Market and State without Responsibility
Economy and government without self-government 1. 2. 3. 4. 5. 6. 7. The Market The Household and the Inter-generational Economy Work outside the Household Market without Restraint Public and Private Man Government over-extended Self-Government and Good government

1. The Mixed Economy of Household and Market
The market and public square

We leave family and household and go out to meet people outside. We meet outside our respective households, in space that is public. We do so simple perform the joy of it, because we are social beings, who like one another’s company. We talk, and explain ourselves to one another, and exchange accounts of who we are, and as we talk we adjust our expectations and so we learn. People are constantly checking up on each other, constantly monitoring the ongoing stream of communicative exchanges and accounts that make up daily life… accountability and account giving are part of what it is to be a rational individual. It is through giving and monitoring of the accounts that we and others provide of ourselves, and of our actions, that the fabric of normal human exchange is sustained.1 What we discuss there in that public space are matters of common interest. We tackle the matters that are of immediate interest to us all, and a pragmatic common approach to them emerges through our discussions. We do not start a completely new conversation each time we encounter one another, nor give a new account of ourselves. Whenever we gather we pick up from earlier conversations, so what we said to one another this time refers to what we said last time. Each conversation relies on the accounts of our common identity that we have given and received in all previous conversations with one another. We abbreviate these accounts. We give extended accounts of our identity and abbreviations of them. It requires that we tell one another who we are and what we are worth, and it requires abbreviations of these accounts of our worth. Our encounters feature both (1) extended accounts of our joint identity and (2) those abbreviations of these accounts. The extended accounts, in which we explain and argue with one another about our identities characterises the public square. Prices are our abbreviations of these accounts. The market is that part of the public square in which we accept or decline the account offered to us, and so in which our accounts are shortened to yes/no exchanges, to buy/sell signals. We cannot communicate with one another simply by means of these abbreviations. In addition to prices we request a fuller account for one another in order to establish what we are being offered, and to say what we are ready to accept. Alongside prices and decisions to purchase, there are bids and negotiations. The abbreviations cannot substitute for the full accounts, prices cannot substitute for negotiations; equally the prices and negotiations of the market cannot substitute for the more complex giving of accounts that characterise the greater part of the public square.


Michael Power The Audit Society: Rituals of Verification (OUP 1997) p. 1.


The Market – the judgment of our peers The market forms part of the public square. The public square is bigger than the market. The market is that part of the public square in which we deal with our immediate and pragmatic considerations and do so in prices, the which are the shortened form that has evolved through generations of such encounters. The more lively our encounter and conversations, and the more careful the attention we pay to the nuances of one another’s offerings, the healthier our public square is. When our public square is vigorous, our economy is likely to be so too. We come together to judge and praise and win the praise of others. We make our judgments with reference to what is purposeful and good and true. We do not merely say ‘I like that’, but ‘that is good’ and ‘that is true’. When we say ‘I’ll buy it’ or ‘I’ll sell it to you at that price’, we are offering one another abbreviations which we are all able to relate to those longer accounts in which we describe things in their setting and with their purposes and then say of them that they are good. We are one another’s judges. We go out to find people who convince people of our worth. In the market we submit ourselves to the judgment of our peers. It is for other people to tell the value of our contribution and so say what they will pay us for it. If we do not accept their evaluation, we can appeal to some other part of the market for a higher estimate. A market is a large assembly of people. They may judge what is true, and what is the value of any account, or of any enterprise or other public contribution. They may not be perfect judges, and their immediate assessment may be adjusted so that a truer judgment emerges over the long-term. The global market is the whole assembly of all our contemporaries around the world. This market, of all mankind, is the proper limit on the decisions of any one particular group or nation. ‘Even the GNP economy of traded goods is an economy of interpersonal relationships.’2 If markets are not convinced that the decisions of any national government are just, and particularly if they think that the clique with political power has been rewarding itself, investors from other countries will sell their holdings and walk away from that market and nation. A market must be free, for exchange that is coerced is not economic exchange. Yet free trade is an aspiration. A ‘free market’ cannot be a market entirely without regulation. Law enables markets to emerge; if law disappears and is replaced by lawlessness, exchange will not be free. It will become a form of pillage in which the strong benefit at the expense of the weak, and the freedom of unforced exchange is lost. A market will be regulated by a set of practices that may remain tacit if that market remains small enough, but it nevertheless depends on the existence of law and its sanctions. Law and regulation, and public consent for the enforcement of the law enable a market to operate in greater rather than lesser freedom. ’Markets’ do not exist in a void and political announcements will not create them. Trade is based on complex information and trusted institutions, customary, legal or other.’3 There is law because we decide that we do not act solely as individuals, or as single entrepreneurs, but we also act together with others, and so deliberately to create consensus about what is acceptable, and so bring about first selfregulation and then explicit regulation. This is what any society does in order to


Offer The Challenge of Affluence p.358 Reuven Brenner Labyrinths of Prosperity: Economic Follies, Democratic Remedies (Ann Arbor: University of Michigan Press 1994) p.149


function as a nation, that is, a political society which under law achieves a level of domestic stability and peace. We call this ‘trust’. ‘Trust itself resembles a gift: a unilateral transfer with the expectation, but no certainty, of reciprocity. Regard provides a powerful incentive for trust, and trust is efficient: it economizes on the ‘transaction costs’ of monitoring, compliance and enforcement.’4 Yet the crowd that makes up the market are not always good judges. They do not attempt to give us a full account of how any particular good fits our own purposes and so will be good for us. They do not refer what is good to criteria outside the price system, against which they have to measure goods and services with their own judgment. The concept of marginal utility, the concept central to the distinctively modern economy, tells us that everything which someone is willing to pay for, adds to the total value of economy. Whatever I can find a buyer for is good, simply because there is a buyer for it, and no other judgment is of any significance. But not everything we do adds to the real economy. Some goods and services – narcotics, for example – make it more difficult for others to act well, impact negatively on the economy over the long term, and so may be considered disservices. We can appeal for fuller and more adequate disclosure, and can heap public disapproval on certain forms of economic activity, and seek to bring the externalised costs onto balance sheets, by tax, so they are reflected in prices. We can insist that the pollution caused by the products of this industry appear as a liability on the balance sheets of the firms that produce them. Some economic services works as disincentives, so that we do not act freely, take our own initiatives and act generously and in the common good. Yet we can appeal to those assembled in the marketplace to use their own judgment to come up with a better judgment. Each industry must make the public case for that it is a public-spirited contributed to the greater economy and well-being, and must answer the case that it attempts to direct and distort markets to its own partisan advantage. All national economies have mercantilist tendencies, for each state attempts to secure those supplies and technologies that it regards as vital to its economy; these tendencies may be kept in bounds by the desire to trade with other economic partners who cannot be coerced, and who give us a reason to commit ourselves to freedom of trade. Some corporations will tell us that their industry is good for our national economy, but we may reply that they appear good only because they conceal the costs that they place on the national economy, by causing social or environmental costs that will have be met by the whole economy, through state action, in future years. The market is fallible. It is the least imperfect system for the allocation of resources, if we should call it a system at all. When price signals are not reliable, and prices do not move down far enough to ensure that everything is sold. When there is no transparency, the market does not clear. Then no one can be sure of the value of their holdings. Interest groups avoid making explicit in their balance sheets the values which their assets would achieve at the present state of the market. We may have too narrow an account of our interests; we may not sufficiently distinguish between what we desire at this present moment and our long-term interests. It is a fundamental tenet of modern economics that each of us is a rational agent, who knows our own interests and pursue them. made up of such rational agents, the market as a whole is efficient: the totality of the knowledge of these individual agents is true. They may be individually deceived, but the market as a whole cannot be: this is the ‘Efficient Market Hypothesis’ (EMH).

Offer Challenge of Affluence p.79.


The privileging of individual choice is founded on contestable premises. It assumes that every person has a set of unique and well-ordered preferences, that she is fully informed of all the choices available, that she has good knowledge of herself, and sufficient self-command to achieve her ends.5 We are indeed rational, or deliberative, beings but it is not sufficient to say this and leave it at that. We must always ourselves whether we manage the best balance between our short-, medium- and long-term interests, or whether each of us is irrationally careless about our own long-term. We have to ask whether we may approach a more adequate and truthful account of our interests simply through encounter with other persons in the marketplace, and that this encounter is itself a supreme good, which the market sometimes makes easier or more difficult. The efficiency of the market is as much an aspiration as the freedom of the market. Every marketplace is riven with factions, some exerting power over the functioning of the whole. States are deeply involved in markets; much of their effort is directed to buoying up certain prices and prevent markets marking prices down. But if the market – which is the assembly of the wider world – is prevented from judging values for itself, the result can be deception and fraud which are economically counter-productive and damaging to the integrity of the state and society as a whole. True knowledge and rationality are likewise aspirations. The economy flourishes to the degree that the public square promotes freedom, efficiency, rationality and truth; the health of our economy depends on the extent to which our society demonstrates moral competence, that is, that enough of its members not only act for the common good but cannot conceive of acting in any other way. Business is the function of persons reacting near-spontaneously to opportunities. There is economic growth when people take risks and find a way to charge for a service. Only individual economic agents, combining freely together can do this; governments simply have to allow this happen. Governments can sustain such pursuits both by adopting policies that help the humble to rise and do not prevent great from falling, and by establishing institutions that discourage erroneous policies.’6 Yet governments are not content just to let things happen, but want to make them do so, believing that it is in their power to steer and advance their national economy. They believe that a finite and knowable set of instruments, employed in known ways will produce tangible outcomes. But attempts by governments to develop a ‘macro-economic’ policy and steer their national economy are very often counter-productive, so that resources are pulled in less-than optimal directions, as various interests establish their claim on subsidies, and thus create long-term distortions and extract a form of ‘rent’ from the economy as a whole. 7 Governments should not permanently decide that they are better judges than the market as a whole or intervene to prevent the process of public judgment by which true values emerge. But is this not what governments did in response to the financial crisis of 2008? They put money into the banks, expecting it to flow from them into the productive economy, and talked the markets up, encouraged people back into them. But they thereby prevented the discovery of true values,
5 6

Offer The Challenge of Affluence p. 357

Reuven Brenner Labyrinths of Prosperity: Economic Follies, Democratic Remedies (Ann Arbor: University of Michigan Press 1994) p. x… 7 Reuven Brenner Labyrinths of Prosperity: Economic Follies, Democratic Remedies (Ann Arbor: University of Michigan Press 1994) p. x.


so no bank trusted another enough to lend to it, and paralysis of the system was, and still is, the result. They concentrated entirely on the issue of confidence, and avoided the issue of truth. Governments did not instigate the judicial process by which specific instances of the deception of the market could be brought to court. It is possible that there has been widespread deception and complicity in it. The way to test this is to put charges to some leading actors in the financial industry and let due legal process decide whether there has indeed been fraud. No charges were brought and there was no public process of confession or discovery of the truth. Confidence was thought to be all that was required that the market recover, but a confidence that is not based on truth can only be short-lived. By putting themselves between us and the truth, governments can make a bad situation worse. Political failures have economic consequences. Failure to secure the truth through judgment ensures that the economy remains in crisis. The market is part of the larger public square. We are not limited to what current prices tell us. We can speak to one another directly and publicly, using the language of justice and right. We can appeal to one another to re-assess our individual performance, and to offer one another more modest accounts of our worth. We can shame offenders, charge them with malfeasance and bring them to court. The health of an economy depends on the courage of the whole citizen body to make these challenges in public. It depends on the ability of that citizenry to sustain the climate in which the powerful can be challenged and feel obligated to give an account of themselves, face justice and receive their penalty. The political nation may not allow such financial interests to become so powerful that they are able to decline to respond to such a call. We can encourage one another to take the discipline of the market and mark our assets down, and so release the market from paralysis. The nation with the vigour and political will can recover from corruption, and need not descend into economic stasis. The whole political nation is always on trial in the market, and the market, in particular the financial service industries – is always on trial in the public square.

2. The Household and the Inter-generational Economy
The logic of Continuity Persons are both the ends and goal of the economy and also the means of the economy. Economics is about those flows from one generation to another by which the human race persists through time. We may hope to bring up children to be persons, who have children of their own, and pass on the virtues that make for the same readiness to bring a new generation into existence in the course of time. We provide one another, through the market, with the material requirements of human bodies by which this process may continue. We trade economic goods and services in order that the human species continue. All economic activity may be said to serve this fundamental common good which is the continuation of humanity. We live and work on the assumption that life will go on from generation to generation; on this basis we can talk about an ‘economic equilibrium’. But this should not be taken for granted, for the bringing into existence of a new generation is a work, for which we need a motive. We have said that love, of particular persons, gives us this motive. A society persists because there is conversation and economic exchange between its generations. Would-be grandparents have persuade their adult children to produce grandchildren for them. One generation has to encourage another to bring into existence a third. This requires that we all speak an intergeneration language, which allows us to conceive of more than just our immediate concerns and the present moment, and to adopt that longer-term rationality, and with it, self-restraint and self-sacrifice, required to bring a new generation into existence. Such an inter-generational orientation has to seem reasonable and desirable. Modern economics would seem to recognise only those conversations, and


concede the rationality of those decisions, that take place within a single generation.8 Can it acknowledge the reasonableness of working for a generation that does not yet exist? The household is the entity that holds two and more generations together. It transmits inter-generational motives and rationality, and thus is the means of continuity for any society. Within the household, members of the family can discover the satisfaction of their needs and desires through one another, and learn to distinguish desires from needs. Children can develop the emotional maturity which will give them greater freedom for their subsequent decisions about which relationships and forms of life to commit themselves to when the time comes to set up their own household. The work of parent supports the household within which each member can develop a degree of personal autarchy. The household is itself a little economy. We may say that it is the first economy, the primitive economy, while the market and all that we usually understand by ‘the economy’ is dependent on it. The household as primitive economy Once the domestic household was the fundamental economic factor. Now it is the place of consumption. Has the household become a left-over without function? Would anything change if it disappeared? The was a long debate in twentieth century social anthropology about the economy in ancient, and in what used to be called ‘primitive’, societies. Did the Greeks and Romans have an economy? Or did the economy only start to appear much later, in early modern Europe? Some anthropologists contrasted the primitive economy, which persons exchanged gifts, with modern of economy of rational calculation, in which people did not give but bought and sold. Moderns calculate and maximise. Other anthropologists pointed out that ‘primitive’, nonmodern, peoples calculate too. They simply calculated without paperwork, making fewer explicit records than we do, and so working their memories harder, but they nonetheless knew whose turn it was to give next. Primitive economies were small, so everybody knew everybody, or knew someone who was able to issue an instant credit rating on them. Ancients maximise too, because each seeks to gain honour, and this honour is a sort of credit; it may be that they were content to maximise over longer timescales than moderns, and so were in no hurry to make that credit explicit or to call in any favours, because it was not in their interest to call too much attention to how much more honour than they had accrued than their rivals because it was not in their interest not to start a war. They had an economy, but did not isolate and reify it as such as we do, and we may find it a challenge to identify all the relationships and transfers in their society that might be regarded as ‘economic’. Are today’s primitive societies still waiting for a developed economy to emerge? Are they lacking something until it does? Or are non-modern societies not primitive but just different? Is the question of the development of a society to maturity with the emergence of a distinct economy a reason question, or are such comparisons between cultures not meaningful or even wrong? More recently some social anthropologists have suggested that these societies are more robust than our own. Perhaps over the very long term our society will disappear while they, if they survive our predations, will remain. Primitive societies have, some suggest, a more sustainable relationship to their environment than we do, and this will become clear as the connection to economic growth becomes a more urgent challenge for our economy. We will come back to these questions when we ask about the necessity of making cross-cultural comparisons, and make

