Our political economy can never be perfect for it is but a human enterprise… we all must be compelled to raise the alarm against debt peonage and how it and financialism attempt to reshape us in their harsh image. We are in a fight pitting the imperfect against the utterly venal… We must do what we can to uphold the imperfection of man’s collaborative endeavours against the perfection of his selfish designs.
Ten of the world’s richest people hold more wealth than the 3.6 billion people who constitute the poorest half of humanity. The world produces more food than at any point in history, yet one in every ten people struggle against dire poverty and imminent hunger. Meanwhile, tonnes of edible food are discarded and burnt on a daily basis.
Affluent people have amassed so much wealth that they can afford to visit outer space in their own crafts. Yet, billions of people live as their distant ancestors did, using the same rudimentary farm implements to till barren soil and eke out a hard scratch existence. The cell phones that have pierced into these areas are but trinkets to gull people into believing they are of the modern world, when that world has left them far behind.
People are so craven that they commerce plastic rice to make money. A diligent parent goes to bed happy that his hard work has produced a meal for his beloved children. Little does he know that he paid his hard earned money to sicken, perhaps kill his offsprings.
In Japan, the love of profit led to the construction of a dangerous nuclear power plant near a coastal earthquake faultline. The Fukishima plant was battered by a combination of a tremor and a tsunami. That was five years ago. Three reactors probably experienced meltdown. Radiation readings at the entrance of one reactor now exceed 550 sieverts. Experts are astounded by this unprecedented danger. Eight sieverts is sure death.
The experts do not know how to contain the trouble. Instead of seeking to protect its public, the Japanese government passed a law criminalising certain public disclosures relating to the meltdown.
Thousands of barrels of highly contaminated and toxic water are being poured into the world’s largest ocean daily. An ocean is not private property. It is the common heritage of all mankind. The pouring of nuclear waste into the ocean will continue indefinitely. Marine life in the Pacific is already tainted. All oceans will be affected in time. We will soon have to take precautions about eating from the bounty of the sea. Perhaps, we already should be thinking about it.
Try as they might, African nations cannot break the hold that poverty and rich nations have on them. African nations have basically done as told by the economic masters. You opened your markets to free trade. Instead of benefiting, you lost the small control you had over your economic life. You integrated into their financial system and banks like them. The more banks you build, the more you fall into debt that takes you farther from the development you want.
They send international organisations to demand African governments balance budgets and cut programmes for the poor. Yet, the powerful nations that control these organisations run perennial budget deficits that funnel hundreds of billions of dollars to some of the wealthiest institutions on earth.
Something is wrong. These unjust things befall us not by accident. They are the product of conscious designs. Only if we change the design of things economic can we change the wrongs that have relegated so much of humanity to poverty and despair.
We have been told to follow the path of fiscal austerity, tight monetary policy, open markets, unrestrained competition, comparative advantage and free trade. Government should not attempt to do too much to help people. Let the rich get richer. Money will trickle down to the rest, even the poor. A rising tide lifts all boats.
What happens to the destitute who have no boat? The rising tide will sweep them aside. Commanders of the global economy occupy an ocean distant from the minute streams navigated by the average man. The true history of the world is that the wealthy boats are forever on the rise. But the backwaters the poor occupy only experience an infrequent small ripple from that distant churning of massive wealth.
How can the economic system claim to be based on a rational and efficient allocation of resources when it produces such awful results.
Imagine a people living in a strange type of house where the roof is only present when the sun shines. They complain about getting wet when the rains come but never seem to question why the roof disappears when it is most needed.
We would be wise not to pass the verdict of foolishness against these people. We are those people.
We must understand the difference between social indoctrination compared to genuine learning. The masters of society will teach you what they need you to know. To reach the place of truth, you must begin to learn for yourself that which you need to know.
Contrary to the claim that classical economics is a benign path to the maximum good for the maximum number of people, the story of the mainstream economics and of human history is starkly different. It is the tale of a well-tooled elite that willfully fashioned social institutions to maximise in perpetuity elite accumulation of income, wealth and power at the expense of the people.
Here, I want to present an alternative perspective on economics. What I say hopefully may lead us to scrutinise the assumptions upon which the global economic system is based. To do this, I do not intend to confine myself to the standard language or even subject matter of economics. Economics has been presented as a separate discipline that explains aspects of human behaviour with mathematical precision.
