I’ve been reading this interesting book about economics- because- well- I’m such an incredibly hip and trendy person. It’s called “Keynes: the return of the Master” by Robert Skidelsky. This sentence caught my attention:
“In the US, [in the time leading up to the Great Depression] the top 24.000 families received three times as much income as the 6 million at the bottom. As a result, credit had been channeled from the wider economy into financial speculation and conspicuous consumption. While easy money stoked the inferno, farmers and other primary producers struggled with poor prices and mounting debts. The same was true of post-Reagan America and post-Thatcher Britain.” In other words the minority of people with more money than they could possibly use, were putting all their spare cash into speculation on the stock market, property markets etc. the sole purpose of this was to make yet more money, which they still couldn’t actually use for anything useful. So they’d just have to invest that, too. And of course, they couldn’t possibly be expected to pay any taxes on all this because that would just ‘discourage enterprise.’ All this fueled the crazy markets that inevitably crashed, and we are all paying the price. It isn’t just unfair that some people are so rich while vast numbers live in poverty, it’s inherently unstable and damaging to the economy. The only healthy economies are those where there is a majority of middle-income earners, who have enough money to keep the economy rolling steadily along, and who pay their taxes.
I’ve written a story and posted it here, with this rather naff picture – to illustrate this point. Any of you out there who know a bit more about economics than I do, just let me know where you think I should alter the story to explain these points better.
THE MILLER’S TALE
A Terrifying Tale
Once there was a Miller who owned a mill that ground the corn for his village and a few hamlets in the area. His Grandfather had built the mill and it was a good one. It kept working away, grinding corn all year round. The people would bring their corn for him to grind, he’d grind it into flour for them, take part of the corn for himself as payment, and sell it on to people in the big town nearby. People would use the flour to make their bread and pastries, some of them would take their baking to the big town to sell them in the market, so they’d have enough for themselves and a little over to make money from. Of course, the Miller had more flour as he got a share of everyone’s, so he made far more money than anyone else, but, though a few grumbled, as long as he charged a fair rate, everyone was happy.
This arrangement had suited everyone since his grandfather’s time. The Miller’s father had taken on extra help in the Mill, so several people earned their living in the Mill, grinding the corn, or transporting it to the nearby town. The Miller had grown up with this comfortable life and he wasn’t very inclined to work hard in the Mill himself, so he took on a few extra hands and looked for other ways to make money.
First, he took a larger share of corn than his family used to, so people got less back for what he did for them. There was no other Mill in the area, so they had to put up with it. But the people all got together and refused to pay the higher price and demanded the same old fair rate they’d always had. So the Miller called on the Sheriff and asked him to help him and the Sheriff sent his armed men to the Village and beat back the protesting villagers and forced them to accept the Miller’s terms.
Then the Miller and Sheriff got together and decided they could make lots more money if they bought up all the corn in the area, and sold it back to the people at his own price after he’d ground it. He refused to grind anyone’s corn unless they sold all of it to him first. So the only way people could eat their own produce was to buy it back from him. Some people refused and went back to grinding their own corn by hand, using querns, but this was hard and the flour was rough and dark, so it was not a popular choice. If people complained too much, the Sheriff would come out with his armed men – there were a lot more of them by now – and people would have no choice but to accept his terms.
The Sheriff was making lots of money too, as, of course, he expected to be paid by the Miller for helping him out. They divided the spoils between them. This was so successful that the Miller expanded and bought up the Mill in a neighbouring Village and set up the same plan with them. They, too, protested, but the Sheriff came out with his small army and soon everyone was toeing the line. They made mere and more money. Some people got fed up and left the Villages and went to live in the Town and make money some other way. The Miller took over their vacant farms (we don’t know if he paid for them or just seized them). So now he was growing the corn himself so he didn’t have to buy it from the farmers, he could make even more profit this way. He decided to take over all the farms in the area, using any means he could, fair or foul, and soon everyone who used to own a farm was, instead, working on a farm that now belonged to the Miller.
It sort of worked.
