Welcome to the Metaeconomics website, which has been designed to raise awareness that the global economic system is in terminal breakdown and argue the need for a new economic paradigm. We may, in fact, be sleepwalking into a new paradigm of a baneful, destructive and anti-democratic nature. I opened debate on this in 1993 with a discussion paper, "The End of Economics", which was later reprinted in my 2002 book Jehovah and Hyperspace. One section of it was entitled "The Genie Escapes the Bottle", the genie being the power of governments to print money at will since it had been detached from the backing of gold. Such a conclusion was widely regarded at the time as reactionary, for America had managed to convince the world that gold was a "barbarous relic" and that the American dollar could take its place as a global currency. Acting in concert with American policy, and no doubt at their behest, the Chancellor of the Exchequer Gordon Brown sold off most of Britain's gold at rock bottom prices. Events are now proving his foolishness, for the financial catastrophe which started to unfold in 2007 can be traced back to the unlimited amount of dollars created by the American government and the political deception that has grown along with it.
The website could be entitled "Economics at the Crossroads", and I offer in the last section a signpost to a sustainable future. The body of the site is made up of inform¬ation, historical and current, to support my case. Some of the information is hardly more than simple economic logic, some is rather technical, and this has created a difficulty in identifying and writing for a target audience. While I hope that professional economists may find something here of value, the website has been designed largely for the non-specialist. It is unusual in having an exceptional amount of text, for which an apology and explanation is offered here in advance. As the evidence for the argument of the website was compiled, it grew way beyond its original plan in order to give proper weight to unfolding events and as a result it has ended up half way between a website and book, and even so much significant material has had to be omitted. It is hoped that the "book of the website" will be published and available in late 2017. In the meantime momentous economic events continue to unfold in a most dramatic and hardly credible way. Who could have thought, for instance, that many banks – and soon, no doubt, all banks - would not be paying interest on deposit accounts, but would actually be charging clients for having use of their money. Or who could have imagined the powers that Mario Draghi, the head of the European Central Bank, would take to himself in declaring that the bank would buy corporate bonds from any company at his discretion – even those going bankrupt – effectively making a gift from the taxpayers of the Eurozone. The list of these outrageous innovations grows steadily and it seems as though we are too mentally numbed to react to them.
I think it is true to say that no mainstream economist takes this systemic criminality – for it is no less – into consideration as they juggle their ever more esoteric equations. George Soros's book The New Paradigm for Financial Markets (2008) attributes global economic malfunction to poor regulation, seemingly unaware that the regulatory bodies in many countries are themselves corrupted. If, as this website argues and for which it offers evidence, economic policy really is driven by fraud on a global scale and at government level, to ignore or deliberately blind oneself to the fact must lead ultimately to an economics of delusion and, more to the point, to much human misery.
Metaeconomics is, broadly speaking, the study of the foundations of economics and differs from economics proper in that it examines elements that we take for granted, such as money, banks and corporations, with a view to radical changes. Fritz Schumacher popularized the term "metaeconomics" by defining it as "economics as if people matter," but since his time we have become aware also of the need for an "economics as if the planet mattered". While completely in sympathy with these approaches, my particular concern has been to explore the hidden dimensions of economics – historical, political, ethical – and bring these to the surface. Two principles may be taken as a thread to guide the viewer through a large amount of economic information. They are:
In effect they turn Marxism inside out, for while he too believed in economic evolution and predicted the collapse of capitalism, he was blind to the main assumption of the argument here presented, namely, that to rebuild society with a new economic system but with the same selfish, ignorant and power-hungry individuals running it can only end in future disaster. That is why it is so important to know why the present systems are now failing, but that is only the beginning. At some point we need to identify new principles and apply them in new structures. That will inevitably be a long term and complex task and an enormous challenge to logistical planning, but the outline of an answer is given in the last page, headed Metanomics: a Really New World Order , and a word or two is appropriate here to introduce it.
"Metanomics" is not a word to be found in mainstream economics, but is not actually a neologism. It was invented by the social philosopher Eugen Rosenstock-Huessy (1888-1973)to indicate an economic theory based on ethics and principles of social justice. There is nothing new about that – Adam Smith was a professor of moral philosophy and Aristotle's economic writings are to be found in his Ethics - but on reflection it can be seen that capitalism operates on a kind of anti-ethic. The aim of the corporation is maximize shareholder value and it would be immoral for the directors to compromise on this. Thus, to take one simple but very pertinent example, if profits can be increased by closing a factory in the UK and transferring production to China, this becomes an over-riding obligation of a moral nature. The resulting damage to the now unemployed UK workers or, in many instances, to a whole area dependent on their wages is not a prime concern, or even a concern at all. Until now, the only solutions proposed to resolve this dilemma have been socialism or cooperativism, each bringing its own problems. Metanomics is a third option, not a policy imposed from the top but building up from economic micro-communities with a strong and essential sense of helping the local community in which they are embedded. Much radical thinking needs to be applied to come up with a workable theory, but the nature of the challenge may perhaps be indicated by saying that a metanomic theory would work towards the elimination of poverty by something more permanent, more productive and less demeaning than food banks.