This is economics’ first fiction – that a person, a firm or a nation makes economic and financial decisions based purely on reason and with perfect, complete information at their disposal.
We know this as untrue. No one can perfectly forecast the consequences of his economic decisions.
Imagine a person purchasing an air conditioner and being unaware that the appliance is defective. He is merely seeking to improve his family’s living conditions. A month later, the contraption sparks, then catches fire. The family must run from the burning house with only the clothes on their backs. Classical economics implies that the purchaser is rational, and he somehow knew about the quality of the appliance.
Both traits cannot coexist in this instance. If rational, the man then lacked sufficient information. No rational person would spend money to endanger his family and destroy his home in such a fashion.
If the man possessed full knowledge of the appliance’s danger and still bought it, then he was not rational. He is either mad or near to it.
Western intellectual tradition further errs in dividing complex human behaviour into artificial categories. It claims that economic man is different from political man, who is different from cultural man. That cannot be. We are integrated spiritual, social, cultural, political and economic beings. Each aspect of our life influences the others. There is no such thing as economic man, as distinct from political man. They are the same.
Herein enters mainstream economics’ most dangerous lie. It asserts to be the most efficient allocation of wealth and resources among the population. This implies that what now exists is the best thing possible. Any reform, any change to the market will produce an inferior outcome.
This is one of the greatest lies ever told. It ranks at the top with the infamous the “earth is flat” falsehood. Some knew for centuries that the earth was spherical but they concealed the knowledge because the truth did not fit their purposes.
Since we have delved into ancient history, lets go a bit further.
Contrary to the claim that classical economics is a benign path to the maximum good for the maximum number of people, the story of the mainstream economics and of human history is starkly different. It is the tale of a well-tooled elite that willfully fashioned social institutions to maximise in perpetuity elite accumulation of income, wealth and power at the expense of the people.
Seen from the average man’s vantage point, the history of mankind is the struggle to secure freedom and fair compensation for the labour of the many against the avarice of the few.
Here we will do a lighting survey of the earliest civilisation to the present. Of necessity, my statements will be broad and general. As in most things human, no observation of our interaction is without exceptions. However, I believe the thrust of what I say is valid despite the exceptions that exist.
To begin, we must expose another myth of classical economics. One of the mainstream’s core tenets is that the original economic systems were based on barter. Man eventually stumbled on the concept of money due to the inefficiency of barter.
The father of classical economics, Adam Smith, enunciated this theory. The only problem is this claim has no basis in empirical evidence. It is but a construct of his vibrant imagination. Yet, his musing has become a tenet of faith for the mainstream. This shows how much mainstream economics is dogma or subjective faith, not evident science. They make their minds that an idea is real or true simply because they want it to be so.
If you take an unvarnished look at human history, man has been less than kind to fellow man. Slavery has been with us longer than universal freedom. Slavery described most societies for several thousands of years. It was abolished approximately 150 years ago. But it would be abolished in a manner that would allow its evil spirit to live and influence the affairs of man.
Objective economic historians fault Smith’s postulation. The oldest records of ancient civilisation don’t mention barter. These records are surfeit with the concepts of credit and money. As long as civilisation has existed, credit and money have also been.
In ancient Mesopotamia, pagan temple priests were the repositories of knowledge. They were the creators and recorders of debt and credit and money.
More importantly, the priests controlled the worldview of the population. They kept the secret knowledge about the world and how it worked. Their belief system assumed the movement of the planets and stars somehow dictated the fate of man; activity in the cosmos that would be reflected by events on earth. Recent scientific research indicates that the cosmos was more unstable than now. There, apparently, were terrifying collisions, lights, explosions and shifts in the evening sky that frightened the people.
The gods that the ancients created from themselves mirrored the tumult in the sky. They were sadistic, amoral and erratic. They needed to be constantly appeased. Just as the myths state that the god Saturn or Kronos ate his children, the priests would practice human sacrifice to sate these deities.