Lots of people left. The ones who remained had secure jobs, they got paid for their labour and used the money to buy what they needed. Some of the Villagers set up businesses of their own, making and selling things. Everyone had enough to eat and houses to live in. Admittedly, they had to pay rent for their houses, to the Miller, because he owned those as well as the land of the farms. He even offered some of them the right to buy their own houses – houses they used to own anyway. Quite a few Villagers lost their homes and farm-work because they were too old or ill to work. These people had to live as best they could, working whenever they could, or begging. The ones who had their own homes and who earned enough money from their work on the farms or their own enterprise began to look down on the ones who had lost their homes and farms. They felt more and more that the way things were was the right way, because at least they were better off than the unfortunates.
By now the Miller had bought every Mill in the Country and the Sheriff was the greatest power in the Land, with an Army to back him. He and the Miller had a coat-of-arms made for both of them – it showed 2 men with big backscratchers, each scratching the other’s back.
But the whole system kind of worked. Other people were making money too. They emulated the Miller and found ways to get hold of all the money that was circulating. The mills carried on grinding the corn. They owned every mill and every cornfield in the country. No-one could eat without buying from them, and they could charge what they liked. They bought ships and railways and wagons, so everyone had to pay them to transport the corn and flour around the country. No-one could move without paying them, but lots of people earned money from working on the trains and ships and wagons, so they were happy.
So – it was ok. People learned to work within the system and lots did quite well out of it. A generation grew up who never knew anything different.
The Miller and Sheriff had so much money by now, they set up this massive system of exchange. They could get people to pay them money for next year’s corn, or even the year after, before it had even been planted, let alone harvested. They had all the money, so anyone who needed money had to come to them and borrow some. Then they’d have to pay it back at interest. So the Miller and Sheriff were making money on that too.
But it worked – kind of.
People had money to buy food and homes, they had money to buy all the things that everyone else was making to sell. They made and sold things themselves, and employed people to work for them, to help them make the things, or to sell them. The money went round, everyone got a bit out of it. And if there were a few losers, well, that just made the successful ones feel good about themselves. As long as the corn kept growing and the mills kept running, it was ok.
So- you’ve guessed it – the next thing was that the harvest failed. It was too wet, or too dry, or maybe it was a disease or a pest that ruined the crop – who knows? People tend not to remember the details. They just knew the harvest failed.
Of course, it used to fail every so often in the old days. That’s how it goes. But back then everyone had their own cornfields, if the harvest failed, they understood why, and they all felt they were in it together. They would help each other out of it. They would always save some grain from the good years to tide them over the bad. In fact, in bad years, the Miller would usually do well out of it, because he would have the biggest grain-store of everyone and he could raise his prices because of the scarcity.
But things had changed. The Miller owned all the farms and all the mills. All the farmers were his employees and tenants. Either that, or they had stopped being farmers and gone to the City. So it was up to the Miller to make sure everyone got enough bread to eat. He controlled the whole thing.
But the Miller had already sold his harvest for the next 3 years based on his belief the harvest would never fail. He had some grain stored away, but not enough to pay his creditors and feed the people.
At first he was quite happy about it all – there was a shortage of grain so he could sell what he had a really high price, which would make his investors happy, as they benefited from the profits. Lots of people couldn’t afford the high prices, but he lent them money to pay for it – which they had to repay at interest, so he made even more money. The Sheriffs army grew so they could keep all the angry people under control – that was a good job, actually, being one of his “peace-keepers”, you got 3 square meals a day and a nice uniform and an array of weapons. Quite a lot of people who might have starved were eager to join the Sheriff.
People had to work harder and harder, with less and less to show for it. People grumbled, but everyone believed that if they kept on working they’d be alright. Some people couldn’t keep up. They couldn’t keep working so hard and they failed, but that just made the ones who were alright feel smug. They blamed the people who’d lost out for their own misfortunes.
But the harvest had failed catastrophically. It wasn’t just one or two fields, or one area, it affected the whole country. It didn’t matter how hard people worked, or how high they racked up their debts, borrowing money to pay for the bread, they just weren’t getting enough. The corn had been sold before it had grown, and now there wasn’t any corn for the rich people who’d paid for it in advance, so they couldn’t sell it on at an even bigger profit because there wasn’t any corn to sell. They had bought and paid for imaginary corn.
