Economic lie no. 5; competition can solve all our problems…

william, sports day

Some ideas are so central to our world view that everyone just assumes them to be fact. The domination of so called free market economics have forced quite a few of these kind of ideas into our thinking- one of them is the absolute necessity of competition.

Without competition we become flabbily inefficient, like some kind of state run farm in the old Soviet Union. Without competition we will never become the best that we can be, either as individuals or as countries. Without competition, we are told, all human endevour atrophies. All science is still born, all education is weak and pointless.

A what is more, without competition, there is no fun, no sport, no football no (Lord save us) cricket.

Be honest, at an economic level, do you think this is a closed argument? It might surprise you then to hear that there the value of competition in economics can be regarded as something of a mixed bag. Sure, it might drive down prices, but it might also drive down quality. It will ensure too that devices will lack interoperatability- each new produce will lead to the need for a new device- leading to huge waste and cost.

It might also deliver more choice for consumers (choice being another one of those current cultural holy cows) but this often leads to huge complexity, confusion and again much more waste.

What about competition pushing technology forward? We appear to be seeing unprecedented advances in computing at present. People are upgrading and renewing computers faster than ever before. Rather than buying a machine and using it for 8 years, people are renewing every 3 years, often due to the lower build quality, and cheaper parts end up breaking sooner. Again this is leading to huge wastage, not to mention the environmental impact of all those rare earth metals– which seem to be increasingly dumped in poor countries. There is now huge pressure to buy a new computer at the slightest problem, rather than fix the old one- they are cheap enough and new formats (netbooks, tablets, wrist) are made to look like essential accessories.

bourke-white-margaret-under-construction-blast-furnace-at-magnitogorsk-metallurgical-industrial-complex

Competition might also be regarded as aiming to destroy the opposition. So a powerful company (say IBM) might ensure that their computer platform overcomes other ones. They are removed from the marketplace, even if the technological solutions they contained were better, more useful. The story is often told of computers that used to boot up in seconds but the company that won the competition went a different route.

Am I suggesting that competition is bad then? It would be possible to make a strong case; what is the root cause for war if not competition? Does it not create far more losers than winners? Might competition not be dragging us headlong towards the end of our civilisation because of the damage being done to our environment? But this would be every bit as simplistic and one sided as the competition-is-always-good hegemony. What I would argue for however is the urgent need to look at the holy myth of competition and expose it to a measure of healthy doubt.

Clearly competition delivers huge benefits, but at what costs? I have mentioned potential environmental costs, but there are other more human ones too. The dream of success stalks us all- our huge need for measurable, quantifiable, objective evidence of our place in the human race. But in order for some to win, many must fail. And so we will do what we can to be one of the winners, not losers. However it has never been a level playing field; some will always be able to control the game on behalf of themselves and their families/friends. At present, by almost every measure, the world is providing less chances for those who have little than previously. We are discarding countless Einsteins, Beethovens, Marie Curies every day.

You could argue that even the costs of failure (our current banking crisis) has been outsourced. Those suffering from all the adversity programmes slashing our welfare, health and education budgets were certainly not the cause of the problem- in fact they were not even in the competition.

As someone who tries to follow after Jesus, it seems rather obvious that he did not seem to regard the winning of competitions as any kind of priority. In fact he seemed to favour the opposite; turning the other cheek, the first becoming the last, the lion lying down with the lamb. I know that neo-liberal economists do not tend to use Jesus as their major source material, but nevertheless it is strange how these ideas co-exist within so called Christian cultures. Perhaps the Jesus way of doing things is not really a good way for our children to get ahead?

Which brings me to my final point- the education of our children. When I was a kid back in the increasingly distant 1970’s, competition was bad. Enlightened parents and teachers tried to emphasise non-competitive games, encouraging co-operation and the shared experience. To be honest it was a bit shambolic, not much fun and the urge to compete was so strong in most of we kids that it was pointless anyway. Since then the whole attempt to imbue education with egalitarian principles has been totally abandoned in the UK. Competition is most certainly good- the more the better it seems, particularly under our current government.

school photo

The fear we live with as parents is that we do not skew the scales as far towards our own kids as we possibly can. The pressure is on to equip them for success in each and every exam, so that they can succeed in life. There is some evidence for the truth of this. Expensive private education hot-houses kids to exam success, and privately educated kids crowd the top professions in this country, particularly the political class.

Here is the rub though- as we start to look back on lives (rather than imagine forward into the lives of our kids) what successes do we most appreciate? What gives us most pleasure, satisfaction? Which of them might be regarded as having been worthwhile- not just for ourselves but for the world we were part of? If you are like me, this has little to do with money or exam results or career. It is much more to do with family, friends, community, creativity, love, kindness.  Is it possible that competition mitigates against some of this? Is it not at least a distraction, or perhaps given too much weighting in the choices we make for both ourselves and our kids?

