{"id":143161,"date":"2019-09-23T12:00:22","date_gmt":"2019-09-23T11:00:22","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=143161"},"modified":"2019-09-16T08:45:55","modified_gmt":"2019-09-16T07:45:55","slug":"current-events-in-an-historical-perspective","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2019\/09\/current-events-in-an-historical-perspective\/","title":{"rendered":"Current Events in an Historical Perspective"},"content":{"rendered":"

Pretoria:<\/strong> Cyril Ramaphosa, formerly the President of the National Union of Mineworkers, and now the President of the Republic of South Africa, has recently been talking in his sleep:\u00a0 I do not understand what happened to me.\u00a0 I do not understand what happened to me. I do not understand what happened to me.<\/em><\/p>\n

A mouse, having worked its way under his blankets and being in a position to take a bite of one of his toes, upon hearing his moans, like the Daily Maverick <\/em>and the Globe and Mail, <\/em>and apparently for similar reasons, decided not to attack.<\/p>\n

As for me, I decided to treat the occasion as an opportunity to state the obvious, and to use the obvious as an opportunity to reframe current events in a long historical perspective.\u00a0\u00a0 \u2018Neither do the economists,\u2019 I remarked (thinking I was stating the obvious).\u00a0\u00a0 \u2018They do not understand what happened to Cyril Ramaphosa either.\u2019<\/p>\n

\u2018Come off it!\u2019 the mouse squeaked loudly, and, I might add, rudely.\u00a0 \u2018You do not even know the names of all the economists!\u00a0 You certainly do not know that not a single one of them understands what happened to Cyril Ramaphosa or to South Africa!\u00a0 Surely as we speak here in the dark at the President\u2019s bedside, in other places where we cannot hear them more than one economist is diagnosing South Africa\u2019s ills! Who are you to dismiss all their diagnoses as misunderstandings without even knowing who is speaking or what they are saying?\u2019<\/p>\n

I felt that the mouse was not making an effort to see my point.\u00a0 Instead, he attributed to me an implausible epistemology, as if I were claiming to know everything that is going on in the minds of thousands of scholars I do not know, and most of whose works I have not read.<\/p>\n

Choosing to ignore the mouse\u2019s bad attitude, I simply replied, \u2018Let\u2019s listen a little more:\u2019<\/p>\n

\u00a0 I do not understand what happened to me.\u00a0 I do not understand what happened to me. I do not understand what happened to me.\u00a0 I did everything I was supposed to do to create jobs for the unemployed.[i]<\/strong><\/a> When corruption was scaring off investors, I fought corruption.\u00a0 When lack of access to credit was the problem, we provided credit. When investors are afraid that they could not take their profits out of South Africa and move them back home, we guaranteed freedom of capital movement.\u00a0 We hardly tax profits at all, paying government expenses with the VAT and by taxing the incomes of middle-class professionals and by going farther into debt!\u00a0 I do not know what happened.\u00a0 Unemployment went up instead of down.\u00a0\u00a0 The unemployed were not grateful for all the blood, sweat and tears I put into creating jobs for them.\u00a0 Violence got worse!\u00a0 And violence scared away investors!\u00a0 Fires and murders!\u00a0 Demands that I \u2018do something!\u2019\u00a0 Why do they blame me when I am working as hard as I can following the advice of the most highly qualified scientists?\u00a0 I do not understand it!\u00a0 I do not understand it! <\/em><\/p><\/blockquote>\n

\u00a0<\/em>His moans gradually subsided into silence, and then they started up again, repeating the same themes.<\/p>\n

The mouse said I may only be a mouse, but unlike the people who are rioting in the streets, raping women, and setting fire to buildings burning people to death, I can think straight.\u00a0 I can understand that the President is working on solving the problem.\u00a0 I can make a rational argument.<\/p>\n

The mouse offered the following as a rational argument:<\/p>\n

    \n
  1. The only way to overcome poverty is for poor people to get money to buy food, housing, medical care and other necessities and conveniences.<\/li>\n
  2. The only way (or at least the only desirable way, ruling out drug dealing, prostitution and so on) for a poor person to get money is to find a job.<\/li>\n
  3. Jobs come into existence only when investors create jobs.<\/li>\n
  4. All human beings, including investors, seek to maximize the satisfaction of their preferences.<\/li>\n
  5. In the case of investors, maximizing preferences means maximizing some combination of high earnings and low risks.<\/li>\n
  6. South Africa does not have enough capital to create jobs fast enough to absorb existing unemployment and keep pace with its growing population.<\/li>\n
  7. Therefore, to overcome poverty, South Africa must seek foreign capital.<\/li>\n
  8. Following from premise 5 above, foreign investors will invest only on terms they accept, and these will be terms that maximize their confidence that they will achieve their investment objectives.<\/li>\n
  9. Consequently, South Africa must remould itself to become an environment where potential investors will feel confident that they can achieve high rates of return at low risks.<\/li>\n<\/ol>\n