It wasn’t like the Miller was suffering any real hardship, he just wasn’t making the vast profits he was used to. He began to look around to see what he could do to keep most of his money for himself. Well, for a start, he could get rid of all the farmers who were working for him. What use were they? Just sitting around staring at fields full of withered stalks or waterlogged with floods or whatever it was that had caused the harvest to fail. The Miller didn’t know anything about actually growing corn. All he knew was how to make money out of it. So he sacked half of the farm-workers, and while he was at it, he laid off most of the mill-workers and the carters, bargemen and all the rest of them. I mean- what was he? A charity? He couldn’t support all those people when there wasn’t anything for them to do. People had to work and if they wouldn’t work they had to go. In times of austerity you had to tighten the belt and get rid of waste.
So, now there were a lot more people who didn’t have any money or anywhere to live. They took what savings they had and went to live in the City, where they found rooms to rent. But they had to pay high prices to rent because there were too many of them and rooms were scarce, but the people renting to them were happy, because they made lots of money. Everyone was working really hard, making things to sell to everyone else, or working for the people who made things, doing stuff they didn’t have time to do themselves, like laundry, cleaning and cooking. But there still wasn’t any corn, and now there weren’t enough people working on the farms to grow any corn and keep it free of pests and harvest it, or people working in the mills to grind it or people working on the roads to transport it, so even if the harvest did grow they still couldn’t feed the people. The Miller began to sell off his land. But the people who bought the land weren’t interested in growing anything on it, they just wanted to own it and rent it out. They didn’t do anything useful with it.
A small number of people had lots of money, and lots of other people had very little. More and more people had nothing at all and were desperate, but the ones who still had a little and were getting by, making enough to buy what little bread was available, believed that they were safe because they worked hard, and the ones who had nothing, had only themselves to blame. They looked disdainfully at all the lazy people sitting around, not working, and said they should all be locked up or sent away, instead of crowding into the city and making prices rise the way they did.
All this time the Sheriff had been very busy. At first he’d been angry with the Miller for not managing to grow the corn that underpinned the whole enterprise. But he realized he and the Miller better stick together through all this, as the alternative would be worse. Not that either of them really considered any alternatives – like sharing out the corn fairly to make sure everyone had enough. They never even thought to look at the whole way they were growing the corn, over-using the soil and not putting anything back into it, treating it as if it could keep producing corn indefinitely with nothing to replenish it. As if the sweat and toil of the farm-workers was all that was needed to keep it all going. All the Miller and Sheriff cared about was making lots of money and being in control of everyone’s lives. It was far better to make everyone afraid of them than to go round being fair. Fairness was a childish idea. The world just didn’t work that way, only the most naïve and simple-minded people believed in such nonsense.
So, the Sheriff went round quelling any riots or rebellions that were started up by the people who were demanding fairness. He brought in all sorts of new laws banning people from gathering together, banning them from moving around the country without papers showing who they were and why they were travelling. He created a huge network of spies to check what people were saying. People who talked about ‘fairness’ were locked up. The prisons grew. Of course they cost a huge amount of money to run, but that didn’t matter. It was fun, knowing you had total power over all these people you’d locked up. And power over the rest of the population who weren’t locked up, but were afraid of doing anything to get themselves locked up.
Now – here was the nub of it: the more people the Miller laid off, the less chance there was of growing any more corn. The less corn there was, the more the prices went up. People were working harder and harder just to pay rent and buy food, so they didn’t have any money left over to buy all the things that other people were making to sell. When people didn’t buy the things that other people made, that caused the makers to go out of business, or, at least, lay off their employees. So more and more people were without any money or means to live. And that had a knock-on effect on everyone else, because their businesses relied on enough people having enough money to spend on the things that everyone else was making.
And the people who had lots and lots of money were making it from rents and investments, not from actually doing or making anything. They siphoned money out of the system by charging their high rents, and took the money off and invested it elsewhere. So that money wasn’t being used to do anything useful, not even to buy the goods that that people were making.
But, somehow, in spite of all this, the people – lots of the people, anyway – still believed the Miller and the Sheriff were looking after them. They felt they were safe with them, because what was the alternative? All the weird people - the ones who talked about fairness, were crazy, weren’t they? And there were people who were angry and rioting and getting violent, and they were obviously bad people, terrorists even. So it was obvious the fairness preachers were in cahoots with the terrorists. So they preferred the Miller and the Sheriff.