John D Mueller Redeeming Economics


some of our own, in chapter 4, and compare modern and non-modern economies as we talk about growth in chapter 5. The household and the costs of accounting But ‘primitive’ economies are also found right here in Britain. Each of us was born in one. Every family and every domestic household is an economy in which we exchange gifts and services without payment. This is not to say that there is no calculation in the domestic economy: husbands and wives, parents and children are all calculating, and all prepared to protest when they think they are being treated unjustly by parents or partners. But how we account is a matter of what accounting period we use. We may protest some injustices instantly – my brother hit me, my parents left me with the washing-up. But families are not intending to reach any final year end, but intend to continue and so the period over which injustices can be rectified always extends. If economics involves explicit accounting, we always have to decide on our timescale. I have suggested that modern economics seems to exclude all but the short-term. It is not in our interest to give other family members the impression that we will soon be turning our backs on them and moving out, for we want to continue to receive their little gifts and services. I am tempted to behave badly to my children, but I know that I will then be teaching them how to behave badly back to me. I suspect that if they are hellish to me now, in a few years time their own children will be hellish to them, while I as grandparent can bask in a warm relationship with their children. Though we can leave the domestic economy we call home, we cannot leave the economy in its entirety, for we have no alternative planet to go to. We could draw an intermediate lesson from this. If we agree that any economy continues because all its members believe, or at least hope, that it will, each member must give the impression that they are committed to it and not about to withdraw. We have to convince one another that we are here for the long-term, and it is worth their while to continue to make open-ended unpaid investments. We all have to concede that we are here for the long-term. It does not benefit us to allow to threat or even the thought that we are individually about to de-camp from this economy, leaving favours unreciprocated and debts unpaid. Early and persistent profit-taking results in medium-term losses. In such a prisoner’s dilemma, we all lose, trust is lost and the economy grows less than it could have done. It serves us all to talk up the general sense of confidence and generosity that encourages others to greater commitment. Excessive accounting and excessive profit-taking diminishes that warm feeling, makes everybody nervous, and shrinks the economy as a whole. There is a cost to accounting and thus a cost to excessive employment of money, as we shall see. Let us consider a first exchange, that takes place between two friends. You lend me your ladder and on another occasion I lend you my car jack. You ask for that pile of spare wood at the bottom of my yard. You may offer to pay, but I refuse to accept payment and pretend to take offence if you persist. Or perhaps I am glad that you volunteered to pay; you offered a price, and I pronounce that I would be satisfied with half that amount. We negotiate the tricky transition from neighbourly favours, friendship gets stronger, but we are also able to price our obligations and start to put business one another’s way. Let us consider a second exchange, within the household economy. Your wife or husband beckons you into the bedroom and provides the service that only they can. You are bathed in a warm glow. This service is free, or each of us is happy to think of it as free. You do not factor in all the many hours in which you wooed her, the months of going out to cinema and restaurant that you had to put in


order to win eventually this promise of sex on tap at home, which turns out to be sex only when both parties are in the mood. So much time has to be invested to achieve that mood. At this point it is worth wondering with economists, particular those schooled in Chicago, whether it would not have been more efficient just to pay for sex from a professional, and so to unbundle all the various services that one’s spouse provides and pay for them individually?9 But afterwards you wonder in what economic terms you should describe this. Should she bill you for this service, or should you bill her? Who should pay whom? Could you bill each other, and could it be a twice-counted addition to GDP? Then there is another consideration. Let us say that your spouse is better at making out bills than you are. She can itemise things with greater detail. It would take me longer to make up a bill to present to my wife that itemised even the small number of my services to her that I was able to name. To keep down the amount of the day which we both spend in making out our bill to one another, and reconciling our accounts, we call it quits. I am convinced that this is more to my advantage than hers. The cost of accounting for all the various little services would be prohibitive. We owe each other everything: our love denominates itself as many little services, but we don't pay each other in return for specific, individually named favours. We account informally: she doesn't pay me and I don't pay her. We have agreed to avoid all the costs of accounting. I am going to run an unending account with her and she with me. Perhaps we hold a cursory and casual reckoning at the end of the day and in that sense we keep short account. But we will never reckon up; what unit would we reckon in? What currency is valid within this relationship? This marriage is an ontological fundamental: within it we two persons are also a single entity, a single legal ‘person’. Intergenerational accounting Now let us consider the same domestic exchange, over the longer term, between one generation and another. What is the relationship between me and the next generation? In what economic terms should it be expressed? Should I be preparing an invoice to present to the next generation? I wipe the grubby faces of my children, dress them, give them breakfast, and at night I add this and a hundred similar little services to the invoice that I will present them when they are adult. With every hour of the day they move deeper into my debt. Each year the detail with which I make up this account, the number of services I make account for explicitly, increases. As result the time taken by this accounting grows, so that I can only wipe faces in the morning because I need all afternoon to prepare my invoice for these service. I will need to earn all this credit. When I am old and infirm I will be put in an old people’s home and will have to pay to my face wiped. I care for these children in order to earn the means to pay for the same care in a few years’ time. Alternatively, if I wash my children’s faces now, and don't present them with any invoice for this service, perhaps they will not put me in an old people’s home. Perhaps they will stay around to wipe my face themselves? What are my chances? Of course, if I don't invoice them for it none of this work is reckoned as an addition to GDP, and it earns me nothing. If I wipe their faces without invoicing anyone for it, but in thirty years they do not return the favour, I am in trouble. But if I allow this explicit accounting to enter the family and define the relationship between us, will they have enough motive to wipe my face then? Which is likely to be more reliable over this length of time, my children or the cash nexus of the global economy? It is this question of time and timescale that is involved in the issue of accounting.

Jennifer Roback Morse Love and Economics


But there is a further consideration here. Over this putative thirty year period there will be an increase in the sophistication of our accounting. Perhaps the bill I make up now contains only a dozen items a day. But in thirty years accounting is likely to have become more sophisticated. When it is time to pay the care home, it will present me with a daily bill made up of, not a dozen but, a hundred individual items. If the complexity of accounting progresses, no one earning now can hope to have enough savings to pay for that same care then. The proliferation of costs invoiced is the result of increasingly minute itemisation. Transactions proliferate because we make ever more minute division of our activity towards one another. It is only multiplication because it is simultaneously division. We divide our time, with the result that we have more time-units, and more transactions and thus more ‘money’.10 As we attempt to account explicitly for the range of services that used to belong to the household, children increasingly appear as items of expenditure, rather than as investment. If we have no conception of the household as a entity of reciprocity that functions over long-term, we are unable to see what sort of benefit we could possibly get from children, and so no sense of why we should pour our effort into them. Societies that account explicitly for inner-family and inter-generational care, or what they used to call ‘love’, cannot possibly afford either to have children or to grow old. Children used to appear in the balance sheet as assets, but now they only appear in the profit and loss account as items of consumption. Explicit accounting makes inter-generational service impossible. Only if we keep husbands and wives, parents and children out of our profit-andloss account and reckon them as permanently non-liquid assets, can we account for the changing status each of us experiences as we progress from childhood to adulthood to senescence. Children are investments: they require expenditure but are not themselves expenditure. Beyond a certain point accounting ceases to be efficient, while excessive accounting is even counter-productive. All this may make for tension, even for mutual incomprehension, between marriage partners, and so between men and women. Shirley Burggraf believes that ‘our current crisis stems from the fact that, while many of the efficiencies of gender specialization that once formed the basis of the family economy have lost their economic value, degenderization of economic production roles has put stress on the caring function of the family for which there are no technological substitutes.’11 Arlie Hochschild points out that ‘because economic trends bear most directly on women, they change women more. As a result, culturally speaking, men lag behind women in their adaptation to the new economic reality. ‘For women the economy is the new changing environment, while for men women are the changing environment. Women are adapting more quickly to changes in economic opportunity and need than men are adapting the changes in women. A culture lag in their wider society, then, echoes as a ‘gender lag’ at home.’ 12 Men are the new dinosaurs. Each generation is in debt to the generation before. We are in debt to our parents and to their parents. Do we really wish to communicate to our parents that we
10 11

Eric Alliez Capital Times: Tales from the Conquest of Time (Minnesota 1996) Shirley Burggraf The Feminine Economy and Economic Man: Reviving the Role of Family in the Post-Industrial Age (Reading MA: Addison-Wesley 1997) p.19

Arlie Russell Hochschild The Commercialization of Intimate Life (Berkeley University Of California 2003) p.106.


reckon that what they did in bringing us up was worth so little that we will not return the favour? A readiness to acknowledge this debt and pay our predecessors the honour they are due makes for a confident society. Intergenerational debt and global capital Now we arrive at a central thesis of this book. An economy is an ongoing affair. It requires that one generation make things possible for the next. When it is reluctant to do so, this is reflected in, and this is what we witness as we make resort to financial speculation and the recent massive growth of capital markets. The present state of our financial markets reflects the fears about our economic future that we have not wished to state. In order that an economy continues each generation has to persuade the next to bring a third generation into existence. One generation has to bring up a second and when this second generation have become adult, it has to persuade them to bring a third generation into existence. Generation one has to hope that generation two and three are of roughly the same size as itself. They may hope that each generation be slightly larger, since would help it to carry the financial burden it inherits from the previous generation, but in any event it must hope that the subsequent generation is not significantly smaller, for that will quickly increase the burden that generation three will be carrying. Generation one has to tell generation two that childbearing and bringing up children is rewarding, and that all the social and cultural apparatus of marriage is purposeful and worth having. Our friends at work, our peers in the market, have to persuade us that it is worthwhile to start a household. The market has talk up the household enough. The market has to respect the household and give it enough dignity and autonomy to motivate to start families. If it does not do this, the market is bringing itself into crisis, for it will run out of workers and so run out of people to lend money to. It has to persuade us to bear these costs. After employment At some point in mid-life we realise that our parents are growing old. It causes us to look ahead and start to understand what it is to be in their position. We realise that we have our own acute financial crisis, not just about our own retirement, but about our own old age. Each of us individually realises that there will be no family to look after us. Few of us will be cared for by members of our family when we grow old; they will not nurse through our last illness and we will not die surrounded by our own family. We will have to buy our own old-age care. We will be in nursing homes and since the staff of these homes are not well-paid, so in our last stage we will not be cared even by people of our own culture. This dawns on each of us at different moments, individually, and so though common to all of us it is largely unexpressed and secret. Most of us realise that we cannot possibly pay for the care that we will individually need, but it causes an inner sense of panic about making that provision. This is the result of making the

long-term flows between generations invisible.
‘The better-off eventually become the worse-off – the young and healthy and well-paid have a definite and ascertainable probability of becoming old and sick and poor (and if not they themselves, their children will want educating) – so redistribution to the worse-off or to support medical or educational services is not, in the longest-term sense, really redistribution.’13 If you are still a member of the household, your period of advanced old age and complete dependency is likely to be shorter. When you can no longer work as you

Jonathan Gershuny 2000) p.248

Changing Times: Work and Leisure in Post-Industrial Society (New York OUP


did, and are ready to give up formal employment (or are prevented by legislation from continuing in employment) there is easier work to be done in the household. You can continue to do productive work around the house – food preparation, cleaning, child care and education. Such work brings the gratification of being in company of young people who are your own grandchildren. But the household is not only about the care of children. Each of us is likely to need care again before we die. But our own family household may not be there to provide it. Either we don't have children of our own, or we can see that our children will not want, or not be able, to take responsibility for our care. We have dismantled the threegeneration family and consequently, at the end of life there is nowhere to receive us. Our failure to acknowledge and continue the essential flows between generations is already having an economic impact. Older people save and younger people borrow. Younger people borrow in order to invest in homes and businesses. Thus older people lend to younger and older populations therefore lend to younger (average) populations. Europe is an older (average) population. It lends to the US which has a younger (average) population. Thus European savings are always looking for somewhere to go. There is a shortage of places for them to go. European and Asian savers are therefore taking on less and less creditable loans in the US. Financial markets transmit these savings from old people, who have money and want to lend it, to young people who want to borrow it. In a moment we will ask some more questions about the function of this money, but first we have to ask a very basic question about the people who save and borrow it. There are plenty of people in my generation, and plenty in our parent’s generation. But the people of my age have kept their own parents waiting and not rushed to produce children. There are plenty of people older enough to be grandparents, but not enough of their adult children have done the honourable thing and produced grandchildren. There are plenty of people of retirement age, now becoming elderly, but there are declining numbers of young people. If there are older earners looking for a newer generation, at the beginning of its working life, which needs capital this means that there are fewer productive places for that lending to go. Older average populations are looking for young average population to place their savings with, but population growth across the world is slowing so there are fewer places for those savings to go. The result is that savings have been placed recklessly and unproductively. David Goldman set this out in a series of ‘Spengler’ columns:
‘There is nothing complicated about finance. It is based on old people lending to young people. Young people invest in homes and businesses; aging people save to acquire assets on which to retire. The new generation supports the old one, and retirement systems simply apportion rights to income between the generations…. It is easy to change the financial system and announce tougher lending standards. But it is impossible to fix the financial problems that arise from Europe's senescence. … Never before in human history, though, has a new generation simply failed to appear. There simply aren't enough young people in America to borrow money from Europe's and Japan's aging savers.14

The crisis of missing earners is going to worsen, though its effect can already be seen. In instead of real growth in productivity, we have also the pretend growth created by encouraging people into taking on loans. Our grow has not been truly economic growth, that is growth in production, but simply the growth of credit. Our economy has seemed to grow because we have tempted one another to take

David Goldman, ‘Spengler’, ‘The Monster and the Sausages’, Asia Times, May 20, 2008


on debt. We are attempting to compensate for a lack of earners and savers, who can support themselves and their own dependents and pay enough taxation to support the national care and welfare services, by enticing people to borrow against their earnings in the future. We have enticed them to hand over their future so we can spend it now. But there will be relatively fewer workers to make those earnings. We don't have the financial ability to support our present welfare spending. We have assumed that there will be a more energetic and prudent population in the future and we going to borrow from that future taxation of that future population. This is what our personal and national debt amounts to.15 Capital markets grow because more people put their money in them, and they do so because they believe that capital markets will always grow. But will they? If the future population is smaller than the present one, there will be fewer people to borrow our savings and put them to productive use, how can capital markets continue to grow? Pension funds have put the savings of vast numbers of people of people into a capital market that is buoyed up by a deep, cultural, assumption that there will always be growth. But an economy does not grow inevitably: it is a reflection of a society. The economy has grown because the population has grown. If we are unwilling to have children, and bring them up in such a way that they are willing to have children in turn, we will have fewer young people to sustain a prosperous economy, and there will be fewer workers to support us when we leave the workforce. If we are unwilling to raise a generation big enough to sustain the existing generation in work, how can we expect to enjoy a healthy economy? Could it be that our financial crisis is simply our own self-evaluation coming back to us? We will come back to this issue in chapter five. So far we have made a link between the family and the economy, specifically by saying that our readiness to have children relates to the growth, or at least, the continuity of the economy.
It seems true that capitalism is a cultural as well as an economic system and that the symbols and rituals of this cultural system compete with, however much they seem to serve, the symbols and rituals of community and family. 16

What we want is an economics that can think long-term and that can concede that fundamentally the economy is about the production of persons, and the economy that produces good and services is dependent on this more basic economy of persons. We need is an inter-generational economics. Perhaps we should look for a wider understanding of work.

3. Work outside the Household

We go to work in order to encounter our fellow man. We also do so to earn the means to support our family. You leave your household, your primary economy, in order to procure those goods that your household cannot provide for itself. But to earn money you have to leave your household, which means entrusting your children to the care of others. This may be the opportunity for grandparents to step into their role, so that for shorter or longer periods, we become a threegeneration household.

Neil Record and James Mackenzie Smith, Public Sector Pensions – The UK’s Second National Debt (Policy Exchange, June 2009); Brooks Newark The Hidden Debt Bombshell (Centre for Policy Studies, 2009). Nick Silver, A Bankruptcy Foretold: The UK’s Implicit Pension Debt (IEA, 26 November 2008). The State of Public Finances: Outlook and Medium-Term Policies after the 2008 Crisis IMF Companion Paper (6 March 2009). 16 Arlie Russell Hochschild The Commercialization of Intimate Life (Berkeley: University of California 2003) p.144.


