onsdag 16 april 2008

Should Brown be blamed for all the trouble?

Yesterday's Daily Express ran its front page on the idea that Gordon Brown was to blame for the unfolding financial disaster. It is convenient to look for a scapegoat, but the crash of 1992l took place under the Conservatives and there is no reason to believe that things would have been different under any conceivable UK government. So in a sense it is stupid to blame the former Chancellor. He just happened to be occupying 11 Downing Street during the period in question.

At the root of the problem is the defective economic theory which guides politicians and their advisors and gives them no plausible means of accounting for economic cycles. Accepted economic theory has no room for the idea that these cycles might be due to the interaction between the land market and the banking system. So the danger was never forecast. Since there was no explanatory mechanism, nobody had the foggiest idea how the collapse might be forestalled.

There is also the role played by a lot of other people. Those who borrowed money on the equity of their houses in order to pay for foreign holidays or imported consumer goods - which resulted in large outflows of sterling and ultimately the inflationary drop in the exchange rate now taking place. And of course those who lent money to people, when there was a significant chance that they would not pay it back, have also helped to bring about the situation. And not least, journalists are to blame for not helping their readers to understand how the system works. Presumably, they, like the government's advisors, are just regurgitating the economics they learned at university.

There is good information available on the workings of the economy, available to those that can be bothered to keep on asking questions until they receive convincing answers that are capable of standing up to scrutiny. But intellectual laziness means that most people are satisfied with the same old dubious explanations.

Following in the intellectual tradition of the physiocrats will deliver both explanations and means of preventing the problems we are now experiencing, but they have long been regarded as interesting but of no consequence today.

The failure is a national one and has taken place at all levels of society. And so it is not unjust that the pain should be equally widespread.

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