And it’s whispered that soon if we all call the tune
Then the piper will lead us to reason
And a new day will dawn for those who stand long
And the forests will echo with laughter
— “Stairway to Heaven,” written by Robert Plant and Jimmy Page for Led Zeppelin’s fourth album (untitled) recorded in November, 1970, released in 1971.
The Mythology of Economics
Many people know that our great trusted rulers routinely lie to us and deceive us – always “in the national interest”, obviously. The clearest single proof of this that nearly everyone is familiar with is our rulers’ obsession with secrecy – the routine classification of government documents that prevents the public from knowing what their governments are really up to – at times when full disclosure of that information would be most useful. Those great heroes who try to reveal government secrets, at inopportune times, are brutally dealt with by our great trusted leaders – as Julian Assange, Chelsea Manning and Edward Snowden (to name but a few) could easily verify. But the maintenance of great secrecy is not the only hard proof of the deceit of those we trust to lead us.
Another well-known tool is the manipulation of the media. Once again many people know the mainstream media cannot be trusted to tell the truth. Fine books are available detailing the proof – Knightley’s First Casualty, for example, or Edwards and Cromwell’s Guardians of Power, or the classic Manufacturing Consent by Chomsky and Herman; and the website Media Lens is one of the very best in the world for their ongoing scrutiny of media deceit.
But these are not the only devices our great trusted leaders employ to keep us deceived and easy to lie to. By far the most insidious device, that facilitates meek acceptance of the other two, is much less well-understood. Generally known as education, it is in effect a carefully managed programme of brainwashing – a lifelong drip-feed of half-truths combined with blatantly fallacious propaganda strongly affirming the moral right of the ruling elite to rule us. The most obvious proof of this is the powerful role that religious education once played in most parts of the world – and still does to this day in far too many corners of the world.
Religion is not quite the force in the west that it once was as a tool for enforcing elitist control — a new belief system has largely replaced it for that purpose, a belief system that is almost indistinguishable from religion in terms of paucity of hard verifiable proof: economics.
Economics has only recently emerged as a self-contained entity. The subject of government finance used to form part of an area of knowledge called Political Economy. A mere hundred and fifty years ago a standard textbook on the subject by one of the world’s leading authorities, JS Mill, was titled “Principles of Political Economy”. Economics, as a distinct and separate subject, did not exist. This is not a trivial point.
The expression “political economy” rightly suggests an inseparable link between politics and economics. The linkage is an indisputable fact, and will always be so whilst human society exists, but that’s not how economics is taught. Today economics is taught as though it was a real science, based on hard, verifiable, empirical evidence, a real science where immeasurable subjective concepts from the political realm, such as justice, security, fairness and happiness are completely irrelevant. Today economics seeks to impress the unwary with impressive-looking mathematical formulae, creating the illusion that it’s a real science. But the truth is that economics is just another pseudo-science scarcely distinguishable, in terms of verifiable proof, from astrology, shamanism or any other religion. Real science has evolved from centuries of careful experimentation and fact-checking. Scientific formulae need to be so robust that they can withstand repeated experimentation at any time and place and still continue to produce the same results. Economic formulae, on the other hand, are based on no experimentation whatsoever – or so little experimentation, and in such tightly constrained circumstances that they cannot be said to truly reflect real-world conditions at all.
Galbraith has made this very point before:
The increasingly technical formulations [of mathematics in economics] and the debate over their validity and precision provided employment for many of the thousands of economists now needed for economics instruction in universities and colleges around the world…
Mathematical economics also gave to economics a professionally rewarding aspect of scientific certainty and precision, adding usefully to the prestige of academic economists in their university association with the other social sciences and the so-called hard sciences. One of the costs of these several services was, however, the removal of the subject several steps further from reality. Not all but a very large number of the mathematical exercises began (as they still do) with the words “We assume perfect competition.” In the real world perfect competition was by now leading an increasingly esoteric existence, if, indeed any existence at all, and mathematical theory was, in no slight measure, the highly sophisticated cover under which it managed to survive.1
And economist Steve Keen is even more direct:
There is one striking fact about this whole literature [of economics], and that is that there is not one single empirical fact in it.2
This is not an issue that can be ignored or passed over. Understanding the legitimising service that economists provide for the plundering and looting that our great trusted leaders perpetrate, not only all around the world but upon their own people too, is vital. The economists of today fulfil a similar function to the priests of yesteryear, people who justify the monstrous crimes of rulers, demanding acceptance from the masses because “there is no alternative”.