As used here, the term Metanomics goes beyond Rosenstock-Huessy's concerns in adding a futuristic dimension by anticipating the long term effects of current economic policy. With the obvious exception of Marxism, no economist of note has projected economic theory beyond a horizon defined by the life span of the generation that they were addressing. It was generally assumed that the present situation would continue indefinitely with minor or major economic tweakings. Now, within the space of ten years economic thinkers find themselves staring into a theoretical abyss, where the concepts of money, bank, investment and money supply are losing their accepted meaning. The changes have been so rapid, so unexpected and counter-intuitive that it would be fair to say that no mainline economist has begun to take in their implications. Only now is it beginning to dawn that almost without exception pension funds are heading for bankruptcy within the next ten or twenty years. As that happens, a wide swathe of the population will have no income and, just as important, the society that depends on their spending will suffer a massive economic blow.
The economic future is a vast and unexplored continent, and metanomics may be taken as an umbrella term for the drive to explore it, draw conclusions and ultimately to propose workable solutions. Given the appropriate data and using a minimum of logic and imagination, one can at least see that the traditional pillars on which economic theory has built are now collapsing. One isolated fact will illustrate that assertion. China accounted for just 3% of global manufacturing in 1990, but today provides over a quarter, including 70% of mobile phones and, astonishingly, 63% of the world's shoes. This economic "miracle" has been created by a seemingly endless supply of cheap, almost cost-free, labour, but now, in response to cheaper labour from other developing countries, the Chinese government has embarked on a massive programme of "robotization", which progresses at breakneck pace. When it is fully implemented, it is estimated that it will throw 100 million Chinese out of work. What employment will they then find? In the face of these figures the classical answer that they will move into higher-skilled, higher-paid jobs is clearly a nonsense, and looking at this development on a global scale, we can foresee a world in which about half the population will be permanently without employment. How to understand and prescribe for such a situation is the kind of question for which metanomics is designed. It is what organisation theorists call a "wicked problem", that is to say, one for which an answer cannot be found even in theory. It will be totally outside the competence of a generation of economists who see their challenge in terms of building appropriate mathematical models and will, in fact, call for philosophical thinking at a new depth.
Isaac Newton famously said that if he could see further, it was because he stood on the shoulders of giants, and no one can write seriously about economics without the same feelings. It goes without saying that one must be grateful to Adam Smith, Ricardo and Marx, the great founding figures, for doing the heavy intellectual lifting, and to Keynes a century later for giving us “modern” economics, which made balancing the national budget a rather quaint old-fashioned idea. But all these were in a sense prisoners of the self-regulating machine model that has been the basis of economic theory. Marx, of course, was the exception in condemning free market economics, but still believed that economies worked like machines if directed from above by expert socialists.
My greatest debt is to those theorists who, while not rejecting the principle of competition or the free market, worked more on the margin where economics overlaps with sociology and ethics, and who were as much concerned with social justice or ecology or political theory as with economics in the narrow sense. Much of what I normally take to be my own insights is usually forgotten wisdom learned from Mill, Jevons and Bagehot who wrote for an earlier age, from Schumacher, Silvio Gesell and Barbara Ward in the more recent past and a host of contemporary writers who are alerting us to the need for a global economics that is sustainable, ecologically sensitive and socially just. In this they are at odds with most mainstream economics, and sometimes seem to inhabit a parallel universe. My indebtedness to them would call for too long a list, and though it is really invidious to single out names, I feel I should mention Lester Brown and Colin Hines for their passionate and informed work on the effects of globalisation, and David Korten, William Greider and William Engdahl for their professional sleuthing into the nefarious Realpolitik that drives it. For insight into monetary theory and community I acknowledge my debt to Thomas Greco, the late Ferdinand Lips, Bernard Lietaer and Richard Douthwaite.
Last, but not least, I would like to thank Jennie Dawson, of Lakeland Web Design for her professional help in constructing this website, finding solutions to many technical difficulties, and helping to shape a theme that has constantly overflowed its boundaries.
The obverse to Newton’s famous saying is that if one stands on the shoulders of giants, one should be able to see further, and that, I hope, justifies this website. From where I stand I see a world which is calling for a revolution in economic theory and practice, with new forms of banking, new forms of money and not-for-profit communities integrated into the wider scene. I hope that you, the viewer, will see something of the same.
