Letter to The FT- New Economic Models

14 Jan 2012    

The Financial Times has launched a new series this week called "Capitalism in Crisis". Larry Summers kicked off the debate by opening: "It would have been almost unimaginable five years ago that the Financial Times would convene a series of articles on “Capitalism in Crisis”. That it has done so is a reflection both of sour public opinion and distressing results on the ground in much of the industrial world... The spread of stagnation has raised doubts about capitalism’s efficacy as a promoter of employment and rising living standards... A more serious problem is being raised about the fairness of capitalism... In addition there is the problem of looming government bankruptcy in rich market capitalist economies...". John Plender wrote: "Fewer than half of the American and British people sampled in the 2011 Edelman Trust Barometer now believe businesses acts in the public interest. The two fundamental philosophical theories that underpin the capitalist system are invisible hand and rational expectations, and the survey describes in particular a public now deeply skeptical of the former. Indeed public support for capitalism has fallen so low in the US and UK that it is now only marginally ahead of Russia. Capitalism is therefore in the midst of a serious crisis of moral and philosophical legitimacy, in addition to it's ongoing struggle for performance legitimacy... As Stewart Lansley, author of a recent book on inequality, puts it, the modern economy appears to consist of two tracks: a fast track for the elite, and a rusting track for the masses. Ordinary people enjoyed rising living standards before 2007, despite stagnant real incomes, thanks to increased borrowing on the security of their homes. Since the crisis, however, ordinary real estate has gone into reverse and left the masses struggling to service their mortgages. At the same time, says Mr Lansley, finance has come to play a new role as a cash cow for a global super-rich elite, and quantitative easing, negative interest rates and all the other policy tricks deployed by Central Bankers since 2007 have simply compounded the gap."

On this web site I talk about socioeconomic paradigm change, but the articles at the FT were, shall we say, more evolutionary that revolutionary. Larry Summers said the problem is in non-traded goods, he said capitalism doesn't work in health care and the American government desperately needs to improve the effectiveness of government services. John Plender sounded more like Warren Buffet, which is to say America can be fixed with higher taxes on the rich. The historian Gideon Rachman wrote an article saying "Why I am feeling Austrian". Rachman said Keynesian stimulus has failed and we need more of Hayek's laissez-faire. A reader called Claudio Gatti commented: "Reading such foolish non-sense makes me re-evaluate the worthiness of my populist native Italian newspapers. Thanks, Mr Rachman, for making it all so clear: at the beginning of the 21st Century the debate is Keynes vs Hayek! I don't think so, in fact I think the two words you dare not tell your readers are THEFT & THIEVES. Ask yourself why!" Mr Gatti was of course referring to the extremely high price and dubious quality of elite journalism!  

My favourite article in the FT's series so far comes from Samuel Brittan. He wrote:

My central case for competitive capitalism is that it promotes personal and political freedom. A businessman outside the financial sector will prosper by providing what adults wish to have – even if that is pop records, candyfloss or nude shows rather than what their supposed elders and betters think is good for them. Early in the 20th century Ludwig von Mises, an Austrian economist, challenged socialists to explain how the question of “whom should make what and how” can be answered in the absence of capitalist markets. The most interesting response came from “market socialists”, who asserted that state-owned enterprises could mimic capitalist ones in using market prices to guide their activities. Indeed they could, at least with a known set of products, a known technology, and known and static public tastes. The matter is wholly different when it comes to inventing new products or discovering low-cost methods. And who should be the managers, and who the managed, and how is a limited amount of investment funds to be allocated to everyone with a bright idea? Above all there is the political consideration enunciated by John Stuart Mill: “If the roads, the railways, the banks, the insurance offices, the great joint stock companies were all of them branches of government ... If the employees of all these enterprises ... looked to the government for every rise in life, not all the freedom of the press and popular constitution of the legislature would make this or any other country free otherwise than in name.”

I wrote back:

Dear Mr Brittan,

I think this is the best FT article in the series so far because it makes the vital philosophical connection between capitalism and personal freedom. Why are new economic models such a challenge? As you point out is it a matter of psychology / ethics / ideology not just a matter of science. Unless we talk about this philosophy we are trapped, at least we in the West who come at decisions more emotionally than scientifically.

Yet what you haven't done here is try explore the other side of the philosophical debate, that is the philosophers who say this freedom is bad for us not good. A journalist has a responsibility to consider both sides of the debate, especially on a matter as important as this. This debate is missing from the FT.

