Ed,
At 12:40 27/05/2010 -0400, you wrote:
Keith, If I read you correctly, you are saying that greed is a motivating
force in economic and political behaviour. I can't disagree, but would
point out that it is one of several motivating forces. Greed (not called
that, of course) and the entitlements that emerged from it were powerful
forces during the medieval period, when the nobility owned everything and
the peasants were left to starve. Much more recent times have been
characterized by growing social equality, leading the peasants to raise
questions about why those guys in the mansions on the hill should have
everything and they should have nothing.
Greed is a rather overloaded word (used by religions!). It just means
ordinary selfishness when offered an opportunity. The medieval Peasants'
Revolt in this country was not by poor peasants but by the better-off
stratum who could afford weaponry. Otherwise the poorest simply accept
their fate -- the Highland Clearances in Scotland, the Great Famine in
China, etc.
In the west, industrial development, market growth, and social programs
resulted in large redistributions of income and enabled many people to
afford things they could never have had in earlier times. Were they
being greedy? I think not.
Yes, they were being greedy. Firstly the rising middle-class bourgeoisie of
the early 19th century, after acquiring some modest wealth, wanted the vote
and a great deal more benefits from government as against the landed
aristocracy. One to two generations later, the increasingly prosperous
workers also wanted the vote for benefits as against the middle-classes.
They were simply behaving in accordance with the new economic and
social rules that had come into being. Democratic governments,
responding to the people that keep them elected, tend to respond by
giving people what they want even if they had to go into debt to do it.
But, originally (the early decades of full electoral rights [except women,
of course] ), pretty well all government debts were to do with paying for
armaments and large armies. Very little was spent in relieving poverty or
supporting the old. (The Tudors spent far more on the poor and the old than
Western governments did until after WWII.) It was only later that
politicians of this or that party caught onto the trick of dishing out
particular benefits to this or that class of the voters in order to get
re-elected.
They also had to respond to fluctuations in the business
cycle. Initially, responding to economists like Hayek, they tended to
leave the market to solve its own problems even if the result was mass
unemployment.
But they didn't. In the inter-war years Western governments had already
long gone along with restricting the free market with exchange controls and
tariffs. It was only when governments went even further into more state
control and welfarism that Hayek came on the scene, pointing out the
dangers (quite rightly in view of communism's collapse in the USSR)
However, during the Great Depression the Keynesian idea that if business
couldn't restore full employment then government had to do it via public
spending emerged and gathered strength. That is still about where we are
now. Massive government debt has been a result.
Massive debt resulted not so much because governments did it but because
politicians and civil servants didn't have (and still don't have) the
experience to be able to choose the best economic objectives that would
give a return on investment as well as increase employment.
However, now something relatively new has emerged: the electronic age and
finance driven capitalism.
This is new, yes.
A new class, hidden behind places like Wall Street walls and
instantaneously connected by the Internet has found ways to manipulate
financial markets,
But this isn't new, because governments, ever since, disestablishing their
national currencies from value, have themselves been manipulating financial
markets, interest rates, and paying off their debts by inflation. The banks
started to do the same with a new batch of sophisticated paper documents,
particularly since about 1980, which politicians and civil servants
couldn't understand, nor even bothered to find out about, even though they
should have had a duty of care to their electorates.
become very wealthy and put global systems into loaded with government
debt into jeopardy.
But governments put the debt there in the first place before banks started
to muck national currencies about.
As you argue, greed is undoubtedly a motivating factor, but I'd suggest
that the real problem is the absence of rules and regulations to control
that greed. There is now a near global rush to formulate (or reformulate
- e.g. rules under Glass-Steagall in the US) new rules and regulations,
but whether they will be strong and timely enough is a major question.
Governments will never be able to control cleverer financial innovators
until they make it their job to understand what they're doing. If they
can't do that then the next best thing is to get help from their
electorates by making sure that all the operations of banks and other
financial institutions that seek funds from the public are made transparent
(just as they do, for example, with firms which run complex chemical
operations).