This website was launched in 2008 and updated in 2011 to take account of global economic developments that followed on the collapse of Lehman Brothers and the rescue of the world's major banks by the American taxpayer, thanks to Hank Paulson's intervention. It is a complex picture and any attempt to simplify risks oversimplification. With that proviso it can be said that since 2011 economics as we have known it has come to an end, and the world is now entering into a period of economic chaos.
What has happened in the eight years since this website was started is very largely the culmination of trends that were predictable since 1971, when President Nixon decoupled the American dollar from its gold backing, opening the way for "fiat money" – i.e., money called into existence at the whim of the government. The decoupling of the US dollar from it gold backing in 1971 was an epochal decision and heralded the start of a new economic paradigm. For a short while the world of trade and finance was in shock and confusion, but soon it was realised that the economic wheels kept on turning and thereafter free-floating currencies became accepted as a norm. From the point of view of monetary supply it could have been predicted that once this traditional restraint on money-creation was lifted, governments – and particularly the US government – would create paper and digital money and the dollar would continue as a global reserve currency with no more backing than "full faith and credit" in the American administration and the country's economic health. On both counts there has been massive failure, for not only has America created trillions of dollars "out of thin air", using the soothing expression "quantitative easing", but America's industrial base has been hollowed out by so-called offshoring, that is, the removal of whole industries to countries with lower wages or a more favourable tax structure.
The theory behind quantitative easing, or at least the second stage of it, was that the government would effectively injected enormous amounts of new money into the economy, which would in theory be spent and would revive faltering economies through the well known multiplier effect. Thus someone who borrowed this new cheap money in order to buy, say, a car would put more money into the pockets of the car worker, who would in turn spend it on other goods, like furniture or clothing, thus priming the pump that would start a cascade effect. The economic logic was plausible, but there was one huge snag, in that the rise of China and other low wage Asian economies changed the whole nature of economics. The new globalism has ensured that a large part of the newly created money (backed theoretically by future production) now flows straight through to paying workers in China, Thailand or Vietnam. The globalized economy has effectively made it impossible to stimulate national economies in the old-fashioned, Keynesian way by using government borrowing to activate economic activity. Nevertheless, the Governor of the Federal Reserve, Ben Bernanke, justified this strategy in a landmark speech of November 21, 2002, when he said quite categorically, "The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning." Quantitative easing, initially proposed as a desperate measure for a desperate banking crisis is now becoming mainstream economics.
The last desperate ploy of printing money having now failed, there is simply no solution in sight, only permanent depression.
It would be foolish to rely on the business cycle returning the world to prosperity, and this for several reasons which, taken together, should awaken us to a completely new economic logic at work in the world. The change now in progress is so radical that it would hardly be untrue to say that university textbooks used across the world are now obsolete, hardly more relevant than those of the Victorian era.
What is almost never mentioned in economic circles is that full employment, which has been the goal of economic theory, certainly since Keynes, is now a dream of the past. We have passed the "demographic sweet spot", when there was a maximum of workers in employment in proportion to retirees who were dependent on their earnings to provide the financial flow required by pension funds. Add to this the rise of the robots, which now replace workers of many kinds, farmers and bank tellers and car assemblers, and it is impossible to see where future jobs will come from.
The upheaval in global economics goes deeper even than this, for the very definition of the human group is now changing more profoundly than at any time since the Middle Ages gave way to the Industrial Revolution and the rise of parliamentary democracy. Since Adam Smith wrote his seminal work The Wealth of Nations, the nation has been taken as the natural economic community, but all that is now changing with government agreement to create transnational organisations that will have legal authority over the legitimate state. What began as the General Agreement on Trade and Tariffs (GATT) after WW2 moved on to become the World Trade Organisation (WTO), which effectively removed the right of the nation to impose tariffs in order to protect its home industry. The WTO is now being superseded and its power extended by three organisations which are currently under discussion, mostly in secret. Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership (TPP) and the Trade in Services Agreement (TISA) are now being foisted by Big Business on national governments, all for much the same purpose. If they are accepted in full, it will mean that henceforth not only will national trade barriers be flattened, but transnational companies will be able to sue and demand damages for any governmental action that is deemed to damage their profits. Its repercussions will be immeasurable, for it will mean the end of democracy. No government who has signed up to them will have the power to block any import for any reason, for instance, because a product is produced by sweated labour or its manufacture involves massive pollution. Any attempt to do so would land the government in question in a court – set up the world's TNC's – and it would be overruled and fined for attempted restriction of profit.