what to do with the time. So far these decisions have been influenced by our commitment to the work ethic.  Everyone should spend most of their time working and their share of the surplus should come in the form of wages.

As our exchange of goods and services is facilitated by money the decision-making goes with the money.  To the extent that a person has money one can decide how the surplus will be used.  So the more equally money is distributed the more decision-making will equal. The ancient Egyptians did not use money and it appears the pharaohs decided the surplus would be used to build burial chambers.

In the industrial economies we do not need full employment but we do need a more equitable way of distributing the surplus.  With the ups and downs of the economy full employment may not be a realistic goal.  There are lots of things people could do that would be satisfying but which do not contribute to gross national product.

I believe a universal income scheme would give us a more equitable distribution  of the agricultural surplus.  If we are approaching the limit of our ability to produce food, it might provide a more equitable way of dealing with shortages.   It would also spread the decision-making among more people.

Unemployment can be financially and psychologically  devastating for the people who experience it.   But it is not the real problem.  The urgent problems are an equitable distribution of the agricultural surplus and how it is to be used.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

 

Ministers, teachers and consumer power in the economy

How much power do consumers have in our economy?  In theory they have all the power but in reality their power varies according to the degree of competition in any industry and their own personality.

Economic power means the ability to make decisions about what and how much is produced. If we lived  in small self-contained communities such as a Pacific island these decisions would be made mostly by people for themselves.  If we had perfect competition we would also make these decisions for ourselves and the market mechanism would transmit our decisions to producers.  As there are lots of people who want to make decisions for others one of the conflicts of our society is over economic decision-making.

Two examples illustrate how decision-making by individuals can vary according to competition in the industry.  The provision of spiritual services is, at least in Canada, the industry which comes closes to perfect competition.  Education is a mostly a monopoly.

As most of us Canadians have a strong commitment to freedom of religion people are free to attend the church of their choice or not at all. This means governments do nothing to restrict competition. Anyone with an inclination to preach can rent a school or community hall on Sunday mornings and some congregations allow anyone to do services.  No licenses are required by the government although some denominations use ordination, a form of licensing.  A minister’s career path is determined by his ability and his/her reputation. The Bible and most other religious texts are not copyrighted.  Churches receive no government subsidies other than an exemption from property taxes (which makes entry into the business easier).

On the other hand governments interfere extensively in education.  Parents are required by law the send their children to school, teachers must be licensed and governments closely supervise curriculum. Teachers generally must be licensed and are very difficult to fire.  Job security goes with length of service rather than teaching skills.  The result is a monopoly which is strongly defended by its employees.

In the spiritual world the customers are kings and make their own decisions.. :People can and do express dissatisfaction with their feet and some people go church shopping.  Ministers can be and are fired.  (My observation is that ministers are asked to leave for one of two reasons:  They get into an inappropriate relationship or they stay too long.)  Those people with the right skills rise to the top and those without the skills drop out.  To survive churches and staff must satisfy the spiritual needs of their congregations.

In education the customers (or their parents) make very few decisions.  They have no say in the curriculum and very little over who teaches their children.  Education is one of the most important things parents should give their children, yet it is where they have the least control.  This may be why home schooling and private schools are appealing to those who can manage them.  I believe education is too important to leave all decision-making to those employed in the field.

In other sections of the economy producers have to be more creative in influencing customer decision-making. Governments are usually willing to limit competition with licensing, tariffs, subsidies, patents and copyright.  Some firms can use the media to make emotional appeals to customers. Consumer power comes from being able to switch to another provider. The reaction to emotional  appeals may vary by person and personality. Maybe those people who don’t watch television have it easier when it comes to economic decision-making.

Another aspect of economic control is money creation.  The fractional reserve money we currently use creates money when bankers make loans.  This gives bankers a great deal of power to decide what economic activity happens and who does it.  On the other hand creating money  via a national exchange trading system as proposed in the essay “LETS go to market: Dealing with the economic crisis” on this weblog would transfer this power to individuals.

Some of us like to make our own decisions, some people like to make decisions for others and probably some people don’t care.  As one of those who likes to make his own decisions I like the perfect competition model.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Making wise those who need wisdom

Here are some words of wisdom from John Kenneth Galbraith from his book The Great Crash 1929  (A paperback, written in 1954 and reprinted in 1997) pages 24 and 25.

Galbraith was writing about 1929 and I believe our current situation is quite different and probably worse.  However, the following thoughts may also apply to us.

Purely in retrospect it is easy to see how 1919 was destined to be a year to remember. … No one, wise or unwise, knew or now knows when depressions are due or overdue.

… the position of the people who had at least nominal responsibility for what was going on was a complex one.  One of the oldest puzzles of politics is who is to regulate the regulators.  But an equally baffling problem, which has never received the attention it deserves, is who is to make wise those who are required to have wisdom.

Some of those in positions of authority wanted the boom to continue.  They were making money out of it, and they may have had an intimation of the personal disaster which awaited them when the boom came to an end.  But there were also some who saw, however dimly, that a wild speculation was in progress and that something should be done.  For these people, however, every proposal to act raised the same intractable problem.  The consequences of successful action seemed almost as terrible as the consequences of inaction , and they could be more horrible for those who took the action.

…. The eventual disaster also had the inestimable advantage of allowing a few more days, weeks, or months of life.

To this I would add the observation that most of us most of the time think and act in our own short -term interests as opposed to our own long-term interests or the interests of our community as a whole.

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