At this point in our series, Economics with Ian, we are taking a decidedly more serious look at the subject. You should understand, by now, that most of what passes for economics is bullshit. If you learned anything about economics from TV or the newspaper, it is bullshit. The two most popular economic theories, each espoused by the Republican and Democratic parties respectively, are bullshit. Penn and Teller ought to do an episode on that, but I fear they will not. We have previously examined a minor, much less popular theory which takes a less scientific and more philosophical approach to economics: it is the Austrian school, embraced by anarcho-libertarians everywhere. Unfortunately, the Austrian school strictly forbids all government intervention in economics, which puts many pencil-pushing bureaucrats out of jobs.
Why all the bullshit? Well, it’s rather simple really: bullshitting people is one of the best ways to manipulate them into giving you what you want. Now, whether or not you choose to believe bullshit is entirely up to you. You have that right, and if you choose to exercise it, God help us all, but it’s your right.
It is very chic to blame Capitalism for Government’s failures. Your author does not blame anyone for wishing to be chic. After all, it’s cool to agree with your friends and shout for hope and change because those nasty Republicans pissed on your leg and told you it was raining. They did piss on your leg. And now so have the Democrats. Welcome to politics: you have the choice between either Elephant piss or Donkey piss, but it’s still piss all over your khakis.
All of the major economic schools have their roots in Adam Smith’s tome, “The Wealth of Nations.” All of them agree that the Market, when left to itself, is guided by an Invisible Hand—the disagreement among the schools, at its core, is the question of whether the Invisible Hand is benevolent or malevolent in the long run. Monetarists like the Invisible Hand just as much as Keynesians; which is to say, both Democrats and Republicans (politicians, not you rank-and-file voters) are equal in their respect towards the Invisible Hand of the Market. In other words, they have no respect whatsoever for it, the only difference is their rhetoric. Republicans like to paint Democrats as people who hate the Free Market. While this is true in some cases, it is the pot calling the kettle black: Republicans hate economic freedom just as much as Democrats, they’re just better at lying about it, and they hate different aspects of the freedom. If the economic freedom were a person, Republicans would hate her nose—Democrats would hate her teeth. Why? Just because they do. Actually, there are some specific reasons, but we’ll go into those in a future lesson.
The point of the major economic schools is this: “How can the government control or manipulate the economy in such a way as to benefit everyone, but mostly the people on top?” Communism is guilty of the same. If your author were wealthy, he’d distribute copies of “The Gulag Archipelago” to every one of these children who thinks Communism is cool (the only problem is, very few of them could grasp Solzhenitsyn.) Communism is certainly about the redistribution of wealth, and as with any cult-like ideology, there are True Believers who think Marx, Lenin, and Stalin really meant everything they wrote about the Proletariat and Bourgeoisie. But in every case, from Monetarists to Communists, the redistribution is from the people at the bottom to the people at the top. Keynesian Socialism and Monetarist/Supply-Side Economics and Communism all have the same goal, the exact same goal: to separate you from your hard earned money and give it to the people at the top of the system.
Really, the only difference between the three is who the people at the top are and how they redistribute the money. In Communism and Socialist Keynesianism, the people at the top are the heads of state and upper-level bureaucrats. In Monetarism, the people at the top are CEOs and company presidents. Let me repeat: the only difference is who receives the money. Democratic politicians lean towards Socialism, because Keynesianism is a Socialist theory. Don’t get bent out of shape: Europe is Socialist, it’s not an insult, it’s just the correct label. Most Republican politicians (especially so-called moderates, often praised by the Left) are Fascist, and Fascism is just another form of Socialism, except Bureaucrats don’t benefit as much as Corporations. Think of Fascism as the kind of Socialism you might buy at Wal-Mart. Note that I said “politicians,” I did not say “if you are a Democrat, you are a Socialist.” You may be an unwitting stooge of the Socialists. Just as many Republicans are not part of the Vast Right Wing Conspiracy: they’re just average, every day Kool-Aid Drinkers like yourselves.
And let me take a moment to remind you that Fascism and Nazi-ism are two different things. The words are not interchangeable. Mussolini was a Fascist, Hitler was a Nazi (or National Socialist.) Their governments had some similarities, such as the unholy marriage between Corporation and State, but Hitler was far more extreme than Mussolini. The reason people confuse the two is because in the 60s, we let Communists into academia and the Commies kind of screwed up the semantics: on purpose.
As someone who believes in Human Nature as one of the few immutable truths of the Universe, the author can’t blame anyone for wishing to be on top, or wishing to be a True Believer. Indeed, the desire to believe in something is part of Human Nature.
