I started punching out this rant about a week ago and, since then, much in the social forum has changed but not by way of improvement. Over the weekend much my state was devastated by bushfires – the likes of which I have never seen.
For my part, I assisted where I could. But, there is no need to report more upon the carnage for that is the realm of the media who have canvassed almost all outlets with updates and figures and tolls.
Living in the city as I do, I too could not but notice the mood on the streets today: Numbness. A numbness that would become someone who, while already grappling with a terrible loss, was the then told of another. Literally, the midday streets of suburban Melbourne were Sunday-like quiet. At the shops, sales assistants all wore long faces.
The bushfires are just more ill tidings as we grapple with the fallout from the economic crisis. And, as the loss of the weekend is still too close and because I think that writing more on it will proffer little or nothing of value, I will continue on with the point of the economy, for that, at least, is something which can be addressed and handled.
That’s right, handled.
Words we hear to the contrary, that the economy is ‘out of control’ or that there is nothing anyone can do to prevent the loss of jobs or the decline of the economy are, in fact untrue. This economic crisis, whether intentional or unintentional, has been manufactured – make no mistake. And, hence, it can be repaired...though not easily.
The economic crisis is not like the weekend’s wild fires that roared and raged according to the whims of wind and weather. Rather, it is a social situation and one that was created by the co-relations of business and the regulations (controls) put upon the enterprise of the people by governing bodies.
The free-market and unfettered greed have been labelled the culprits of the fiscal collapse, at least by the PM and other politicians. And, perhaps many jobless men or women have found comfort in such statements for they give, at least, a reason for their hardship. But this is not wholly the case. For the culprit is far more devious and, as witnessed by the 600,000 job losses in the USA just recently, far more callous in its wrath.
The market is a natural thing suffering with an affliction: Unnatural elements have tainted it and corrupted it from its pure form. The market climate has been given haughty names like “neo=economic liberalism” and been made an esoteric thing only understood only by university graduates (who, yet do not truly understand it) and sent into decline.
And, just as forest can be killed by pollution or a sea can be killed by overfishing, the economy is being slain by overborrowing, overspending and very bad financial governmental policy. None of which are qualities of a free market. Essentially, the fundamentals of the market (discussed below), have been violated. Though the free market has been targeted as a thing of greed, overborrowing and overspending have been things sanctioned by governments, not free marketeers. And now, our PM advises us that tighter market controls are needed, intimating that the old system must go and a new regulated system must supplant it.
This is throwing the baby out with the bathwater.
The forest and the lake, if left to its own devices, would flourish and require minimalist human intervention. So too would the market and the economy should only the impurities be eliminated.
Put simply (and very simply, because this is a can of worms I’m opening here and one which requires much more clarification on the subject) a businessperson could not operate his/her business as a government runs the economy and experience any sort of viability or longevity.
To be clear, this is not an anti-political or anti-governmental essay, either. I believe our government is intent on ending this crisis – it is only their methods of which I object.
Dabbling both in the fields of art and business has proffered me an interesting perspective of the current economic crisis that, right now, sweeps the globe like a flood.
To the naked or un-indoctrinated eye, art and business appear to lie at opposite ends of the creative spectrum. In art, there is of course creativity in some expressive form; whereas in business, there is creativity usually in a functional or structural form. An artist could be forgiven for describing business as ‘boring’ just as a businessperson may be excused for describing art as ‘airy-fairy’. Hence, the two fields rarely cross paths except, perhaps, in the form of management or organisation.
As I have had a hand in both fields, I am fortunate to have bridged the gap between the chasm of art and business...at least for myself, anyway. And, in the course of my travels over the last ten or so years, I discovered that these two seemingly polar entities – art and business – have one common thread: They are both philosophically based.
If you have ever had the good fortune to meet a successful businessperson, you will note immediately that they are very philosophical in their approach to the world and its affairs...even if they don’t admit it. Of course, there are always exceptions.
Particularly, at this time of economic crisis, these two fields are more closely related than ever before. It is within these two fields that common threads can interweave to provide some solutions to the doomed path our local economy is treading. For both the causes and the solutions to this situation are, in fact, philosophical and social and not scientific (though economics defines itself as a science, it is not of the order of physics and chemistry, but rather a social science like politics and history because it studies and defines the fluid [not rigid] rules of human exchange, distribution and monetary social interaction).
One key thing to understand is that economies (which are essentially organised markets) were founded by business and people, not by governments or by economists – they came later. Markets were created out of the necessity of people to exchange commodities with one another to enhance their own survival potentialities. However, the running of the economy, in Australia and most other states, is a governmental faculty. For example, last October, the Federal Government injected $10.4b into the economy to stimulate it.
