Wednesday, June 20, 2012

412: The Utopia of the Free Market - The final Lecture

This is the last lecture of the project  "The Utopia of the Free Market". My goal was to show you, that what is called the financial crisis of today, is not just a financial crisis at all.

It is an existential crisis which forces us again to redefine the meaning of human life on a planet with limited resources.

What never reaches the newspapers, is the fact that at the bottom of the present crisis, is a set of utopian assumptions about us, human beings.

The worst of all is formulated by Adam Smith and in a more literary way by Ayn Rand: The Virtue of Selfishness, as she calls it.

The second assumption is that because all people are driven by selfishness it eventually will balance out, so that in fact the common good is served. In other words, the believe in the self-regulating free market.

But these utopian beliefs have a number of negative effects:
A. an impoverishment of human relationships because the world is reduced to a market (Money can buy everything….);

B. expropriations and violent uprooting of large groups of people, which happens in several countries to get access to natural resources by multinationals;

C. increasing social inequality;
D. exclusion of people who can not handle the competition in the free market;

E. degradation of the political power of communities, e.g. Thatcher succeeded in pulling the teeth of the unions;

F. a paradoxical increase in monitoring and control (everywhere surveillance cameras, in unstoppable increase of rules and regulations)

But you could object…but what about our increased prosperity? You can not deny that neoliberalism brought us that. 
And point A to E… it is just a matter of time to iron out these.

To begin with the last argument. If you mean that the policy of the Washington Consensus (1989)  maybe up to now  has not yet reached the expected results but certainly will in the future, you exchange empiricism for ideology.

And with regard to our increased prosperity, as alleged by  neo-liberals. Robert Skidelsky, born 25 April 1939, British economic historian and Emeritus Professor of Political Economy at the University of Warwick, England, came to different conclusions in his book "Keynes: The Return of the Master" (2009).

He compared the periods of Keynesianism with the periods of the neoliberal Washington Consensus. From 1951 to 1980 (keynesian period) the average global economic growth was 4.8%. From 1989 to 2009 the growth was 3.2% due to  the neo-liberal policy.

You can imagine what would have happened when this global economic growth of 4.8% had continued. According to Skidelsky's calculations our prosperity would have been 50% higher than it is now.

The financial crisis of today shows us that the neo-liberal utopia does not bring the good life, which it promises. We need more wisdom to shape our future.

Let me put it this way: you can distinguish three elements which constitute our world: The Market -- The State -- The Society.

The market is the global mechanism of exchanging goods and services. The state is the regulating principle in this and society are we, individual humans who want a good life, which means we want to  live in a community (family, town, country) and feel happy.

And here we need Aristotle (384 - 322 B.C), for what we need is what he already identified as justice. It is about the general good of society. 

Justice is not a property of the system, but a property of man himself. A righteous man, in his opinion, gives to everyone what he deserves.

As I  have emphasized in several lectures, the future will be about an equitable distribution of the limited resources of this earth and for that we need the virtue of justice.

The Discussion

[13:21] herman Bergson: This concludes the project and the lectures of this season....
[13:21] herman Bergson: Next lecture will be in the week of September 1 ^_^
[13:21] Debbie Dee (framdor): Yesss.... Thanks herman.
[13:21] herman Bergson: Thank you...