Competition is saving us. Competition is killing us. Both are true, and neither.

Competition is overvalued, and needs to be subordinate to grace.

 

Kaynes and Hayek, why their ideas still matter…

In order to look for new ideas of how to organise our economy, we have to understand the old ones. Never was this more important.

In the 1920’s and 30’s, two protagonists argued polarised opposite views in the midst of their own economic crisis. One (Friedrich Hayek) insisted that the free market would right itself, and that the job of government was to get out of the way, to reduce its spending and the proportion of the public purse that interfered with the self correcting forces of free market economics.

John Maynard Keynes fundamentally disagreed. He said it was the job of government to govern, and the primary way that they should do this was by managing the economy. He was concerned with the human consequences of boom and bust economics – mass unemployment, poverty.

These two polar opposite positions have been fought over ever since. One libertarian, one interventionist. One arguing for centralised control, the other wanting no control at all. Evidence for the failure of both positions exists.

The free market brought us vulture capitalism, Thatcherism and the current crisis. It became the mantra of the International Monetary Fund, and the basis on which it manipulated whole nations. Centalised managed economies did not do well in the former communist countries. And we in the UK remember the strikes and power cuts of the 1970’s.

However it is also possible to point to the stable, eventually prosperous and well managed period after the second world war when Keynes ruled the world, or the eventual triumph of the Free Market, until this current crisis of course.

The question remains as to how this argument will play out in our current context. It seems that the current political instinct is towards Hayek, whilst having to acknowledge that when the free market is really free, then the unbridled greed it releases is potentially destructive to us all.

There is a really good clip on the Guardian website, here.

Ideological shifts for the free marketeers?

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What is happening in the economic world? The news is full of competing ‘expert’ voices- some seeking to reassure and proclaim business as usual, others taking on the role of doom mongers, proclaiming the end of the world as we know it. If the later group are to be believed, then pretty soon we will have to throw away our plastic and start bartering with chickens and baskets of logs…

Whoever we believe, it seems clear that there are huge changes afoot. Here is a quote from this article from The Independent newspaper…

The Western world is in an economic crisis similar in scale to the oil shock of 1973. What we are seeing is nothing less than the unravelling of neo-liberalism – the dominant economic and ideological model of the last 30 years.

The disintegration of Anglo-Saxon-inspired markets has come about largely because of the confluence of two tendencies of the “free market”: speculation and monopoly capitalism. Contrary to received opinion, free markets – unless subject to civil regulation, asset distribution and persistent intervention – always tend to monopoly.

Similarly, there is nothing inherently efficient about free markets – they do not of themselves promote sound investment or wise management. Rather, when markets are conceived wholly in terms of price and return, and when asset wealth and the leverage that this provides becomes as concentrated as it was in the 19th century (which is a scenario we are approaching), then markets encourage nothing other than gambling masking itself as sound investment.

Regulation?

In the free market? What would Thatcher say?

Is this finally the time when the stranglehold that neoliberal thinking has had on the economic world for the last 30 years is broken?

Will the IMF and the World Bank stop deifying the free market?

There seems to be a resurgence of confidence in the old leftist politicians- check out this article from the Guardian newspaper- and the quotes taken from is below;

Sadly, I don’t think this will be the end of capitalism. But there is going to have to be a return to a much, much more interventionist state. As a system for the distribution and exchange of goods, you can’t beat the market. But the mistake a lot of politicians have made is to think that because the market was good at that, it could be good at everything: it could train workers, create infrastructure, protect the environment, regulate itself. Quite obviously, it can’t.

Ken Livingstone, former mayor of London.

I remember the 1930s. What the Depression did then was to stimulate antisemitism. I met Oswald Mosley in 1928 when he was a Labour MP. The next time I met him he was wearing a blackshirt. Where there is fear, there is scapegoating, and that is very dangerous.

Blair and Brown based their politics on a belief in the market: the market answered all your needs and the state had to be kept out. That confidence has now collapsed and New Labour is seen for what it is. You can’t, as New Labour believed, nurse capitalism.

Tony Benn

What next then? Is Tony Benn right, and we live in a time when fear could stimulate the rise of hate politics, where we look again for scapegoats, and we retreat into our tribal enclosures and look with loathing at those outside? History warns us of our tendency look for messiah figures who appeal to the base instincts of the human animal.

Time will tell…

But as for me, the uncertainty and fear that such change brings into our lives is combined with an excitement over the dawning of something new. Capitalism is not dead- but it will not be the same.