But your absence at work probably means that your children are in the care of others, from outside the family. When you are away your children are with the child-minder, sitting in front of the television. There they are learning that their desires are met by the marketplace, not by the household, and that shopping is the reliable way to happiness.17 While parents are away, children are being brought up by those who have less idea how to protect their childhood and maintain the integrity of the household. While you are gone, your children are exchanging dependency on the household for dependency on alternative ‘households’, that reach them through the media. They are not learning how to wait and defer, but learning to expect a more rapid gratification and so to become consumers. It takes determination to resist this, and this involves spending less time at work, and so reducing your earnings.18 We have to decide for ourselves that we are going to make time to learn how not to spend. You have left the house to earn the money to keep the family, but while you are away, the selfsufficiency of household is diminishing. Your children are learning to want new things as fast as you can earn the means to buy them. The more time you spend earning, the more of its own intrinsic interrelatedness the household has haemorrhaged in your absence. You may be forfeiting the substance of the family faster than you are bringing it home through your pay-cheque. When you earn something extrinsic, you are also giving up something intrinsic. You go to work to earn money to support your family, but you must stay at work in order to pay your taxes. You do so in order that the government can provide the services that your children and you yourself will need. A wide range of interpretations of that need is possible, but you must remain outside the household in order to meet the financial demand set by a widening interpretation of that need. The state takes on new dependents, and has to raise the revenue by which it can support these dependents, and so it asks you to shoulder a burden that grows. Through these taxes you can support the members of other people’s families, which the state has taken on as its dependents. The state can add more members to that part of the national fiscal household assigned to you; it can give more employment or benefits until it either has to demand payment from you through taxation, or by printing money, devalue the currency so that inflation diminishes the value of your earnings and savings. By increasing the number of dependents you support through taxation, governments increase the time you have to spend at work, so reducing the time which the family is able to spend together. You must work longer hours outside your own household in order to meet obligations that you cannot place any limit on. By doing so you are less able to give time to your own family, so that your own children will have less time to develop that mutuality of support and consequent independence. ‘Less parental input and training means less drawing in of the child into the adult world, and its pragmatic concerns for managing the domestic economy, and less cognitive stretching of the child to understand the


Offer Challenge of Affluence p. 74. ‘Market competition promotes myopic bias. It promotes hedonism over other forms of satisfaction, since hedonic reward is easier to identify, package, and sell. It promotes individualism, since that reduces the costly and time-consuming need to negotiate and compromise with others, and to contract with the future. 18 Offer The Challenge of Affluence p. 74 ‘Taking affluent societies as a whole, there is a tendency for prudence to decline with affluence. One reason is that affluence shows diminishing returns. Another is that under affluence, the environment change faster than commitment strategies can keep up with it. Adaptive technologies take time to form.’


concerns of adults, including no doubt, the nature of work and the demands of specific jobs held by adults in the family.’19 You need money in order to bring your children up, but money is also the great obstacle to doing so. If you give up on the task of letting that mutuality form you, you give up the autonomy of the family which forms them into the mature economic agents of the next generation. As soon as you have put someone else between you and them, and paid that person, their course as needy individuals, without intrinsic self-control, is set. Money is required to bring up children, but if we regard it as the chief medium, we give away the integrity of the family and the autonomy of persons that may develop within it. We need an economy that develops persons who will be our future economic agents, able to carry the responsibility and financial burden of our society’s future. Persons learn to take on responsibilities and burdens through work. Experience of work develops character and forms mature persons. As much as work produce goods and services, work produces character and thus public persons. We said that members of a family learn to become members of a society about over the table at meals and learn to work as playing develops into helping with household tasks. Within the household there is a unity of love and work expressed through a myriad tiny services to one another. Next we have to ask about the forms of work and therefore about the industries and forms of employment that create the productive social and cultural capital that sustains an economy in such a way that one generation has the motive to bring into existence the next. The various of virtues of labour and industry The healthy economy is the mixed economy. Let us say that an economy is composed of three broad sectors of agriculture, industry and services, each of them representing a third of total. In fact these sectors were last in this equal proportion at the beginning of the twentieth century. The industries of each sector produces different sorts labour and each labour produces a different set of virtues. A national economy is made wealthier as it contains all these virtues and forms of motivation. While agriculture is primarily about food production, it also produces a people who have a wide set of skills and motivations, who know the origin and value of food, its cultivation, preparation and its social functions as the medium of all our socialisation and public encounter. We need to have a proportion of the working population to be employed in agriculture in order that the nation as a whole receives a sense of what is involved in our complex interaction with the land and seasons to produce the food that both makes our bodies and sustains a community of persons. We need a high view of the socialising effect of eating, and of the preparation and even production of food, in order to find our reward in one another’s company, first in the home, and then in the wider community. It is not so easy to despise someone once you have shared a meal with them. We need to regard the food of our own region in order to develop some relationship with the particularity of each place. But more than that, we want a significant proportion of our population to be engaged in the sort of work that agriculture represents. Memory and meaning is linked to slow-moving communities, and thus to particular places. The human economy has to move at a variety of speeds, the slow as well as the fast. Those some elements of the human economy may change, but others, such as the formation of relationships and social capital, cannot change. Agriculture and the

Alice Rossi & Peter Rossi, Of Human Bonding: Parent-Child Relations across the Life Course (New York Aldine Transaction, 1990) p. 494.


industries that immediately support it represent a form of work that is not disassociated from our own bodies, local communities or regional geography. These produce a local and regional identity that makes us not solely citizens of every place indifferently, but citizens first of one particular place and only subsequently citizens of the wider world. We then have an that instinctive privileging of neighbourhood and region that is essential to the economic development of each particular region. Work that relates to a locality produces a local pride and sense of worth which in turn motivate our work. This is not to say that we should ‘go back’ to any particular form of industry, but simply that we should promote a mixed economy, rather than let service industries entirely replace those industries which are labour-intensive and place-specific. After all, ‘the more a society’s consumption consists of services that embody high-value labour, the smaller is the category of ‘the poor’ to be concerned about.’20
The thinning out of the economy

Any person can employ him-or-herself in another’s service. No one is obliged to consider ourselves unemployed until the moment some employer gives them a job. Work is not confined to earning the money which we are going to spend elsewhere on goals unrelated to that work. We can hope for work that relates to our own vocation, and not solely defined by our individual preferences and consumption. Why is there only a very limited opportunity for self-realisation for some people in the modern economy? If we decide that the scope for selfrealisation in work is too limited, we can look for ways to make it less so. ‘The obstacles to self-realisation are so deeply rooted in the institutions of our economy that only profound changes in the ownership and control of industry can create the opportunity for greater access to meaningful work.’21 Why do the middle of ‘mature’ economies thin out? Is this is result of detaching from sets of skills and from persons and their ends, so that motivation and purposes are lost? Could it be that our economies are thinning out because we do not make this connection between labour and dignity? In the ‘mature’ economies first agriculture, then industry, dwindle away. Agriculture now employs less than one percent of the UK, industry less than [*n]. Their place is taken by services and the ‘knowledge economy’. Could it be that there is less manufacturing in the ‘industrial’ countries, because manufacturing is associated with less satisfaction, or less sense of community in the workplace? Is there less desire to work? Is this because we regard it as too physical or too demeaning? Could it be that without the grind of industrial processes there is not the context within which innovation takes place, and so less opportunity for the satisfaction of developing a new process or product? We are content to have many of our needs met by mass-produced things. Big corporations provide our needs, and coax us into demanding more. The result is an economy in which we are uninterested in the unique, so local and national producers have no advantage. We have less experience of the dignity of manual work, of the particular of agriculture and industries. As we have exported industries we have lost the skills each requires and lost the virtues that each fosters. We entice the most skilled and adventurous members of other economies to come and do for us what we are not motivated to do for ourselves. As we have imported people to do what we now see as menial work, we have lost sense of the dignity of any form of service, and less sense of the local, regional or national

Jonathan Gershuny Changing Times: Work and Leisure in Post Industrial Society (New York OUP 2000) p.248. 21 James Bernard Murphy The Economy of Labor p. 228.


sense of community that comes from such service. Fewer university-leavers go into industry, preferring the greater rewards of the financial services, or media or management of national services. As work is detached from sets of skills and from persons and their ends, it becomes indifferent to locations; as jobs are exported, so is the proprietorship and social capital that makes for a confident working population. Then what do we can very easily between done by someone else. An economy must be more than a collection of employees. An economy must be more than a collection of consumers. But the rhetoric coming from the market invites us to think of ourselves as primarily as consumers, and only secondarily and inconsequentially producers. We have an economy in which we are uninterested in what is unique, give no particular recognition or reward to initiatives and enterprises that are local to us, and so we have economies without small and middle-scale enterprises. The need to comply with government demands means that larger businesses do better than smaller ones, with the result that the economy is dominated by trans-national corporations, and capital has diminishing relationship to the local social capital of any particular community and the practices of civil society. A gap is always opening up between the corporations at the top of the economy, and the supine population at the bottom that simply consumes whatever results of that ‘growth’ reach it, by receipt of welfare or as the direct employees of the state that disburse that welfare, two complementary forms of dependency. The corporations shed employees when credit transfers its affections to more tractable workers with fewer aspirations, on the other side of the world. The jobs lost from agriculture and industry are not all provided by the knowledge economy. There is also the less visible sector of the permanently dependent. Could it be that the data-inputting industries will never provide work for all those whose skills are manual, and that by default they create a group of those permanently excluded from work. They may not be explicitly unemployed, but without the identity that employment can bestow, they are without the dignity or motivation. The status of unemployment is not conferred by the [*Office for National Statistics] for it is also a moral status, or an issue of morale and demotivation. For a proportion of the population, the thinning out of the economy brings the question ‘Why should I go to work’? ‘The state has externalized the costs of its “social market” policies onto society, and the greater the costs, the more the state expands with fictitious plans to reduce them. Never has a better machine for expanding the rentier class of bureaucrats been devised than this one, which constantly amplifies the problem that it is established to solve.’ 22 Those then out of work become state dependents. The economy is then overdeveloped at top, with a bulging layer of corporate managers and state employees, while at the bottom there is a bulging bottom layer of dependents and those who administer their benefits.

4. Market without Restraint
Confidence without judgment

I have suggested that human beings give themselves to one another. They are givers, and what they give is themselves. In all our work, in different degrees of freedom, we ourselves to one another, and this giving is the platform on which all economic exchange runs. We have also said that we give ourselves to bring a

Roger Scruton ‘The Journey Home’, Intercollegiate Review Spring 2009.


new generation into existence, and that all the material goods and services that make up the economy serve this most fundamental gift of life and the slow exchange of life from one generation to another. What we do is who we are. All our labour expresses our giving of ourselves. There is a basic unity of life and labour. But our economy seems to assume that it is not so. We experience a separation between work and dignity. Could it be that our recent economic experience reflects an underlying fracture of and consequent assumption that labour and its many forms of mutual commitment are something to be shunned?
Hollowed out economy

Is our national economy sustainable? A healthy economy is made up of a vast number of small- and middle-sized enterprises, and a small number of big corporations. It is a pyramid that stand on a wide base made up of many small businesses, and tapers towards a point. But the majority of employment in this country is not given by the small or medium-sized institutions. An economic crisis might be a warning of a long-term imbalance. Since we have not regarded labour as intrinsic to our dignity, we have given up most of the industries that involve heavy processes, so have let a large number of economic functions leave country. We no longer make things. Is this because we regard it as too physical and demeaning? Our own most talented young people do not opt for engineering, but prefer to steer for the headquarters functions, which are all that corporations keep in this country. Why is this? Is it because we have not insisted that prices reflect long-term costs? It may be that we have allowed too many costs to be externalised so that they are borne by future generations. Imported and mass-produced goods are cheap, but that may be because other costs, in particular the true cost of its transport, are not included in the price. This is so for environmental costs: we have reduced our impact on our environment, but done so by exporting industry to other countries which then bear that environmental damage. But it is also the case for social and economic costs: we have inadvertently exported some of our industrial excellence so that we no longer have the range we did. As a nation we no longer have the balance of skills that enables us to sustain a range of industries. We do not set out to buy source our goods locally or regionally because we consider them too expensive; that is, we have made our own fellows too expensive to buy from, and they regard us as too expensive in the same way. We cannot afford one another’s labour.
The missing demand

Our small and medium sized firms are not sufficiently capitalised. Their working capital is not the result of slow and cautious re-investment in the firm but is excessively dependent on borrowing. Small firms therefore have unnecessarily claustrophobic relationships with their bank and are immediately vulnerable to the bank’s decisions to raise its rates and call in loans. Thus even small business is in immediate hock to the big business of the finance services industries. The share of the price paid to the worker who produced it has been falling. Each firm wants to pay its employees less, but needs other firm’s employees to be paid more, so that they will have enough to its products. There isn't enough purchasing power in the population to buy everything that our factories are capable making. We no longer make what we consume. We are content to have our needs catered for by mass produced things. Big corporations provide our needs, and the result is an economy in which almost nothing we own comes from our own region. We no longer give our custom to local and national manufacturers. But if we do not


buy from them, how will they be able to afford what we want to sell them? The more we are bewitched by the corporate and global economy, the fewer indigenous, local, quirky enterprises can survive in the market. We are not interested in what is unique or local and see no reason to invested in our own local entrepreneurs. Productivity has grown hugely over the last fifty years. But the wages of the people who could consume all that increased production have not grown as fast. By buying on price, we have all been driving down the labour-cost component of the things we buy. Effective demand means that people not only would like, but actually have the money to buy, what we produce. There is a growth gap between the goods for sale and the purchasing power necessary required to buy them. John Médaille tells us that ‘when you drive down the price of labor, while increasing its productive capacity, you run into the problem that is usually called ‘overproduction’ but is really ‘underpayment’.’23 It is difficult for companies to increase their profits if consumers do not have the money to buy what producers want to sell them. There are two ways in which producers try to increase their profits. One is by cutting their costs by firing some of their own workforce, and hiving off functions to contractors who will do the work for less. The other is by buying other companies, in order to achieve economies of scale, or occasionally simply to take a rival out of the market in order to reduce the competition. But neither of these are long-term solutions to the challenge of how to grow when, because the economy as a whole has only sluggish productivity, your customers are not becoming any more able to afford what you sell. Another is to increase the amount you spend on marketing in order to coax consumers that they need to come back to get the latest edition, because in some way you have found a way to make last year’s models obsolete. We have to educate people to want more, and so to talk up their desire, and create in which we feel a nagging dissatisfaction which can only be sated, temporarily by another foray to the shops. We gain satisfaction by buying things, and so by consumers and victims of ungoverned desire, not by being producers who work, make things and present them as our gifts to our society. Good jobs can create a sense of personal ownership. But if we never buy from the local firm because they are too expensive but always choose the standardised global product we send capital out of our neighbourhood and region. We do not tend to hold shares in local companies, or to participate in the local economy as shareholders. As a result we have been exporting jobs, and that sense of our economy has been losing that level of personal ownership. Then we have an economy with an over-developed upper part of corporations and their managers at the top, and a bulging bottom part of jobs that demand no skills and teach no skills, an economy of taxi-driving, call-centres and care homes. We don't have very much stake in the economy, and we are poor consumers, so can't creating much demand or much employment for others. This makes for an economy without motivation, so it not only capital, but that particular long-term form of capital that we call ‘social capital’, that represents our national hopes, that has left. Our prices do not reflect this fundamental question. If we do not give our custom to suppliers nearest to us, how will they have to money to spend on the goods we want to sell them? If we are not their customers how can they be ours? The whole issue of ‘too expensive’ reflects a long-term cultural trend to regard all businesses around us as though they were strangers, with no more claim on us than a supplier on the other side of the world.

John Médaille Equity and Equilibrium (ISI 2010).


