Joseph and Moses by all accounts were economic geniuses, unlike the cosy cartel of our ruling Establishment today. Three thousand plus years before Nikolai Kondratiev, Joseph (son of Jacob) recognised the inevitability of economic cycles (feast or famine) and planned measures to mitigate the worst effects. Moses led his people out of increasingly oppressive servitude to economic freedom in a place of opportunity for hard work. He introduced laws, which made civilised society and economic activity possible. Both pragmatically responded to both the strengths and weaknesses of humanity. Can our policy makers learn from these examples as crony corporatism takes precedence over our interests and our living standards fall?
Much of what is claimed about the economic performance of our country by our ruling Establishment, Euro-Blob and Green-Blob comes across as light-weight, incorrect, counter-intuitive and doesn’t accord with experience for many people. Missing are perceptive observations, deep insights and analyses, innovative ideas and careful plans for successful implementation. Also there is a failure to take cognisance of current knowledge, invention, risks and how the real world works. Whilst economic theory is in part ‘black art’, much is known about what is likely to work to bring peace and improving standards of living to many people, the rightful objectives of economics. Much is also known about what clearly doesn’t work, because for example, it does not bring mutual benefits or incentivise, or focus on ‘making the cake bigger’ for everyone.
Throughout history increasing prosperity and wellbeing have come as a result of human endeavour and risk taking, in particular, invention, innovation and continuous improvement, to find new and better ways to add value and reduce costs. Clearly decisions with economic implications, not just ‘economic policies or plans’ should support these as a high priority. However, change, progress, creative destruction and economic policies also have a downside for some (under or unemployment) until they can be accommodated in the new order. Consequently, there need to be ethical, prudent, sustainable and compassionate components within policies and plans to, as far as practicable, mitigate potential economic downsides on people. Policies and plans also need to take cognisance of the real world, factors that can influence or slow successful innovation activity, such as preconceived ideas, speed of action and agility, servicing the national debt and taxation, education and skill levels, monopolies, incentives and cycles of economic activity, and scientific or technological progress.
This approach challenges current policy orthodoxy, which is often where innovation starts, and leads to some surprising conclusions. Thus abundant low cost labour in the absence of an ever expanding technological or physical frontier acts as a disincentive to progress including to higher value-adding activities and productivity; there is no ‘Necessity to mother Invention’. There may even be an escalator effect (Jevons Paradox) as low wages ‘draw in’ further low wage, low productivity work. This appears to be happening in our country; economy expanding without improving living standards and tax receipts underperforming. Also, with the government (and public sector) taking up such a large part of the economy it shuts down much innovation and risk taking by favouring risk aversion and larger businesses especially in procurement. Its tax arrangements also dis-incentivise and its large demands on resources, including people, capital and discretionary spending, and burdensome regulations and debts, make successful innovation much harder. Consequently, being world leading, as we once were in many fields, and selling to the world are often not possible.
Inevitably there will be further economic cycles despite claims (under Labour) to have ‘abolished boom and bust’ and the economy will nose-dive despite current claims that ‘We have a strong economy’. Greed, deceit, incompetence and amnesia by the ruling Establishment cannot save us from the next economic tsunami. Unfortunately, the current and previous governments’ modern equivalent of Ancient Egyptian grain storehouses of reserves for the coming bad times are empty and the burden of economic servitude on us, including the national debt, is increasing. However, implementation of economic and other policies and plans which create an environment where we, through our own efforts, can be world leading through invention, innovation, continuous improvement can help us to survive and prosper in a competitive world despite whatever happens.
Photo by eyewashdesign: A. Golden