Rulers of the day became absolute kings, fashioning themselves gods on earth. Using the violence in the sky to justify the terrible selfishness they had at heart, they would expand the concept of sacrifice into economic life. A large segment of the population was coerced to sacrifice their labour so the royals and priests could amass wealth sufficient to sustain power over the people.
Slavery would be established as an institution integral to economic life. Think a bit deeper about slavery. If it means the ownership of one person by another then the very life force of the enslaved is sacrificed to the benefit of the master. The slave is reduced to a tool. He becomes an asset, a form of capital no different from a chisel or a goat.
Slavery would evolve into serfdom in much of Europe. Different names, same family: The people worked and were denied fair compensation for their toil.
In the 14th century, the Black Death depopulated England. Over one in three perished. This tragedy loosened social and economic controls. For a brief period, common labourers freely walked the land. Due to the loss of people, they had bargaining power over the wages they could negotiate with landowners desperate for workers. This would have uplifted the people’s welfare while reducing elite profits and power. Such a more equitable state of affairs could not be countenanced. The English government quickly enacted the Poor Laws. Essentially the measures restricted the commoner to a certain tract of land. To seek work elsewhere, he needed the approval of the owner. Approval rarely came. With people chained to the land like prisoners, the owner could give them any small bit he wanted because they had no recourse but to accept the low wage or suffer no wage at all. These laws remained in force for over five centuries
If you take an unvarnished look at human history, man has been less than kind to fellow man. Slavery has been with us longer than universal freedom. Slavery described most societies for several thousands of years. It was abolished approximately 150 years ago. But it would be abolished in a manner that would allow its evil spirit to live and influence the affairs of man.
The British did a curious thing upon ending slavery. In Jamaica, the British compensated slave owners, though they already had unfairly profited from stealing the wages that should have gone to the enchained black man. The gift to the slave would be a bitter one. The colonial government looked in the history book to enact a brutal version of the Poor Law.
America was not to be outdone. America promised slaves compensation. My family still waits. In Alabama where I was born, a black man walking the street could be imprisoned for vagrancy if he had not a letter from an employer. The system would hire him to private companies to perform the worst of work for the least of pay. He was not a slave; in many ways, his fate was worse.
In Florida were I was raised, a free black man could not leave a job without his employer’s consent. Such approval rarely came. When it came, the employer would charge a departure fee so exorbitant as to defeat the reason for the move. Because he was tied to the job, the man was forced to accept a dog’s wage. Such indecencies did not end in many places until the 1960s.
These examples demonstrate a maxim of human history that the mainstream hopes you overlook. Every step toward freedom and fairness never fully achieves the change contemplated. Progress toward better equality is always counterattacked by the powerful; as such, progress can be so twisted and convoluted that it resembles the old ways more than it establishes the new one. Mainstream economics is a major barrier against progress. Thus, to make one true step of progress, you have to aim for two or three.
For two brief periods, the first before WWI and the second after WWII until the 1970s, reform appeared to have gained the upper hand. Fearing rebellion, the global leadership was amenable to social changes that would better the lives of people below them. During these periods, progressive laws regarding child labour, women’s rights, social security, welfare, and labour unions, were enacted.
The 1960s proved a double-edged sword. The American Civil Rights Movement and the national liberation movements in Africa and elsewhere sparked an elite backlash. The non-elite were asking for too many rights too soon. Something had to be done.
…the financial sector is dedicated to nothing but itself. As the financial sector expanded from this internalised investment, the more it siphons funds from productive industries. People lose jobs or wages stagnate. They borrow to maintain their lifestyles. The more they borrow, the less likely the loan repayments. People become trapped in a cycle of increasing debt. This is debt peonage.
The inflation and recession that characterised western economies in the 1970s gave the global elite the cover they needed to dismantle the reformist state. That Reagan and Thatcher appeared at this time is no coincidence. Since 1980, the global elite has been undermining the common person in order to return to the age-old practice of extracting the utmost profits from the labour of others. This is being achieved through the device of modern-day debt peonage. The global elite used three pillars to the construct modern debt peonage. They first decimated organised labour. Due to labour weakness, wages have stagnated for decades. While smashing labour, they freed the banks to charge interest rates that would have been illegal in years past.