We need capital to be more closely tied to social-capital and to be more equally distributed through the economy vertically. Perhaps if the tax burden was shunted upwards off the poorer and onto the wealthy half of the economy a greater vertical distribution of capital would re-emerge, and there would be then both more demand and more opportunity for smaller companies, for more local industry and so more productive employment would succeed in staying in the country. We invested in anonymous funds, managed at such a distance from us that we could not know whether there was in fact any actual productive business at the end of the chain. The corporatist-economy-and-state have become the mechanism by which the social-capital is stripped out of capital. The ‘social’ aspect is relegated to our after-hours leisure selves. A gap is always opening up between the what is happening at the top of the economy, in which the corporations are shooting ahead into a growth and at the bottom, where a supine population simply receives the result of that growth, by employment in bottomend services and benefits. Have we referred too many purchasing decisions to price, and not clung on to those in which the familiar and therefore more local or national products get our preference, regardless of price? We have relied on price to be not just a signal but a comprehensive summary and thus our only discriminator. But price really tells us only what other people are doing, and what other people are doing is guessing, and so speculating on, how prices will respond to what we are going to do next. They are trying to buy the commodities, and stocks in the companies that provide the services, that we will buy next. We are watching them, but they are watching us. Work is good. But by giving one another more affirmation as consumers than as producers we given one another less opportunity to keep a wide range of work in the country. The nation has not been engaged in that work that keeps us familiar with a range of skills, virtues and smaller and larger forms of industry and the forms of solidarity, community and motivation that come from them. More consumers even though they are less well-off create more demand than hyper-wealthy consumers who are fewer in number. The rich can only eat so many dinners or buy so many yachts. They spend the rest on financial speculations. Would it help if we paid each other higher wages? This might close the gap between what we are able to produce and what we are able to buy. Industry once offered workers a wide range of wages, skilled and manual. Now in the lower half of the economy, skills and wages have done down together. Half the nation is becoming poorer. There is not enough money around in the bottom half of the economy. For some of the time this disguised because that half is takes on debt, most significantly in the form of a mortgage on a house, and then as the value of that house was perceived to be rising, took on more debt in order to go spending. Nonetheless, in the bottom half of the economy there is not enough money. But that is because we have come up with a substitute, credit, which we put in its place something other than money, which we will come to in chapter 5. The economy relies on consumer credit; those with too much money lend to those with too little and at excessive rates of interest. An economy that lies on debt in order to keep demand up has a problem, and the gross-inflated volumes of capital make the financial system on which that economy relies for capital, less stable.
Saving and investment


Let us look at the connection between present action and future outcome, and so between saving and economic prosperity. Saving simply means that you decide not to spend now but to keep some part of your income to spend later. You lend this money to someone. That someone wants to borrow it in order to take an initiative and start an enterprise. You both know that their enterprise may not work, and that if it does not, you will lose your money. Interest is your reward for your preparedness to lose your savings. If you decline to bear this risk there is no reason why you should receive any interest. Christians have always referred to the demand for interest without risk as ‘usury’, : it is wrong to demand payment when you are not offering something for it, such as taking responsibility for this risk. It suited all of us to believe that the credit boom could go on forever for each of us could go shopping on the basis of the mortgage that we were surprised to be granted. We wanted others to believe that a national economy can continue to ride on borrowing, and enjoy increasing amounts of the fruit of that growth now before we have created it. As our mutual indebtedness grew, and consideration of risk was suppressed, this became increasingly implausible to each of us individually, but we did not care to say in public, nor did we decide not to take advantage of the unsustainably high return on offer. Market information was widely distorted or withheld; those responsible for overseeing the market, regulators, boards and shareholders, failed to do so. A prolonged lack of transparency or failure to tell the truth and insist that others be truth with us, meant that there has been no meaningful market here. Now we are experiencing a collective collapse of belief; no one knows what valuations to believe. The resulting breakdown in trust that has destroyed our fundamental asset, our reputation. We have been foisting delusion on people, and it is an open since we are still over-value, I do not believe that we have stopped doing so. We have all been complicit here. Restoration of the market requires more than apologies. It requires criminal and civil charges and trial in a court of law for some, confession and penitence for others, and no less than a conversion for all. We can see that connections between the health of the economy and the health of the public square, and the readiness of people to challenge in public the consensus on which it rests. I will return to these issues in chapter 5. The money I put into my savings account, or that is invested on my behalf by my pension fund, is not lent by the bank or fund managers into the productive investment of the sort which grows an economy. It is not put to work to build the factory or give employees the skills by which firms can increase their productivity. Because the gap between high street banks and the more risk-taking merchant banks has been abolished, my previously conservative bank is also playing in the money markets, making money in order to achieve the twenty-five percent return on capital that pension funds and other customers now expect. They do so by repeated buying and selling stocks or derivatives by automated high-frequency trading within a tight circle of banks attempting to advantage of minute differences in price in markets in the various centre around the world, and which can always secure a better price than any individual investor. Marieke de Goede discusses the formulae for pricing complex options and so of proliferating complexity in identifying and pricing risk. While financial speculation is justified as providing security in the face of an uncertain future, new risk products and markets provide security only to those who can afford to purchase them… while professing to provide security for an uncertain future, the finance industry invents more and more uncertainties to be hedged.’24

Marieke de Goede Virtue Fortune and Faith: A Genealogy of Finance (Minneapolis: Minnesota Press 2005) p. 141-42.


Money was being lent faster and on less security. Finally in 2008 crisis arrived. When Lehman’s collapsed, each bank suddenly realised that it did not know how fragile any other bank’s position was, so each refused to lend to others, and over a single weekend in November 2008, interbank lending was paralysed. The banks could not believe one another’s claims any more. This was a failure of trust, and when trust is gone, there is no quick way to re-generate it.25 Since they could not lend to each other, they mostly certainly did not lend to anyone else. As a result, lending worldwide started to dry up and real economies faltered. The market had ceased to work. Governments stepped in. Believing that they could not save the banking on which our pensions rely without saving not just the more responsible high street banking but the whole sector, governments attempted to bail out the entire global finance industry. As they did so they discovered that the sector’s liabilities were more colossal than had been realised, for the sector extended beyond banks, governed by banking regulation, into much vaster derivative markets for which there was no regulation, and so no reliable means of assessing which institutions were bankrupt. Since the whole system was highly interconnected that the bankruptcy of Lehman’s had caused the entire system to go into trauma, governments decided to cover all liabilities, even those that did not appear on any balance sheet, and so to prevent any institution from going bankrupt. The market had stopped working, and government intervention now prevented it from doing so. The derivatives markets had created a form of money that was many times in excess of the formal money supply. Governments transferred money from the real economy into the unreal economy of credit. But this process required, and still requires, a completely undisclosed and scarcely discussed order of money. The liabilities were great enough to bankrupt even the most powerful nation state of all. Public knowledge and understanding had not been up to the task of challenging the market, and was not able to challenge government responses. The public ability to interpret capital markets in terms of flows from groups, and generations, was missing. Despite government intervention, or because of it, markets were not restored. Credit was not advanced to industry, or in the face of a collapse of demand, industry was not in the position to resume borrowing. Governments bailed out banks and other financial institutions, creating the understanding that no bank would be allowed to go bankrupt. True values, and the present insolvency of the banks, would never be revealed. Banks were not obliged to sell their stocks into a market that didn't want them, and the vastly lower, heavily discounted value that the market would actually be prepared to pay for them. So there was very little real trading and the market remained in a state of suspended animation. So far we have said that the economy is a series of flows between generations and we have showed that the family is. We have said that as functions are ceded by the family they are picked up by the market, and result in the placing of excessive expectations in the market. When capital markets cannot sustain the burden, the state has to pick them up. The market draws functions away from the family until it goes into crisis, and the state has to take those functions on. The Financial Services Economy Credit markets are simply about the best allocation of capital. They are to serve productive industry. Capital-allocation itself cannot be directly productive, for it simply moves money around; the market achieves the optimal distribution of

Stephen M. R. Covey The Speed of Trust: The One Thing that changes Everything (Free Press 2008)


money which will then enable the best distribution of productive resources. But as proportion of the economy, this sector, the finance services ‘industry’, also known as the FIRE (Finance, Insurance, Real Estate) economy, has more than trebled over the last three decades. Has it done so because we have become several times better at identifying the best, that is most productive, locations for capital? Does the task of getting capital to the very most productive place involve moving our money much more often, so dramatically increasing the volume and velocity of capital movements? Or could it be that the credit markets have attracted money out of long-term investment in slow-growing productive industry and into the fast-moving capital-allocation ‘industry’. Have capital markets grown at the expense of the productive ‘real’ economy? Could it be that we are all much less interested in investment, and thus committing our money to one place, than in identifying investment opportunities before the rest of the market does, getting in early and buying low, and then getting out again as soon as the slower money arrives? Has the extraordinary growth in wealth been a consequence of the new forms of capital market that rides on the back of the main market, offering a new some form of arbitrage on the main business of lending money to industry? Every few years a new derivatives market emerges, so that we have a series of financial markets each of which stands on the back of the market beneath, all supported by the productive economy, at the bottom. Each derivative market is developed in order to provide some additional security to the wealthiest investors. But the value of the trades that take place in these derivative side markets are many times greater than the value of the market that supports them all. Can the whole system be said to be efficient, that is, do its fundamental job of distributing the money that will distribute productive resources to the best advantage of the economy as a whole? The greater part of the money flying around the world through international dealing floors is never intending to be investment at all.26 It is all gambling on the future movements of prices and so it is the triumph of the short-term over the long-term. Generally we could say that the already-wealthy lend to the not-yet-wealthy, the rich to the poor. Whether we regard it as credit or as debt, the development of this vast global financial apparatus has been to prevent any person-to-person questioning of the purpose of this lending. The lender never meets the borrower. Thus the lender can never ask the borrower what he intends to use this loan for, whether it will go into the work by which they may make themselves truly wealthier, perhaps creating employment along the way by which others can do the same. They cannot therefore discover that this loan is not for production at all, but for consumption, and will be spent aping the lifestyles of those who are wealthier than themselves, in which case that loan is unproductive, contributes nothing to greater economy and is usurious. We have the wealthy but unscrupulous lending to the poor and gullible, which is not the kind of covenant that promotes the good society. The further down the market and, as with credit card borrowing, more immediately related to consumption, the higher are the interest rates. The consequence for the whole economy is that that significantly higher returns are paid on lending to consumers than producers. The rate of return on lending for consumption is significantly higher than it is on investments in productive industry. When all money is chasing the feckless consumer, credit is more difficult for industry. By assiduously looking for the highest rate, each middle-class saver has added to the pressures on industry in his own nation.
The end of restraint

John Lanchester IOU!


Over the last thirty years the restrictions on borrowing have been relaxed, making it easy to lend and to borrow. Successive governments in Britain and the US have made it easier for the banks to lend, so that they no longer have to decide whether the sum borrowed is going to be truly productive or whether it is merely for consumption. The separation between high street banks – predictable and safe – and merchant banks – high-risk venture capitalists – has been abolished. The reward of higher interest came through to the high street, but so finally, despite the slicing and dicing of risk through securitisation, did risk itself. If we search only for the higher interest rate we bring into being a financial industry that competes to find the highest rate and to bid rates up. As they do so they award themselves corresponding more, and as they become more rewarding the finance industries attract the people who used to work in industry, making the rest of the economy less attractive.27 Capital-allocation is also risk-allocation. If, enabled by some new mathematical tools, we develop a novel way of spreading risk and so reducing the share of that risk that we are exposed to, we have given ourselves a little freedom from our commitments and so can go back into the market to chase new profit opportunities.28 Looser regulation has allowed us to change what we had previously marked as liabilities into assets against which we can borrow more so we can plunge back into the market. With the technical know-how and computing power the insiders can make money by accepting deals with much slimmer margins which allow them to trade at greater speeds and in greater volumes. At various moments in Western history there have been periods of dramatic booms and busts: there were many such periods in the nineteenth century. After the boom and bust known as the Great Depression Western governments imposed close regulation of credit. Banks were held to strict deposit ratios, so had to hold greater deposits than they do now. The control on the issue of credit, legislated after earlier financial crashes, was understood as the sort of restraint that we expect governments to provide. We did not call this restraint ‘usury laws’, but that is what it amounted to. In effect governments had re-introduced usury laws and so for forty years mid-twentieth century money was comparatively tightly controlled. Those controls began to be loosened again in the nineteenseventies, and continued to be rolled back in the following decades without apparently causing great instability. By the end of the century, money was cheap, and easily available, and less caution was exhorted on lenders by central banks or governments. But the progressive removal of this restraint has an unforeseen consequence. It put an end to much manufacturing industry in the United Kingdom. At the time this was understood as simply as a move from older and less profitable to newer and more profitable industries. But as we have seen, the loss of our industrial base produced the two other consequences. First, a proportion of the working population no longer had a personal stake in the economy, because their own craft or industrial skills, which are a form of personal properties, were no longer valuable. A culture of industry and the motivation that comes with it, disappeared. Secondly, those who had earned reasonable money for industrial work, so there was a drop in incomes in the lower half of the economy, and a consequent reduction of purchasing power in the nation as a whole. Easier money had had the effect of sending industry abroad so there was a loss of the ability to buy our own products. This was compensated for by making money easier to borrow so that people could continue to buy the goods they wanted.

27 28

Mark E. Taylor Confidence Games, John Lanchester Whoops (in the US, IOU!)

Niall Ferguson The Ascent of Money pp. 320-31 (London: Allen Lane 2008).


We have lent people money to go shopping. Their shopping increased imports rather than domestic demand but governments find re-election easier when they relax financial restraint so that they can shop. They went into debt to do so, and are now taking their losses, their credulity punished, though perhaps not learned from. What effect does this have on the economy as a whole? The savings of those in late middle age seem likely to create repeated speculative bubbles and financial crises. Those who manage to buy the very best financial advice will become wealthier, while those who do not will find that that the money that they accumulated through a lifetime of saving has shrunk and their security vanished. They will not able to support themselves, and so will be dependent on the state. The more the capital market grows, unrestrained by an adequate legal framework, the easier it becomes for the wealthy few to relieve the many of their savings, and so their ability to provide for themselves and remain self-reliant. In the long-term, on any account of self-interest, whether we consider consumers or governments, we have done ourselves no favours. We have reduced the amount of buying power in the economy as a whole, reduced the skills and morale which makes ours a healthy and entrepreneurial economy, taken away the confidence that enables people to start families and bring their children up with a measure of self-reliance. In all these ways we have not made our national economic longterm any easier. As a result, for the majority, the long-term not only does not look bigger and brighter than the past. It looks significantly smaller that we have to wonder whether we will experience it as a series of unpleasant shocks. Through the ages Christian thinkers have linked lending and borrowing to this issue of the integrity of the nation, and so to the justice and class harmony that prevents the nation’s constituent parts from drifting apart. Restrictions on lending are part of the responsibility of any government and indeed are intrinsic to the self-government of a society that intends to remain a functioning whole. Restrictions on lending help to keep disparities of wealth within limits. Disparities of wealth can turn the nation from a single united people into antagonistic classes. Christians through the ages have believed that the policy of every nation should be directed to the good of its every member, and that each should benefit from membership of the nation. It should be policy to prevent some parts of the nation – the wealthy – benefitting beyond a certain point by impoverishing the majority. Christians and others have insisted on usury laws in order to maintain the unity of the nation so that each member may continue to participate in its political life and so achieve for themselves a bigger economic role than as mere beggar or slave. It is not in anyone’s interest to make those who are not well off so poor that they can neither take part in political or economic life. People have jobs because other people value what they sell and they sell what other people value. But how shall we value the total value of product of the UK economy? GDP not only grew but the rate of its growth increased through the last three decades and through the last ten years in particular. It grew because the financial services grew? But how meaningful is this growth? If GDP grows because financial services grow we might ask whether any part of this growth, even the part for which the financial service were directly responsible, relates to a real growth of productivity. Or has the entire market been telling itself what it wants to hear, and refusing to submit itself to any extrinsic scrutiny? Could it be that the British economy is not worth as much as our figures have suggested, and that we have taken excessive rewards for a growth that was delusory? Could it be that this generation has paid itself too much and not left enough for the following generation? All this is the result of considering ourselves primarily as consumers and only secondarily as producers. Could this be because we do not consider ourselves primarily as givers, persons defined by their generosity rather than neediness,


and thus by our action rather than passivity? Why should we regard ourselves as those from whom our labour is extracted from us under duress by the division of labour, as it were by a process of nature? We can decide for ourselves that we work in freedom, so we create and produce because we love and give, in freedom, and that we work in order to have something to share. We can decide to exercise our own self-restraint, find more modest ways to save and establish more restraint as a nation through restoring limits to speculation. When the financial services have become too large a proportion of the economy they must brought under control and their size reduced.29 The political nation must come to the realisation that the long-term effect of financial services is to remove capital from productive industry, which we have related to the virtues which build the social capital of a society, and pumping into the virtual, that is, imaginary, economy. The claims on future resources that have swollen this virtual economy until it has become several sizes larger than the real economy, must be brought until control until they correspond more nearly the actual resources in the real economy. The society that cannot implement the political changes that will stem that flow is in long-term trouble. We can find non-financial ways of creating provision for our future, for future provision does not have to be financial provision. We have looked at some of the medium-term issues around the economy, relating them to the concept of labour. We could conclude that a renewed sense of the connection between work and the property and personal dignity of the person. But there is a set of long-term issues which we have to link to the concept of utility and demand. We have take a look at how the work and service of that person is recognised by all his peers in a vigorous public square. We need to see how in the Western account, man changed from a social to a non-social being, ceased to be a person and became an individual driven by needs and passions.