We who are not experts in toothpaste are not qualified to make decisions about it, and because rational expectations is an illusion capitalism stops being rational and turns into a shadowy and wasteful world of toothpaste that does not serve out needs, but rather submerges society in the dark Dionysian arts. So instead of a scientific expert economy, today we have around us a sort of mindless ultra-populist ultra-liberal witch craft economy, and because this world is like a broken tool box and a talentless plumber, it eventually implodes when everyone realises it no longer serves our needs. From Socrates to Thorstein Veblen, the world of utopia has always been a place of reason, not the mindless "pop records, candyfloss or nude shows" you talk about and which are constitute modern capitalism.

So Mr Brittan you must talk about the vital philosophical principle so clearly and passionately described by Socrates- namely that if one wants an accurate opinion about something one should seek an expert who has spent a lifetime testing his opinions about that something against the reality of that something. Plato's dialogues typically begin: what are you an expert at, what force of contradiction keeps your mind on track, don't wave your hands and waffle about something you have never experimented with because waffle is mindless and dangerous. Why dangerous? Socrates says what makes a man more virtuous is the pursuit of expertise in something small, like a bee in hive, not the cave wall like illusion of knowing everything about everything, like the sheep herd. So if Socrates were to debate Murray Rothbard, who is indeed precisely a modern version of Thrasymachus, he might begin by talking about producers pandering and hoodwinking inexpert consumers, selling "injustice" instead of "justice", and destroying everntually both the people's bodies and minds.

What was the difference between the Medieval Peasants and the society Fredrick The Great built? Like Socrates, Fredrick said we must become experts at something, and leave the rest to others, he built an elite science and asethetic society. That's the point Steve Jobs makes too, populism is a poison in the soul, a poison that ultimately destroys civilization, a poison that serves as it's ultimate end the wild beast or devil in humanity, not the love and light that leads us back to heaven. Niall Ferguson asks what made the West powerful, he talks about "six apps" including the scientific revolution during the Age Of Enlightenment, but he misses the most important thing form his list- namely the Puritan work ethic was anti-Dionysian and transformed the human mind. Our capitalism is a step back into the dark adages, it is killing us because not only is it a world of "pop records, candyfloss or nude shows", it is also a world where what makes a pair of shoes good is a logo on the side not anything real.

Mr Brittan what I am saying is an enormous challenge to the ego, but the idea you have to explore is that the world we want is one based on reason not populism. No great man, from Socrates to Steve Jobs ever loved populism, we are dying and the world can only be saved by famous and great men such as yourself thinking more carefully about human nature.

Thank you, WH

I am pleased to say Mr Brittan responded with: "WH is interesting; but I cannot deal with everything in one column. Please look at my website." Well I did go to his web site, and I didn't find the discussion I was looking for, so I replied:

Dear Mr Brittan,

I went to your web site, I have read many of your articles with interest, and it seems to me you are more of a big picture man than say Mr Wolf, by which I mean that you are not buried in spreadsheets but rather someone who thinks like a statesman in grand terms about human nature, and therefore you are the closest the FT comes to a philosopher. It seems to me the FT is mostly staffed by young men buried in spreadsheets, or young men buried in the dark arts of spin and ideology, on the one hand they are clueless about philosophy, on the other they are trapped in a spiders web of emotions. I think this is why they say great men are always old, because with age comes the ability to see through the science and passion of youth and attach to one thing that really matters, namely what really constitutes a good or a bad man.

Mr Brittan I am a philosopher too, and so I would love to talk to you to see whether I couldn’t help you write the other side of the debate in the FT. Like Socrates I am so desperate for a good conversation I would pay for the privilege, alas I can’t find a worthy mind – yet you I feel I really could talk to. Your web site has no contact information, nor is your email address published on your articles, so please email me and lets engage in philosophy, my address is "w" dot "hooper" at hotmail dot com.