In the days of yesteryear, the monstrous crimes of kings and emperors were shrugged off by the priests as being of “God’s will” — too mysterious but unquestionably right for any to question. Today the monstrous crimes of prime ministers and presidents are shrugged off by the economists as being attributable to “market forces” — too mysterious but unquestionably right for any to question.
Galbraith once again:
The market, it is said, sets wages, salaries, interest and prices for suppliers and the sovereign consumer. The market having this authority, neither the individual not the enterprise can be possessed of it. To the charge of misuse of power there is the simple, all-embracing answer: your quarrel is with the market. The paradox of power in the classical tradition is, once again, that while all agree that power exists in fact, it does not exist in principle.3
In other words, we’ve been conditioned to accept the mythology of economics in general, and capitalism in particular, as though it was some timeless natural law, like gravity, which we can do nothing to change or alter. Yet the truth is that the mythology of economics is an entirely human construction which we could, and should, mould to serve the best interests of all humanity – not just the narrow interests of the 1%, which is the present disastrous situation.
It’s bad enough that economics has assumed such a powerful and iniquitous role in our lives, but there’s a particular area of economics where the cynicism is so extreme that few can scarcely believe it when they first discover it: money.
Money
Here on planet Earth there’s surely no human invention that’s so widely used, yet so misunderstood, as money. It’s a bit like electricity (although electricity isn’t nearly so widely spread), in that those of us who can use it do so all the time, without ever understanding what it is. Unlike electricity, however, where there’s no real need to understand it, money could and should be clearly understood by most of those who use it.
Galbraith hints at why this might be so:
The study of money, above all other fields in economics, is the one in which complexity is used to disguise truth, or evade truth, not reveal it.4
The mystery of money is strongly enhanced by this complexity of disguise. Most of us are conditioned to value money very highly; to feel the importance of having it; to fear not having it; to desire having more and more of it no matter the cost in years of useless and often hateful toil, and often broken lives and relationships. Some people work until the day they die hoarding sizeable quantities of it, yet live lives of such Spartan austerity and hardship they are scarcely distinguishable from the poorest and most downcast members of society.
Few people have done more in recent times to reveal the truth about money than American writer and champion of the Public Banking Institute, Ellen Brown. Her first book on the subject, Web of Debt, is an excellent place to begin understanding this bizarre human invention. Her writing is easy to read and comprehend, and encourages the reader to find out more. Finding out more about money is like learning how an illusionist’s trick is done: glad at first that an apparently inexplicable mystery is so simply revealed and then, in the case of money, angered at the brazen confidence-trickery of it, and the unimaginable global suffering its controllers have caused ever since the day of its invention.
In 2014 the Bank of England published a quite remarkable article. In the space of just two short sentences it told the truth about modern money in words anyone can understand:
The reality of how money is created today differs from the description found in some economics textbooks:
Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.5 (5)
The importance of these few words cannot be over-emphasised. As the quotation implies in the first two lines, the general understanding about where money comes from – deposits and household savings, or “multiplied up” by the central bank – is wrong.
In just four words the magic trick of money is exposed: “bank lending creates deposits.” Money is “created”, quite literally out of thin air.
The enormity of this concept is breathtaking. Unlike every other important thing we need in order to live – food, water, clothing – which all have real material substance and must be found or made from other material substances, most money has no material substance whatsoever: it’s an artificial fabrication of a bank. Some of it may take a material shape in the form of metal coins or pieces of paper, but much of it – most, in fact – doesn’t even do that; it’s invisible, mere computer records.
Given this fact about money – that it has no finite substance, like food and water – that it can simply be made out of nothing by someone working in a bank, why is it so difficult to come by for so many people? Why is there massive global poverty? And why, on the other hand, are tiny handfuls of individuals able to have vast quantities of it? Why do some individuals have more personal wealth than entire countries?
The answer, like many other things that effect our daily lives, is due to how we are ruled.