5. Public and Private Man
We need a little history of economics, just enough to introduce the four basic economic concepts of distribution, labour, utility and exchange. We have made considerable use of three of these already. The first, distribution, relates to love. We have said that love is primary, and yearning for love and reputation is the motor of human interaction. St Augustine tells us that we love our family and so we are able to put their needs in order and decide how to distribute between them the various goods that we know they need. It is a given that we love and care for ourselves, and that we distribute goods in proportion as we love others, so we feed and care for our own children before anyone else’s. Because we both love and know them, we are able decide between their needs and so to achieve the best distribution of the resources we have. We give, or distribute, goods between the persons we love. Love is a fundamental economic concept. Augustine tells us that love is fundamental to understanding human beings and societies. Love can turn to narcissism, but this is a perversion of love, and so is not the point at which to start. There is a self-love that is proper to every creature. It is a given that we look after ourselves first: when some part of your body itches, you scratch; when you fall over you pick yourself up, when you are cold you put a coat on. You do all these things for yourself. Then when your wife is cold you fetch her coat, when your child cries you comfort them. The Letter to the Ephesians tells husbands that they ‘should love their wives as they do their

Simon Johnson ‘Doom’, ‘Baseline Scenario’


own bodies… for no one ever hates his own body, but he nourishes and tenderly cares for it’.30 You show a basic self-preservation and self-respect, and so it makes sense to encourage one another to love and look after those closest to us in the same way. Love and self-respect are primary, and the basis on which you can be appealed to do something similar for others who are not quite so close. What the family does first for its own members, it may then do for others. Psychology and political science can confirm that we observe one another, seek one another’s approval and that our desire to be loved and admired drives all our acts. We do things because we hope that they will get us noticed by the right people, making it easier for us to be loved by those whose love we want most.31 Business is of course all about public reputation: we know that, better than business is repeat business, and that we are in trouble if our customers do not come back. Each financial transaction is a joint act of mutual acknowledgment and promise of ongoing relationship. But in the language of economics we cannot talk about why men act responsibly in public, or commend one another for acting well, that is, generously and justly. In the next chapter we shall discuss what happens to the society that is has no concern for its reputation or cannot find reasons for self-respect. We live in an economy of emulation. As Aristotle puts it: ‘Imitation is natural to man from childhood, one of his advantages over the lower animals being this, that he is the most imitative creature in the world, and learns at first by imitation.’32 ‘What causes habits to become customs in certain species? The answer seems to be the proclivity to imitative behaviour.’33 Persons as ends and means Another fundamental economic concept is utility: our identification of anything requires that we find the use and purpose to which it is oriented. Modern economists try to use the concepts of utility and self-interest in order to make sense of inner-family activity and so explain the family in terms of transactions between individuals.34 John D. Mueller believes that this is the wrong approach. The family cannot be adequately described in terms of a collection of selfinterested individuals. Neither a family nor a society are the outcome of a multitude of self-interested individual decisions. We do not love in order to do something else. Love is fundamental. We may love people because through them we get what we desire, but this just defers the question of what it is we want. Ultimately we desire this person; we want his or her love. Perhaps we want the love of thousands of our contemporaries, so that as Augustine says, we are driven by love of glory, that is, public reputation. So to say that we want this or that thing is not an ultimately satisfactory answer. We want these persons, and we want these persons to want us. But modern economics is not prepared for this. It is adamant that utility is the fundamental category and the hypothesis of love is not required. ‘The logic of economic theory is quite clear that love cannot be based on utility, for the simple reason that utility is derived from love. To love a person for his or her own sake is precisely to treat him or her as an end; and it is only because there is such an end that the means selected to serve that end (like milk or college tuition) have any value. To say that love is based on utility is therefore circular. In economic theory, human love is not a weighing of utilities (though these may also be present) but a weighing of persons. If I weigh another person as equal to myself,
30 31 32

Ephesians 6.28-9 Adam Smith A Theory of Moral Sentiments

Aristotle Poetics 1448b8 James B. Murphy ‘The Kinds of Order in Society’ in Philip Mirowski Natural Images in Economic Thought: Markets Read in Tooth and Claw (Cambridge: Cambridge University Press 1994) p. 561].

Gary S. Becker


and the needs and preferences of that person are similar to mine, then I give him or her the use of half of what I have.’ 35 Augustine tells us that it is the mother who ranks the needs of members of the family and ranks the things that she has to distribute in terms of their appropriateness to each. If we make love a fundamental concept we can explain why we consider things desirable, and so make them our intermediate goals, the means to greater goals which must ultimately be particular persons. Love, Mueller tell us, ‘is not essentially an exchange of utilities, though of course a mixture of gift and exchange is possible. Mutual love is best viewed as a simultaneous pair of gifts or voluntary transfer payments, the ends for which economic action is undertaken are best described as the persons listed in the distribution function, not the commodities listed in the utility function.’ 36 According to Christian and other non-modern economic traditions which start from some concept of ‘natural law’, economics describes how we choose persons as ‘ends’, to whom we direct all our effort and make gifts of ourselves, and as the means, through the production and exchange by which we are able to make those gifts to persons. Mueller points out that the Christian economic tradition brought together the four fundamental concepts of distribution, production, exchange and consumption. Thomas Aquinas sets out the relationship between the four of them in the Summa.37 The end of all human activity is happiness, or blessedness, which we may find in God. A great tradition, often called the Scholastic tradition, built on the work of Augustine and Thomas Aquinas. Until the seventeenth century economics was embedded in discussions of the practices, habits, communities, institutions and other forms of shared embeddedness, so economics did not appear as a separate discourse. Nonetheless this economic tradition has been argued for by Christians in every generation, winning varying degrees of interest from the tradition that does not wish to go beyond the concept of utility. The ‘utilitarian’ tradition, which we now called ‘neo-classical economics’, has dominated the discussion over the last couple of hundred years. The Christian tradition is constant and vibrant, and elements of it are regularly borrowed or ‘rediscovered’, but nevertheless the ‘utilitarian’ tradition is the only economics represented in universities and business schools. This orthodoxy refuses to regard giving, that is deliberate person-to-person distribution, or the related complexity of human motivations, as relevant so shunts it off to ‘Ethics’ and neighbouring academic departments. Modern, that is classical, economics began when Adam Smith gave the first account that omitted two of these four elements from his account. Smith dropped distribution, which we have related to the deliberate person-to-person relationships of love, and he dropped consumption, which relates to purposes and utility, which again relate to persons. In the Wealth of Nations (1776) Smith set out the first treatment of the economy in terms of production and exchange alone.38 Mueller suggests that Adam Smith’s reductive economics represents a collapse in economics; the discipline that had been able to offer a sophisticated account of human interrelating, ceased to do so after Smith. Why is this? Smith decided to dispense with distribution and consumption because he believed that, being driven by their passions, human beings cannot make a truly rational choice of means and ends. Human beings are not as capable of deliberation and action in freedom as previous generations of thinkers had thought, or as Christian thinkers continue to believe. We will pick up this thought again in a moment.
35 36

John D. Mueller ‘The End of Economics’. John D. Mueller ‘The End of Economics’ p. 20 37 Aquinas, Summa 38 Adam Smith An Inquiry into the Wealth of Nations (1776).


At the end of the nineteenth century economists re-introduced the third concept of utility. Thus ‘neo-classical’ economics combined three of the four ancient concepts. Economics continued to make no use of the concept of distribution which we have related to the deliberate disposition through gift of goods between persons on the basis of which person makes best use of that gift. Utility defined in terms of demand, that is, to what someone was willing to pay for it, or ‘marginal utility’, to make the point that that someone would have to outbid all other potential purchasers. Thus the true use and purpose of any good was to fetch a price in the market. When a thing gained a price, by virtue of being bought by someone, it had fulfilled its goal. Of course, anyone with a view not influenced by utilitarian economics (a view which we could call ‘common sense’ or ‘natural law’) might protest that the true fulfilment of that thing was that it should actually be put to work, in production. It was finally useful only when it reached the hands of someone who could work with it to produce another good – and, of course, when the product of that man’s work was itself awarded recognition as it came to market and achieved a price. Christians insist that the value of a thing is determined primarily by its use. Only secondarily can this be governed by the value it achieves in exchange. It is not therefore the market but the goals and purposes in which it finds its final place which determines the value of any good.39 By restoring utility (purpose), consumption but not distribution, neoclassical economics makes the assumption that we can calculate means but cannot calculate ends. 40 It does not concede that we can decide between the needs of persons known to you. Utilitarianism (reckoning the purposes of things, so teleology) reckons that all other persons are means, but that you yourself are the only end, effectively the only person in your calculations. You act for others only in order to get something from them. Every person is a means to support yourself, for you are the only end. Utilitarian economics is based on not being able to tell the difference between persons and things and so, it is sometimes suggested, is a form of autism.41 But things differ in their ends and purposes. Aristotle realised that ‘labour and action is defined by its end, so human labours cannot be aggregated or added up and cannot constitute the uniform substance of something so clearly non-natural, conventional and undifferentiated as exchange value.’42 Labour is not all the same, because labour is not merely a matter of nature but also of convention, that is, the decisions embodied in the culture of a society. But the classical economists decided that labour was a function of nature alone, and so that all labour was the same.43 Smith treated labour as an undifferentiated substance that an employer could extract from as by a process of nature.44

Christopher A Franks He Became Poor: The Poverty of Christ and Thomas Aquinas’s Economic Teachings (Eerdmans 2009) p. 68 ‘From the non-market society perspective of Aristotle or Thomas, exchange value is an important but nonetheless secondary and subordinate phenomenon. The primary context for imagining where wealth has come from and where it is going is the antecedent fabric of natural and social co-membership, dominated by use-values, that encompasses humans beings and intends their flourishing. This context disciplines and conditions all economic activity. ... in modern market society on the other hand this predominance of use values is superseded as exchange value itself becomes the regulatory factor in economic activity.’
40 41 42 43


Meikle Scott Aristotle's Economic Thought p. 183. Meikle Scott Aristotle's Economic Thought p. 183 When it came to labour, Smith and Ricardo did not distinguish between nature and convention.

Margaret Schabas The Natural Origins of Economics (University of Chicago Press 2005) p. 90 ‘Clearly, Smith thinks of labor as a substance, insofar as it can be transferred, stored and extracted – and evaporate, for that matter.’


The modern labour theory says it is a single activity, differentiated only by intensity, skill and duration. Utilitarianism assumes there is only one end – ‘satisfaction’ (for Bentham, ‘pleasure’), so everything can be measured with everything else. All modern economics is based on nature as given and then is built on a series of nature metaphors. But nature is not the only given. We are born into a world that is formed by history, that is, of all the generations of human beings before us. This history gives us culture, which is the basis of all our desires and goals. It tells us what is purposeful, and what is useful because it contributes to that purpose. If we set ourselves apart from our culture we could not identify anything as desirable or useful, and thus could not identify ‘utility’. Labour is not an undifferentiated lump of stuff that can be tapped from human beings as though it were tree-sap. There are many different sorts of work: what differentiates them is what they aim at. As there are different fulfilments, different happinesses, so there are different labours. Work is not entirely interchangeable because humans are not interchangeable. Nonetheless money represents the absolute equivalence of all labour, a point we will return to in chapter 6. Divided between nature and will We have said that modern economics represents a departure from public man and a turn towards private man. What brought this about? Could it have been a turn from a richer to a poor conception of human being? Did this turn force a complex set of issues which relate to human dignity into that single discourse, known to us as ‘economics’, which starts from the two assumptions that man is an asocial individual, and that he is ruled more by his passions than his reason, and thus cannot truly be the judge of his own ends.
The Early Moderns separated the law from the good because they had come to the conclusion that it was no longer possible for the ends of man to have a place in the law. Men had ideas about ends that were too incompatible.45

This was the outcome of a long movement away from richer to poor conceptions of ‘natural law’; which took place in parallel with a movement away from the Christian, to a Stoic conception of God and man.46 Until the seventeenth century economics worked on the basis of three concepts of nature, convention and individual will (convention). Economics was embedded in discussions of the practices and institutions, and so it did not appear as a separate discourse of that name. But increasingly from the seventeenth century convention and will were elided so that these three concepts were reduced to two – nature and will. Moderns identify just two significant forces of nature on one hand and culture on the other. Modern economics assumes that nature is what is real, and that it be scientific as it conforms itself to descriptions of nature. (One snag here is that much of our early modern science was constructed on the basis that nature is a

Pierre Manent The City of Man (Princeton 1998) p. 179.


Margaret Schabas The Natural Origins of Economics (University of Chicago Press 2005) p. p.98 ‘strongly pessimistic component of Smith’s scheme, the sense in which we are but pawns on a chessboard, subject to vanity, greedy and ambition. Emma Rothschild Economic Sentiments: Adam Smith, Condorcet and the Enlightenment (Cambridge, MA: Harvard 2001) on Smith’s ‘Stoicism’ 13133. p. 132 ‘Smith was quite sceptical about a great deal of the Stoic system.’ Gloria Vivenza Adam Smith and the Classics (OUP) on Smith’s wide and eclectic use of classical thought. Smith dismissed the apathy of stoicism, insisting on the importance of fellow-feeling. Vernard Foley The Social Physics of Adam Smith, Athol Fitzgibbons Adam Smith’s System of Liberty Wealth and Virtue: The Moral and Political Foundations of The Wealth of Nations (Oxford: Clarendon Press 1995), Margaret Osler Atoms, Pneuma and Tranquility: Epicurean and Stoic Themes in European Thought


machine, so it is not ‘nature’ but the ‘machine’ that is basic.47 Subsequent economists have wondered whether the organism should replace the machine as the basic metaphor. 48 But if it is the ‘machine’ or the ‘organism’ it is at rate not the person that is doing the major conceptual work in this discipline. Moderns assume that culture is simply a matter of will. Instead of three or more, we started to conceive ourselves in terms of two concepts, and discussed the world in terms of nature and our culture, or even of our individual will, without any consideration of how we decide what it is that we will. The result is that we understand ourselves as units, rather than as covenanted beings who are both singular and plural. We conceive of ourselves without our history, so not as complex bundles of possibilities but as simple atom-like beings. The result is that we conceive of ourselves as pitted against the world, both the social world of other people, and the natural world, and so likely to develop a casual regard for our natural environment. But if we have nature and culture as two domains defined in mutual opposition how can any relationship between them be established? But two such concepts are not adequate. Without this third term we will simply have nature on one hand and the will of the individual on the other, and the two will face each other in an implacable opposition. We need to find a third term. We need a third. There are many to choose from – history, tradition, habit, custom, law or community, or all of these. We need some sense of a shared embeddedness that precedes us and which brings us together and gives us our reasons for approaching one another. It is only such a third term that allows us to talk about change, interactivity and history.49 As long as we stick with this dichotomy of nature and what is willed, we can have no conception of the social processes by which nature is worked upon or by which we make up our minds about what our will is. If we only have two terms to play with, we cannot show anything about the change in their relationships. We cannot show how they came into existence, or how they develop, or so say anything about changes in their relationship. If they cannot change relative to one another they do not really have a relationship, for they are simply aspects of one another, opposing faces of the same thing. We need to come up with a third term, which will allow us to talk about the movement, history and so the freedom of the two things we are looking at.50 It is stochastic, which is to say that it is a function of all the events that preceded it; its present form is not its inevitable form, but the outcome of everything that has brought it about.
47 48

Murphy Philip Mirowski Machine Dreams: Economics becomes a Cyborg Science (Cambridge: Cambridge University Press 2002) 49 Knight Eschatological Economy p

James Bernard Murphy The Economy of Labor p. 46 Nature, custom and stipulation represent three fundamental concepts of order; there is the natural order of physical, chemical and biological processes; there is the customary order of habitual social practices; and there is the stipulated order of deliberate design. All forms of social explanation refer implicitly or explicitly to one or more of these categories. Every human institution has three dimensions; a natural, a customary and a stipulated dimension. James Bernard Murphy The Economy of Labor p. 47 ‘the term convention collapses the distinction between the collective, habitual order of custom and the individually designed order of stipulation.’ James Bernard Murphy The Economy of Labor p.13 Aristotle’s natural teleology is based on an elaborate analogy between the design of artefacts and the design of organisms. Aristotle insists that natural organisms be understood as if they were the products of efficient workmanship: nature economises in her productions just like a good workman. Therefore in the context of Aristotle’s economy of nature it makes perfect sense to argue that if labour is natural it must be efficient, and conversely if labor is efficient then it must be natural. p.12 this twofold reduction of the division of labor to efficiency and to nature is what generates the conundrum of classical political economy: for if the existing division of labor is uniquely efficient, then we ought not to subject it to social transformation; moreover, if the existing division of language is natural then we cannot subject it to social transformation. ...


