Now, I don’t often devote that much thought to economics, much less try to crystallise my thoughts into words, so I’m free to be proven wrong on this one. But let’s have a quick look at the following sentence, taken from CNN’s report on yesterday’s economic plummeting:
In their single worst day since the 2008 financial crisis, stocks plunged Thursday, with the Dow tumbling 512 points, as fear about the global economy spooked investors.
If we focus on the important parts of this statement, we get two facts: the stocks plunged, and this was sparked by fears about the state of the global economy. Now, nobody could argue that a 512-point collapse in the Dow is in the interests of a healthy global economy – if it were, this whole fiasco wouldn’t be news. So, in essence, stripping away the excess fluff, what this really says is:
The global economy worsened yesterday because people were afraid the global economy would worsen.
Something is hideously out of whack with that statement.
The problem with economics, as I see it, is that no-one really knows what it’s about or how it works. Obviously I’m not talking about fairly minor points of mathematics, but rather their wider implications. Take the idea that if you raise taxes the government will have more money. This is something that nobody could dispute, but beyond the basic obviousness, the effects of such a policy are open to wildly different interpretations, and no-one who espouses any one of the dozens of economic theories takes the trouble to remind people that this is the way they see it. Instead, you have people claiming, with equal sincerity, that neoliberalism is the solution and the problem, and that the way out of recessions is austerity cuts or stimulus spending. (I myself have opinions on both of those matters, but they’re largely held because they are supported and expounded upon by the kind of people I know who are more familiar with economics, rather than as a result of sustained scrutiny on my own part.)
My central point is that you can’t really understand economics. If there were a concrete theory which explained what to do in various circumstances, then situations of global economic instability would not only be less frequent but would also be met with considered responses based on logic rather than fear. A shaky Euro would not rattle anybody because there would be a definite plan of action to bring it back round. Instead, modern economic practice is based almost entirely on self-fulfilling prophesies, so that the moment any kind of problems arise, the dread of a global economic collapse drives people to unwittingly create that same collapse. As Bertie Wooster says, “One hardly knows whether to smile or weep, what?”