14. Duiker, Ho Chi Minh, 475–88.
15. Galbraith, American Capitalism.
16. Galbraith, Affluent Society.
17. Fenby, Penguin History of Modern China.
18. Madron and Jopling, Gaian Democracies.
19. Lawson, View from Number 1.
20. Interview with Lord Nigel Lawson, in The Daily Telegraph, January 30, 2016.
21. Sachs, End of Poverty, 169.
22. Sachs, Commonwealth, 8.
23. Hebden, Seeking Justice, 30–31.
2 Foolishness to the Greeks
There is a new generation of internationally respected economists who work across continents, writing intelligible patterns of alternative economic theory. What they share is an understanding of what is happening as the developing, corporately accepted theories of last century’s economics do not seem to be working in our new economic world order.
Twentieth-century capitalism has created “the new monsters”:
• I have a brave UK-born friend, who has retired with his Chinese wife to a provincial city in China. Many of our mutual acquaintances have voiced concerns for them because of the increasing inequalities that may re-erupt in the new Chinese capitalist economy. How long before that economy becomes the world’s largest, overtaking the USA’s, and is then deciding the “ground rules” for us all?24
• A few years ago, I heard one of the new generation economists, Yanis Varoufakis, speak in a London School of Economics public lecture. He spoke of the new global minotaur within economics. The minotaur is a mythical beast that devours all in its wake, ultimately bringing tragedy upon the nation that does not comply with its demands. I found Varoufakis, his thesis, and now his writings totally credible;25 he is a Keynesian, believing in altruistic economics.
• Both my own and my friends’ world travels beyond the civilized free world tell of inequality. The rich are getting richer, the poor are getting poorer, and the planet still burns in its own carbon emissions as the “haves” seek to acquire more at the expense of the “have nots.”
If you are uncertain, think about what is happening to the Nenet, those caribou herders in Arctic Yamal.
Crashes and the failure of corporate theory
Humanity naturally favors a capitalist system, because of greed. We have to work against our very human nature not to “acquire bigger barns” (Luke 12:18) and then fill them. I have many friends and acquaintances who believe in a “simplicity of living,” in developing low-impact lifestyles; more of them in chapter 9. But the faith of those Quakers, Mennonites, and other radical Christians can seem like “foolishness to the Greeks” (1 Cor 1:22–25)—those who live in their orbits of self-centred philosophy, greed, and acquisition.
Even the Romans conquered Europe with a capitalist model. The old joke that their legions’ standards, declaring SPQR, meant “Small Profits, Quick Returns,” is of course false. But its true Latin meaning of Senatus Populus Que Romanus is “the Senate and People of Rome,” and was attached to the coinage and documents of the Roman Empire; possession of either implied acceptance of the empire’s dominion over one. In other words, every aspect of life and death was based on the empire’s rules. That is also how monetary systems work—or not.
The South Sea Company formed in 1711 was a public-private company designed to consolidate and thus reduce national debts, which naturally occurred in the development of the British colonies, including the Americas. The company was given the trading monopoly for South America, attracted much inward investment without any realistic trading prospect or even transactions, then financially collapsed before 1720. The bubble had burst, huge losses by investors were sustained, and the phrase “South Sea Bubble” became subsequently applied to any form of dubious investment. As a result, the UK Bubble Act of 1720 forbade the creation of any similarly styled joint stock companies. Yet after the great Wall Street Crash of 1929, the phrase “South Sea Bubble” was applied to the trading euphoria that preceded it. This crash had involved much speculative investment, stock/commodity prices free-falling and heralding a decade-long financial depression for all the industrialized nations.
But did the Western world learn? The previous chapter about economic theory tells of the postwar crawl for the free world to become partners rather than slaves of US-led capitalist domination. It was not just Gordon Gekko who thought he was a god on Wall Street. The plain fact is there are too many more, thinking they could live without much regulation in their expansionist speculations. Either side of the Atlantic, the worker power of unions was crushed and statutorily emasculated. For nearly twenty years, the US promotion of almost unpayable subprime mortgages occurred, spiralling many families down into poverty and once-fine cities (e.g., Detroit) into decline. Traders operated from less-regulated market centers, with insufficient supervision, occasionally with calamitous result. Do you remember the collapse of Barings Bank—and why it happened?
In 2008, all three of Iceland’s national, privately owned banks had huge commercial investments in UK and Dutch infrastructure projects. Then because of the international trading crisis they could not create the necessary short-term refinancing. Therefore the whole Icelandic domestic economy tumbled, forcing austerity upon its people, overseas financial losses, and the nationalization of one of those three banks. Bolstered by its growth through US dollar support, Japan’s economy majorly stuttered as both the “Asian tiger” and Pacific Rim economies slowed by 2008.
The outworking of this was the Great Crash of 2008, regarded as worse than that of 1929, which precipitated a global liquidity crisis. Should governments devalue their currency and print more money? The consequent downturn in economic activity led to a five-year (2008–12) global recession, significant rises in commodity prices (including oil), overwhelmingly contributing to the European “sovereign debt” crisis. Multiple African and Asian nations reported that their previously growing economies had stalled or even entered decline. There were runs on several UK financial houses, including the one that bankrupted Northern Rock, as well as in the USA and Europe. Internationally renowned companies such as Lehmann Brothers went to the wall.
What must be recognized is that we live in an interwoven global economy as one household/oikos. No amount of US legislation, such as the 2010 Dodd-Frank Act (to protect consumers and investors) can reach beyond their national boundaries, nor protect America from the effects of another global recession. Given current economic practice, if the USA cannot protect itself, no other country can—as global recession is spectacularly devastating and one day will be irredeemable.
An even more crass development is the current US-European Union Transatlantic Trade and Investment Partnership, or TTIP, which is opposed by many Europeans, socialist groups, green, and other “people parties.” Basically this will allow transnational conglomerates to sue governments/nations for loss of trade if their national restrictions diminish those transnationals’ profit margins or right to trade.
The question remains—how much has corporate theory got it wrong? And if so, is there a present alternative?