Not Keynes Or Kuznets Or Krugman But Cowperthwaite
From Sean Corrigan of Diapason
Before we really get into the detail this week, let us just deal with one simple canard: this idea that if the US Congress does not immediately roll over and allow the Administration to have its head in consuming the capital of the nation at its present, unsustainable rate, the whole house of cards will come crashing down around its members’ ears.
Not least of the reasons for our rejection of this cheap exercise in scaremongering is that the $85 billion or so which will supposedly be trimmed back in the course of the next fiscal year, should the dreaded ‘Sequester’ actually take place, is no more than the amount of new money the Federal Reserve has pledged to inject into the system each and every month, for ever and ever, Amen.
It would also be remarkable if the fictional Keynesian ‘multiplier’ - so remarkable in its absence when the government was spending an extra $1 trillion annually with hardly any unequivocally attributable addition to jobs (Solyndra, anyone?) - will now become so magnified in its effects that a trimming of that largesse 1/12 the scale will instantly cause 700, 000 positions to evaporate. Right! What we are being asked to swallow whole is the idea that if government spending slips back by no more than 1.5% of its inordinately large total - a proportion which is actually more like 0.25% of total, economy-wide, annual turnover and which is equivalent to around 75 cents per head per day - that the Apocalypse will be ushered in forthwith.
Well, your author, for one does not believe that the economy - any economy - is THAT fragile. After all, the sum in question is roughly of the order of the official tally of retail sales of sporting goods. Where Nike goes, there goes America??
Nor is he convinced that the state controls or even monitors its budgets with that degree of accuracy in the first instance. Just think ‘Pentagon’, not to
mention ‘black-ops budget’. In that light $85 billion is all noise and no signal. Finally, if none of this has assuaged your worries then, by implication, you must believe that we are now locked in to spending over a $1 trillion more than revenues in perpetuity. If so, stop selling your gold, for heaven’s sake, give your assault rifle a quick once-over, and make sure the axle has been greased on your wheelbarrow.
Partly this lack of comprehension is just another example of the strategy of the ‘Big Lie’ as instituted by Bernays, refined by Goebbels, and institutionalized ad nauseam by today’s cradle-to-grave, career-politician spin-doctors. Partly it emanates from the dreadful pseudomathematical juggernaut of macroeconomics and its intellectually impoverished inability to recognise that its devotees’ cherished time series aggregates are nothing more than a pale, fictional reflection of the joint actions of millions upon millions of disparate individuals, each ceaselessly selecting from their non-ordinal and ever-varying lists of subjective preferences in order to achieve a momentary elevation in their psychic and material condition.
It is bad enough when we forget just how approximate all these numbers are when we elevate them to the status of the fundamental laws of nature
by which we must ‘govern’ the running of our rigid economic ‘machinery’ (another pernicious, but all-pervasive metaphor which obscures clear thinking about the functioning of what is really a complex, evolving ecosystem of interpersonal exchange).
But when we then lose sight of the underlying reality itself, put effect before cause, and regard those numbers’ temporal trajectory as an end in themselves, we really begin to do mischief. What we really seek is to provide the most conducive institutional conditions for the average citizen to attempt to satisfy his own unique desires as best he can—something he will fortuitously find hard to do without contributing something in return to the well-being of the fellows with whom he interacts under a mutually enriching division of labour and subject to the rule of law.
If we, as policymakers, manage to achieve that— or, more realistically, if we refrain from acting in a manner likely to jeopardize it—as and when we next take the a rough reading of the temperature of all the myriad economic processes currently underway, we may well be pleasantly surprised to see that it is has undergone a modest and entirely wholesome rise. If, however, we construct a spurious mechanics of the nation-at-large and start throwing levers willy-nilly because some statistical fiction seems to have had a fleeting numerical correlation with that temperature in the past, if it subsequently rises at all, we have no way of knowing whether this is all to the good, or whether this is because the organism is now suffering heatstroke, a fever, or is, indeed, spontaneously self-combusting.
To reiterate; instead of fretting that we have “blundered in the control of a delicate machine”, let us recognise that there is no such construction: that
we must not rely on what are essentially static, equilibrium relations between non-existent, top-down concepts, we must learn to deal with a dynamic, nonequilibrium, emergent order, bubbling up from the smallest scale, that it is a process not a pattern; a becoming not a being.
It is therefore not Keynes or Kuznets to whom should be looking, much less the ineffable Krugman, but the shining example of Sir John Cowperthwaite whose enlightened strategy of what he called ‘positive non-interventionism’ in 1960s Hong Kong— coupled with a near blanket ban on the collation of official statistics for fear their provision would tempt men into meddling (“If I let them compute those statistics, they’ll want to use them for planning.’’)—allowed the entrepôt to more than quadruple its GDP per capita (it really is a hard habit to break, isn’t it?) in comparison with its colonial masters in Britain, in the space of single generation.
A man who eschewed tariffs in an era of protection; who abstained from government borrowing at a time when his peers were fast becoming ’all Keynesians now’; who capped income taxes at a modest 15% in an age when the rich were being ‘squeezed until their pips squeaked’; and who refused all acts of corporate welfare, Cowperthwaite’s assessment of his own role was characteristically modest, once declaring that, as regards his contribution to Hong Kong’s success, "I did very little. All I did was to try to prevent some of the things that might undo it"
Today, when we are plagued with the grossest of governmental interventions, the maddest of monetary manipulations, and the most invidious of attacks on individual wealth, it might serve to reflect upon some of Sir John’s expressed principles.
On capital controls: "… money comes here and stays here because it can go if it wants to. Try to hedge it around with prohibitions and it would go and we could not stop it and no more would come."
Re the role of the state vis-à-vis the private sector in production: "…when government gets into a business it tends to make it uneconomic for anyone else."
On what we Austrians would call the great ‘knowledge’ problem—so routinely overlooked by the meddlers in office: "In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralized decisions of a government, and certainly the harm is likely to be counteracted faster."
Or this: "For us, a multiplicity of individual decisions by businessmen and industrialists will still, I am convinced, produce a better and wiser result than a single decision by a Government or by a board with its inevitably limited knowledge of the myriad factors involved, and its inflexibility."
And again: "I must confess my distaste for any proposal to use public funds for the support of selected, and thereby, privileged, industrialists, the more particularly if this is to be based on bureaucratic views of what is good and what is bad by way of industrial development. An infant industry, if coddled, tends to remain an infant industry and never grows up or expands."
Are you listening, Mr Cameron; écoutez-vous, M. Hollande?
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