Lemmings are small furry animals famous in folklore for mass migrations during which they sometimes jump to their deaths over the edge of cliffs or into rivers too wide to cross. Why on earth do they do that? Couldn’t at least one or two of them stand up and say “Listen everyone, you’re going the wrong way: do a U-turn and run back uphill now!”? Perhaps it would help if they had a handy little book explaining how to do a U-turn? Maybe the difficulty for the lemmings is actually knowing when they are heading for a cliff edge: as they stumble along from one tuft of grass to the next, they probably see only the tails of the ones in front of them plus the grass itself, not an overview of the scene. As well as not having that physical overview, they don’t have language or books to hand down the history of past disasters. Even if you could call out to a lemming “cliff ahead” he or she would probably reply: “Scaremonger – in all my years I’ve never seen anyone fall off a cliff.” “This downward slope is just a normal fluctuation in terraaaain ....... aaaaarrgh ....... thump.”
So at the end of the day, writing a U-turn guide for lemmings is probably a waste of time. However, there is another animal which often shows the lemming-like behaviour of going careering off as a group without thinking too much about where it is heading. This new creature is fairly closely related to lemmings being also a mammal. Of a sociable disposition it is larger, less furry and has the advantage that it can read. I hazard a guess dear reader that you are one of these animals (as of course am I), and unfortunately we humans are facing a cliff edge of our own. Plenty of humans have indeed stood up and warned us in the strongest terms. In the words of the United Nations General Secretary: “The world must wake up. We are on the edge of an abyss — and moving in the wrong direction”.[4] He refers to a “cascade of crises” – disastrous climate change, glaring inequalities, and more. Yet it is proving very hard to heed these warnings – the reason almost certainly being that at the root of many of the problems is the operation of the economy. So understanding our economy is key to achieving the change of direction we urgently need, and that is what this book is about.1
Beginning an economics book talking about animals may be a little unusual. Yet economics is about ordinary activities that all creatures do: getting or producing the things we need to stay alive, sharing them out, and cooperating with others of our species in the process. Keeping in mind that we are one animal amongst many, allows us to compare ourselves with our cousins and thus gain a better perspective.
The knowledge that we are only one of many animals that live or have lived on this planet, also helps us to be more realistic about ourselves, about our place in the world, and about what the future might bring. When modern economics emerged in the 18th and 19th centuries, European society was deeply Christian and Christianity then placed us centre-stage: God had a human appearance and created us in his image; the world itself was created for us and the other animals put in it for our benefit.
“In the beginning God created the heaven and the earth.” “And God said, Let us make man in our image, after our likeness: and let them have dominion over the fish of the sea, and over the fowl of the air, and over the cattle, and over all the earth, and over every creeping thing that creepeth upon the earth.” – The Bible, Book of Genesis.
By Giovanni di Paolo, 1445. [WMC]
Religions also offer hope for the future. However bad things may be now, life has a purpose and direction, leading for example to heaven for the individual and judgement for the whole Earth. Much economics theory seems similarly optimistic: the world’s resources have been placed here for our use and the operation of the free market will lead to the betterment of mankind.
Nor is it only free-marketeers who see the operation of the economy as leading to a ’happy end’ for humanity. Karl Marx for example, believed that economic development would eventually lead to a sort of heaven on earth in which there was no obligation to work and all needs were met – and that this would inevitably come about. Even though Marx was an atheist and his heaven had to be an earthly one, his vision remains curiously similar to the religious belief that humans are special and that the human story leads to a future paradise.