- My Second Live Viewer crashed, so I had to relog -

[13:23] Gemma Allen (gemma.cleanslate): *:::* WELCOME BACK *:::*
[13:23] Annie Brightstar (anniebrightstar): Welcome back Herman
[13:23] herman Bergson: A real dramatic timing of a crash ^_^
[13:23] Bejiita Imako: wb herman
[13:23] Bejiita Imako:
[13:23] Gemma Allen (gemma.cleanslate): ♥ LOL ♥
[13:23] Gemma Allen (gemma.cleanslate): was
[13:23] Debbie Dee (framdor): dramatic exit herman ;)
[13:23] Bejiita Imako: hehe
[13:23] herman Bergson: yes Debbie ^_^
[13:24] Gemma Allen (gemma.cleanslate): thought you just deserted us
[13:24] Debbie Dee (framdor): can we do drama next semester ;)
[13:24] herman Bergson: Yes ...looked like it indeed Gemma
[13:24] Gemma Allen (gemma.cleanslate): do you have the next project ???
[13:24] herman Bergson: but no...
[13:24] Lizzy Pleides: if anybody is interested in the documentation i mentioned earlier, here's the link:
[13:24] Annie Brightstar (anniebrightstar): Thank you Lizzy
[13:24] herman Bergson: Ahh LIzzy...
[13:24] Gemma Allen (gemma.cleanslate): ♥ Thank Youuuuuuuuuu!! ♥
[13:24] Gemma Allen (gemma.cleanslate): lizzy
[13:25] herman Bergson: That was about that movie?
[13:25] Bejiita Imako: nice
[13:25] Lizzy Pleides: yes
[13:25] herman Bergson: good..
[13:25] Lizzy Pleides: i found it in german only but i think you can find it in english too
[13:25] herman Bergson: ANyone got a remark or question about this lecture?
[13:25] .: Beertje :. (beertje.beaumont): german is no problem Lizzy
[13:26] Gemma Allen (gemma.cleanslate): well i hope that the rand people do not win
[13:26] herman Bergson: Ist mir egal Lizzy ^_^
[13:26] Gemma Allen (gemma.cleanslate): that the pendulum swings
[13:26] Debbie Dee (framdor): So as good citizens herman, we should we do?
[13:26] Penelope Apparatchik (penelope.grau): take care of those, whom god sets before us :)
[13:26] druth Vlodovic is online.
[13:26] herman Bergson: Yes is a pendulum effect....
[13:26] Bejiita Imako: this was a really interesting subject
[13:26] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:26] Gemma Allen (gemma.cleanslate): i think so
[13:26] herman Bergson: The Rand people wont win...
[13:26] Bejiita Imako: opened my mind for sure
[13:27] Debbie Dee (framdor): I think we need to be mindful of our thoughts and actions.
[13:27] herman Bergson: Thank you Bejiita
[13:27] Bejiita Imako:
[13:27] Lizzy Pleides: when the Rand people would win, they would be lost themselves
[13:27] herman Bergson: Yes Debbie....
[13:27] Debbie Dee (framdor): and we probably need a lot more socialism
[13:27] Penelope Apparatchik (penelope.grau): they lost already, Liz
[13:27] herman Bergson: And a lot of people are really thinking about the present situation....
[13:28] herman Bergson: just keep your eyes your newspaper...
[13:28] Merlin (merlin.saxondale): It is difficult to know whether we can make a difference by just doing the right thing as individuals
[13:28] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:28] Gemma Allen (gemma.cleanslate): it is
[13:28] Gemma Allen (gemma.cleanslate): and they are going after the unions all of them
[13:28] Gemma Allen (gemma.cleanslate): here in the USA anyway
[13:28] Debbie Dee (framdor): we are all individuals
[13:28] Penelope Apparatchik (penelope.grau): of course we make a difference
[13:29] Debbie Dee (framdor): every one of us. including Ayn Rand.
[13:29] herman Bergson: Yes I think so too Penelope...
[13:29] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:29] Gemma Allen (gemma.cleanslate): still hopes
[13:29] Merlin (merlin.saxondale): Well I try to act in a way which I think everyone should, and if they did it would be ok
[13:29] herman Bergson: Every voice and vote makes a difference...
[13:29] Penelope Apparatchik (penelope.grau): if you are nice to someone, that makes a difference
[13:29] Merlin (merlin.saxondale): When the world burns I can at least say 'it wasnt me'
[13:30] herman Bergson: You just have to be politically alert....
[13:30] Debbie Dee (framdor): yes. and stand up to other people who are making bad decisions on a daily basis
[13:30] Gemma Allen (gemma.cleanslate): if you find anything this summer of interest about this perhaps send to herman an dhe can send a notice to the group
[13:30] Penelope Apparatchik (penelope.grau): nothing like optimism, Merlin :)
[13:30] Merlin (merlin.saxondale): But we have the arch Environmentalist Jonathan Porritt jet-setting around the world
[13:30] Merlin (merlin.saxondale): He does not lead by example
[13:30] herman Bergson: I have to think about a new project this summer ^_^
[13:31] Bejiita Imako:
[13:31] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:31] Penelope Apparatchik (penelope.grau): illogical positivism :)))
[13:31] Gemma Allen (gemma.cleanslate): i am sure you will find something
[13:31] herman Bergson: smiles
[13:31] Debbie Dee (framdor): i like illogical positivism.
[13:31] Penelope Apparatchik (penelope.grau): sure, why not?
[13:31] Penelope Apparatchik (penelope.grau): might as well be cheerful :)
[13:32] herman Bergson: Well I am thinking about the themes Justice...or The Ethics of money....
[13:32] Merlin (merlin.saxondale): *sings Reasons to be cheerful part three
[13:32] herman Bergson: as a follow up of this project
[13:32] Bejiita Imako: oki
[13:32] Bejiita Imako: can be a suiting subject
[13:33] herman Bergson: I mean....we should work on a world where justice we have to know what justice is
[13:33] herman Bergson: It is not greed...
[13:33] Debbie Dee (framdor): well, please let us know herman. I enjoyed this project, and will be back.
[13:33] Bejiita Imako: aaa yes
[13:33] herman Bergson: You are welcome Debbie...
[13:33] Merlin (merlin.saxondale): Justice is often a euphemism for revenge, retaliation and retribution
[13:34] herman Bergson: There you go Merlin.....
[13:34] herman Bergson: at least worth two or three lectures ^_^
[13:34] Debbie Dee (framdor): Military intelligence, and fighting for peace, are both commonly used oxymorons
[13:34] Merlin (merlin.saxondale): :))
[13:34] Bejiita Imako: the sum of all this u can say is we have to hope for a more fair world where everyone not only the ones with money can get a good life
[13:35] Bejiita Imako: hope that the development today reverses in some way
[13:35] Bejiita Imako: hope for the best
[13:35] Gemma Allen (gemma.cleanslate): yep
[13:35] Qwark Allen: maybe that will hapen, if a rock falls from the sky
[13:35] Debbie Dee (framdor): I foresee wide spread famine first, as resource depletion curtails the population explosion
[13:35] Gramps Mistwalker is offline.
[13:35] Merlin (merlin.saxondale): Exactly Debbie
[13:36] Debbie Dee (framdor): and global warming reduces crop yields
[13:36] herman Bergson: Skidelsky suggest in the last chapter of his book that there is a pendulum movement in economics...
[13:36] Gemma Allen (gemma.cleanslate): according to history i agree
[13:36] herman Bergson: one period the greedy ones the other one solidarity prevails...
[13:36] Debbie Dee (framdor): well - it is an over-excited pendulum - the upswing is eneormous right now...
[13:36] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:37] Debbie Dee (framdor): so the downswing will be too?
