Thursday, 28 May 2009

Economics

My thoughts have frequently moved to economic issues over recent months. This is partly because we are selling thing off in preparation for a move to the UK but it also reflects the issues surrounding the economic environment and my reading on the train.

Today was the reading of New Zealand's budget in parliament. I have to say that I don't see there being any surprises in what was in the budget or in the reaction of the opposition and members of the public that were reported in this evening's news.

The research method that I used for my PhD looked at the different ways that object-oriented software development practitioner's perceived what an object-oriented program is. As I expected, we uncovered a number of different perceptions from a technical perspective and from a design perspective. Hopefully, I will get into this more in another blog.

Anyway applying this thinking in the economic realm means that I expect there to be different perceptions of how to economy works or can work, and of how to resolve the current crisis.

The monetary based understanding of economics says that we have borrowed more than we can afford and that the New Zealand government should live within its income. The credit rating system works on this basis. So in order to maintain a good credit rating the New Zealand government has reneged on some of its election promises and decided not to borrow to continue funding a superannuation scheme and to fund promised tax cuts. Basically, it has primarily decided to stay with things the way that they are until the economy picks up again and there are surpluses to play with.

This whole system is based on the idea of profit and lose. A government does create credit for the things that are needed rather it borrows from a banking system that generates credits from deposits that people have made into the system. Of course people have done the same. When a large enough group of the people can no longer afford to fund their debts (as is currently happening), the whole system falls into chaos with companies failing and governments either increasing their borrowing and higher interest rates or slashing the spending often on the very things that are needed to enable the country to recover.

Of course none of this matter while things seemed to be charging along on an ever increasing debt mountain. Now though, we are paying for our consumerism and desire for better things. We must learn to live within our resources or be consigned to begging on the street corners. Never mind that you may not have enough resources for basic needs. The holders of the credit strings can dictate what you can or can not do. They hold the power!!!!

It is made worse by the way that we trade in the very commodity that we use to determine value (i.e. money / currency). We can speculate on future exchange rates and future cost of imports. In fact, we can make or lose money trading currencies. We don't have to produce anything or even have any real assets to trade in. we can just play a game with changes in rates other winning or losing in a game of chance.

Most economic proposals aim to become a will-to-power. They aim to centralise control in government or big corporations. Companies need to consolidate into bigger companies in order to compete (and to be able to run up bigger debts). Money is lent to people so that they become enslaved to a need to work in order to pay of the debts (employmentism) (Dobbs 1974).

Marketing strategies are designed to generate a sense of artificial need so that the wheels of production can keep producing (productionism) (Dobbs 1974). The power isn't with the consumer it is with the producer and the enslaving to employment. It is all about controlling the people.

C.H. Douglas (1974) argues that the alternative is a will-to-freedom. An approach which puts the consumer in control of the credit. As I understand it, Douglas would argue that a government shouldn't be borrowing to meet real needs. Instead, it should be generating debt free credit. That is a government shouldn't be borrowing for basic services or for social welfare payouts. These are needs of a society and should be paid for from generated credit.

Of course the credit agencies don't like this because they lose the power to control and dictate how a government and its people should behave (will-to-power). Instead, this moves the power to the people to decide how they should meet their needs (will-to-freedom). Douglas argued that increasing mechanisation of production would reduce employment opportunities so there would be a greater number of people who were without employment but not without needs. The thing is that production will never be done away with. Goods need to be produced so that people can live. That production should be controlled by genuine need not a system that is dictated to by a need to produce and employ.

As I look at our current transactions selling off furniture and property so we are more easily able to make a move around the world, I realise the real risk that in the financial stakes, we are likely to go backwards. When we arrive in the UK, we are probably going to find that we can't afford to own a house with the same low level of debt as we have enjoyed here. We may find that we can't even raise a mortgage despite having a very healthy deposit. We are probably not going to be able to buy similar assets to what we have enjoyed here. But I also need to recognise that we have probably enjoyed a number of assets that we haven't really needed (luxuries of earning a good income).

My argument isn't very elegant and I am sure that there are plenty who will endeavour to pull holes in it but maybe it is time to re-examine the assumptions behind our economic system and really ask whether it is a servant of the people (will-to-freedom) or whether the economic system is little more than a tool for controlling the people (will-to-power).

References:

Geoffrey Dobbs (1974) Introduction. In:
C.H.Douglas (1974) Economic Democracy. (Fifth (authorised) edition) Bloomfield Publishers: Epsom, Surrey, England.

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