First edition, 1848. [WMC]
“... as the exploitation of one individual by another will also be put an end to, the exploitation of one nation by another will also be put an end to. ... as the antagonism between classes within the nation vanishes, the hostility of one nation to another will come to an end.” – The Communist Manifesto, Karl Marx and Friedrich Engels.[5]
“In a higher phase of communist society, after the enslaving subordination of the individual to the division of labour, and therewith also the antithesis between mental and physical labour, has vanished; after labour has become not only a means of life but life’s prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly – only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!” – Critique of the Gotha Programme, Karl Marx.[6]
In the 19th century however, science began to remove humankind from our pedestal and place us firmly back among the other animals. Charles Darwin published the Origin of Species in 1859 introducing the theory of evolution and making it plain that we share common ancestors with all other animals. Nineteenth century English society was said to be shocked by the suggestion that they were ‘descended from apes’! For me the extraordinary thing about evolution is not that we evolved from an ape like creature that was also the great great great ..... great grandmother of chimpanzees (the resemblance between us and chimps is after all pretty obvious) but that if you go even further back, our ancestors were furry little rat like creatures that scurried around under the feet of dinosaurs, and before that, reptiles, and before that fish, and so on back to the very origins of life on earth.
In recent years genetics has complemented evolutionary theory by allowing us to see how many genes we share with other life forms. The results are startling we share roughly 98% of our genes with chimpanzees, 85% with mice, 60% with fruit flies and 50% with bananas. Yes, the banana is a distant cousin, and all mammals are close relatives – little wonder that we like to drink the milk that our near cousins cow, sheep and goat make for their babies.
Lycoptera Fish Fossil. [WMC]
Once we accept that lemmings and other animals are our cousins, it is less surprising that like them, we are also focused on what is just in front of us for most of the time, and we find it hard to step back and see where we are going. It is natural for us to find it hard to tackle big world-wide problems. Like most other animals we are mainly interested in our own patch of ground and family, friends (and enemies) who live near us. We should not be too hard on ourselves if we find it a struggle to forget the concerns of our day-to-day existence and survey the wider scene, let alone take effective action based on what we see there. Yet, the wonder of being human is that we do have the ability to look out from the small part of space and time allotted to us and contemplate the immensity of the universe, study the distant past and gaze into the future.
That we are a small and recent branch on the immense family tree of creatures that have lived on this planet, must also lead us to another conclusion: that we are not the heroes of the story of life on earth that everything else has been leading up to. There is no guaranteed future for us any more than there was for dinosaurs or dodos in the past or there is today for polar bears and pigeons.
Having said all that, if you hold a religious faith that includes the belief that humans are created by God, please don’t stop reading here. Though from a different starting point, you may well arrive at similar conclusions regarding the need to accept human limitations and that (given free will) there is no guarantee of a bright future for us.
The motivation then, behind this book, is that our economy appears to be leading us to an environmental and economic disaster; a future paradise for the human race is not guaranteed and probably not even likely. It is therefore up to us to have more foresight than lemmings, to understand and modify our economic system, to spot the precipices and turn away before we go over them. This has become more urgent than ever before because the human economy has grown to an extraordinary size. So what is economics and why does the economy matter?
Economics is typically defined as a ‘social science concerned with the production and consumption of goods and services’. So we can define the ‘economy’ as being ‘the system by which people produce and consume goods and services’. At the very least, we need our human economy to produce what we need to be able to survive. And just like other animals, to survive we need to:
Our economy produces food, drink, houses and clothing in abundance to cover the first two needs. Our desire to reproduce is provided for by an enormous variety of products that are supposed to make us more attractive or enhance our status – from fashion items and skin creams to fast cars and yachts. To keep safe we make locks and guns and pay for police, soldiers and health care.
Since all animals produce goods and services to cover their needs, do the other animals also have economies? It seems to me obvious that they do. If an animal is solitary and produces what it needs by itself for most of its life, then its ‘economy’ is admittedly a very simple one because it does not cooperate with others of its kind, in for example producing food or shelter. However, many animals do live socially and cooperate with one another, some in complex societies where individuals have different types of job and cooperate to survive; bees are one such example. Of all these social creatures, it is probably safe to say that we humans cooperate more extensively and widely than any other, having a myriad of professions and a web of relationships that spans the globe. For many of us, almost everything we consume is made by other people who we have never met and may well live thousands of miles away. Because our human economy involves such extensive cooperation, economics is a social science.