    Although my mother always said that honesty was the best policy, experience has taught me that what she always said is not always true.\u00a0 In this case, if I had told the truth I would have said that the mouse\u2019s conclusion (9) only follows if all 8 of his premises are true.\u00a0 In fact, all his premises are false, except perhaps for 8.\u00a0\u00a0 Even 8 is misleading in a word like ours overflowing with excess funds finding no profitable outlet making anything useful.\u00a0 They dash around the world in high-speed speculative transfers in quantities that dwarf the real economy, usually concealing their true ownership, operating as trust funds parked in tax havens.\u00a0\u00a0\u00a0 Any project that pays, and is known to pay, will not fail for lack of funding.\u00a0 This is still as true today as it was when Walter Bagehot wrote it in 1873.[ii]<\/a><\/p>\n

    In the imaginary world of Cyril Ramaphosa, the National Development Plan, the mainstream press, the economists, the DA, the ANC, the mouse, and too many others to count, there is a shortage of capital in South Africa.\u00a0\u00a0 The solution to the problem of mass unemployment is to persuade investors to bring to South Africa the capital it needs. In the real world, every, or almost every, profitable niche in the South African economy is already being occupied by a firm that is already making money there.\u00a0\u00a0 So, 8 is at best misleading.\u00a0\u00a0 It leads one to believe that capital is scarce and investors few.<\/p>\n

    What is really scarce are real markets with real customers who will pay for products not already being supplied by somebody who got there first.\u00a0 The score: 7 false premises and 1 misleading premise delude a President who does not understand why 9, which he fervently believed, was a fantasy that could only collide with reality.\u00a0 It led to anger; to setting fires, to killing police officers, and other acts typical of the humiliated poor. They are driven to violent insanity by the tissues of lies that enslave them.<\/p>\n

    Disregarding my mother\u2019s advice, I did not tell the mouse any of this, judging that brutal honesty would lower his self-esteem and poison our relationship.\u00a0 Instead of criticizing his opinion, I stated my own: `<\/p>\n

    The economists have it backwards, I said.\u00a0 They think the problem is insufficient investment and the solution is more investment.\u00a0 As John Maynard Keynes wrote,<\/p>\n

    \u2018there has been a chronic tendency throughout human history for the propensity to save to be stronger than the inducement to invest. The weakness of the inducement to invest has been at all times the key to the economic problem.\u2019<\/em>[iii]<\/a><\/p><\/blockquote>\n

    But this is not strictly true.\u00a0\u00a0 As Julius Nyerere often said, before Africa was conquered there was no unemployment.\u00a0\u00a0 African societies were not economies in the European sense.\u00a0 People did not think or act in economic terms.\u00a0\u00a0 The \u2018economic problem\u2019 analysed by economists was not part of their social repertoire; there were no words for it in their languages.<\/p>\n

    So, asked the mouse, if the economists have it backwards when they think the problem is how to strengthen a chronically too-weak inducement to invest, what would it mean to get it frontwards?\u00a0 What is the real problem?<\/p>\n

    The real problem is how to meet human needs in harmony with nature.\u00a0\u00a0\u00a0 But somehow humanity has tied itself up in knots in such a way that if somebody sells shares instead of buying them on Wall Street, that means unemployment in the Cape Flats.\u00a0 If the Chinese cut copper imports, that means mines have to be mechanized to remain profitable.\u00a0 How did humanity stew itself into such a pickle that most people have no control over their own lives, and are condemned to insecurity by forces far beyond their control?\u00a0 That is the problem.\u00a0 That South Africa feels compelled to seek foreign investments to stay afloat and avoid a further credit downgrade and further devaluation of its currency and even more unemployment, is a symptom of a much larger problem.\u00a0\u00a0 We should be asking, how can we become more self-reliant? How can we create dignified livelihoods for all?<\/p>\n

    What I can\u2019t agree with, said the mouse, is talking of \u2018the economists\u2019 as if all economists think alike.\u00a0\u00a0 I can see why you might say that some economists have mistaken views and give unhelpful advice, but surely the solution, as in any science, is to do more research and give better advice with the support of more evidence.[iv]<\/a><\/p>\n

    As Thomas Kuhn might put the matter, I said, this is no time for normal science.\u00a0 This is an historic crisis.\u00a0 Taking a broader historical view, economics grew up as a way of thinking that made sense of \u2013and actually, as a matter of history, contributed to creating\u2014modern society, often called capitalist society but more appropriately called economic society.<\/p>\n

    Modern society, economic society, is not working.\u00a0\u00a0 It is not meeting human needs.\u00a0\u00a0 It is not in harmony with nature.<\/p>\n

