Economics by Dummies Part I

Liberalism

When I studied Political Science there was no element of economics on the agenda. Yes, we cruised through political theory, but that was not to dissect theories so much as get an overview of the ‘bad’ ones.

It was not until many years later, and many wrong ways, that I finally realized how integral economics is to politics, probably even dominant.

Back then the world (the ‘free world’) was in the grip of Liberalism, and I think there is an historic factor in that. To see why, you need to look at the birth of Liberalism.

It came out of the Industrial Revolution, out of the harsh social upheaval which replaced even the meager self-sufficiency of rural life with the total dependency of employers in industrial cities.

Even if there were time and energy to grow a supplementary vegetable garden, the soil was too ruined to sustain it.

Far from being born out of any great sense of compassion, Liberalism developed as a way of securing a relatively fit and happy workforce. No more than that because given too much freedom and self determination, employees would start competing with the industrialists.

The second wave of Liberalism emerged in the post-war period. (I have to stop and think about that term because what is real to me still is now just a concept to many.) But the world did need to rebuild after the Second World War, women needed to be sent back to the kitchen to make way for returning men and there was a goldmine waiting for cashed up industrialists.

But it was a different world, and by accident or design, the horses bolted. Ordinary workers, perhaps emboldened by war experience, began to challenge traditional capital for their own bit of gold.

The third wave of Liberalism struck after the fall of the Berlin Wall, building to a frenzy in the ‘80s and firming into what is variously called neo-liberalism or monetarism. This is perhaps the harshest form of all, because it divests economics completely of one of its two main pillars. Monetarism only reluctantly, for political benefit, recognizes a social aspect of economics. As we are witnessing in our brave new world, people are now expendable. Monetarism recognizes as primary, the return on investment. It does not require that anything be made; it does not recognize the needs of consumers, instead creating wants; employees are no longer valued for experience or loyalty. Producing profits is the whole thrust of neo-liberalism.

Of course all this occurred against a backdrop of dreaded socialism; itself a little understood or practiced economic theory. But between those two is Keynesian economics, so lets treat this as an introduction, a backdrop to part II.