There were other countries that had also experienced the failed harvest. It was a world-wide phenomenon. Some of the countries borrowed money from the Miller when things began to go bad. He had more money than anyone else, so they went to him and he bailed them out. But he made them do things the way he liked to do things in his own country, as a condition of having his money. So they had to lay off their workers, even though anyone could see this hadn’t done anything to help things in the Miller’s country. Soon their countries began to experience the same effects from having so many people out of work, or on such low incomes they could barely afford the basic necessities. They had spent decades relying on everyone having enough money to buy things from each other to make it all work. Now fewer and fewer people could afford that, and the ones that did have lots of money could only buy so many of the things the other made before they had enough. They could never seem to have enough money, but once they had it, they didn’t seem to know what to do with it all. They just used it to make more money but never put any of it back into the system to keep it going.
But there were other countries that didn’t borrow from the Miller. They’d had bad harvests too, but the bad harvest didn’t last forever. And these countries had been sensible ones. They had made sure they always looked after the fields where the corn grew. They didn’t over-work them. They didn’t sell corn that hadn’t even been planted yet. They just kept on steadily. These countries were not wealthy by the standards of what the Miller’s country had been in the good years, but they looked after their people. They understood that in order to keep the money going round they had to make sure everyone had enough money. And they could only do that by making sure the corn was used fairly and sensibly. They didn’t accept any bail-out loans from the Miller. They didn’t need to even ask for one – they’d already learned how to manage when they had bad harvests in the past.
But the Sheriff and Miller made sure no one of their own people ever got to hear about these countries. They just kept on telling their own people that the way they were doing things was the only sensible way. They kept telling people they had to tighten their belts and cut back and eventually the austere times would end and they’d realize how sensibly the Miller and Sheriff had managed the failed harvest.
Eventually even the Miller realized that he’d better do something to get people back into work in the corn-fields. But then he had a brainwave. Why not get people from the prisons to work in the fields? After all – it was costing a fortune to look after them while they were locked up. Not to mention the cost of building even more prisons. They should work for their keep – why should the lazy so-and-so’s get something for nothing?
So all the people who’d been locked up for wanting fairness or for complaining at the hard times were herded out to the fields and made to work there for nothing except some food, some shelter and the clothes they needed. They barely had enough to feed their children – but that was their own silly fault, wasn’t it? How irresponsible of them to have had children!
The Miller and the Sheriff and their cronies enjoyed being able to stamp around in the fields, cracking the whip. They took any of the young women and children they wanted for sex – who could stop them? They paid a whole lot of people to go round every day telling all the people who still lived in the towns how lucky they were that the Miller and Sheriff were looking after them. All these people believed they were being kept safe from the bad people who had been sent to work on the farms. They were just glad they didn’t have to go there and that there was just about enough to eat now there were enough people to grow the food. None of them remembered a time when things had been any different and the people who were being paid to tell the stories over and over to them every day, only ever remembered the past as “the bad old days,” or told people they were foolish to want to go back to grinding their own corn on querns, as if that was the only alternative.
Eventually quite a lot of the other countries that had had failed harvest worked out that the best way to get things going properly again was to share out the corn more equally to make sure even the people who didn’t have jobs had some corn. This meant that everyone was able to live a little bit easier and they were able to buy a few things for themselves. This meant the people who made things began to earn a bit more, so they were able to take back the workers they had laid off. That meant they had a bit more to spend, and the effect spread. It was so simple to understand this, they were looking at the Miller’s country and wondering why they were having so much trouble working it out.
The trouble was, the Miller and the Sheriff spent all their money on having a great big army – which made all the weapon-makers happy. They didn’t use this just to keep their own people toeing the line – they strutted about the world telling everyone they were more powerful than anyone else, so they’d all better just watch out. It was true, they were, so the other countries had to deal carefully with them.
The countries that had borrowed huge sums from the Miller were really stuck. Every penny they made at home had to be used to pay back what they owed the Miller, so none of it was being used at home, so things just got worse and worse for them. Some of them tried to refuse to pay back the debt, but that made everyone angry at them. They didn’t want to see anyone getting away with not repaying a loan – that would just put ideas into peoples’ heads and where would that lead?
The Miller could see the other countries were getting back on their feet, but he still kept telling his own people how well they were doing at home because he was looking after them and his people believed him, ignoring all the signs that it wasn’t true. The Miller and Sheriff were having so much fun with the mess they had created, nothing was going to make them change their ideas – why would it?
I told you this was a scary story. Are you hiding behind your sofas? Will you have nightmares?
Well- don’t have nightmares – WAKE UP!