Keith
Ed
----- Original Message -----
From: <mailto:[email protected]>Keith Hudson
To: <mailto:[email protected]>RE-DESIGNING WORK, INCOME
DISTRIBUTION, ,EDUCATION
Sent: Thursday, May 27, 2010 2:59 AM
Subject: [Futurework] Imperialistic greed
Let's forget about the "greed" of bankers or hedge funders in the present
financial fiasco. They are just as greedy as the rest of us. Given the
same opportunities, almost any other group of people would act exactly
the same as they have done and will continue to do. Bankers are just as
greedy as the early industrialists of the early 19th century. They are
just as greedy as the trade unions which destroyed eight automotive
industries in my home town of Coventry and threw it into recession for 15
years -- with not much better health since.
Choosing the greed which must take first place as the main cause of our
present misery, today's bankers are just as greedy as the politicians of
Western Europe were more than a century ago -- British, German, Belgian,
French, Dutch, Portuguese, Spanish, Italian -- who saw opportunities for
rich pickings in much of Asia, Africa and South America. (Not North
America, however. The Brits had already received a bloody nose there and
the other European politicians paid due attention.) Oh! and we must also
mention the rapidly industrialising Japan which had designs on Russia and
China.
Some of the Western European countries (and Japan) were surging ahead in
a wave of unparalleled prosperity and also a fast-developing series of
military inventions such as machine guns and artillery and monster
battleships which could easily subdue "backward" and "primitive" people
elsewhere. However, it was when the West Europeans started turning their
weaponry on each other in the 1914-18 war, that the fatal self-inflicted
mistake was made.
Despite the fantastic prosperity of the industrial revolution and the
increasing ease of raising lumps of taxation from year to year, the cost
of military weaponry raced forward at an even faster rate. So European
governments had to go into debt. But then they discovered that it was
becoming difficult to pay those debts out of taxation, so they hit on
another dodge. They had very deferential, manipulable electorates (after
all, they had been willing to die in their millions on jingoistic
pretexts) so it was a relatively easy matter to pretend that printing
more and more bank-notes (nowadays called Quantitative Easing) was doing
no harm even though they no longer had any underlying value.
Politicians even conned many economists (from the time of Keynes
onwards). Some of the latter even began to make ridiculous comments such
as: "A country has to have debt. Otherwise, how can its central bank set
basic interest rates for the rest of the economy?". These economists
obviously knew no history, when interest rates (and other things such as
credits and simple futures derivatives) had been used for at least 5,500
years already.
Well, that's where we are now. For about a century, Western governments
(and now all governments) played fast and loose with bank-note printing,
not only for their own immediate purposes (their civil services also
becoming increasingly greedy) but also to devalue the debts they had
already incurred.
But then, round about the 1980s, banks and other financial groupies
discovered a wonderful thing. They, too, could print a variety of new
paper documents -- sophisticated derivatives -- which they could pretend
to be money among themselves and their customers. Some of these paper
documents, such as Credit Default Swaps (CDSs), didn't need to be based
on anything one owned (or were indebted for) or indeed any amount of
money that had any connection at all with reality. A bank or a hedge fund
could insure themselves for anybody's else's transactions for any amount
of money, far beyond the value of the transactions involved.
So that's where we are. We -- starting with the European Monetary Union
-- are now on the verge of chaos and also with every single advanced
government in debt. Japan is leading the way with a debt that's twice
its total annual economy. There's not a hope of Japan's debt or any of
the rest ever being paid off without a massive bouts of hyperinflation to
follow at some stage.
It's about time economists started teaching themselves some basic history
and, then, maybe, telling politicians that it's time to start all over
again with sensible currencies that always existed until imperialistic
greed took over a century ago.
Keith
Keith Hudson, Saltford, England
----------
_______________________________________________
Futurework mailing list
[email protected]
https://lists.uwaterloo.ca/mailman/listinfo/futurework
Keith Hudson, Saltford, England
_______________________________________________
Futurework mailing list
[email protected]
https://lists.uwaterloo.ca/mailman/listinfo/futurework