They promoted the growth of the financial sector. It is now the most profitable sector of the economy. Speculation in real estate and exotic financial instruments is where the financial sector invests the bulk of funds. This is a radical departure from traditional capitalism. There the financial sector focused on investment in capital, meaning actual physical equipment and inputs needed to manufacture tangible products.
Now the financial sector is dedicated to nothing but itself. As the financial sector expanded from this internalised investment, the more it siphons funds from productive industries. People lose jobs or wages stagnate. They borrow to maintain their lifestyles. The more they borrow, the less likely the loan repayments. People become trapped in a cycle of increasing debt. This is debt peonage.
After a time, they work just to pay a mountain of bills for the credit used to buy cars, homes, TVs and other appliances. They become prisoner to the debts they have amassed. Most of their lives’ effort is aimed at making the debt payments on time. This is the life for most Westerners. In America, most working families can’t gather 500 dollars should a financial emergency arise.
The world is burdened with high aggregate private debts. Few people realise that most money in global circulation is not created by government. Most money, almost 90 percent in the UK, is created by private banks. There is a catch to this. Private money creation is always the byproduct of a loan, a debt. Because it is laden with the interest payments, this money is actually worth less than its face value. With too many loans outstanding, people and firms chase feverishly to acquire funds to repay loan. People cut costs and purchase less. Firms hire less and fire more. Productive economic activity decreases. Everyone suffers, except the financial sector. It is bent on collecting the debts even if it means marching to the very gates of hell. Given the lack of morality of some global bankers, such a march would not be a long one for them. They already reside in the neighbourhood. The process of expanding the financial sector at the expense of the rest of the economy is what I call Financialism, the meaner offspring of capitalism.
For example, over 90 percent of American GDP growth this past decade went to the top one tenth of one percent of the population. Most Americans are worse off than they were ten years ago. Similar inequality plagues other Western nations.
If they so mistreat their own, we should not delude ourselves that they intend better for an Africa they have always despised.
Colonialism was the visitation of economic slavery on Africa by other means. During colonialism, Africa exported raw material to Europe in exchange for manufactured goods. Fifty years later, the nature of trade remains the same, except that China has entered the joust. Your economy is still colonised. They pay diminishing amounts for your commodities, while you pay more for their products. Debt mounts. The IMF then comes around periodically to tell you how to behave. They place conditions on government spending too grievous to bear. Yet, you still bear them only to find that your condition has worsened due to your obedient adherence to these crackpot remedies.
If you continue to follow the dictates of mainstream economics, you will be locked in poverty and debt forever.
I will offer a few ideas on how to reshape our economies to provide more fairly for all. These ideas are founded on empirical evidence, unlike mainstream economics. I have tried to make my ideas fit reality instead of trying to amend reality to accord with my thoughts.
1. End the implicit peg to the dollar: African nations are commodity exporters. They create a new amount of national currency based on export dollars received.
This way of determining the flow of national currency into the economy is an artificial, self-imposed limitation on fiscal policy. By pegging government expenditure to dollar intake, we allow the whims of foreign consumers to shape the fiscal policies of most African nations.
There is no sound economic reason to perpetuate this servitude. This custom only undermines African fiscal independence. This practice is no less capricious than pegging government fiscal policy to how many stars are visible in the evening sky on the third Monday of every odd numbered month.
It is a strange notion that foreign currency earnings are the best determinant of optimal fiscal spending levels. Instead of pegging our fiscal determinations to foreign consumption patterns and a foreign currency, African nations should peg their fiscal policy to the amount of money they calculate will produce the optimal level of shared growth without sparking harmful levels of inflation.
2. Have the courage of deficit spending: Government deficit spending is basic to economic growth. When governments runs deficits, the private sector runs a surplus and expands in ways beneficial to the people.
The artifice of government borrowing money it has sovereign right to print is one of the greatest scams in world history. Mainstream economists say this ruse prevents governments from causing inflation by printing too much money. This is a lie. This contraption was invented to provide banks with sure profit. Banks know that a government with its own currency can never default on a loan denominated in that currency.
Greece perfectly demonstrates the utter failure of mainstream austerity economics. The IMF and EU imposed massive budget cuts on Greece. They said this would help Greece save to repay its debts to private banks. The opposite happened. Because government spending dipped, the private sector fell into a depression more severe than the Great Depression. Greece is now a ghost economy. A decade has been lost to negative growth. The poverty and jobless rates are those of a third world nation.
