Are We All Keynesians now?

The fact that the Keynesian Revival has its own Wikipedia page demonstrates that, whether it is actually true or not, those with an interest in the boring world of economics do believe that it is taking place.

A glance at the contemporary discourse tends to support this awakening: Paul Krugman is the man of the moment; Naomi Wolf is a regular guest on late night talk shows; and, most importantly of all, Timothy Geithner is lording over the Federal Reserve.

The glaring failure of right-wing economics has not appeared out of the blue. It has been obvious from the very beginning. Rising inequality led to enormous pressure on the middle-class who, facing stagnant incomes, had no choice but to mire themselves in debt. It doesn’t take a genius to figure out that an economy where inordinate sums money are being spent on Mortage-backed securities and consumers are maxing out their credit cards on the high-street, is not going to last.

The economic ‘elite’, however, appeared to be oblivious of this startling fact. The ‘experts’ in this country laughed David McWilliams off the stage when he had the gall to suggest that the housing bubble would defy logic and, somehow, not burst. We were told to relax. Charlie McCreevy had worked it all out years ago and we had nothing to worry about. Well, you know what happened next …

This financial crisis did not just hurt the bankers’ wallets; it hurt their pride too. The superfluous jargon that permeated the financial discourse (referring to sections or wedges of securities as ‘tranches’, for example) made those who took the time to scan a dictionary feel intellectually superior to the general public who turned glary-eyed when the financial news followed the sports. The right-wing economic mantra lulled those in power into a false sense of security.

They have now finally, it appears, woken up – a bit. Probably the most significant development is that Martin Wolf, the chief economics commentator of the Financial Times – that paper that all students like to be seen browsing in the shops – has come out in favour of a Keynesian solution. The worm may have turned.

This, of course, begs the question: have the bankers really abandoned Friedman’s soft, alluring words? Have they really decided to forgoe honour, leave the nicely decorated drawing room and enter the crowded lifeboats with the poor plebeians from the lower decks abandoning ship? I remain skeptical.

Surpassing all the talk of Keynes is that of FDR. The bankers appear to pine after that Golden Age preceded by the New Deal. If Friedman cannot fund their indoor swimming, maybe FDR can? Reading William E. Leuchtenburg’s book on the subject, one is struck that the New Deal was not based on any coherent economic ideal or set of principles. The Government decided to take responsibility for the mess of the great depression, make things mildly inconvenient for the financial elite and spend a very substantial sum of money. Most importantly, FDR made it all better again.

Will Obama (or Cowen) introduce a truly progressive tax system, create a proper welfare state and properly regulate big business? I think not, and I think that the financial elites certainly do not want such an eventuality to arise. Like the modern evangelical Christian movement, the bankers want to be saved, but they do not want to take the medicine.

Real economic reform will not be achieved by piece-meal effort. We will not attain a semblance of economic normalcy until there is systemic change. Monetary reform, an end to a money supply created as bank debt, has got to the first step. We should not hold our breath.

If you were to ask me why, in a nutshell, we are in this mess. I would say that it is because a group of Math geniuses, with little understanding of real economics, were in one room of a ‘too big to fail’ company creating sophisticated algorithms to leverage even more sophisticated financial instruments. In another bigger office were their bosses, the economists, who had no understanding how these instruments even worked. No-one, it appears, even bothered to attempt a bit of cross-dialogue as they were all making bucket-loads of money. Ignorance is bliss.

A Musical Interlude

I feel it my duty to introduce you to the wonderful band that is Smile Empty Soul! Christians in the US were deeply offended by their music and protested a Wal-Mart store selling their Album. SES made this wonderful song in response. It demonstrates the hypocrisy of Christian fundamentalism and the Wal-Mart phenomena; people being supposedly 'happy' buying cheap crap that they do not need and consoling themselves with religion. One cannot question it and must, at least, 'smile' and appear content with it.

It makes me thing of the poor Wall-Mart employee who was trampled to death in New York. Happy shopping!!!




While i am on the subject of religion bashing, here is a great ditty from the band Jesse James. It, too, was barred from TV after complaints by Christian fundamentalists.


A

Wake Up and Smell the ...

First contact is an interesting documentary on primitive New Guinean tribes and their first contact with the outside world. The natives initially regard the white-bodied intruders as spirits and follow them around in awe and with trepidation. One particular scene stands out for me. The natives, hiding behind bushes and at a safe distance, observe a white man answering the call of nature.