Economists after Adam Smith attempted to do economics in terms of the two concepts of labour and exchange, without the concept of distribution which we have related to self-giving, love and a complex ‘covenantal’ conception of human being. With only a truncated account of utility, related to the prices determined by the market, they did so without consideration of the purposes, uses or goals to which a thing or person is oriented. With only the three concepts of labour, exchange and utility, neoclassical economics knows nothing about covenant, selfrespect, Adam Smith’s ‘sympathy’, community feeling or love of reputation. It is unable to account for the motivations of people who are free self-givers, or deliberate, reasoning and political creatures. Neoclassical economics cannot say why we should go work, or why work is good even when it is not explicitly and financially rewarded, or why it is good to be a public agent. It cannot tell us why we should not skim our customers or corner a market. Neoclassical economics does not allow us to ask about the public or long-term effect of our myriad private actions. Economics does not able to give us any of the discipline by which we can be formed into generous and responsible public agents, and it has divorced itself from the other discourses which can. Economics reflects man’s assumption that he is fundamentally alone. Economics is the ‘theology’ of the short-term, in which everything is shorn of its public consequences. One reason why we face an economic crisis could be that economics is not an adequate account of what takes place when persons meet in the marketplace. We are able to make this suggestion only because the Christian tradition gives us the resources for a more adequate account. The Economics of Private Man
After the Autonomists

Let us pursue our brief history of economics a little further. It is essential to the claim of neoclassical economics that economics is timelessly true. It does not wish to acknowledge that it has a history; it has simply dropped down from heaven. Nonetheless, what we presently know as ‘economics’ is part of a greater economic tradition, not the whole. Economics has devolved out of the disciplines of politics and of ethics, which themselves belong to the Humanities, in which all accounts of human being as a social, political and reasoning creature are gathered. Over many centuries Europe has accrued a vast tradition of thought about how to act well and so live well together as a society. A society is healthy to the extent that its members are generous and just towards each other. Individual responsibility, generosity and justice, and so an orientation towards the common good, is the goal that the classical tradition of political philosophy points us to. Much of the vocabulary that now belongs to economics was employed by earlier generations to describe our public, political and religious motivations, and parallel terms, (grace, credit, honour, profit) can be found in economics and in religion.51

See the discussion of grace to debt and credit in Craig Muldrew The Economy of Obligation: The Culture of Credit and social relation in early modern England (Palgrave Macmillan 1998) pp. 123-47. Andrea Finkelstein The Grammar of Profit: The Price Revolution in Intellectual Context (Leiden: Brill 2006) p. 316 ‘Profit tends to fade from the family sphere not just as it is heating up in the political but also it is becoming embedded in the spiritual…. Had profit left the personal sphere by the front door only to re-enter via the window? If the still small but growing split between profit and honor that marked the turn of the (seventeenth to eighteenth) century was an indicator of the narrowing of profit (outside of its legal meanings) to the baser spheres of endeavour (despite the age’s insistence on the holiness of all callings) and, hence, an indicator of its lack of place in the sanctuary of the family, perhaps the worldliness of honour made that term equally unsuitable for describing spiritual matters leaving profit (in its merely mathematical sense)


In their discussions of what happens when men meet in the marketplace, for many centuries Christians preferred the description offered by Plato and particularly Aristotle, developed by Augustine and Thomas Aquinas.52 But from the seventeenth century a series of reduced accounts of man and politics, owing more to Stoicism and Epicureanism, began to take over. These identify other people not as persons but as sub-personal forces which we have to master or fly from. Alasdair MacIntyre has shown that economics is founded in an anthropology in which men are bound by their passions, and so are in conflict by nature.
‘It was in the seventeenth and eighteenth centuries that morality came generally to be understood as offering a solution to the problems posed by human egoism and that the content of morality came to be largely equated with altruism. For it was in that same period that that men came to be thought of as in some dangerous measure egoistic by nature; and it is only once we think of mankind as by nature dangerously egoistic that altruism becomes at once socially necessary and yet apparently impossible and, if when it occurs, inexplicable.’53

What had been the dominant account, owed to Plato and Aristotle, of how to be a responsible individual in pursuit of public acclaim through acting and reasoning well, began to be replaced by a much more limited account. When it cut loose from the great tradition of political philosophy from which it had come, economics was considered more fundamental than politics and so gradually became an autonomous discipline. It became the science of man in which man was a creature without a past, or who had to escape his past.
‘The Early Moderns separated the law from the good because they had come to the conclusion that it was no longer possible for the ends of man to have a place in the law. Men had ideas about ends that were too incompatible; these disagreements easily degenerated; what mattered above all was to avoid civil war which is the greatest of evils.’54

Modern or neoclassical economics is most often identified with Adam Smith. Smith did not intend that we should be care-nothing autonomous agents without responsibility. We are not ‘selfish’ atoms. Smith wanted to see men behave well as citizens and public actors, who were able to act for the common good. He was determined that men should not conspire together to create monopolies that corner the market and act against the wider common interest. The concept of ‘sympathy’ that he introduces in his ‘Theory of Moral Sentiments’ is the key to ‘The Wealth of Nations’: Smith expects us to act from our own best instincts, which he knew are a mixture of self-respect and fellow-feeling. The ‘Theory of Moral Sentiments’ tells us that self-respect is inextricably related to our concern for what other people think of us, and so to our reputation.55 The market should be free because we should each of us be free to form relationships and enter covenants with whomever we wish. When the market is skewed by big corporations and by government revenue-raising or -spending it is not free. Smith simply wanted to remove the blockages to individual initiative caused when the market is dominated by any group of self-interested big players. Smith nonetheless dropped love and purpose, two of the fundamental economic concepts employed by Augustine and Aquinas, and limited himself to the two concepts of labour and exchange. But others came after Smith who were convinced that the entire existing tradition of deliberation about what is good, of Plato and Aristotle, and Augustine and
in place by default?
52 53

See Bernard Dempsey Functional Economy; Pesch.

MacIntyre After Virtue p. 228-9. 54 Pierre Manent The City of Man (Princeton 1998) p. 179. 55 Adam Smith Theory of Moral Sentiments


Aquinas and their heirs, had become hopelessly tangled. They decided to give up on it, and cut moral language loose from all previous discussion of what is good or true. The chief of these was David Hume who, disdaining the metaphysics of many previous centuries and logic, and creating the dichotomy between nature and will, and so between fact and value.56 The generation who followed Hume in this have become known as the Utilitarians, of whom Jeremy Bentham is best known. The Utilitarians wanted us to give up talking about right or wrong, or good or bad, even in the sense of ‘good for some purpose’, as when we say ‘this will not look good to other people’. Any good is good to the extent that it is wanted enough to raise its price to the point at which its present owner is prepared to sell it. They have encouraged us to think only in terms of good as this is established by the satisfaction of the person who employs enough money to outbid all others and so claim it. The value of a thing, its utility, is determined by the price that reflects the preferences of all agents in the market. Within this Utilitarian account, all our acts are seen as ‘preferences’, that is, as private. Utility then no longer had any direct connection to what was useful and purposeful, but meant its value to the market, or the price that you could receive for it. After the eighteenth century the whole tradition of thought about being human in public was turned inside out. As neoclassical or utilitarian economics became the dominant idiom of public life, our various actions in the public square were described in terms of individual market transactions in which each of us imagines that we act privately, as though no act of ours could be seen by others or would be emulated by others. Every transaction is considered in isolation from all previous and subsequent transactions. Economics understands each transaction as though it took place in the secrecy of a private room, and no act of ours could create envy in others or induce them to copy us. The inside world is the whole idiom in which we understand the public world. Nothing you do is seen, for no one is watching. It is as if each of us is quite alone. The history of economics is long and complex. But in the last 250 years, the history of has narrowed. The history of economics is the history of a reduction as much as it is of a development.57 This history is vital nonetheless, not merely because it is relevant to the discipline we now call economics, but because it massively influences the way we see ourselves and act for our future. We said that economics was a sub-discipline of politics. But even here there is a problem. For economics is not a discipline, that is, it does not offer us any of the discipline by which we can learn to take responsibility and to act in the market as mature political agents. Such considerations might appear, briefly, only in the ethics module of a business management course.58 In this modern or neoclassical economics everyone is taken to be unaware of those around them and unable to attribute motives to them. It is as if we cannot take one another seriously as deliberative, reasoning and public creatures. But economics need not remain constrained by the utilitarian heresy. There are always alternative traditions. When these are forgotten by mainstream economics, Christians and others are able to bring them back.


Meikle Scott Aristotle's Economic Thought p. 182.


Mary Poovey Genres of the Credit Economy: Mediating Value in Eighteenth and Nineteenth Century Britain (Chicago 2008) p. 418 ‘If economic writers had not pursued natural philosophical and then mathematical models to the exclusion of other ways of modelling value, if these writers had not been successful in popularising a theoretical consensus about which economic questions mattered, and if they had not embraced marginal utility theory in a way that narrowed the discipline and ignored what their models could not explain, economics as a discipline might not have assumed the form which it now takes. 58 John Médaille The Vocation of Business


We have indicated the history of this change from the identification of man as a public and relational being to a private and fundamentally pre-relational being. Next we have to return to the idea of public service and the government that comes from it.

6. Government over-extended
We act individually and independently. When this great gathering of independent persons are considered together, we have a crowd, and we call this crowd the market. The market is the great assembly of humankind that mills about the public square exchanging accounts of themselves, their needs and contributions and our own freely-entered covenants give us the motivation to take initiatives. A healthy economy is driven by a healthy culture with a healthy public square. We make agreements to act together in covenants of mutual service, and of public service. It is our public service that brings government and the state into being. Government holds the ring so that our own motivations may operate, but an unrestrained government prevents us from discovering such motivation. Since we are not free in relationship to them, the market and the state cannot motivate us to anything. If state and society do not recognise the household as the source of the next generation, there is no incentive to start a new household. If society does not recognise and commend new households and all other forms of enterprise and risk-taking, there will be fewer of them. If society does not praise such enterprises, no one will be take the risk of initiating them and the result will be cultural and economic stagnation.
Distorted market

The state grows. It grew throughout the twentieth century and continues to do so now. Since they have decided that they cannot receive, however much at second-hand, the self-government that originates with the Church, our political leaders are in a quandary. The state that does not acknowledge the primacy of self-government is trying to push the Church out of the public square. It tells the Church that it is merely one ‘faith community’ among others. But the Church replies that, though there be many faith communities, there is only one that threatens us. The government that is over-extended and looks round for ideological justification for why it should become more so, is itself a ‘faith community’. Because they do not condescend to recognise the covenant from which all our many distinct covenants come, everything governments do substitutes for our own love and initiative and action. Their equality agenda attempts to flatten every specific covenant, bringing each individual into direct relationship with the state, so that the relationship each of us has with the state is more important than any other relationship that we have inherited or entered freely. Their determination to solve our problems drives them to do things for us and instead of us, so taking away our motivation to do things for one another or for ourselves. Middle-sized firms grow into mega-corporations because the fiscal regime of government induces them to do so. They are in a symbiotic arrangement with government by which they are allowed preferential treatment in order to grow to produce the tax revenue to support the rest of us. The demands that we all make on the state that it intervene for us and support us, means that the state grows, and the corporations grow with it. They draw capital upwards. Governments have been saving big firms, but doing so by laying the taxation burden on other, smaller, firms. They are thereby reducing the incentive for the individual initiatives that become new start-ups. The state makes its settlement with the


international corporations that, for the state’s purposes at least, make up the market.59 Yet it is our demands and unwillingness to exercise our own responsibility and forms of provision that over the extend both market and state. It is our own individual reluctance to sustain our own relationships and make our own provision that brings this about. Thus because we prefer to have the state intervene to manage things for us, the state has to raise money, which is simply about stripping capital out of social capital, cashing in social capital. The state is the universal reconciliation machine, that makes us all the recipients of its standardised decisions, the individual political nature of which are largely hidden in the funding decisions. This means that all decisions go on over our heads, and we are passive recipients of decisions. We ask for this, and the long-term result is that it is imposed upon us. The practices of self-discipline and self-control that enable each person to become a self-giver may be found through the Christian life. This discipleship enables the self-control that allows our giving to be free and deliberate. We are freed to love, and to act, first for ourselves, then for our families and then more for our neighbourhood and wider society. The practices of self-government enable generosity, and public service and government are what result. Where it receives, however much at second-hand, the virtues of this Christian formation, our society may find the resources to acknowledge our various acts of generosity, and so motivate us to become responsible and confident members of the public square. As the gift of oneself to another, marriage is the primary act of generosity; where our society affirms this, our society will command affection and loyalty enough to work for its continuation. The society that is able to deal in the currency of selfgiving will hold together. But when we, or our leaders, forget that all government is sourced in the self-government of the person, the integrity both of the person and of our society as a whole, comes into doubt. The state is that set of public servants who serve society. They hope to do so by safeguarding whatever is necessary to its future. A government exists to protect the household, which it does by recognising marriage as that fundamental event of self-giving that brings new households and new economies into being.60 Any government wants to encourage all those initiatives that make up civil society. It may do so when it acknowledges that persons are both intrinsically self-governed and self-restrained persons, and both self-givers and thus public servants. It does so when it acknowledges that persons may adopt for themselves those forms of discipleship or formation through which they hope to become better self-governed and better self-givers: thus the government must acknowledge the covenants and communities, such as the Church, that embody such a course of formation. A government is committed to public service when it recognises these covenants pre-exist it, and thus when it is modest and self-restrained. Marriage is the one institution that is more basic than the state.61 But when those in government do not acknowledge the fundamental nature of such covenants, they operate on a different understanding of the person, one in which the person is an individual. The government that is not sourced in the selfgovernment and public service of persons, looks for an alternative and more

John Lanchester Whoops! p…. The biggest of the banks are bigger than the state – too big to fail.