Despite the obvious failure of their approach, the IMF and EU insist that Greece continue to slice its budget. This is the premeditated murder of a national economy.
Nations should not engage in deficit spending for spending’s sake. If the private sector is collapsing, government deficits are needed to extricate the private economy from recession’s gravitational pull. However, expenditure must not be towards frivolity. Spending must be geared to projects that yield jobs, as well as those that spark follow-on economic activity.
3. Have greater deficit but not greater debts: Increased spending should not be linked to new borrowing.
The artifice of government borrowing money it has sovereign right to print is one of the greatest scams in world history. Mainstream economists say this ruse prevents governments from causing inflation by printing too much money. This is a lie. This contraption was invented to provide banks with sure profit. Banks know that a government with its own currency can never default on a loan denominated in that currency. Institutional lending to government is actually the largest welfare scheme ever developed. Trillions of dollars have gone to the largest banks under this guise.
4. Industrialise: The steep decline in commodity prices teaches an age-old lesson. A populous nation cannot attain prosperity based on natural resource exportation. A nation is better off manufacturing sturdy affordable cars or inexpensive machinist tools than in cultivating a perfect cassava or tomato.
Government must also institute a package of tax credits, subsidies and protections from imports for industries vital to national development.
Our major aim at this stage should be to nurture domestic demand and intra-continental trade through ECOWAS and other institutional mechanisms.
At bottom, most African states require national industrial plans. During the 19th Century, my country established what would be called the American System. This policy moved America from a weak pioneer nation to become the strongest industrial power within a century. The policy featured high import tariffs on foreign manufactured goods, promotion of local industries and government funding of infrastructure. China would implement a more strident version of this policy to transform from a backward agrarian nation to the world’s second largest economy in less than two generations.
Mainstream economists will complain that this undermines their beloved theory of comparative advantage. I say their theory undermines itself if we are to judge by its practical effects.
They parade the theory as one of general application, which is valid in all instances. I contend it is one of limited application, only beneficial when items traded between two nations may be different but are at rough parity regarding the values of the traded products and the value of the inputs required to make the product.
Such a confluence of parity occurs in a minority of instances. Of more general application, I offer the theory of initial advantage. For example, two nations trade and one has a clear, even if small, advantage over the other concerning the export of a manufactured good. Unless something occurs to change the terms of trade, the initial advantage of the one nation will compound over time to the benefit of that nation but to the compound detriment of the other. Under free trade, the rich get richer and the poor can’t figure out why they fall deeper into the ditch.
Trade in this instance might be called free. To call it fair is to insult moral decency. This is why America opposed free trade in the 19th century. Once it became the world’s most dominant economy, it would change tune so that free trade became its economic national anthem.
5. Help the farmer: In addition, governments should consider establishing commodity boards ensuring minimum prices for certain crops. Improved warehousing systems will add food security and lower prices, while improving farm incomes. Farmers will receive warehouse scrip or tickets for their products. They can use these to borrow money in the short-term as well. Agricultural mortgage loan corporations should be considered.
Conclusion
These are just a few ideas to consider in the search for a more just and prosperous global economy. Opposition to these ideas is strong and as old as it is strong. This is the fight of our times.
I leave you with these thoughts:
Our political economy can never be perfect for it is but a human enterprise. Yet, this admission of imperfection cannot be used as a pretext for wanton injustice and disregard for most of humanity. We must cling to the belief that man can attain higher levels of economic cooperation in order to increase wealth and decrease scarcity. For this reason, we all must be compelled to raise the alarm against debt peonage and how it and financialism attempt to reshape us in their harsh image. We are in a fight pitting the imperfect against the utterly venal. The former has civic purpose. The latter has no purpose, save the incessant feeding of its own selfishness. There really is no choice in deciding which side to join. We must do what we can to uphold the imperfection of man’s collaborative endeavours against the perfection of his selfish designs.
Brian Browne was a former Consul General at the US Consulate in Nigeria.
This was delivered as a public Lecture in celebration of the 90th birthday of Professor Adetowun Ogunsheye, organised by Atayese on February 16, 2017 in Ibadan.
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