[13:37] herman Bergson: since ..say 1989 ..the Randians were the dominating species ...the greedy bankers and bonuses
[13:37] Gemma Allen (gemma.cleanslate): maybe but maybe years b4 the upswing is proved wrong
[13:37] Debbie Dee (framdor): too scary to contemplate...
[13:37] Annie Brightstar (anniebrightstar): When exactly did solidarity prevail Herman?
[13:38] Debbie Dee (framdor): i think i will carry on hiding in the forests, growing my own food
[13:38] herman Bergson: in the 50s and 60s...
[13:38] Annie Brightstar (anniebrightstar): Please may I join you Debbie?
[13:38] Annie Brightstar (anniebrightstar): No, no never Herman
[13:38] Debbie Dee (framdor): lol...
[13:38] herman Bergson: Especially in Europe...where everybody had the feeling that they had to rebuild the world...a better one after the destructive World War II
[13:39] Debbie Dee (framdor): It is only hidden if I don't tell you where i am ;)
[13:39] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:39] Bejiita Imako: hmm yes
[13:39] Annie Brightstar (anniebrightstar): I don't recall the Cuban missile crises being a fun time
[13:39] herman Bergson: then in the 70s when prosperity increased the individual and his money became dominant...
[13:40] herman Bergson: As Rand said...the Americans coined the phrase : We can make money....
[13:40] herman Bergson: and making money became the main target...
[13:40] Debbie Dee (framdor): Now we all make money.
[13:40] herman Bergson: Banks made creating debts....
[13:40] herman Bergson: mortgages subprime stuff etc...
[13:40] Debbie Dee (framdor): the industrial revolution produced machines that made stuff.
[13:41] Debbie Dee (framdor): People no longer were needed.
[13:41] Debbie Dee (framdor): but they needed pay - so had to be employed.
[13:41] Debbie Dee (framdor): then we made the internet, so we could look busy
[13:41] herman Bergson: Yes..Debbie also a period of asking an increasing social inequality
[13:41] Debbie Dee (framdor): while making money.
[13:41] Debbie Dee (framdor): lol
[13:42] Bejiita Imako: haha
[13:42] Bejiita Imako: i thought we made internet to communicate
[13:42] Debbie Dee (framdor): that too.
[13:42] herman Bergson: So we do Bejiita...
[13:42] Debbie Dee (framdor): and that is a huge force for change.
[13:42] Annie Brightstar (anniebrightstar): No its to play Farmville I thought everyone knew that
[13:42] Bejiita Imako: and CERN who created the www made it so it should be open free and controlled by nobody
[13:42] Bejiita Imako: created
[13:42] Debbie Dee (framdor): social networking is changing the way we get information
[13:43] Bejiita Imako: indeed
[13:43] Debbie Dee (framdor): and that breaks the government propoganda systems
[13:43] herman Bergson: Fact is that things are changing rapidly these days....
[13:43] Lizzy Pleides: the internet enables us to make a global brainstorming
[13:43] Debbie Dee (framdor): Oh yes. And you are helping it along, professor.
[13:43] herman Bergson: Except the market for houses...:-)
[13:44] herman Bergson: Try to sell my house in RL....
[13:44] herman Bergson: Sign in the frondyard….
[13:44] herman Bergson: for a year now....
[13:44] herman Bergson: got roots...
[13:44] herman Bergson: not a soul is interested :-)
[13:44] herman Bergson: my crisis ^_^
[13:44] Debbie Dee (framdor): Oh well, you need a house ;)
[13:44] Merlin (merlin.saxondale): My next door neighbours house has been for sale for many months too
[13:45] .: Beertje :. (beertje.beaumont): you live in wonder..grins
[13:45] herman Bergson: frowns at Beertje.....
[13:45] herman Bergson: :-)
[13:45] .: Beertje :. (beertje.beaumont):
[13:45] Lizzy Pleides: we needed 5 years fr selling a house recently
[13:45] herman Bergson: As if H somuch better...
[13:45] .: Beertje :. (beertje.beaumont): hey!
[13:45] Debbie Dee (framdor): Start a self help shelter for starving refugees.
[13:46] herman Bergson: Well..let's enjoy the cries at hand with open eyes and stay sharp on politics...
[13:46] herman Bergson: I thank you all for this wonderful year again...
[13:46] .: Beertje :. (beertje.beaumont): yes..i read more and more artikles in the newspaper
[13:46] Debbie Dee (framdor): So, do we have a class party now with cake, and tea ?
[13:46] herman Bergson: and I gonna take a nice long vacation....
[13:46] .: Beertje :. (beertje.beaumont): you deserved it Herman:)
[13:46] Qwark Allen: Hooooooo!!!!!!!   \O/     \O/     \O/
[13:46] Qwark Allen:                                |         |          |
[13:46] Qwark Allen:                              / \      / \      / \
[13:46] Guestboook van tipjar stand: Merlin Saxondale donated L$100. Thank you very much, it is much appreciated!
[13:47] Debbie Dee (framdor): lucky northerners - winter is biting down here...
[13:47] herman Bergson: Sorry ..bit dull indeed party....
[13:47] Debbie Dee (framdor): ;)
[13:47] Qwark Allen: AAHH!!!
[13:47] .: Beertje :. (beertje.beaumont): it's raining since febrauri Debbie...
[13:47] herman Bergson: Next lecture will be in the first week of September
[13:47] herman Bergson: Class dismissed .....
[13:47] Bejiita Imako: been a lot of rain for sure
[13:47] Qwark Allen: have nice long vacations herman
[13:47] Annie Brightstar (anniebrightstar): Thank you Herman
[13:47] Debbie Dee (framdor): Oh, and i thought i had it bad - it is 12 C tonight
[13:47] Qwark Allen: hope to see you around
[13:47] Merlin (merlin.saxondale): Yes I will miss it
[13:48] herman Bergson: I'll enjoy it Qwark...really...
[13:48] Qwark Allen: good good
[13:48] .: Beertje :. (beertje.beaumont): last sunday it was 8c during the day...
[13:48] herman Bergson: I will be around dont worry
[13:48] Qwark Allen: nice
[13:48] Lizzy Pleides: enjoy the summer Herman, will you make a journey?
[13:48] Debbie Dee (framdor): ok. I wont complain about the weather again ;)
[13:48] Qwark Allen: at least for sundays partys :-)
[13:48] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:48] Gemma Allen (gemma.cleanslate): going to the island again?????
[13:48] herman Bergson: Yes an island to the north of the Netherlands :-)
[13:49] Gemma Allen (gemma.cleanslate): ah nice
[13:49] herman Bergson: Indeed Gemma :-)
[13:49] .: Beertje :. (beertje.beaumont): the most wonderfull part of the Netherlands:)
[13:49] Gemma Allen (gemma.cleanslate): take more pictures and do a viewer
[13:49] herman Bergson: True Beertje
[13:49] .: Beertje :. (beertje.beaumont): except H ... of course
[13:49] herman Bergson: of course Beertje
[13:49] .: Beertje :. (beertje.beaumont): smiles
[13:50] .: Beertje :. (beertje.beaumont): have a wonderfull summer!!
[13:50] Gemma Allen (gemma.cleanslate): see yu soon
[13:50] Debbie Dee (framdor): Bye philosophical friends - see you after summer...
[13:50] herman Bergson: I'll be around
[13:51] .: Beertje :. (beertje.beaumont): I have to go..Goodnight and sweet dreams
[13:51] Gemma Allen (gemma.cleanslate): ok
[13:51] Debbie Dee (framdor): and have a great break. Thanks Prof ;)
[13:51] herman Bergson: There will be a new project Debbie..that is for sure
[13:51] Gemma Allen (gemma.cleanslate): Bye, Bye   
[13:51] Merlin (merlin.saxondale): I dont want to step on anybody
[13:51] Gemma Allen (gemma.cleanslate): ♥ Thank Youuuuuuuuuu!! ♥
[13:51] Gemma Allen (gemma.cleanslate): beertje
[13:51] Qwark Allen: see you all soon