Those who rule us have, since the beginning of modern history, seen to it that they tightly control the creation and supply of money. If these people always acted selflessly and in the best interests of the societies they rule that would not necessarily be a bad thing – as money must be managed by someone. But history shows that selflessness is not a typical quality of rulers, and always acting in the best interests of others is all but unheard of. This is proven time and again in almost every society by the fact that rulers nearly always supply themselves and their closest supporters with vast wealth, whilst the ordinary masses of those they rule are often left to fight for survival or starve to death in conditions of the most abject poverty.
It is not the purpose of this essay to prove this claim. Most thinking people already know it’s true. Nor is it my intention to write another study on the origins and nature of money: plenty of those can be found elsewhere. The purpose of this essay is to add to the growing demand for a revolution in the way money is managed, such that the grotesque inequalities which have nearly always existed, exist still, and which are worsening by the day, will be swiftly brought to an end, and that the full benefits of real economic justice can finally be turned to the benefit of all humanity and our desperately suffering planet.
Our starting point should be this: money is literally nothing, a human construction made from absolutely nothing. Unlike real natural resources such as air or water – which are finite in quantity – modern money is infinite its quantity, the amount of which is determined by human whim.
This is not necessarily a bad thing, because the bottom line is it works: money made in this way can be and is used to lubricate the wheels of commerce. The real issue is around the human beings whose whims decide how much money is created, and how it is used. In other words, it’s as much a political issue as an economic one.
The rulers of the western world, the so-called “first world”, claim that the so-called democracies upon which their political systems are based are the state of the art. There is nothing better and could be nothing better, they would say, than western democracy. Indeed, they like to fight wars in other people’s countries, ruining the lives of tens of millions, to impress upon them the boundless benefits of western democracy. But when we examine those wonderful democracies – and we do not need to look very closely – what we actually find is a vast open sewer of corruption and dystopian horror.
There’s no need to prove this. Many thinking people already know it. The relevance to this essay lies in the fact that the supposedly wonderful democracies of the “first world” are not democracies at all. Our fine western governments, who control not just us but most of the planet too, are not in any sense controlled by we the people, the supposed caretakers and beneficiaries of these democracies; they’re controlled by tiny cabals of all-powerful super-rich people who hide their existence and purpose behind a screen of lies and disinformation. Most western “first world” governments are very far from being beacons of democracy. They’re simply the tools of a secretive world of unelected, unaccountable, anonymous corporations and investment banks. The proof of this is provided in every general election where these same organisations provide the funding for those wishing to be elected, and then afterwards (no matter who wins the election) when these same organisations become instrumental in the daily business of government decision-making as reward for their election funding and generous campaign donations, through a revolving door between secretive corporate boardrooms and the corridors of government. Most of the so-called democracies of the western world are not controlled by we the people, they’re directly controlled by big business.
Given the central importance of money to the smooth operation of the economy, this mechanism also directly controls how money is managed.
At the heart of this issue – the proper management of money – lies a very simple ideological question: should money be managed in such a way that it benefits the long-term interests of the planet in general, and human society in particular; or should it be managed so that it serves the immediate interests of those empowered to manage it?
Most of the history of economics suggests the latter belief is invariably preferred, as Galbraith has pointed out before:
[Money] should be kept scarce and valuable, as those already possessing it had every reason to wish.6
Putting an end to this situation will not be easy – not so much because of any serious problems in alternative solutions, but because of the vested interests of those powerful individuals who like things very much as they are.
Nevertheless, good alternative methods of money-management exist; and the more well-known and talked-about they become the closer society will be to resolving this problem.
Central to the best-known alternatives is the notion that money is far too important to be left in the hands of just a tiny handful of individuals to control – individuals who have never shown any good reason why they should be so entrusted. Monetary reformers believe instead that money must be democratised, managed by the state, which must itself be managed by we the people. We need and must have a state-owned public bank. Money should be seen as a human right with government ensuring that all people have enough of it to live secure and comfortable lives. Given that money, unlike any other vital resource, is made by human beings from nothing at all, this should not be a difficult thing to achieve.
Not only is another world possible, she is on her way… On a quiet day, if I listen very carefully, I can hear her breathing.7
- A History of Economics: The Past as the Present, JK Galbraith, p. 259
- Debunking Economics by Steve Keen, p. 67
- A History of Economics: The Past as the Present, JK Galbraith, p. 286
- Money: Whence it came, where it went, by JK Galbraith, p. 5
- A History of Economics: The Past as the Present, JK Galbraith, p. 145
- War Talk by Arundhati Roy. p. 75