I’ve been watching a fair bit of David Attenborough’s A Perfect Planet recently.
Every time I think I’ve seen it all, he pulls me back in and it’s just as extraordinary and magical as always.
Tim Harford, economist and thinker in chief, has written eloquently in Adapt: Why Success Always Starts with Failure and The Logic of Life about how human society and the business world follow very similar evolutionary patterns to nature.
Success breeds size and like the largest tree in the forest, it blocks out all the light.
But when it ultimately falls, as every giant must, suddenly light pours into the undergrowth, encouraging a thousand start-up lifeforms to reach for the sky.
Progress is achieved through natural experimentation, failure, and development through generations.
This has been the driving ethic of Western free-market capitalism for the last couple of hundred years.
But something has changed.
A wise man I know tells a story to illustrate why capitalism beats communism.
It’s the simple story of the working lunch in a capital city like London.
Between 12pm and 2pm, maybe a few million people eat lunch at different times, for different prices, different lengths of time, and in different places. Sushi, sandwiches, and soups from all over the world – everyone gets roughly what they want not too far from the price they’d want.
But imagine if the working lunch in London was centrally planned… If there was some division of the civil service responsible for getting lunch to everyone.
It would be a logistical nightmare. And it couldn’t be unfair, so everyone would have to get the same more or less. And then their budget gets cut, and so they start cutting corners, using cheaper bread and thinner ham, and you get the point.
Just look at the pathetic attempts to send out free school meals – a mouldy potato or two, some tragic looking fruit and a few tins… Supposedly 30 pounds’ worth.
Free-market economics have been responsible for the incredible growth and improvements in the quality and standards of living here in the UK and across most of the world.
The endless drive and ingenuity of humanity means that slack is often picked up by new ventures, now products, new ideas. Any void created by failure is quickly filled by ambitious people.
And now that we’ve started letting women contribute, things have improved even quicker, as we have twice (some would say more than twice!) the intellectual capability working away at clever ideas and new products.
However, the problem I am seeing in both government and central bank meeting rooms is a steady overreach going back decades.
The basic point which is pretty clear is that low interest rates and quantitative easing (QE) have driven money into financials assets, which has benefitted the wealthy much more than anyone else, because they already owned financial assets (houses, stocks, bonds, real estate).
But growth has been anemic, meaning wages have not grown in tandem, leading to a widening between the haves and the have-nots.
Central banks driving interest rates lower is one thing, but governments have also bailed out businesses who have struggled in the three unexpected, unpredictable, no-one to blame, once-in-a-blue-moon crises of which we’ve had three in the last 20 years.
After the dotcom bubble crashed, the financial crisis of 2008 and the corona-crash, governments and central banks have pulled together the “shield-wall”.
It is hard to argue with the intention to protect jobs and the vulnerable. And you can forgive them for thinking something must be done.
But they have gone too far and in doing so have blocked the evolutionary function of society which is what truly drives humanity forward.
Not all capitalism is equal. Our current version favours profit and shareholders above all else.
We are still democratic, but our free-market economies are going the way of the dodo, slowly.
By keeping “extraordinary measures” in place for ten years instead of one, by refusing to bring interest rates back up after pushing them down during the crisis.
Nothing so permanent as a temporary government measure and all that…
The result is what? Addiction.
The longer interest rates stay low, the more used to them society becomes. More and more businesses become “zombies” – companies unable to survive on their own profits, needing to borrow more and more.
The longer rates stay low, the harder it gets to raise them because low rates have encouraged so much borrowing.
The UK’s debt just grew larger than our GDP for the first time since the two world wars.
In the US, the total national debt is nearly triple what it was on the eve of the global financial crisis just 13 years ago.
Then after one emergency dose of QE in 2009, we’re now on our fifth iteration, and it’s widely accepted that if the Federal Reserve stopped supporting the US bond market, it would collapse rapidly, taking most of the global economy with it.
Free markets are brutal and unfair in some ways, but they are evolutionary and beneficial too. I’m not endorsing anarchy, and I believe that some government is required.
But I think it’s gone too far.
What has happened over the last 30 years is a taming of markets.
We needed a packet of painkillers, but have been given a crate and become addicted.
The returns on stimulus have diminished, like a coffee drinker who no longer feels that same buzz and needs three triple shot espressos just to get through the working day.
Or, to return to our evolutionary analogy, some Western societies like the UK and the US are like animals at the zoo.
We are no longer wild and free. We are safer and get fed twice a day. If released back into the wild, we might really struggle. But… that doesn’t mean zoos are better for animals than the wild.
What was once thought of as protection is now the very reason why we wouldn’t survive in the wild. Fending for ourselves, with higher rates, no bailouts and no QE underpinning debt markets, many, many terrible things would happen.
But is that a reason for keeping animals locked up in the zoo? Or, as many people think, is that a cruel and circular logic?
“Having locked you in this cage for so long, you could no longer survive out there, so we’d better keep you here, like this.”
The really tough thing when criticising the steady overreach of the economic authorities is this: there are no safe paths from here.
If you asked me what I’d do in their position, all I could do is repeat the old Irish joke about the lost man in the countryside who asks a nearby farmer for directions, and who receives the helpful reply, “Well, I wouldn’t start from here.”
Taking away QE, raising interest rates, and allowing companies to fail when they go bust would create the sort of depressing negative consequences associated with a traditional recession.
I believe that there are better ways to move forward from here, but they aren’t really relevant. The relevant thing is what is actually likely to happen.
The economic authorities are in a hole, and boy are they digging.
Governments look set to take an ever-greater role in economic policy.
Funny Irish farmers will only be allowed to make their jokes if their carbon footprint is lower than their neighbours.
Banks will be told to lend to businesses in the sectors governments want to support.
Levelling up the North and South, transitioning to net zero, keeping jobs at whatever cost…
The zookeepers have a new mandate. The animals they think will bring the most visitors to the zoo will be fed 17 times a day, while the cages and diets of the lesser creatures will be cut and cut to make it all possible.
I think zoos are kind of cruel.
Like… they’re great, and I love animals, but they’re also sad, right?
Seeing a tiger lapping round the cage endlessly. No prey, no mates.
Well society, I think, has moved very subtly in that kind of direction.
Addicted to the hand that feeds us, tearing us away, and putting us in the wild would be incredibly jarring and upsetting, at first.
But then we might recapture the old magic of resilience, adaptability, and evolutionary development.
Sadly, that seems far off right now, and we must prepare for even greater government intervention going forward.
All the best,
Editor, UK Uncensored