411: The Utopia of theFree Market - Neoliberalism

"TNT acquisition by UPS cost thousands of jobs"
That was a headline in my newspaper of last Saturday.
Formerly I wouldn't have read the article, but nowI see the utopia at work.

The situation is thus: UPS delivers parcels in the Netherlands and Belgium. TNT does the same. UPS wants to acquire TNT, not to increase its capacity, but to take over the customers of TNT. Delivery of parcels will be done by the existing UPS organization.

This means that a few thousand jobs become redundant. It means that people loose their jobs, while one of the things that give meaning to life in our society is participation, having a job.

Here you see the market at work. Profit maximization and stockholders are the main goals of an enterprise. That it creates employment and in this sense has a social function is just an accidental value.

Like Adam Smith said. That the baker bakes a bread, that can feed you  is just an added value. The main interest of the baker is his own profit and income, his self-interest.

Here we may ask the question, whether it is justified that a company just for the sake of increasing profit is allowed to create a social disaster for thousands of families. What ethics applies here?

This is the result of privatization  of the postal services in the Netherlands and something unique is happening now. 

The Dutch Senate has started in investigation into the effects of privatization of a number of previously state enterprises, like postal services and the national railways, energy and telecommunications.

Privatization of state enterprises and public services  was from the late eighties seen by politics as THE answer to all problems.

State enterprises were heavy and slow, the public service was inefficient and not transparent. All  misery would end, if the market would get a say. 

The prices would decrease, increase of quality, and previous public services would become innovative and customer-friendly.

Non of this has become really true. Therefore an investigation by a committee of the Senate is more than justified.

All this could happen due to the 10 commandments of neoliberalism as formulated in the Washington Consensus.

The concept and name of the Washington Consensus were first presented in 1989 by John Williamson, an economist from the Institute for International Economics, an international economic think tank based in Washington, D.C.

The consensus as originally stated by Williamson included ten broad sets of relatively specific policy recommendations:
1.Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP; 

2. Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;

3. Tax reform, broadening the tax base and adopting moderate marginal tax rates;
4. Interest rates that are market determined and positive (but moderate) in real terms;
5. Competitive exchange rates;

6. Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs;
7. Liberalization of inward foreign direct investment;

8. Privatization of state enterprises;
9. Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions;
10. Legal security for property rights.

These have been the guidelines of many governments of many countries in the past 30 years. I guess you recognize some of the themes favored by your political parties (e.g. 3, 8 and 9).

Since 2008 we know that these commandments and neoliberalism have failed, like the opposite, communism, failed. Maybe in the next lecture I can formulate some ideas for a post neo liberalist society.