But, though retail spending did increase, the IMF’s prediction as of January 2009 was that the Australian economy would shrink. Hence, presently, another package of five times the October ‘08 amount is being hurried through parliament.
Such figures give the impression that there is a federal bank account with an abundance of money in it...but, sadly, there is not. So, where does this money come from? If I said thin air you wouldn’t believe me, but it wouldn’t be too far from the truth.
Now, an economist would argue with me here. Perhaps they would say something in the order of: ‘But, this money is accounted for and is based upon the purchasing value of the dollar’ or ‘bonds will be created to stimulate investments...’
Naturally, people are chary about spending money that we don’t have and the opinion polls are now reflecting this. As I said earlier, a businessperson would not operate their business by spending money they didn’t have to boost viability. Rather, they would demand production increases while curtailing spending in every sector. So, what makes a country so different? Well, this is the billion dollar question.
Much more must be said about from whence this stimulus money came, but, sadly, not here. For your own investigation, ask yourself this question: If Australia’s foreign debt was $1 trillion as of June 2008, where would an extra $50b come from? Certainly not our national bank accounts.
To put it bluntly, this is money that the government does not have and that Australia does not have.
I am dramatically oversimplifying the situation here, of course, and you are invited to state as much on the blog (We also understand that there are many more words that could be written on this subject and, in fact, are writing a book on it right now for release next month).
So, what is the government’s job when it comes to the economy? It should be the protection of the rules of business where needed but, for all intents and purposes, to let the market proceed relatively unhindered. The market is not and never has been a thing of politics – so, politicians should leave it be.
The economists? In a way, they are scientists, however economics is not a laboratory science – although the manner in which interest rates, the Reserve Bank and such are talked about, you’d be forgiven for thinking otherwise. Rather, it is a social science based upon the laws of human interaction and endeavour which, in the case of the economy, is business.
In its pure form, despite it being a social science, economics is an exact science. It is based upon the phenomenon of balance...and, you can’t get more arty than ‘balance’.
Like any such balance in this universe, of which nature is one, if one part of it is tampered with, another part of it will be affected in some measure (witness the introduction of rabbits, foxes, cane toads, etc – all such introductions created imbalances after which destruction ensued).
Economics is the science of trade and distribution of goods. These are the realms of business over which goes the economic umbrella. In a way, economics is a study of balance, just like the environment. For example, a person manufactures a car and, in exchange for that car, they are provided money to the value of that car. The car manufacturer works hard to maintain a balance within their workshop to ensure that cars are made at a lower cost than they are sold for. This way the manufacturer turns a profit and can continue to make cars.
And, thus, there is balance. The manufacturer receives money for their hard work and the buyer receives a car. One side is equal to the other – balance. People may argue that this is business and not economics, but as there is exchange and change of position of valuable products and thus, distribution, we’ll call it economics.
Economics goes one step further than mere exchange and enters the realm of money. Again, this is balance – money was once gauged against gold. Then, one day (mid last century) it was decided that money would be valued differently and not against gold, but against (and this is putting it very simply indeed) the amount that a nation could raise for its taxes...so, actually, how potentially rich the country was. As taxes were based upon production, this made sense: The higher the production of the country, the richer it was.
The maintenance of this balance is the key role of economics and central banks (like the Reserve Bank of Australia), but the maintenance of this balance, as well as being a science, is an art. How well the RBA and other central banks do this is determined by the state of economies. It would be fair to say that, presently, they may have slipped – globally, economies aren’t in that great shape.
However, economists and politicians are not necessarily business people and, rarely, economists and politicians are artists. However, in Australia, when there is a problem with the economy, it befalls politicians and economists to solve the problem of imbalance.
Recent events are illustrating for us the results of mishandling the economy and the misunderstanding of this ultra-fundamental term ‘balance’.
This is a very brief outline of a very, very complex problem. Perhaps, for the expert, this is too simple, but this was not written for them. This was never intended to be a thesis – only a blog. There is absolutely no intention to oversimplify the issue; of course I realise that I have made this error. Then, this was a rather hastily written piece.
An artist sees the universe as it is; even if distorted by imagination, there is still a foundation of reality to any creation.
Do not shy away from this crisis. Investigate it and get your own questions answered.
In a very short time, we will be releasing a book that dissects the recession in Australia – its causes and solutions. In it you will find the sources of items referenced in the above text.
If you would like to know more about the root causes of our economic crisis, written in terms anyone can understand, or to purchase an advance copy of the book, please contact us via the Writers’ Resource Centre: globalfinancialcrisis@writersworld.com.au.
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