    So, said the mouse, you are saying, echoing Keynes, that somebody who thinks generating more growth by finding more investors is the problem to be solved is thinking like an economist.\u00a0\u00a0 Economists by definition do not understand.\u00a0 Their science presupposes a social structure that is not working; dysfunctional ways of thinking and acting are built into its foundations.[v]<\/a> \u00a0Not by mistake, but because its foundations always were identical to the social structure of modern economic (first European, then global) society.\u00a0\u00a0 It is not any economist\u2019s fault that the subject they chose to study was a study of a way of life that is dysfunctional.\u00a0\u00a0 Nevertheless, that is the way it is.<\/p>\n

    Thank you, I said.\u00a0 I was glad that I had avoided quarrelling with the mouse and that he had come around to seeing my point of view.\u00a0 I had to admit that my way of using the phrase \u2018the economists\u2019 has the awkward consequence that mavericks like the ones who write the Real World Economics Review, are not part of the set of entities to which the term \u2018the economists\u2019 refers.\u00a0\u00a0 It is counter-intuitive to call them \u2018dissenters, not economists\u2019 when they have doctorates in economics and are employed as professors of economics.\u00a0\u00a0 But my way of using the term has the advantage that it makes it clear that to rebuild the world, to build a world that works, we do not need \u2018other economists\u2019 as much as we need people trained in other fields who are able to look at problems now classified as \u2018economic\u2019–like \u2018unemployment\u2019–from other perspectives using different conceptual and mathematical tools.<\/p>\n

    NOTES:<\/strong><\/p>\n

    [i]<\/a> Details of mainstream economic advice on how to attract investors and create jobs are provided in papers by Dani Rodrik, Ricardo Hausmann, and Andres Velasco cited in the National Development Plan.\u00a0\u00a0 See Dani Rodrik with those co-authors One Economics: Many Recipes.\u00a0 <\/em>Princeton: Princeton University Press 2007; and other works by the same three.<\/p>\n

    [ii]<\/a> Walter Bagehot, Lombard Street: A Description of the Money Market.\u00a0 <\/em>London:\u00a0 Henry S. King publishers, 1873. \u2018We have entirely lost the idea that any undertaking likely to pay, and seen to be likely, can perish for want of money\u2019.\u00a0 From the second page of Chapter One.<\/p>\n

    [iii]<\/a> John Maynard Keynes, General Theory.\u00a0 <\/em>London: Macmillan, 1936.\u00a0 Pp 347-348.<\/p>\n

    [iv]<\/a> Robert Heilbroner, The Making of Economic Society.\u00a0 \u00a0<\/em>Englewood Cliffs NJ:\u00a0\u00a0 Prentice-Hall, 1969.<\/p>\n

    [v]<\/a> Andre Orlean\u00a0\u00a0 L\u2019Empire de la Valeur\u00a0: refonder l \u2018\u00e9conomie\u00a0\u00a0 Paris\u00a0: Seuill, 2011.<\/p>\n

    _____________________________________________<\/em><\/p>\n

    \"\"<\/a><\/em>Prof. Howard Richards is a member of the TRANSCEND Network for Peace Development Environment<\/a>. He was born in Pasadena, California but since 1966 has lived in Chile when not teaching in other places. Professor of Peace and Global Studies Emeritus, Earlham College, a school in Richmond Indiana affiliated with the Society of Friends (Quakers) known for its peace and social justice commitments. Stanford Law School, MA and PhD in Philosophy from UC Santa Barbara, Advanced Certificate in Education-Oxford,\u00a0 PhD in Educational Planning from University of Toronto. Books:\u00a0 <\/em>Dilemmas of Social Democracies with Joanna Swanger,\u00a0<\/em>Gandhi and the Future of Economics with Joanna Swanger, <\/em>The Nurturing of Time Future, Understanding the Global Economy (available as e-books),\u00a0<\/em>The Evaluation of Cultural Action (not an e book).\u00a0 <\/em>Hacia otras Economias with Raul Gonzalez, free download available at www.repensar.cl<\/a>.\u00a0<\/em>Solidaridad, Participacion, Transparencia: conversaciones sobre el socialismo en Rosario, Argentina. <\/em>Available free on the blogspot lahoradelaetica.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

    To rebuild the world, to build a world that works, we do not need \u2018other economists\u2019 as much as we need people trained in other fields who are able to look at problems now classified as \u2018economic\u2019–like \u2018unemployment\u2019–from other perspectives using different conceptual and mathematical tools.<\/p>\n","protected":false},"author":4,"featured_media":139551,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[40],"tags":[120,378,109,985,1218],"class_list":["post-143161","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-transcend-members","tag-conflict","tag-journalism","tag-politics","tag-social-justice","tag-south-africa"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/143161","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=143161"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/143161\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media\/139551"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=143161"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=143161"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=143161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}