Free-market soothsayers peddling snake oil

JOSHUA DRUMMOND
Last updated 07:27 11/06/2012

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Joshua Drummond

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OPINION: If I knew anything about economics, and I don't, it would be quite obvious that something big is coming.

When you see economists like Bernard Hickey panic-tweeting about the end of the global financial system as we know it, it's probably time to buy some extra toilet paper.

I believe things are coming to a head because I'm a sucker for narrative inevitability. Nothing says "comes before a fall" like pride or pride's closest economic corollary: an upwards-trending graph. The narrative is infallible: commit hubris, and the gods will get you.

I'm also bothered by niggles of common sense. I remember interviewing an award-winning economist of the free-market, minimal-regulation, infinite-growth globalist school. She talked about how free markets, once unfettered from cloying regulation, would usher in a utopia, about growth and about how everything was going to keep growing forever.

Now, perhaps I'm just not intelligent enough for high-concept economics, but there seemed to be a flaw in all this.

"But surely, with finite resources, growth can't be infinite," I said.

She looked at me as if I had hit her smartly with a large fish, and had no answer. Oh, she had plenty to say – wise-sounding, ultimately meaningless things such as, "Ah, but human ingenuity is infinite" – but no answers.

There's no getting around the fact that we can't grow forever with finite resources. As far as I can tell, the economy depends entirely on growth, because there is wailing and the gnashing of teeth as soon as figures show things are contracting rather than expanding.

Never mind the fact that economic news has begun to approximate a Magic 8 Ball in terms of accuracy and utility, swinging sharply from "Outlook good," to "Outlook not so good" with an added, occasional "Better not tell you now".

It's all a lot to take in, so I've devoted my time to learning economics before it's too late.

It may be too late to do anything about the downfall of Western civilisation, but at least I will be able to make smart comments about it as it happens.

To help you understand the endless barrage of jargon as we tumble down the rabbit hole of awkward metaphors for economic trouble, I have prepared the following glossary:

Money: Tokens to exchange for goods and services. Not actually a thing, except when it is. Useful for forestalling parking wardens, buying groceries, and deciding that you've got more of it than actually exists. (One of these applies only to investment bankers. Guess which!)

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Capital: A thing. Can be used to make more things. The Lego brick of economics. If you're Karl Marx, it's how you exploit the working classes. Also Wellington.

Asset: Something that makes you money. This is why John Key wants to sell them.

Liability: Something that loses you money. John Key, unless you're in an upper tax bracket.

Liquidity: An asset's ability to be sold. Also descriptive of the atmosphere of Wellington in any season, including summer.

Surplus: Having more money than you're spending. An undesirable state for a Government to be in, if the National party is in Opposition.

Deficit: Having less money than you're spending. An undesirable state for a Government to be in, if the National party is in Government.

Austerity: The political equivalent of selling everything you own at a garage sale for about one-eighth of its actual value and not feeding your kids, because this makes everything better somehow.

Hedge fund: Money is taken into a hedge maze of impenetrable economic jargon. When it comes out again, there is magically more of it.

Capitalism: The miracle behind cheap big-screen TVs. Never question it. Basically the god of economics.

The free market: Very expensive, which is to say, not free at all. In theory, the free market is the noble concept of a market where prices are determined by supply and demand, with little or no government control. In reality, most things are controlled by a few mega-entities. Could be described as "dog eat dog" except that 99 per cent of the dogs are mouse-sized and the rest are Godzilla.

The invisible hand: Rounds out the "holy trinity of economics". Like Santa Claus, the invisible hand steers the free market sleigh as it rampages around improving everyone's lives, pulled by its Godzilla-dog corporations and governments. Some people suspect that there really is no invisible hand, but they're stupid communists and should be ignored.

The Emperor's New Clothes: A fable by Hans Christian Andersen. Utterly unrelated to the state of modern economics in any way.

Joshua Drummond is a Hamilton freelance columnist who likes garage sales and hedge mazes.

- Waikato Times

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