A few of my Rants

Crazy people in a crazy world.

The human race evolved to live in small tribes in a hostile world, and we have the social skills necessary to survive under these circumstances. Until a few hundred years ago our cities remained relatively small, and the world population did not pose a threat to the environment. On several occasions relatively large urban areas have developed, but on each occasion they grew to the point where the local food supplies could not keep up with the population, and the cities collapsed.

Unfortunately in the last few centuries we have become too clever for our own good, so that the old controls no longer applied, and the population has risen to the point where the world is completely overrun with people. However our social skills have not evolved to match, and we are now completely incapable of managing the mess we have created.

The rapidly rising world population, which is demanding an ever rising standard of living, is consuming our finite resources at an exponentially increasing rate, and in a few years we will run out of a number of critical resources. When this happens the world population will inevitably crash, and in doing so it will almost certainly poison the resources that do remain so that, at least from our point of view, the world will become almost uninhabitable.

Favourite fallacies:

1. "The market knows best". Exponents of capitalism use this theory to justify giving them free rein to run their businesses as they wish, on the grounds that the market will ensure that everything works out for the best. But the market has neither brains nor morals, and permits the following most undesirable outcomes:

a. As the cost of transport has become a smaller component in the price of goods the free market has ensured that most goods will be produced in whichever country has the most exploited workers, and the least respect for the environment, this year.

b. Countries which pride themselves on protecting their workers, and looking after the environment, will find their wealth is being exported, and their workers thrown on the scrap heap. A few people will become obscenely rich, but, as is happening in America today, more and more people will be finding themselves out of work, and the country will accumulate a crippling foreign debt.

2. "The market knows best". The following scenario is repeated ad nauseam:

a. Someone has a bright idea. His company develops it, and makes a killing.

b. Three other people note his success, and copy him. They get their money back.

c. A further 10 people copy them, and wreck the market for everybody.

3. "Governments must balance their budgets". In the Western world in recent years our governments have become more and more obsessed with balancing their budgets, but all too often the only result of this has been that while their citizens have suffered from the resulting effort to reduce costs, private industry has continued to build up massive foreign debts. But it is not the government's debt that matters

4. "Efficiency is all-important". Capitalists are always hystericking about "efficiency", as if efficiency were the be all and end all of financial affairs. But efficiency, per se, is almost completely irrelevant. There used to be a joke that the villagers in the Highlands of Scotland supported themselves by taking in each other's washing. And there is a substantial element of truth in this -- if we analysed any of the modern shopping complexes I suspect we would find that half the shops made their money catering for the staff of the other shops.

a. The problem facing society today is not that our businesses are inefficient, but that because of automation 20% of the population can produce everything that needs to be produced, and the real problem facing society is to keep the other 80% of the population happily occupied without wasting resources, and without producing unnecessary "stuff". The two obvious ways of achieving this aim at through education, which improves the skill level of the population as a whole, and through research.

b. Research only really works when we support lots of researchers, and tell them to do whatever interests them. Inevitably many of them will waste their time (but this satisfies our primary objective), but some of them will make discoveries which lead to very real improvements in our standard of living. Experience shows that in most cases these discoveries are only distantly related, if they are related at all, to the stated aims of the research.

c. I originally announced this theory in the 60s. The tragedy then was that the only way the government considered it could justify either education or research was if it formed part of the defence effort, and so nearly all of the research was nominally attributed to defence. The tragedy today is that our governments are so obsessed with balancing their budgets that they will not support either education or research under almost any circumstances.

5. "Students should pay for their education". When I was at University 60 years ago I held a Commonwealth scholarship, which paid my fees, and a Trinity College Council scholarship, which paid my board. The government of the day had realised that by investing in my education it was investing in the future well-being of the country. But today the government has the short sighted view that education is a tool which will enable the student to get rich in the future, and forgets that in doing so he will also make the country richer. So they charge students large fees, and advance them HECS loans, which they are supposed to pay back when, inevitably (so the theory goes), they become rich. But all too often the only result of imposing this debt upon the students is that they flee overseas, where someone else profits from their education.

6. The original "Free lunch". We are often told there is no such thing as a free lunch, but interest on loans has been around since time immemorial, and interest represents a free lunch. How so? If I manage to acquire a useful amount of capital -- say $1 million, I can lend it to someone else at, say, 5% per annum, and they will pay me $50,000 per annum interest until the loan is terminated. So, if I can manage to live comfortably on $50,000, and until fairly recently this would have been easy, I can retire, and rest easy for the rest of my days. What is wrong with this theory? Theoretically, in an expanding economy, there is nothing wrong with this. The person who has borrowed my money can use it to build a prosperous business, and then they will have no problem paying me my interest. But if the economy is not expanding what will happen is that inflation will cause the currency to be devalued, so that my principal becomes progressively smaller with time.

7. Our Reserve Bank pontificates endlessly on the need to restrain inflation, and whenever it decides that the inflation rate is too high it increases the interest rate, on the theory that this will reduce the inflation rate. This is total nonsense: what actually happens is that the increased interest rate tempts more people in other countries to invest their money in Australia, so it becomes easier for Australian businesses to borrow money, but as the overseas investors are now getting a bigger chunk of something for nothing, the inflation rate will increase to match the increase in the interest rate. So, as any rudimentary inspection of the historical records will quickly show, a higher interest rate begets a higher inflation rate, begets a higher interest rate, and so on, until the system becomes unworkable, and then the economy collapses in a big heap. This has happened so often, and is so obvious, that anybody but a reserve banker would long since have woken up. Conversely when a country decides to stimulate its economy and reduces the interest rate, it makes it harder for that country to borrow money from overseas, and their industries continue to stagnate. Japan is perhaps the best recent example of this phenomenon. Because the United States had managed to get their dollar recognised as a reserve currency they have got away with an enormous trade imbalance for a long time, but there are many signs that their luck is coming to an end.

8. Some years ago the government decided that superannuation was a "good thing", and legislated that a fixed percentage of income had to be invested in the employee's superannuation fund. Unfortunately, at the same time, the government became obsessed with the notion that it should balance its budget. So, instead of borrowing this money, and using it to improve our infrastructure, our education system, and all the other public assets that are currently falling in a big heap, they are outsourcing everything that they can outsource, and our superannuation money, with no safe haven available, is sloshing around in the stock market.

As almost no one today is remotely interested in anything past the next election or the end of year bonus, let alone long-term investments, no one has anything worthwhile to do with all this money, so it is just sitting there, tempting all the "Bondy's" to devise creative ways of diverting it into their pockets. When we retire we will discover that the white ants have eaten most of our superannuation funds, and the only result of the government's consideration for our welfare will be that a lot of parasites will have grown fat at our expense.

 © Roger Riordan 2004-2017