Now we must shift gears, and move back into the study of economics. This next paragraph will explain the nature of the Market better than you’ve ever read anywhere else. Read it three times:
Blaming the Market for a depression is like blaming the Weather for a tornado. Duh. It’s obvious to blame the weather. But what the hell kind of good does blaming the weather do? You can’t change the weather, you can’t control it, so cussing out the weather a waste of time and energy and resources. The Market is not a thing to be controlled, it is a force. The Market is not a thing, it is a phenomenon out of which things arise. A storm is not an object, it is an event: but the clouds and rain-drops and tornadoes and lightning it produces (and which comprise it at the same time) are things. A cloud is a thing, a stock on the NYSE is a thing. A storm is not a thing, it is an event; a trade is not a thing, it is an event. A depression is not a thing, it is an event: it produces job loss, bankruptcy, and over-all distress. The Market cannot be controlled, because it is a phenomenon; it is greater than the sum of its parts. Human beings can control things, but we cannot control events, because there are always variables we cannot control. We can control how we trade in the Market, we can control what we buy and where, but we cannot control the Market as a whole. In the Market, every cent is a variable. No agency or man or computer can control the quadrillions of cents in a beneficial way at all times. Infinite knowledge is impossible, and perfection is impossible: blame Original Sin or Entropy, but it is impossible.
It’s like Heisenberg’s Uncertainty Principle: you can know either the location or velocity of a particle, but never both at the same time. One is always unknown, no matter how hard you try. This leads us to McLeod’s Uncontrollability Principle: you can (theoretically) either control the price value (location) or the trend (velocity) of the Market, but never both at the same time.
Only the Austrians acknowledge anything close to this, and only they are the ones who tell you “don’t try to control it; you will only make things worse when a bad storm comes.”
Show us a man who can control the weather, and he can control the Market, too.
Is the Market to blame for the depression? Yes. Why is it to blame?
Depressions are the worst part of the Market’s natural cycle: they are the Category 5 tornadoes, they are the Hurricane Katrinas. They are your girlfriend’s rare-but-exceptionally-psychotic episode of PMS. Depressions are easily predictable: one occurs roughly every 70 years. Recessions are your normal, run of the mill tornadoes and hurricanes or PMS: they do some damage, but nothing too severe. They happen every decade or so.
Did you know that lightning and rain are beneficial? Lightning helps fix nitrogen in the soil. Plants need nitrogen to grow. Contrary to Brawndo’s brilliant advertising, plants also need water to grow: Brawndo does not, in fact, have what plants crave. Did you know that wildfires are not entirely bad? There are some species of pine-tree whose cones have to be burnt to a crisp in order to release their seeds. So, a few McMansions in California get burned down, but those pine-trees will grow right back. Wildfires break down plant matter and Bambi’s mom into carbon, which returns to the soil in order to nourish the next generation of trees. This is sounding a lot like The Circle of Life from The Lion King. Because it is. The Market is a force of nature: Human Nature, and as with all natural things, it is cyclical. And 6000 years of human history have proven that Human Nature itself cannot be altered, only our behavior can be altered (and even then, only to a limited degree.)
Depressions and recessions, like wildfires, clear the economy of three things: inefficiency, bad business practices, and bad business models. They suck when your IRA is in the way, but they are beneficial in the long run. In our depression, GM and Chrysler are companies that the Invisible Hand of the Market has weighed and found wanting. Collective Bargaining and unionized workplaces ought to have ended by now, because they are grossly inefficient. You may think that’s not fair, but the Market is not fair: it is efficient, sometimes cruelly efficient. Life isn’t fair, get over it. If you look at the states hit hardest by the depression, they are not Right to Work states; the Right to Work states are relatively well-off (the South is a great place to live and work right now. Economic downturn? What economic downturn? We’re all busy making and selling things down here.) The Government is trying to prop up the failed companies and unions, but the Invisible Hand will get her way in the end, no matter how much stock in the new GM the Government and Unions own. You read that right, the Invisible Hand is definitely a woman’s, but your author will uncrate that for you in the next lesson.
The Government is delaying the inevitable, and when you delay the inevitable, it is usually worse than if you’d just gone ahead and ripped the band-aid off or broke off that bad relationship. Governments do not fix depressions and recessions, they prolong them. Before the 1930s, when the government had Keynes and others telling it that they could control the market, depressions lasted at most for 5-10 years (there was a depression in the late 1800s, and another one in the 1820s.) They are not fun, and a lot of people are hurt by them, but a lot of people are hurt by the weather every year, too. The Great Depression was special, because for the first time in human history, the Government tried to control the Depression. 15 years of economic hell ensued. Welcome to (at least) the next 15 years of your life, thanks to both George W. Bush and Barack Obama. The dead wood has not been burned, it’s still there, drying further, setting the stage for a far hotter economic firestorm. In 70 years, economists will look back and weep for our generation.
Just as the government can’t control the weather, they can control how people react to the weather: FEMA did an awesome job with Katrina, don’t you think? If the government can’t handle a storm that affected the lives of a measly few million people, how much better do you think the government can handle a Depression that affects trillions of dollars; quadrillions of cents?
Did you know that most of the members of Congress, both parties, are lawyers? Did you also know that the President of the United States is a lawyer? When was the last time a lawyer fixed your life—much less the lives of millions of people? I can think of Abraham Lincoln, and while he did fix the lives of millions of slaves, it was at the cost of the bloodiest war in American history. So even when lawyers make things better for a lot of people, they still ruin about as many lives in the process: “every action causes an equal and opposite reaction.”
