In 1973, there was an "energy crisis".
If you weren't around then, or if you were too young to know what it was all
about, or if you've just plain forgotten, may I urge you to visit
this
Wikipedia page and read it to get a bit of background.
The main issue I want to focus on here is not which side - if either - was
right in the struggle over the price of oil. It's the fact that the price of
oil could be manipulated, quite easily, by the producer withholding supply.
This raises the question: what, if anything, is the true value of a
particular quantity of oil?
- And, in 2006, of course it's happening all over again, even though the
causes are different. Who now uses their car any more than they absolutely
have to? - and, in particular, who in their right mind goes for a "Sunday
drive" any more?
As a young person, I was horrified to learn that vast quantities of food are
discarded or destroyed every year, instead of being donated or sold at
rock-bottom prices to underdeveloped countries with malnourished
populations. This is because it's not "economically viable" to do so.
Actually, it's more complex than that. In years of bountiful harvest, so
we're told, it makes economic sense for farmers to destroy part of their
crop to increase demand, and thus keep the prices up. Farmers have to
survive, just like everybody else - so can you blame them?
In early 2006, there was a huge cyclone in Queensland. The banana crop was
just about wiped out. With limited supply, the price of bananas has gone
through the roof. Again - can you blame ordinary people, just trying to
survive?
In Australia - like most places - buying a house is a major investment. Very
few people can afford to "pay cash" for their home (i.e. buy it outright).
It's necessary to borrow a large proportion of the total price; the
remaining amount (the mortgage) is to be paid off over years, or even
decades.
This of course involves paying interest. The banks, bless 'em, don't provide
interest-free loans. Depending on a number of factors - in particular, how
long you take to pay it off - the interest can well and truly exceed the
cost of the house itself. In these modern, "affluent" times, many people
value their "lifestyle" to the point where they are quite prepared to take
considerably longer to pay off the mortgage than they would need to if they
went without some "extras" for a few years, thus saving themselves a
lot of money.
These days, it's possible to get a fixed-interest loan. This means that you
enter an agreement with the lending institution that your interest rate,
from one payment to the next, remains the same, irrespective of
interest-rate fluctuations affecting other home-buyers who are not on such a
scheme.
It's a gamble, of course. Interest rates may go up or down; if you're on a
fixed-rate scheme, you take the good with the bad. Sometimes you win; other
times you may lose. Many (most?) people take their chances with variable
rates.
Who sets the variable interest rates on a day-to-day basis? The elected
government? Not on your life!
In Australia, we have an institution called the
Reserve Bank.
It's basically a federal government instrumentality, but its governor
has enormous individual power - the power to determine interest rates.
When the Reserve Bank announces a new official interest rate, all the other
banks dutifully fall into line - which immediately has a significant effect
upon the buying-power of the average householder.
This, of course, is deliberate. It's called
"monetary policy";
and we have Britain's Margaret Thatcher and the US's Ronald Reagan to thank
for the fact that it is now ensconced in the western world. If the governor
of the Reserve Bank decides that the economy is "overheated," with the
stroke of a pen he/she can jack up official interest rates and force the
public to rein in its spending. Even though the movers and shakers would
deny it, the effect is to make ordinary citizens poorer.
Why would a government - and its financial institutions - want to do that?
Is it, in some misguided way, out of a sense of guilt for the sweat-shop
conditions under which the bulk of our commodities are produced in
third-world countries? No way, José - this is all about having a "strong
economy".
If the public don't like it, what can they do? Vote the Reserve Bank
governor out of office? No! The governor is a public servant - a
government appointee.
Will a change of government result in a change of Reserve Bank governor?
Possibly - but, from what I've seen, it's not going to make any real
difference. Both sides of politics, it seems, are in favour of the system
staying exactly as it is. The governor is not accountable to the likes of
you and me. So what can the longsuffering public do about it? As long as we
continue to tolerate this system, absolutely nothing!
UPDATE, Wednesday, 4th April 2007
In news breaking today, Australia's Head of Treasury, Ken Henry, has
publicly critisized the federal government which employs him for ignoring,
over some time, advice his department has been offering to the government
concerning its policies on water resources and climate change.
The government has not taken this lying down. Treasurer Peter Costello has
said, somewhat pointedly, that the treasury does treasury-related things
very well, but should not presume to make environmentally-related
statements.
So what has all this to do with "monetary policy"?
