50 years ago, outdoor advertisers, Mills & Allen Ltd, was taken over by Barclay Securities Ltd, stripped of readily saleable assets, and a proportion of employees were declared redundant. Barclay was a financialised associate of arch asset stripper Slater Walker. It was headed up by one John Bentley, who became a media star, proclaiming ‘the theory of what we are doing is to release half the cash, half the assets and half the number of people employed’. That was how he rapidly became a multi-millionaire.
That was 50 years ago – so what’s new today? Well, technologies have changed and everything happens much faster now. Today, the equivalent of Barclay Securities would measure time in nanoseconds.
And it’s over 80 years since F D Roosevelt proclaimed that ‘government by organised money is just as dangerous as Government by organised mob’. By organised money he specified ‘business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism (and) war profiteering.’
So what’s new today?
Well we’d certainly also include as components of organised money, not just monopoly, but other leading elements of financialised business and the whole shadow banking sector, the media including a hyperactive social media, strands of academia proclaiming the simplistic supportive neoliberal economic ideology and a political sector which includes extremely well funded think-tanks and lobbyists, all lubricated by the revolving doors enabling immediate migration between those various sectors and government itself. Organised money looks immensely more powerful than it was 80 years ago.
When Roosevelt identified organised money, he was introducing the second wave of New Deal economic stimulus, bringing to an end the austerity driven Great Depression which had followed the 1929 Wall Street crash. So there’s nothing new about the current situation following the 2008 crash. Osborne and Cameron, Hammond and May, have single-mindedly pursued austerity wreaking all sorts of destructions on public health, education, policing and justice, transport etc etc. Stimulus awaits the appearance of a Roosevelt, or perhaps an Atlee.
That stimulus-austerity debate goes back around a 100 years to concerns about the quantity of money in the economy and the velocity of its circulation. The neoclassical contention was for strict control of the quantity of money, except, of course, when banks and finance are threatened by their own fraudulent excesses. Then hundreds of billions of quantitative easing is found acceptable, despite the obvious fact that it won’t be spent in the real economy providing employment for real people, but will instead be speculated for the high risk high returns of capital markets. For such allocation of public funding, banks are no doubt comforted by the knowledge that governments obviously recognise them as too big to be allowed to fail.
It’s now over 150 years since John Ruskin acknowledged the limitations of the economic theorising on which the current fiasco is based. He likened it to ‘alchemy, astrology (and) witchcraft … The reasoning might be admirable … the science deficient only in applicability’. As Ruskin pointed out, applicability should be the sole purpose of economics.
Since then, there have been many more comprehensive critiques. Routh argued that ‘Economics … ignores facts as irrelevant, bases its constructs on axioms … ‘plucked from the air’, from which deductions are made and an imaginary edifice created … economics becomes a matter of faith … immune to criticism.’ J K Galbraith warned of the dangers posed by ‘institutional truths’, which were not truths at all, but the lies that have to be internalized for individuals to progress in their chosen institution.
Whether witchcraft, faith or institutional truth, economic theorizing has proved extremely dangerous. Business school professor Sumantra Ghoshal argued that its ideologically inspired amoral theories ‘have actively freed their students from any sense of moral responsibility’ creating what has been described as ‘a culture of casual dishonesty’. For example, the 12 global bankers paid out £105.4bn worth of fines between 2009 and 2013 for mis-selling mortgages, rigging capital markets, money laundering and tax evasion as well as the most energetic avoidance. Most financial houses appear to have been behaving in similar fashion. Barclays investment bank was found guilty of fixing the Libor market, on which around $350trillion of derivatives depended, affecting pretty well all mortgages and overdrafts. As one of the traders was reported as saying, ‘If you aint cheating, you aint trying!’ Barclays were fined £290million for their wrong doing and the investment bank CEO was promoted to CEO of the whole group, rather than being asked to bear any personal responsibility.
As Tony Judt put it in his valedictory text: ‘Something is profoundly wrong with the way we live today’. It is the result of organised money armed with neoliberal economic policies which justify working for their own self-interest, at substantial cost to almost everything and everyone else.
So what can be done?
Ghoshal advocated a first step would be to stop teaching the neoliberal economic ideology. Future generations might then escape the tyranny of organised money. That would certainly seem a valid first step. But what should be taught in its stead?
Almost 250 years ago, moral philosopher Adam Smith published his inquiry into the nature and causes of the wealth of nations, which he started with a description of pin manufacture. According to Smith, working alone, a single worker could make ‘no more than 20 pins per day’. By collaborating together on their different specialised operations, ten workers could produce around ‘48,000 pins a day’. That 240 times increase in output per worker, was a huge gain not only for the producer, but also with the unintended but highly desirable potential consequences for society as a whole.
Smith drew common sense conclusions from observation of the real life pin manufacturing system. His analysis had a profound influence on political decision making of the time, as acknowledged by Pitt the Younger: (Smith’s)‘extensive knowledge of detail and depth of philosophical research will, I believe, furnish the best solution to every question connected with the history of commerce and with the question of political economy.’ It was the knowledge of detail derived from observation of reality that defined the best solution, and still would today.
Today’s economic curriculum could provide students with understanding of how real systems actually work, with decision making guided by today’s equivalent of Smith’s moral sentiments, instead of the witchcraft and institutional truths of the neoliberal ideology. It could also include some economic history from which lessons might be learned. For example, Smith noted the stultifying nature of shop floor work and advocated the provision of free education for those workers, paid for by progressive taxation – ‘It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.’
That might then start the no doubt prolonged struggle to overcome the tyrannical power of the self-perpetuating organised money establishment.