The Discussion

[13:20] herman Bergson: There is no self regulating market
[13:21] herman Bergson: and there is no rationally choosing customer
[13:21] herman Bergson: That is a utopia....
[13:21] herman Bergson: Thank you....
[13:22] herman Bergson: Next thursday it will be the last lecture of the season and conclusion of this project
[13:22] Lizzy Pleides: Thank you Professor
[13:22] Femtasia Rexen: thank you
[13:22] Bejiita Imako: oki
[13:22] Bejiita Imako:
[13:22] Annie Brightstar (anniebrightstar): Thank you Herman
[13:22] Mistyowl Warrhol: ty
[13:23] CONNIE Eichel whispers: welcome thorberg...
[13:23] herman Bergson: My observation is that we have great trouble finding our way out of the present crisis....
[13:23] Bejiita Imako: seems so it just continues
[13:23] Merlin (merlin.saxondale): Does anyone know a revolutionary economist in Aus callled Steve something?
[13:23] herman Bergson: because nobody has realized that the basic ideas were utopian
[13:24] Bejiita Imako: the company owners want more and more without caring for their employees at all
[13:24] Bejiita Imako: like they're machines
[13:24] Bejiita Imako: really sad development
[13:24] CONNIE Eichel: yep
[13:24] Mistyowl Warrhol: I read an article comparing Big Business to the Mafia.. it is scary how much they are alike.
[13:24] herman Bergson: That is no longer true Bejiita…
[13:24] Merlin (merlin.saxondale): economist in Aus called Steve something? Anyone?????
[13:24] herman Bergson: No Merlin.....
[13:25] Merlin (merlin.saxondale): Oh ok
[13:25] Merlin (merlin.saxondale): He was very critical of the banks anyway
[13:25] herman Bergson: Steve Keen...
[13:25] Merlin (merlin.saxondale): could be
[13:25] Annie Brightstar (anniebrightstar): Herman we are celebrating 60 years of Queen Elizabeth in UK. As such television programs are showing how things were when she ascended to the throne in 1952. When you compare living conditions in 1952 and 2012 talk of Failure seems to be stretching it a bit.
[13:25] .: Beertje :. (beertje.beaumont):
[13:25] Merlin (merlin.saxondale): Good point Annie
[13:26] Merlin (merlin.saxondale): I was there (just)
[13:26] Lizzy Pleides: Nobody knows a solution for the problems. On long term it will be the question if civilization can survive. the nature limits the growth and we have to prove if we are able to react fairly
[13:26] herman Bergson: In a material sense you are right Annie....
[13:26] herman Bergson: We have created material prosperity...
[13:26] Merlin (merlin.saxondale): Thanks Beertje
[13:26] .: Beertje :. (beertje.beaumont): yw:)
[13:27] Mistyowl Warrhol: I disagree, in 50s, ppl could farm for food, etc. Today, ppl dont know how to do that nor is there land on which to do it.
[13:27] herman Bergson: In the first thirty years after WWII by building the social Wlefare state...
[13:27] Merlin (merlin.saxondale): If its him, he was interviewed or radio this week
[13:27] Merlin (merlin.saxondale): Today or yesterday
[13:27] Linda Bartavelle: neoliberalism was not the dominant doctrine in the 50s
[13:27] herman Bergson: No....neoliberalism took over when prosperity was at its height....
[13:27] Annie Brightstar (anniebrightstar): The average livespan for a man in 1952 in England was 66 now it is 79 not bad for failure
[13:28] Annie Brightstar (anniebrightstar): sorry about spelling
[13:28] herman Bergson: When money could make money...
[13:28] herman Bergson: in the 70s and 80s
[13:28] Lizzy Pleides: we have to reduce our consumption, that is most important
[13:28] Merlin (merlin.saxondale): What Annie is saying is relevant
[13:28] CONNIE Eichel: i wish being older... hehe
[13:28] herman Bergson: Then we went for selfishness in the Randian way...
[13:28] herman Bergson: we didn't need the social solidarity anymore
[13:29] Bejiita Imako: today we have a what we call in sweden, wear and throw away society
[13:29] Lizzy Pleides: yes Bejiita
[13:29] Bejiita Imako: things break deliberately so we have to buy new and new all time
[13:29] Merlin (merlin.saxondale): We call it 'disposable'
[13:29] Bejiita Imako: stuff don't last long so the manufacturers can make miney
[13:29] Bejiita Imako: while the scrap heals grow
[13:29] Merlin (merlin.saxondale): is this a digression?
[13:29] Mistyowl Warrhol: true, in 50's, your watch breaks, you took it in to be repaired.. now, just toss is.
[13:29] .: Beertje :. (beertje.beaumont): they do that on purpose Bejiita
[13:29] herman Bergson: That is changing Bejiita.....
[13:30] Bejiita Imako: yes they do
[13:30] herman Bergson: This Earth is a globe with limited resources....
[13:30] Merlin (merlin.saxondale): I don't believe in that 'planned obsolescence' idea
[13:30] Lizzy Pleides: the industry created an artificial demand for their products
[13:30] herman Bergson: Unlimited growth of the economy as goal is an absurdity
[13:30] Bejiita Imako: before machines held virtually forever now no more then maybee some years
[13:30] Bejiita Imako: at least my tv works great'
[13:30] .: Beertje :. (beertje.beaumont): my monitor screen was build for 3 years..they told me..then it broke..I fixed it for 5 euro:)..
[13:30] Mistyowl Warrhol: in 50's ppl want enough to eat, today, they want more than their neighbor