Robert George ‘What Marriage is and what it isn't ‘ First Things July 2009 ‘Ideologies and practices that are hostile to a sound understanding and practice of marriage in a culture tend to undermine the institution of marriage in that culture. Hence it is extremely important that governments eschew attempts to be neutral with regard to marriage and embody in their laws and policy the soundest, most nearly correct, understanding. 61 Douglas Farrow Nation of Bastards


expansive mandate. It assumes that we are all undifferentiated beings, and thus declares that all relationships are equal, and all equally occasional. If our leaders do not recognise the decisions of persons to give themselves to one another in love and freedom, by recognition of that our covenants constitute a fundamental autonomy, everything governments do substitutes for our own love and initiative and action. The relationship each of us has with the state is more important than any other relationship that we have inherited or entered freely. When the state has accepted singleness over the covenant of two persons the effect of all its interventions is to promote singleness over the covenants of two persons. Then governments do not know how to stop themselves from hearing everything as a plea for their closer involvement. The public budget is employed to compensate for the fall-out from failed marriages. If we are not dependent on one another through a myriad particular covenants of family, and its extensions in the community and voluntary and private sectors, each individual is brought into direct and involuntary relationship with the state. Over the long term effect such compensation leaches away at all marriages, and we are all dependents directly of the central power. If our leaders acknowledge no covenant, they will not know how to restrain the claims of government. Their determination to solve our problems drives them to do things for us and instead of us, will take away our motivation to do things for ourselves and for one another. If it assumes that no covenant is prior to the state, the state will insist that that every covenant requires the state’s sanction. If our public servants fail to sustain the self-restraint that makes for modest government, the ideology of the group that justifies a more expanded mandate will give the state an agenda derived from that ideology. Such a state may believes that humanity is unisex and homogenous. It will attempt to obliterate all differences and flatten every specific covenant, promoting singleness over all the covenants of which society and the economy is made up. The effect of such the mandate given by the equality agenda is to attempt to make us one sex. If we are all a members of a single unisex human being, we have no need or desire for any other human being. If we have no interest in any other specific human being, we are not moved by love of them and are consequently without motivation. The state will be unable to concede that we may love our own family more than others, and prefer our own initiatives and enterprises over others. In its attempt to abolish all specific desires, such an ideology will set the state against every particularity even to the point at which it attempts to minimise the sexual difference given by nature. The state will have become a secular theocracy, a rival church. The state is no longer the expression and limited implementation of our own public service. Rather it is more fundamental than we. It exists before us. It nominates and delegate our functions to us. Society is then a single household. Each of us is then married – to the state. It is our universal parent and partner. We exist for its sake. Then only the state is the only true person, and we are all persons only as we commit ourselves to one another through it and so derive our identity from it. By attempting to out-source our own self-government we turn our own public service into the state that is prior to ourselves, a power that knows no limit. Such a state is the God that acknowledges only his own will and does not care to give any account of himself. A vibrant economy is constituted by a self-motivated population, confident in the virtues and practices which build a common culture and economic life. Are Europeans and are the British confident? Do they regard their histories as worth that brought about the cultural and economic development of that countries as a mistake and the virtues recommended by their forebears as unnecessary for them? Are they beginning to disavow all that they have been? Has European


culture so devalued the household that bears and brings up children that indigenous European fertility has dropped below replacement rate and cannot rise again? Are our economic crises the expression of a long-term decline in cultural confidence and is this decline already reflected in a long-term crisis of demography? Is Europe threatened by demographic winter? Is Europe losing the will to live? Financial and economic meltdowns may indicate the cultural and political breakdown that is both cause and consequence of a population no longer confident enough to reproduce. Societies come and go. The community that witnesses to the covenant of God, the Church, remains. The Christian proposal is that we are primarily givers, who each have something unique to offer, something that is intrinsic to ourselves. In each economic transaction the other party is primarily a giver and so a free agent. Social capital is money in the bank, productive for as long as it is not cashed out. As soon as it is turned into explicit money to compensate for love not given or received, it is gone. When everything is denominated in terms of money, we cannot know whether to enter services on the debit or credit side, with the result that money itself suffers a crisis. The social capital gathered accrued over centuries is being lost, and no amount of welfare spending in one generation can repair or compensate for its loss.
Christian faith as source of true secularity

The Church insists that men are able to find and meet each other in the public square. It insists that there is a – secular – economy in which we may meet and serve one another in this time and place. We may ask each other for what we need and we may provide for one another and so meet on these pragmatic grounds. We may, and must, use our judgment in describing our needs and meeting others’ needs. We are able to make our own judgment of what others tell us about their needs, or the market tells us about them, via prices. We must judge for ourselves, and so engage with one another politically as well as economically. As long as we fail to insist on this element of judgment we will assume that the economy is mechanism that rolls on, entirely detached from our generosity towards one another, and we will be baffled when, for us at least, it fails to roll on. Politics is more fundamental than economics, and culture is more fundamental than politics, and the Christian faith is more fundamental than any particular culture. It is therefore the responsibility of Christians to set out the Christian distinction between public and private. The modern concept of the private sphere ultimately derives from the Christian doctrine that each human being has the dignity of living before God. With no one to hide behind, has our one-to-one session with the Lord. Though there is a world of partisan judges who may not be fair to us, this impartial judge has promised to hear each of us out. The distinction that the Church makes between itself and society is the guarantor of secularity. It is the guarantee that we are not confined by the present state of affairs. Market and state tend to expand and assimilate all that they encounter. But the Church, alone perhaps, holds out against integration into either state or market. The Church will not be absorbed or hammered flat. Ideological secularisers will experience the Church as a challenge to their own power. Simply by being there, and by being not-the-State, the Church indicates the limits of the state. It gives the state its limits, and so prevents the state from becoming the totality. The Church secularises and demythologises the state. It is the Church that provides the true secularity, by distinguishing itself from the state. When we do not make this distinction, between those who are self-controlled and those who are not, we can only ask others, and the state to do for us what we do


not do for ourselves. Then the state takes on more functions and does more for us even than it does presently. But the corporations can only provide for us, and so do for us, what we might ourselves do for ourselves. They cannot free us to act; they cannot make us more, but only less, active. No one can free us to act and take initiatives except ourselves, when we are empowered by God in baptism. We help them when they are enabled to help someone beyond themselves. When we fail to make clear this true origin of secularity we are colluding in the general assumption that people require institutions to act for them, for they are individually without power to change anything. The Christian faith suggests that we can make changes when we ourselves are changed by Christian discipleship. This discipleship converts us from passive consumers, to those who exercise their own self-control and therefore have their own dignity. We are not passive. We are able to judge ourselves, and so to decide for ourselves on the course of formation to which we commit ourselves in order to learn greater self-government. We decide, for ourselves, and for the benefit of others. We have said that the human being is the sole ultimate good. What we essentially desire is one another. Public servants are dedicated to our service. We should therefore remind them that they truly do us a service when they do not attempt to replace our own mutual service to one another. The state and its clients Our leaders have promised too much. We have got into the habit of looking to them to solve our problems for us. All public provision encourages us to believe that we do not have to sustain the relationship with our parents or our own children. When relationships become too difficult for us, they can be provided for by state benefits and agencies. We then see them not as indivisible persons but as individual ‘problems’ for which separate agencies are the solution. In sum these services remove our need for one another. In giving us these penultimate goods and satisfying what are seen as our material and primary needs, our public servants are setting new classes of service providers and intermediaries between us. Meanwhile we learn to think of ourselves as individuals, on our own and without resource of our own. ‘The trend in living alone is something strongly encouraged by government subsidy and taxation policy – it does not result from spontaneous action and free choice of people who are facing the full economic costs and consequences of their actions.’ 62 The upshot of all their promises is that they are trying to deliver us from responsibility. We are divided into active and passive, producers and consumers, service providers and service users, victims and so divided men. Rather than tell us to provide this service for one another, our public servants, perhaps because they are afraid that we will stop voting for them, will prefer to provide these services for us.63 It is of course economically efficient to keep as much demand as possible in the lower part of the economy. The first part of any spending is the most efficient, shows the greatest multiplier effect, and thereafter shows diminishing returns.64

Patricia Morgan The War between the State and the Family: How Government divides and impoverishes (Institute Economic Affairs) p.18 63 Patrick Deneen Democratic Faith 64 Jonathan Gershuny Changing Times: Work and Leisure in Post Industrial Society (New York OUP 2000) p. 248 ‘A fraternal concern to improve standards of consumption among even the poorest members of society... could serve to stimulate the economy in ways that also benefit a substantial proportion of the better-off.


Yet this requires that the state avoid creating dependency traps. The steady expansion of the total money in circulation means that those who once were not taxed have now drifted into the first tax bracket, and yet are still dependent on tax support or benefit. Although they were making only enough to support themselves, they are now required to pay tax (in order to support others. If the tax and benefits system makes unemployment more profitable than work the state is then creating poverty and thus economic inefficiency. . This section of population may insist that such benefits must continue, and vote accordingly, and it is in the interest of the government presently in power to let this continue.65 Those in receipt of benefits have become political clients of the state. But it is not only those on the edge of poverty but also the middle classes that have drifted into this position. Our public servants and leaders are unable to resist the huge weight of this expectation placed on them by their many constituencies. They ignore the consequences of allowing the exception to become the new precedent effect, and so neglect moral-hazard. They do not see that, as public actors we emulate one another, so that any particular mercy for one section is an offence against equity and so taken as a precedent and challenge by the rest of us. The whole population is turning the original sincere public service intentions which took our public servants into politics in the first place, into an inability to say ‘no’ to any request for funding. Our leaders seem unable to make judgments that do not increase the state. We are perverting their originally well-defined intentions. Inflation is caused by the expansion of expectations that assumes that the state can step in with funding for them without doing so for every case. It is our inability not to ask the government for funding that makes the state uncontrollable, and which makes for the stagnation of our economy. Let us summarise some of the points we have made so far. We started with Augustine’s point that a nation is bound together by the desire of each member for the good of nation as a whole. There will always be differences so inequalities will always arise, but when they pass a certain point they have a detrimental effect on the economy. In a great number of ways the state is there to prevent this point from being passed and to rectify such imbalances if it is. It is tasked to ensure a basic national unity, and so to keep inequality within limits. Government wants to encourage our initiatives, but is only able to conceive of each as a project of its own that requires licensing and funding. We are trying to get the state to save us from the market, that is, to save us from the downwards valuation that we would otherwise be obliged to give one another. But the state cannot save us from the market, for, as we have said, the market is the assembly of all humanity. We have to receive our judgment from the whole assembly of our contemporaries around the world. They decide what we are worth, and we cannot ultimately duck their judgment. That judgment will become more terrible when we try to delay it, particularly if we have ducked our obligations to them. If the state tries, it can only bail out the corporations already big enough, and powerful enough to capture and threaten the state, then the state takes on the burdens that make it every more likely to shipwreck, and those burdens are thus placed on the whole nation, so that the poor are being taxed in order to keep the rich man’s corporation intact despite his own recklessness. 66 Our ongoing financial crisis is caused by long and extensive plunder of the state. Going to the state for support has become the policy of an entire middle class. Though it was premised on providing for the poorest, the welfare state has become the major source of middle class incomes. If we have been simply

Reuven Brenner Labyrinths of Prosperity (Ann Arbor: University of Michigan Press 1994) p. xi ‘Governments in the West also have the option of calling unemployment benefits ‘salaries’. 66 John Lanchester Whoops!


plundering the state, we have been robbing the most vulnerable of the protection which the state is intended to give them. Even the industry previously most resilient to this, and most defiantly capitalist, the financial services industry, has got in the on the act. It is indeed right to blame bankers, and regulators and politicians for bringing our financial crises on. Our governments have been captured by the big banks. With their greater financial power and freedom, less hampered by multiple constituencies, banks are able to take advantage of this. Since states are the way that a nation of people organises itself as a public entity, this means that these banks are in defiance of the right of any people to be sovereign over their own affairs. Former World Bank economist Simon Johnson suggests that that Western governments now look like more like the governments of third world countries, subject to the same sort of oligarchic pressures, corruption and wild swings typical of the Third World. He warns that ‘recovery will fail unless we break the financial oligarchy that is blocking essential reform’. 67 The effective plunder of nations will only be brought under control when fraud charges are brought, cases come to trial and a representative sample of offenders are put in jail. Of course, those who are jailed will not be the only guilty ones, for none of us is entirely without guilt in the financial speculation of recent years. Nonetheless this is the only way that states will regain the power to exercise their proper authority from the financial oligarchs who have made undeclared attack on their proper sovereignty. By dispensing with the discipline of self-government our society, including inevitably its leaders, and by cognitive capture of regulators, we have distanced itself so far from the mind set of small and restrained government that we have been unable to see that see that this is what we have been doing, and are still doing. We have acted in the belief that the government will stand guarantor of our debt, or pay our bills for us.68 It is offering to take the burden of responsibility off our shoulders, with the consequence that we approach one another, not as persons, but as ‘needs’, as sectional interests and lobby-groups, and thus as antagonists, for whom the questions of the ‘common good’ are not often articulated. By running inflation takes away the power of those who we have saved and so gathered and deserved respect, the state dissolves any sources of authority but its own. Inflation destroys the incentive to self-reliance, the confident that the money we save in a lifetime of work will be worth anything when we come to draw upon it. It destroys self-reliance, and only self-reliance will free us from it. Without self-mastery we have no means of securing ourselves from the institutions that expand to master us and substitute for us. The present state of affairs, symbolised by the state itself, is the eschaton fully realised. The distinction between the present and future disappears, and so the future itself is lost. If the state cannot say no to those who wish to farm it, then it is taken over by such farmers and power brokers and then the state really is simply the biggest of our gangs of thieves.69 Our insistence that the state must fund us is killing the economy and killing social capital. There is nothing in the state by which it can stop itself from taking on more. Only the Church can hold out against the state, and the individual who is claimant on it. The Church does this by turning us from individuals, necessarily claimants on the state because dependents and functions of it, to persons who, motivated by love, are able to exercise public generosity through their work.
67 68

Simon Johnson (Baseline Scenario) Piergiorgio Alessandri & Andrew G Haldane Banking on the State (Bank of England) 69 Augustine City of God


State out of the control This brings us back to the long-term story in which market and state represent an exercise of power delegated by persons. Where they delegate too much we have a state that exceeds its mandate. The state that does so, does not care to give any account of itself. The people who acknowledge no discipline or limits, and who are therefore not what Augustine would regard as a united people, generate the market and state that acknowledge no limits. Such a people and such a state becomes the God that knows only its own will. Liberal democracy derives from the great tradition of Christian political thought and practice. It is for the Church, that is, the present generation of Christian disciples, themselves under the discipline of that tradition, to offer that political thought and practices afresh, and to say that this tradition of ethics shapes this community, and may go on to shape the wider national community when it is willing. Parts of this vast tradition are always being bowdlerised into different agendas and slogans: there are individual campaigns against poverty, for the environment, against capitalism, for regulation. It is for the Church to say that, as long as we are angry about other people’s sins, without asking for forgiveness and release from our own, our politics is mere self-disgust and shouting. So what is it that Christians are able to bring to the debate?
Christian interrogation of economics

The real economy is the economy of human relationships, regardless of whether the market and the price system acknowledge this or provide us with a fair reflection of it. All Christian economic reflection has insisted on this point. The economy does not function without us. It is not a mechanism: the metaphor of mechanism is no more than a shorthand for our own action. Money serves the good running of the market which serves the good functioning of society; put in any other order these factors are disordered: society cannot function in order to serve money. Money is intended to accompany resources to the best places for them, where they will best serve the reproduction of the human economy. But money may also have the opposite effect: it may divert resources to other, destructive goals and so endanger the real economy of human relationships. The price system does not therefore tells us everything we need to know, and does not make all decisions for us. The price system can harm the human economy, and the financial industries may not serve to obtain the best location for resources. They may be serving their own resources, and on a longterm account, not even them.