So, let us understand the logic of the majority of America: we expect a bunch of lawyers—people who practice the most hated profession, to fix the depression. That’s like trusting a software engineer to fix your relationship problems, or an English major to fix a satellite. Not that it can’t happen, but you have better odds on hitting the Powerball without playing the lottery.
For the “greatest nation on Earth,” we sure are a bunch of idiots.
Aha, a question from the class: “Great Teacher McLeod, oh wisest of the wise, smartest of the smart, what about Communism? Did they not control the Markets?”
To which I must reply: oh astute student, you are a gentleman and a scholar. I praise your intellect almost as much as my own. The Communists gave it the best run anyone has ever given it: they killed millions and millions of people to try to make a selected population that could be controlled, both ideologically and economically. They had a good 70 year run in Russia. Funny how that works, depressions occur every 70 years, it took just over 70 years for Communism to fail in the USSR. China’s Communism isn’t even Communist anymore, they learned to embrace the Market.
In any case, no. As a Guru of Ancient Economic Knowledge from the East, Grasshopper, I must ask: did you know that the Free Market is like a river? If you throw a boulder into the river, will not the water flow around the boulder? And if you try to dam up the river using more boulders, will not the river flood, causing much chaos and destruction?
Lenin, Stalin, Khrushchev, Brezhnev, Gorbachev, bless their hearts, they tried. They really tried to control the Market. They further impoverished an already poor country. Their policies put into place a burgeoning Black Market (which is what the Free Market becomes when you put Government Control in place) in things like Marlboro cigarettes and Levi’s jeans. Western products were of far better quality than their Soviet counterparts, and enterprising capitalists in Russia would run everything from Bibles to Alcohol across the Iron Curtain, and sold the superior Capitalist products at high premiums. The USSR tried to control the market. They kept throwing more and more boulders in the river, and eventually the river flooded their entire land: the Berlin wall fell, the Cold War ended, the Iron Curtain was torn down. And now, Vladimir Putin, a former KGB agent, now lectures Barack Obama on the failures of government controls on the economy.
America’s government can’t control the 50 billion dollar a year illegal drug trade. Can the government control tens of trillions of dollars in white-market transactions any better?
In our next lesson, we will study the makeup of the Market, and its true feminine nature. For now, stop blaming the Market on the failures of Government. Stop blaming the Market for being what it is; it is as pointless as blaming the weather for being the weather.
You’ve had some quizzes in precious lessons, but now it is time for an exam. Unlike previous quizzes, this one does count towards your final grade. Because I am a Horrible Teacher (as referenced in the first lesson), I expect you to know answers to questions we did not study at all.
Exam:
1) In this lesson we learned:
A: E=MC Chris on Robitussin
B: The Free Market is both a wave and a particle.
C: The Market is the Market, just like the Weather is the Weather. They are both cyclical forces of nature, and cannot be controlled predictably.
2) If you were a tree, what kind of tree would you be?
A) Redwood
B) Blue Spruce
C) Long-leafed Pine
D) Al Gore
3) After the Stock Market Crash which heralded the Great Depression, the U.S. Government:
A) Raised taxes
B) Started all sorts of public works programs
C) Bailed out a lot of companies
D) All of the above.
4) In what year did the Great Depression end?
A) 1936
B) 1941
C) 1952
D) 1946
5) In what year did the Dow Jones Industrial Average return to its 1929 high, just before the crash?
A) 1935
B) 1942
C) 1946
D) 1955
6) What is 1955 minus 1929?
A) 21
B) 26
C) 49
D) 3.14159
7) Your answer to question 6 is equal to the number of years it took for the Dow Jones Industrial Average to recover from the crash, in part due to the 90% tax rate levied on the top-income-earners in the United States. If you were born in 1929, how old would you be in 1955?
A) 26
B) 119
C) 4
D) I do not understand this question.
If you want to make money in a Socialist country, your ideal career would be:
A) Soldier
B) Entrepreneur
C) Inventor
D) Pencil pushing bureaucrat
E) President
9) If you want to make money in a Monetarist country, your ideal career would be:
A) CEO
B) President
C) Congressman
D) Prostitute
10) If you want to make money in a country ruled by laissez-faire economic policies, your ideal career would be:
A) Priest
B) Entrepreneur
C) Inventor
D) President
E) School-Marm
Extra Credit:
If the Market is like the Weather, and Former President Bush used the (alleged) HAARP weather-control station in Alaska to cause Hurricane Katrina because he is a hateful bigot who wanted to kill a lot of African Americans, does that mean Former President Bush also had the ability to control the economy? Why/why not? Show your work—all division must be long division.
Note: we will be converting to a new scoring system, as our previous system of red marks and green marks was considered insensitive to color-blind students. You will now receive marks in various shades of grey for all answers.
Tags: Civics 101, Economics w/ Ian
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