Just this:
Prime Minister John Howard has taken the matter a step further, stating that
"we don't want a country run by bureaucrats".
Oh, yeah? Since when???
Give me a break - that's exactly what we've had ever since the government
put control of interest rates into the hands of the governor of the Reserve
Bank!
But of course - you know all this, don't you? - And no doubt many people who
read this page will smile indulgently and shake their heads at the childish
naïvité of anyone who would take the trouble to write a web-page lamenting
these sad facts, wondering why its author won't settle down and deal with
the "real world" like everybody else, and admit that nothing can - or even
should - be done to oppose the status quo.
Have a good, hard look at
this
page, written (apparently) in 1984, but still bang up to date. (There are a
few typos; just absorb the content of what's being said.) One
sentence that jumps out of that page, toward the end, is:
"We can insist on seeing the world economy as the real people’s lives and
deaths that make it up, instead of through the myths of monetary
measurements."
While on the subject, may I recommend a visit to
this
page, written in March 2001 - but also still very relevant. A short quote
from that page:
"The strategy requires work at many levels, including both the strengthening
of global governance and increased organization of civil society. It cannot
succeed within one village or one country. Nor can it succeed by eliminating
entities like the IMF or WTO, which serve the interests of global capital,
but do not generate them." ... "In a world in which capital can--and
will--move at the click of a mouse, there is a need for supra-national
regulation at the same time there is a need for community-based institutions
which serve local needs. "
- - - - - - - - - -
UPDATE, Wednesday, 31st August 2011:
Some five years after originally posting this page, I find that there is
one comment in the above-quoted article that I can no longer endorse: that
concerning the IMF and WTO. I may have been a bit ambivalent about these
two outfits (and also the World Bank) back then, but I'm not any more. Back
in the post-WW2 days of the
Bretton Woods Agreement,
it may all have at least seemed to make sense; but that was a long
time ago, and the world has since changed in all sorts of very ugly and
alarming ways.
In the wake of the IMF "bailout" of Greece just a few weeks ago, in which a
great many angry and disillusioned Greek citizens found themselves hit with
austerity measures in the wake of "GFC part 2", as far as I'm concerned
it's time for the
unholy trinity
to be got rid of, pronto. If Greece, the
cradle of democracy,
can have its immense historical significance trampled upon by what is
effectively a very undemocratic, economically-based "one world
government", then the time for change is well and truly upon us. Please
visit my recently-posted
Sixes and sevens
page, about three-quarters of the way down, to read more.
- - - - - - - - - -
In the Old Testament, in the book of Genesis, is the well-known story of a
young Israelite named Joseph who, through a series of adventures (perhaps
misadventures is a more appropriate term), found himself in a senior
position in the Egyptian administration. (Andrew Lloyd Webber's "Joseph and
the Amazing Technicolour Dreamcoat" is a well-known stage show based on this
biblical record.)
As with many biblical references, there is dispute over the authenticity of
the story. However, may I recommend a visit to
this
web-page which presents evidence that Joseph was indeed a historical figure
in Egyptian history.
One of the main events in the Joseph saga is how he saved the land from
famine. However you may take the account of his interpretation of Pharaoh's
dream, if the story is to be believed at all it's necessary to take on board
that Joseph successfully organized a scheme by which enough grain would be
stored in times of plenty, in preparation for later years of insufficient
production.
So it can be done. We shouldn't have to tolerate a world in
which instiutionalized hunger and poverty on an enormous scale are seen as
the price of our having a "lifestyle". We shouldn't have to tolerate
a world in which the price of everything from fuel to the very roof over our
head is cynically manipulated to prop up "the economy". We shouldn't
have to tolerate a world in which shonky dealing, waste, and/or
bureaucratic savagery are accepted as normal and inevitable.
No-one is suggesting that it's easy. Hard decisions have to be made by
leaders. But frankly, as far as I'm concerned, if "monetary policy" is the
best they can manage, they shouldn't be in the job.
Mahatma Gandhi
(1869-1948) once went on record as saying:
Earth provides enough to satisfy every
Enough is enough. I've made my point.
My home page
Preliminaries (Copyright, Safety)
Enough!!!
man's need, but not every man's greed.
(Click
here
to see a page with many other quotes from Gandhi. Also, I recommend a visit
to
this website
for more thoughts along similar lines. Finally, to read a good biographical
article about Gandhi, visit
this Wikipedia page.)
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