We live in exciting times economically speaking. One economic ‘system’ – free-market capitalism – has triumphed and is now dominant throughout most of the world. The talk is of globalisation in a world shrunk by modern transport and telecommunications. At the same time we are confronted by a number of major economic problems, or problems that at any rate have an economic component. Some of these are:
Until the last two hundred years or so, human productivity grew only slowly (if at all) and much of what was produced were merely life’s basic necessities: food, shelter, clothing, and so forth. But in these last two centuries the industrial revolution and sophisticated forms of organisation have made possible a growth in productivity such that in developed countries it is now only necessary for a small part of the population to be engaged producing those basics. The rest are either working to produce an ever-growing range of additional goods and services – many of which are new – or they are not producing at all (e.g. they are studying, retired or unemployed).
With these advances in productivity, why should the residents of the richer, more ‘developed’ countries, like the UK where I live, ever perceive the economy as a problem? No natural disaster or famine afflicts us, and while there may be ecological and resource problems visible on the horizon, for the moment there is no crisis. Yet in the UK there are over a million unemployed, insufficient money for essential infrastructure and cut backs in facilities we could formerly afford.[9] Those in work are expected to work ever harder if automation and foreign competition are not to take their jobs away.
At the same time, despite the problems of unemployment and poverty affecting some, overall levels of consumption have never been so high. We have become the consume and throw away society, damaging the environment and possibly leading to future resource shortages. But almost the only answer to poverty commonly proposed, is more economic growth – more production, consumption, and environmental damage. Apparently our economic system only works well with the accelerator pressed firmly to the floor. Paradoxically the technological advances which should in principal make life easier, seem to be making it more difficult.
Many ‘alternative’ books on economics move quickly to describing the economy that they would like to see, such as a more environmentally sustainable one. By contrast I want to first understand our existing economy. For example: ‘Why does our economy suffer slumps when no-one in charge seems to want them?’ Therefore, Part 1 of the book is aimed at analysing and understanding the economy as a neutral observer, without judging anything or anyone – the science approach, if you like. You could read it with no intention of changing anything.
However, like many people, I believe that we need changes if we are to avoid environmental disaster and if we want a fairer world. So there is a Part 2 which is not neutral. Based on the analysis in Part 1, it looks at what changes we would have to make to move towards a fairer and more sustainable economy.
So Part 1 – the ‘science’ part – sets out to tackle the questions ‘Why does the economy behave as it does?’ and ‘Where is our economic system taking us?’.
I believe that you will struggle to find a straightforward answer to these questions in conventional economics text books. It could be argued that this is because there aren’t any ‘straightforward answers’ – it maybe that the economy is so complex that it can only be understood by trained economists using sophisticated maths, or alternatively perhaps it’s so complex that it can’t be understood at all. Let’s consider those two possibilities:
The approach I shall follow is to focus on the fundamentals of our economic system, i.e. our needs & wants, the physical resources available to us, and the work we do to turn those resources into the things that we want. By doing that I believe that we can get an understanding of the economy that will allow us to answer the two questions above – why it behaves as it does and where it’s heading. We shall be able to understand why there is high unemployment and a lack of care for the environment, but we shall not however be able to predict the price of corn at any given moment.
In the course of answering these questions we shall also see that some of the claims made by economists are little more than ideology dressed up as science. In order to protect the interests of the super-rich, economic theories are used to justify the indefensible: the impoverishment and marginalisation of a large part of humankind and the destruction of the environment.
To wet the appetite, these are the sorts of things that I have often puzzled over and that I hope in Part 1 to answer.
So let’s get started by considering the simplest economy possible – that of a single isolated individual – and building from there.
1There is a further reason to direct this book towards humans: despite the folklore, it is a myth that lemmings jump en masse to their deaths. In fact, out of the two of us, they may prove to be the more sensible.
2The term ‘Third World’ was used to refer to countries that are poorer and less-industrialised. I occasionally use it in this book since more recent terms like ‘Global South’ are also not very satisfactory or precise.