7. Self-Government and Good Government
What is good? On marginal utility conception of modern economics, what is good is what everyone else says is good, their preferences are expressed in prices. The marginal revolution means that what I want and what I do relate to what all others do and can only be described in terms of what all others do. Marginal economics rules out the idea that there are really things that are good – instead what is good is understood to be only in the eyes of each, only a matter of individual desire. Each of us refers to some good, exterior to the market, by which we can judge the market as a whole. We do not know what the value of the whole market is: it can inflate itself well beyond what is sustainable, and yet no one is prepared to declare that the market is the emperor with no clothes. When this becomes the case, the one thing that can be done for this economy is to declare that it is indeed naked. Could this be the responsibility of the Church? We can distinguish ourselves, step out of the market and address it, that is, address all our peers,


and so act as a truly independent and individual person only by reference to what is good. The individual is able to judge the market as a whole, if he know that he and it are under the judgment of the good and so of truth. But Christians insist that the value of a thing is determined primarily by its use. Only secondarily can this be governed by the value it achieves in exchange. It is not therefore the market but the goals and purposes in which it finds its place which determines the value of any good.70 The over-extension of the top end of the market into a single global economy that threatens the market in each particular place, is the result of our own surrender of responsibility, and readiness to think of ourselves as individual and consumer rather than as covenanted person and citizen. The over-extension of the market into the domestic economy of the household ultimately threatens the functioning of the market itself. The rise of the market as colossus is the obverse of the rise of the state as colossus. The rise of the financial market that overtops all concerted human government and self-government is analogous to the rise of the state beyond public service, that has arisen out of the temptation to distance ourselves from our vocation as self-givers and intrinsic public servants. By alienating our labour from love and the gift of person to person, we have brought into existence another ‘person’, a state that appears to be prior to ourselves. The state is the single unyielding given before which we must, and to and from which we live. As the State tends to become a ‘person’, so too the market attracts the attributes and logic of personhood. As a consequence of our reluctance to understand ourselves as self-governed and self-giving public persons is that our own alienated personhood accumulates in these meta-individual forms of market and state. They are facets of the temptation to which moderns are prone, to assume that unity is more fundamental than plurality, that the One is prior, and that persons derive life and a merely temporary freedom from it. These two aspects of this monad reinforce the deep fear that everything is already present to us and we may hope for nothing that we do not already have. Self-Judgment and self-government We seek and meet one another. This is the basis of the public square and secular economy. We may ask each other for what we need and we provide one another with goods and services. We may and must use our judgment in describing our needs and meeting others’ needs. We are always enabled and invited to make our own judgment of what others tell us about their needs, or the market signals us via prices. Christians believe that we may be formed and improved by encounter with one another, and so we should all examine and test ourselves and one another in public. The Church is the parliament in which all the world is represented and it is home and family. Christians understood the Church as both a household and as a political assembly. Indeed they were the first community to understand itself as the reconciliation of these two antagonistic sphere of the public and private.71 Christians know that we have to approach one another both in peace and with a readiness to question and challenge, even at the risk of confrontation. We expose ourselves to judgment and correction by others. Christians do not think that anyone is above judgment, or that peace obviates the need for confrontation; it is

Christopher A Franks He Became Poor: The Poverty of Christ and Thomas Aquinas’s Economic Teachings (Eerdmans 2009) p. 68 From the non-market society perspective of Aristotle or Thomas, exchange value is an important but nonetheless secondary and subordinate phenomenon. The primary context for imagining where wealth has come from and where it is going is the antecedent fabric of natural and social co-membership, dominated by use-values, that encompasses humans beings and intends their flourishing. This context disciplines and conditions all economic activity. ... in modern market society on the other hand this predominance of use values is superseded as exchange value itself becomes the regulatory factor in economic activity. 71 Bernd Wannenwetsch Political Worship (OUP)


only this insistence that we have not yet reached the universal peace of the end times that keeps the secular sphere open and secular. We have seen that in the economy of modernity no one has to challenge his neighbour directly, for we can refuse to buy their product and ship in a cheaper product from some other part of the world. Each of us holds over our neighbour the discipline of being able to ‘exit’ our relationship with them. We are free to use our own judgment. We are able to decide to act well for one another. We may fail of course. But when we have failed, we may admit our fault, ask for forgiveness and start again. There is a dignity in admitting that we have failed, and terrible failure and loss of dignity when we cannot bring ourselves to admit failure. The Christian faith gives us the dignity of public confession and repentance. Christianity is not a political programme or an economic programme: there is no set of instructions in which our every little act is laid down for us. God invites us to act publicly, using our judgment. Our conscience may be formed from a tradition of judgment, such as Christian discipleship, but we decide for ourselves. Only the Christian faith insists that we have the freedom of individuals who may judge ourselves. It gives us the dignity of confession and repentance. There is a terrible loss of dignity when we cannot bring ourselves to admit that we have acted partisanly and badly, and so failed, and this is what we are now witnessing. In Christianity, God hold himself responsible to us and gives an account of himself: this is what the Church’s Scriptures are. But where no such covenant and personal relationship between God and man is understood, God can only be understood as fate, and so as a threat to our freedom. So for secular liberalism God could only be a large will, and so it mistakenly understand Christianity as though it were some form of submission to such a will. Such raw will is not interested in being answerable to our questions or protests. The Christian doctrine of God gives us the break-through concept of the person that gives us these concepts of freedom and responsibility. Though it declines to acknowledge this, the liberal tradition lives from its memory of the Christian tradition. It takes different elements of the unitary Christian teaching about man but sets these elements out without relationship to the doctrine of God which alone can hold them together. The result is one part of the Christian concept of man is set against another. The independent and autonomy of man is set against the covenant of each man with others of his community and mankind as a whole. So we oscillate between seeing ourselves as deracinated individuals and collectivism that strips us of our individual dignity. When the British decline to hear the Christian account of God and of man his creature they take on a ferociously fatalistic conception of God, in which power dominates and weakness is punished. It is the metaphysics of paganism and tribalism. When power is the fundamental category, and God has all power, why should God be interested in whether we live or die? And if he is not interested in us, he is also an irrelevance, for it makes no difference to us whether he exists or not. Or if he has submitted us to contradictions that cannot be resolved in an arbitrary cruel and meaningless universe, such a God is a monster. Either way, such a conception of God knows no redemption and no hope. Atheism is an appropriate rebuttal expression of this sort of power claim, but atheism is also a result of this deist or pagan conception of God, for in acknowledging no other authority, it allows no challenge to the ‘gods’ of power that we experience in the market and state. The Christian doctrine of God does not offer us naked, unmediated will or power: the God of Jesus Christ is entirely unthreatened by loss of power. We may know the God of Jesus Christ only in this newborn child at Christmas, and in the single isolated figure of Christ on the cross at Easter in


whom all human self-assertion and power is exposed and shamed. The Church insists that God is only accessible in this dark way as someone who has given himself into our hands, utterly without fear of what we may do with him. As the result the Church gives itself into hands of the world unafraid of whatever grief lies ahead. Christians do not think that any victim is simply without aid, or simply to be pitied. They do not believe that the only thing that can be done for them is to give the victim what they want. For the person who declares themselves to be a victim thereby makes themselves a victim in a more profound way. They do not know that the first thing we should ask one another for. More terrible than material poverty is spiritual poverty, by which we inflict material and spiritual poverty on one another. Those who are in material poverty can always appeal to their neighbours and pray to God, and know that they are heard. We have to render one another acknowledgement of our dignity, and we can of course give that acknowledgement along with the material means by which we can pass that dignity on to others. The purpose of human life is to love and give and serve, and from this love and ability to give and serve each human gains their dignity, and the image of God in them is restored. The person without self-control is pitiful, at the mercy of their, unable to grow to maturity. Public interaction between such persons is then on the basis of who is loudest, and politics becomes a form of yelping. What is more pitiful than the society that does not learn from its own great inherited fund of truth and selfdiscipline, that disparages all means of self-control, gives itself away and creates the gods that it gives itself to. It is for the Church to tell people that they are not being held back primarily by other people, but by themselves, that is, by their own sin. They are responsible, we are responsible: whatever it is, no one has done this to us, but we ourselves. When we only tell people what they want to hear, that that they are victims and that society is to blame, we are complicit in the growth of the market to provide what, without self-control, the individual is taught to believe that he needs, and when he doesn't get it, in the effort to compensate that tempts the state into taking on excessive responsibility. The practices of Christian discipleship teach us that we may work so that we may be generous and have something to give to one another. Such labour is its own reward, for we may take pride before God in those whom we have loved and served. Without such a discipleship liberalism turns Christian humility into another game of power in which we all now claim to be victims, with the resulting culture of resentment. But for the Christian, work is valuable regardless of whether it receives explicit financial reward. It is labour that gives the economy and currency their value, not the other way around. The value of money can only be established by what is not money: labour is a fundamental economic concept only as long as it is defined by a Christian account of the work, and the pain, of self-giving.
Repentance, forgiveness and release

Forgiveness makes us free to deal again and so creates an open economy. Without the practices of the Church, of self-judgment, confession and forgiveness, liberalism does not remain liberal, and the economy does not remain healthy. There must be judgment and truth, so market must be allowed to clear, and price discovery and so sustainable values are allowed to emerge. Crises are caused when societies and their governments start to duck the judgment of the market. It cannot be ducked in the long term, but much damage can be done by trying to avoid the judgment of the market.


Governments may not be able to repent and correct themselves, but persons can do this. Governments are only as good as their people will let them be. But a society may repent only when it discovers what it should repent of. The Church is body that knows how and why to repent; it only it can release the nation by starting this process. The Church can start the process of our national selfjudgment in which we hear from the rest of the world its account of our worth. Individuals are responsible. We are a mature and independent individuals if we can take responsibility for what we have done, name it in public, and not merely apologise for it but bear the cost of it. We are individuals if we can repent. If we cannot go back and take responsibility, even for the things that we have not been directly responsible for, we blemish the image of God in ourselves. You can go back to your wife and family and apologise. You can go back to your clients and tell them that you are responsible for their loss, and to the extent that that is possible that you will repay them. We can mark our balance sheets down, take our losses without demanding that they be nationalised, we can go bankrupt. We can admit our failure and our weakness, because the covenants of which we are members make us strong enough to do so. After fifteen centuries in which the British have been soaked in Christian culture, we have the intellectual and ethical resources to repent. We understand what asking for forgiveness means. Because the Church receives its life and strength from Christ, it is strong enough to lead the repentance, and the nation and its leaders are free to follow, to endure the ignominy, If we do this, we will survive. The Church points to the mandate and limits of the sphere of our shared and immediate concerns and so true secularity. It insists that we are free to meet and encounter one another, without the mediation of business or government. It says that we may do so, and thus we may live together, and thus we may live well. We are not given our by those above us – the government does not give it to us. Rather we may collect together to nominate a few to exercise the office of public service. So we delegate some (few) functions to them (that better help us to exercise our freedom well). At all levels can only be the representative exercise of our own powers. The Church insists that the individual may undertake whatever he wishes in the open field of individual and corporate enterprise and responsibility in which we demonstrate leadership and generosity. In this chapter we have begun to examine the economy in terms of its crisis. We can’t fix this crisis with more money, because it is the value of money that is the problem. We have to fix money with something that is not money. The only way to fix it is with attitude, or more traditionally, with virtue. The modern economy hollows out and suffers crises because consumers, who have no motivation of their own, are less robust than an self-givers, who do. We have allowed our economies to hollow out, so that even this economy, with its previously developed culture of law and civil society begins to resemble a third world economy, and the global economy begins to appear as a terrible force of nature. Our society does not know how to judge itself. It bounds and rebounds from boom to bust, its optimism and pessimism equally unfounded. We cannot say whether the standard of living we have experienced all our lives is going to continue as things will pick up again, or whether it is now over and the gains of our lifetimes are about to prove unsustainable and delusory. Each society has to give an account of itself to other societies and cultures. We owe an account of ourselves to other countries, in which we have to persuade that we are energetic, entrepreneurial, virtuous and reliable people who honour their debts. This present generation has to honour the virtues and achievement of previous generations. Other nations will be confident of our society and our


economy to the extent that we acknowledge and understand the qualities that made this society good and this economy powerful and do so by not disavowing our forebears or their virtues. And above it has to honour the household in which children are nurtured and trained up as the next generation of economic agents. Only the household can give this economy its future.

1. The market is dependent on the family and household, the formal on the informal economy. 2. An economy has to sustain itself through time. It does so as one generation persuades another to produce a third. Economics is about the transfer of motivation, and thus culture, and subsequently of all the resources, which a new generation requires. 3. Through the market we provide one another with the material means that our bodies require, and which make it possible for us to be present to one another. 4. Love motivates work. Work creates dignity. Work sustains relationships, and motivate us to seek new ones. Different forms of work create different capabilities, virtues and forms of character. An healthy economy requires a mix of all. 5. Work is its own reward. To the degree that it distributes explicit, financial rewards across the population it keeps demand and motivation high. An economy without local access to capital loses skills, finds little dignity in work, and experiences a loss of industriousness and purposefulness. 6. We need motives to work and to enter transactions. We do things for the recognition of our peers; our hope of public acclaim sends us out to work. We do things for the love of particular persons, both those we go to work with and those we come home to. 7. If the relationship between the formal economy (market) and the informal (family and household), and thus the difference between them, is not respected each suffers a crisis. The modern economy promotes the formal economy (of explicitly denominated zero-sum exchange) over the informal economy (of love and responsibility). 8. The excessive growth of the market and financially-mediated relationships results from our failure to make ourselves open, vulnerable and dependant on one another formally in marriage, and so sustain households that have public and economic motivation to endure. 9. Consumption substitutes for love. It allows us to distance ourselves from our families and friends, and results in loss of social capital. It does not encourage us to development the virtues make us self-subsistent and public persons. 10. The market is the judgement of our fellows. Its good functioning requires freedom and confidence in the exercise of judgment. Judgment brings truth and freedom; long-term economic efficiency depend on these. 11. When money and credit become divorced from relationship, social credit and trust, personal relationship and the particularity of covenants, there is a crisis that appears as intellectual, cultural, political – and economic.


12. Christian economics is the discourse that affirms the proper relationship of, and distinction between, public and private spheres. Modern economics is the discourse of the private sphere, brought in to the public sphere. It is unable to account for our motivations or for long-term and inter-generational relations. 13. The society that does not concede the particularity of the covenant relationship between husbands and wives, does not give its members confidence to have children and bring them up. They will not find the motivation to enter the institutional form, marriage, which secures the transfer from one generation to the next. 14. The state attempts to compensate for failures of families. The effect of this that the state competes with a substitutes for familial love and responsibility. 15. In order to compensate for what we cease to do for one another, the state expands. It spends an increasing proportion of the national product in order to do so. It spreads but does not know how to contract and withdraw. 16. When it fails to motivate an adequate level of fertility reproduction, since it cannot produce children itself, the state imports an under-class to bear children for it. 17. As the state takes on excessive responsibility, it loses its mandate and legitimacy as the realm of the public service of citizens. The state wants to demonstrate its legitimacy in order to justify the ranks of mediators it supports. Increasingly unable to acknowledge any power outside itself. 18. When state funding supports and promotes the weakening of the family, social capital is dissolved. Social capital is the source of future growth in economic productivity. National culture is long-term social capital. 19. Through the global market, other nations judge our worth. They will decide whether they will continue to invest their savings in the bonds of a state that diminishes private responsibility and increases public burdens. 20. The state that determines not to receive the Christian contribution to civil life becomes anxious to demonstrate its legitimacy through its own omnicompetence. The Church has to ask the nation whether the state has been captured by proponents of cultural dissolution. 21. As the state exceeds its mandate, it refuses to concede the proper role for the traditions of civil society, in particular their Christian sources, and the institutions that help secure this. The Church has to ask whether the state is becoming a rival ideological force, a rival ‘church’. 22. If the state attempts to efface the differentiations and asymmetries of the covenants that make up civil society, ideological polarisation is likely to occur. 23. The society of secular liberalism attempts to pull the future forward into present consumption. It does so because it only knows about ‘now’; it knows of no ‘later’. The society without confidence in eternal life will sacrifice the future for the present. 24. Such tensions will ensure that the state is not able to motivate the existing generation to produce a new generation. The state will so over-determine the present that it will render future prosperity more doubtful.


25. The deist atheism of secular liberalism is unable to restrain the demands and undeclared power of individual, market and state. 26. The practices of public judgment, consequent on a concept of public persons can, through confrontation and argument, draw issues out of the private sphere of personal choice and into public. By employing the discourse of shame and honour can a society restrain the externalisation of costs and consequent tragedy of the commons. 27. The universal ability to undercut our neighbour has shrivelled the space for public argument and ballooned the monetised economy in which all cases can be settled by price. National economies reduce the expression of cultural disagreement in order to achieve the efficiency by which it can compete with other national economies. 28. The modern economy assumes that the welfare of this generation is borne by the next, and each generation grasps at what it assumes that the next generation will produce. The economy is a pyramid scheme.


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