One spectator reports that, ‘the man from heaven has just excreted’. When the white man left, some of the natives went to face the godly excretion. After smelling the produce and making the pertinent observation that the stool resembled their own in almost every particular, the natives realized that these pale-faces were not gods/spirits/the undead, but were men – like them. An elder recalls the natives’ conclusion: ‘their skin is different they said, but their shit smells like ours.’ The natives came to a second fitting conclusion soon after. They realized that these men – possessing many enchanting trinkets and tools – were outnumbered. The natives promptly attacked.

The natives of New Guinea were endowed with a tiny fraction of the knowledge possessed by modern man. They knew nothing of science, anthropology or global geography. Their initial assumption that these strange white beings were spirits is to be entirely expected. Even today, if we were to meet a strange coloured and bedecked being, we may scream ghost, too, and run.

The Guineans did not, however, hide behind their bewilderment and observed the new arrivals with a critical gaze. They discovered that the white man walked, ate and, as mentioned above, defecated as they did. The natives -- despite their, as we would perceive it, lack of knowledge – used their rationality to discern the truth. They answered the question of the intruders’ origin like a scientist would. They observed the empirical data, investigated their findings and by using their reason and rationality, came to the correct conclusion: these white beings were men. In other words, they discovered and accepted reality.

Can you imagine if, instead of native New Guineans, evangelical Christians were met with a similar situation? I dare say that the Christians would crouch down over the unknown being’s stool, squint and exclaim that they could see a picture of Jesus , as clear as day, in the shit.

This may seem harsh, but modernity holds this ignorance to be true. Global warming, evolution and resource depletion are all real. They have been discovered using the scientific method by knowledgeable and rational people. Many people, mainly religious people, do not live up to the native Guineans’ standard of rational observance and fail to accept these realties. They are less rational and seem to posses less reason than the native Guineans. It is, therefore, no coincidence that Native Americans were amongst the earliest and most vocal environmental campaigners. Are our environmental skeptics less intelligent than our animist ancestors? I would say yes.

Ah! But what about our vastly superior knowledge? We know far more about the natural world than these tribes. We possess a body of knowledge greater than they could ever imagine. I would counter, however, that knowledge, without the ability to decipher it with rationality, is nothing. For me, knowledge + rationality = intelligence.

The fact that we have a greater quantity of knowledge than them does not make us more intelligent or rational. Modern mans’ great scientific finds were, if you observe, discovered in the main by men of leisure. Darwin, Newton et al. were wealthy men who could devote their lives to the pursuit of science. They did not have to worry about money as they were self-funded or supported by wealthy donors. All of the money, we cannot forget, was created by the average working people who certainly did not live leisurely lives. Agriculture and, more importantly, industrialism, made it possible for significant numbers of the upper class to focus on the improvement of knowledge. In an ancient or modern tribal society, there is no upper class. Everyone has to work and provide for the tribe. These people simply did not have the same opportunity to advance their collective knowledge as we do. They were, however, at least as healthy and well feed as we are today and certainly better off than the average 19^th century labourer.

Richard Dawkins opines that the modern world is becoming more hostile to science. I would agree and go one step further, I believe that modern culture is becoming more and more hostile to reality. The environment, species extinction, agricultural degradation is being ignored. A rabbit would never ignore a fox in its midst, but humanity is ignoring environmental threats of a comparable magnitude.

The public does not lack knowledge. The evidence of these threats is there for all to see. They lack, rather, what the native Guinean’s possessed in abundance, rationality – the other part of the intelligence equation. The ability to recognize and accept reality.

Why are we losing our rational capacity? First of all, it is, of course, true that this is not universal. Many people, maybe a silent majority, have the ability to recognize the grave threats facing humankind. Unfortunately, many more do not. I believe that the main problem is religion. The people who deny Global Warming and shout ‘drill baby, drill’, are invariably the same people who rally against ‘da gayz’ and whine about the war on their version of the winter solstice. It would, however, be too simplistic to blame just religion; this anti-rational vein runs deep within our culture.

If our culture is at fault, then why not look at the ‘primitive’ cultures and see what we can learn? If they can retain and nurture a culture of rationality, skepticism and inquisitiveness, we should feel duty-bound to learn from them what we can. Maybe they can help us to smell the shit, wale up, and face reality.