[13:31] Bejiita Imako: but if things last then they instead market new stuff in a way that make people throw away fully working stuff to get a newer model
[13:31] Bejiita Imako: a total waste
[13:32] Annie Brightstar (anniebrightstar): But if everything lasted forever Bejiita what would the workforce do
[13:32] herman Bergson: I would advise….read your newspaper.....check for the signs that question what Bejiita says, that question the absolute  belief in the self regulating free market....
[13:32] Bejiita Imako: well maybe but the thing is that it goes out of control
[13:32] Bejiita Imako: we must have a balance
[13:32] Lauren Nostram is online.
[13:33] herman Bergson: Yes Bejiita....a balance....
[13:33] herman Bergson: a balance between what....good issue to think about
[13:33] Mistyowl Warrhol: The question is.. is it too late to find balance, even if we could get ppl to do it?
[13:33] Bejiita Imako: today its just buy new buy new buy new all time
[13:33] herman Bergson: It is never too late Misty.....
[13:34] Annie Brightstar (anniebrightstar): Bejiita have you ever seen the film (the man in the white coat" 1951?
[13:34] herman Bergson: Most economists thought that the Free Market really had it all....
[13:34] Mistyowl Warrhol: I hope what you say is true. but I see so much damage that can not be undone.
[13:34] Bejiita Imako: no but i recognize the title i think
[13:34] Bejiita Imako: sound familiar
[13:34] herman Bergson: so if history had stopped and reached its endpoint....long live the free everybody will get happy
[13:34] Annie Brightstar (anniebrightstar): A man makes a coat which he thinks will be a boon fo society doesn't need cleaning will last forever
[13:35] Mariella Diesel (mariella.deezul) is online.
[13:35] herman Bergson: Well that is not the case....
[13:35] Annie Brightstar (anniebrightstar): The unions and the business owners see it as a disaster
[13:35] herman Bergson: The financial crisis has awaken a lot of people....
[13:35] CONNIE Eichel: mayas were right, professor? hehe
[13:36] Linda Bartavelle: what you say sounds like what stalin said about communism in ussr in the 30s.. now we have communism, so happiness for all for ever
[13:36] herman Bergson: Greenspan was shocked by the observation that his idea of the free market was a real mistake,
[13:36] herman Bergson: That is different Linda....
[13:36] Bejiita Imako: good that he realized that
[13:36] Bejiita Imako: 'at least
[13:37] herman Bergson: Every utopian ideology is inclined to totalitairism...
[13:37] herman Bergson: there is always a group of people who dont believe th in the utopia....
[13:37] CONNIE Eichel: yes, believe in the utopia, or die...
[13:37] herman Bergson: so they have to be re-educated....
[13:37] Bejiita Imako: an utopia is always impossible
[13:37] Mistyowl Warrhol: maybe we all need to go back and live in caves for a while and readjust our ways of living LOL
[13:37] herman Bergson: Exactly CONNIE
[13:37] Bejiita Imako: its like building a perfect machine with no energy loss
[13:37] Bejiita Imako: impossible
[13:38] Linda Bartavelle: capitalism for the whole planet is not a utopia, it is reality.. but it doesn't bring happiness for all
[13:38] herman Bergson: The challenge for the future will be finding that balance
[13:38] herman Bergson: to get what Aristotle already called the good life...
[13:38] CONNIE Eichel: it is an utopia for owners, linda, at least
[13:39] herman Bergson: Capitalism in the sense of the belief in the free market indeed Linda
[13:39] herman Bergson: But we have to rethink our situation.....
[13:40] herman Bergson: our resources, redistribution of wealth...
[13:40] Bejiita Imako: yes
[13:40] herman Bergson: But that will be work for centuries...
[13:40] Bejiita Imako: it has spun out of control a bit now
[13:40] Lizzy Pleides: centuries are too long Herman, we don't have so much time
[13:40] herman Bergson: reality has taught us a lesson Bejiita....
[13:41] Mistyowl Warrhol: Maybe if ppl would use their own brains and look at a whole picture and not just the bits, one side of the news had feeds them.. but now I am being an optimist :-)
[13:41] herman Bergson: Part of the people go as usual....hoping for th the next bonus
[13:41] herman Bergson: other are in doubt....
[13:41] herman Bergson: read your newsshows....and you see it everywhere
[13:42] Bejiita Imako: yes, seen some examples now recently
[13:42] herman Bergson: Where it will lead to I don't know....
[13:42] herman Bergson: I'll think about it for next lecture ^_^
[13:42] Bejiita Imako: oki
[13:43] herman Bergson: So thank you all for your participation again....
[13:43] Bejiita Imako:
[13:43] herman Bergson: Class dismissed
[13:43] .: Beertje :. (beertje.beaumont): thank you Herman
[13:43] Bejiita Imako: interesting as usual :9
[13:43] Bejiita Imako: tnx Herman
[13:43] Femtasia Rexen: thank you Professor
[13:43] Gemma Allen (gemma.cleanslate) is offline.
[13:43] CONNIE Eichel: great class, i missed it :)
[13:43] Mistyowl Warrhol: TY.. much to think about :-)
[13:43] Bejiita Imako: yes
[13:44] herman Bergson: Thank you CONNIE
[13:44] Bejiita Imako: ok cu soon again bye
[13:44] Bejiita Imako:
[13:44] CONNIE Eichel: a pleasure :)