I feel that we have a duty to write about post-capitalist ideas because they are so absolutely vital to the future of the Anglo-Saxon world, yet the debate hasn’t appeared, not in the FT, not the Wall Street Journal, nor in any Western newspaper that I have seen. Besides it's like a golden apple to be plucked for the sake of mankind or the gods, which you care about more. David Cameron and Ed Miliband are still arguing like tiny children about executive pay, even Merkel and Sarkozy are stuck in an austerity vs stimulus debate, and for all Monti’s talk about new growth models he has actually delivered a big fat nothing so far. We Anglo-Saxons are famously good at philosophy, yet today we are written off as tired and bankrupt and self interested old dinosaurs, now is our change to rejuvenate our global leadership. They need great men like you today, Mr Brittan, perhaps more than they have for hundreds of years. How to reach the children, it's a far greater problem than the philosophy itself, it's a problem of oratory and your are an orator. The closest the Chinese have come to defining a new economic paradigm is to talk about “Scientific Development”, and Stligtz has said the similar things about investment and economy of scale, but these pragmatic points doesn’t address the ethical philosophy directly, and it leaves the more emotional Western mind unmoved. Our young scientists, men like John Kay, should enjoy them, but alas even their minds are so warped by twitter and facebook they can’t detach from dogma.

The critical difference between an Ancient Greek or Ancient Chinese philosopher and a Socialist is that whilst the former talk about “wisdom” the latter talk about “materialism”. The Ancient Greek philosopher, for example, might say that just as bodybuilders say “no pain, no gain”, so mind builders know that “short term pain is sometimes necessary to produce long term pleasure in the soul”. The Socialist doesn’t see this dichotomy, for example, politicians today from Tony Blair to David Cameron are focused on nothing more than GDP growth, yet Margaret Thatcher thought about what is wrong with the British people and how to fix them. Perhaps that is why wise old people are often perceived as heartless by patricidal youth, because they care about people’s souls not life’s pleasures. For example, Thatcher was austere and Regan was profligate, but what made these statesmen great was what they had in common, namely the vision of a society broken by the complacency and dependency culture of the 1970s, and which they tried to heal by instilling greater fighting spirit into society.

The focus on wisdom instead of material utility addresses both the abusive behaviour of corporations and the abusive behaviour of the workers, capitalism failed in the 1930s because it failed to think about the former, and socialism failed in the 1980s because it failed to think about the latter. Likewise the liberal cultural forces of capitalism have failed just as the nihilistic cultural forces of Communism failed. New socioeconomic models must return to the good old days of Kings and Philosophers, by which I mean the time when leaders thought carefully about what is what and is wrong with people instead of letting the boat sailing toward whatever the utilitarians and twitterers calls pleasure.

Thank You, WH

If ever Mr Brittan gives me the chance to debate with him I will begin by asking him a simple question:

Do you know what the difference between Tesco's Toothpaste and Colgate's toothpaste is? Can you tell them apart in a blind tasting? Do you know which is better for your health? Do you even know what the basic ingredients of toothpaste are? No? Then how can you possibly call yourself a rational agent maximizing utility? We could set up one factory in Greece that made all the toothpaste in Europe and save a fortune and improve economic efficiency and improve people's health and shift jobs from abroad back home.

I would ask him this question because although I joke above that Mr Brittan is like me a statesman who only understands human nature, whereas John Kay and Martin Wolf are the young scientists who don't care about morality and  operate by pragmatism alone, I think Mr Brittan, like me, is still young enough for basic science problems and can follow the logic far enough to say "Gee, you are at least right about toothpaste. I guess we better do at least that much, even if we can't see through the glass clearly, even if we are stuck at the level of little steps rather than big term vision, that at least is one small step forward for mankind."

What that means is that Mr Brittan will be sitting there thinking on side side of his brain about all the amazing social benefits of a factory in Greece making all Europe's toothpaste, and at the same time the other side of his brain will be fighting against it as an invasion of personal liberty.

The side that will be fighting against this relalization is what I call the Dionysian Moral Compass side, and if it wins the Western World will carry on until society does fail and the pain of pain of failure makes such an impact on the Dionysian faculty that it gives up the fight and lets reason rule.

But if Mr Brittan is a smart man he will realise his moral intuition is wrong, and if he is truly wise he will go on an intellectual journey where he compares his reason with his moral intuition, and as his mind and his conscience wrestle with each other he will be transformed. This is really what philosophy is, a sort of journey in which your reason wrestles with your conscience by testing your moral compass for flaws and then recalibrating it.

This is why philosophy is a spiritual journey, and the end product is to make a man good. And thought I write a zillion words about different topics, and not one of them is any good, if there is any single wonderful thing of importance a person can learn from this silly web site it is this.