Friday, June 1, 2012

410: The Utopia of the Free Market - Keynes

From the end of the Great Depression until the early 1970s, Keynesian economics provided the main inspiration for economic policy makers in Western industrialized countries. 

The influence of Keynes (1883 - 1946)'s theories waned in the 1970s, due to stagflation, which is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high.

It also waned because of  critiques from Milton Friedman, and Friedrich Hayek and other economists who were less optimistic about the ability of interventionist government policy to positively regulate the economy. 

From the early 1980s to 2008, the normative consensus among economists was that attempts at fiscal stimulus would be ineffective even in a recession, and the policy was rarely employed by the governments of advanced nations.  

In 2008 there was a rapid shift of opinion among prominent economists in favor of Keynesian stimulus, and from October policy makers began announcing major stimulus packages, in order to head off the possibility of a global depression. 

By early 2009 there was universal acceptance among the world's economic policy makers about the need for fiscal stimulus. 

Yet by late 2009 the consensus among economists began to break down, and in 2010 with a depression averted but unemployment in many countries still high, policy makers generally decided against any further stimulus policies.

With the end of the brief consensus for Keynesian policies, but with the neoliberal policies  still discredited, several commentators have predicted that the Macroeconomic domain will see a return to ideological struggles.  

Keynes's central theme was, that the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government.

It was Keynes's view that an over-reliance on maths is a mistake, because mathematical models will always depend on the validity of their underlying assumptions.

And one of these assumptions was the utopian idea, that man will always acts rationally and based on a rational awareness of his self-interest.

An other assumption was the workings of "the silent hand" as mentioned by Adam Smith, expressing the belief that the free market is self-regulating by itself eventually.

Modern mainstream macroeconomics has become closely integrated with maths, at the expense of other disciplines such as political economy and history.

Keynes put much emphasis on the role of uncertainty. Uncertainty refers to situations in which we have no statistical basis to go on.

In his opinion economics is not some kind of natural science with fixed mathematical models, 

but a moral science which has to take into account the peculiarities of human behavior. Ethics should once again have a role in guiding capitalism.

The big challenges of our future will be themes like the redistribution of wealth, the role of a government, in what sense is a free market economy not a utopia.

The Discussion

[13:18] herman Bergson: Thank you....
[13:19] herman Bergson: Little philosophy today and much economics
[13:19] Gemma Allen (gemma.cleanslate): :-)
[13:19] Gemma Allen (gemma.cleanslate): well it is a philosophy
[13:19] Mick Nerido: Can the European Union survive?
[13:19] Gemma Allen (gemma.cleanslate): makes more sense than adam smith
[13:20] herman Bergson: But  most important observation i s that in fact nobody knows how our economic system really works 
[13:20] Merlin (merlin.saxondale): Well it was interesting
[13:20] herman Bergson: When you read about financial markets, banks and stuff like that....
[13:20] Merlin (merlin.saxondale): I've started to scroll the chat window back a bit and it saves the jumpyness
[13:21] herman Bergson: as an average cant understand it anymore
[13:21] Gemma Allen (gemma.cleanslate): so trye
[13:21] Gemma Allen (gemma.cleanslate): true
[13:21] Bejiita Imako: hmm indyes
[13:21] Gemma Allen (gemma.cleanslate): they say one thing and then do another... the banks
[13:21] Bejiita Imako: yes
[13:21] herman Bergson: and most important is the role of the government in this all...
[13:21] Bejiita Imako: its a mess for sure
[13:22] herman Bergson: The neoliberalist trends are destructive with respect to social cohesion, is my opinion...
[13:22] herman Bergson: the heavy emphasis on the individual who has to take care for himself
[13:22] Gemma Allen (gemma.cleanslate): here that is not the liberal thought
[13:23] Gemma Allen (gemma.cleanslate): that is the conservative thought
[13:23] Mick Nerido: Fear and the unknown drive the markets down it seems...
[13:23] Merlin (merlin.saxondale): Herman... What is the difference between a Liberal and a Neo Liberal in your terminology?
[13:23] Lizzy Pleides: it is the question to find a new definition for a new social market economy, right?
[13:23] Gemma Allen (gemma.cleanslate): liberals worry about everyone
[13:23] herman Bergson: Yes the US the word is used wrongly...
[13:23] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:23] Gemma Allen (gemma.cleanslate): lol
[13:23] herman Bergson: they confuse liberals with libertarians I think
[13:23] Gemma Allen (gemma.cleanslate): hard to relate to the others
[13:24] Gemma Allen (gemma.cleanslate): no
[13:24] Merlin (merlin.saxondale): Well in that case, me too
[13:24] Gemma Allen (gemma.cleanslate): libertarians want NO governmenbt
[13:24] Merlin (merlin.saxondale): Not exactly the same, but closely related
[13:24] herman Bergson: liberals too....
[13:24] herman Bergson: and theo liberalisme even stronger...
[13:24] Merlin (merlin.saxondale): Gemma, isnt that Liberals you mean?
[13:25] Merlin (merlin.saxondale): But not in the UK meaning
[13:25] Gemma Allen (gemma.cleanslate): no liberals democrats want more govennment
[13:25] Gemma Allen (gemma.cleanslate): MORE help for education
[13:25] Bejiita Imako: ok
[13:25] Merlin (merlin.saxondale): But in Herman's sense, where Ayn Rand is regarded as liberal
[13:25] Gemma Allen (gemma.cleanslate): More taxes on the wealthy
[13:25] Gemma Allen (gemma.cleanslate): nonnono
[13:25] herman Bergson: US meaning of the word 'liberal' is historically not correct
[13:25] Gemma Allen (gemma.cleanslate): super super conservative
[13:25] Gemma Allen (gemma.cleanslate): i know
[13:25] herman Bergson: so confusing :-)
[13:25] Gemma Allen (gemma.cleanslate) GIGGLES!!
[13:25] Gemma Allen (gemma.cleanslate): ...LOL...
[13:25] Gemma Allen (gemma.cleanslate): but that is all it is
[13:25] Gemma Allen (gemma.cleanslate): Yes-ah!
[13:26] herman Bergson: Well if you ask me what to do in the present situation....
[13:26] Clerisse Beeswing: If society was oneside it would be boring
[13:26] herman Bergson: I really dont know....except stop believing in the Utopia of the Free Market
[13:26] Merlin (merlin.saxondale): Herman... What is the difference between a Liberal and a Neo Liberal in your terminology?
[13:27] herman Bergson: make society more social....
[13:27] Gemma Allen (gemma.cleanslate): I am a real liberal here in the USA sense or the word
[13:27] Merlin (merlin.saxondale): Did I miss your answer?
[13:27] herman Bergson: liberalism originated from the theories of John Locke....and is focused on the individual and his rights....
[13:28] Mick Nerido: US Liberal Big Gov Consertive small Gov
[13:28] herman Bergson: neo liberalism (as far as I have understood) focuses more on the rights of the individual in relation to the role of the government...
[13:28] Merlin (merlin.saxondale): ok
[13:29] herman Bergson: You could say that it is a counter movement agains the social welfare state as it developed in the 60s of the previous century
[13:29] Gemma Allen (gemma.cleanslate): where can we find that definition on the web?
[13:29] herman Bergson: It is in Wiki....
[13:29] Gemma Allen (gemma.cleanslate): hmmm
[13:29] Gemma Allen (gemma.cleanslate): ok
[13:29] Gemma Allen (gemma.cleanslate): wil check it later
[13:29] Bejiita Imako: individual right sound good but it seem to mean that everyone just think of them selves and do not care for anyone else
[13:29] Bejiita Imako: and that's a bad thing for sure
[13:29] herman Bergson: A good example of the neoliberal credo you find in the so called Washington Consensus of 1989
[13:30] Mick Nerido: Have to log out . Thanks Herman and all...
[13:30] Bejiita Imako: ok cu Mick
[13:30] Lizzy Pleides: TC Mick
[13:30] Bejiita Imako: bye
[13:30] herman Bergson: Just look on Washington Consensus in Wikipedia...
[13:30] herman Bergson: Bye Mick
[13:30] Gemma Allen (gemma.cleanslate): Bye, Bye   
[13:30] herman Bergson: There you find a list of 10 points....
[13:31] herman Bergson: one of the points is deregulation for instance....
[13:31] herman Bergson: Less government controll
[13:31] Merlin (merlin.saxondale): Well in UK, the Liberal party was basically the opponent of the Conservative party,
[13:32] herman Bergson: Next lecture I'll introduce the godfathers of neoliberalism , Friedman and Hayek
[13:32] Bejiita Imako: ok
[13:32] herman Bergson: then we'll look into the difference between liberalis and neo....mor ein detail
[13:33] Bejiita Imako: ah ok
[13:33] herman Bergson: After that I'll come with one or two lectures in which we can evaluate how the future has to look...
[13:33] herman Bergson: Free Market or not....government control or not and to what degree....
[13:34] Bejiita Imako: need to find a balance
[13:34] herman Bergson: And all these issues you will find in the programs of the political parties of your country...
[13:34] Clerisse Beeswing: Just sounds like a bunch of give and take
[13:34] Bejiita Imako: you cant just set it free to provocate companies like today cause then everything is just about company owners wanting more and more money without delivering anything of good quality or even at all
[13:35] herman Bergson: Yes Clerisse....and it is in the political debate that you can hear how much people will give and take and why
[13:35] Fred123 Aiten: someone once said "You make a living by what you get; you make a life by what you give."
[13:35] Clerisse Beeswing: But in a debate people try to outbluff each other
[13:35] herman Bergson: Yes Bejiita...that is one of the problems of today....profit and stockholders dominate the scene
[13:36] Clerisse Beeswing: I like that Fred
[13:36] Bejiita Imako: yes and they just want more and more without delivering, taking overprices like crazy ect
[13:36] Bejiita Imako: so only the rich can afford
[13:36] herman Bergson: Yes Fred.....what is a social society?
[13:37] herman Bergson: Well I read today for instance that people pay interest on loans....
[13:37] herman Bergson: In real this means that 80% of the population is paying this interest to 10% of the population....the rich
[13:37] Clerisse Beeswing: Gosh If I didn't have to chi chang in my pocket
[13:38] herman Bergson: and this widens the gap between rich and poor...
[13:38] Gemma Allen (gemma.cleanslate): no worries clerisse
[13:38] herman Bergson: Start reading about money....the reason why we have to pay interest....
[13:38] herman Bergson: how banks generate money....
[13:39] Merlin (merlin.saxondale): My concentration limit has been reached
[13:39] Gemma Allen (gemma.cleanslate) GIGGLES!!
[13:39] Gemma Allen (gemma.cleanslate): ...LOL...
[13:39] herman Bergson: I did this all day today.....
[13:39] Gemma Allen (gemma.cleanslate): happens a lot merlin
[13:39] herman Bergson: You can start reading tomorrow Merlin :-)
[13:39] Merlin (merlin.saxondale): Yes :)
[13:39] Merlin (merlin.saxondale): Oh I followed it fine until now
[13:40] bergfrau Apfelbaum: very interesting it was! Thank you, herman, & class :-)
[13:40] herman Bergson: Thank you for your participation again.....
[13:40] herman Bergson: Class dismissed