Economics, Reality

The Austerity Craze.

Austerity doesn't work, that doesn't mean people can't believe that it does.

There are people who truly believe austerity works. This post examines why they hold this illusion.

It is hard to understand why intelligent people think austerity can work, but the fact remains that they do. They believe that if a government spends less, that government will have more money. This is directly related to the phenomenon of ‘Purchase Money’ where an individual sees their income as their property. This was clearly demonstrated in my post about the fraudster Jan; he could not perceive the difference between money that had been entrusted to him and money that was his by way of genuine income. (1) The result was that he wasn’t able to handle his business affairs correctly.

In our modern world it is extremely important to recognize the nature of the money that one is handling. If, in the above case, Jan had understood that the money in his hands had been entrusted to him, as ‘Investment Money’, his relationship to it would have been very different. And a little wiser too.

If one is in business, it is not to accrue money for its own sake, but to employ it sensibly. It has to be recognized that the money needs to flow through one’s business from one’s customers to one’s suppliers. The difference between the two amounts is what one has for the upkeep of the business along with a slice of profit.

The problem for many is that they see all the money in their business as being theirs, and resent its passing into other hands. In Jan’s case, since he had invested the money in a business that was, to all intensome purposes irrelevant to the world, he didn’t make many sales. When his creditors asked him for their money back, he had a problem: he didn’t have it. The result is that he lost his house and most of his possessions – along with a number of people he imagined to be his friends. He’s not only poor but lonely with it.

Now, the foregoing has been a brief overview of how a business basing itself on the thoughts that ‘all income is theirs by right’ can run into problems. The more usual course is for a business to strip all the frills from its products, after all, the marketplace is competitive and this is one way to make your product cheaper. When everybody’s doing this, it means competition increases. Slashing prices further means profits shaved to the bone – if there are any to be had at all. The usual solution is for two such businesses to bury the hatchet and merge, because such mergers allow a ‘rationalization’ of the staffing. That is to say, less money needs to be spent on staff and so there is more money to keep. Rudolf Steiner suggested that a corporation was merely a sizeable number of unprofitable businesses who had all joined together to gasp for breath for a little longer.

I think it’s possible that a few of you will have begun to see why I took this detour from the main topic of today’s post. It is an illustration of how businessmen would rather keep their money than spend it on those who work for them.

This kind of selfishness undermines any business, and we can see it all around us: the supermarkets are all about competition – this for an upcoming post that I should have written a year ago – and it is no surprise that the chains of supermarkets are having a hard time. Only the discounters – the likes of Aldi in Europe is a good example – or those with an established clientèle of wealthy people like the British Waitrose have anything like a secure financial foothold. The point here is that ‘Purchase Money’ thinking, which is a term Rudolf Steiner employs to describe the situation, is bad for business.

The problem here is that large numbers of people lost their jobs as a direct result of this kind of thinking. Furthermore, the business will wind up in exactly the same trouble a few years down the line…

The problem isn’t just the nature of Purchase Money thinking, it is that generations of young men have been trained firstly at school and later in the universities and business schools that this is the only way to think. In my posts about the subconscious and dementia, I have looked at various aspects of the phenomenon of “it’s not there at all”. That is to say, if there is only one way to think, there’s no other way to think at all. The other ways to think are quite simply “not there at all”.

For the likes of Jan, and this was mentioned in the post describing our conversation (see below), he literally couldn’t see that this money belonged to someone else. It was in his hands, ergo, it was his. Dangerously simplistic thinking. The understanding that it was entrusted to him was so near to him, yet for all he could grasp the notion, it might have well been on the moon. In the post below, I described it as “hitting the wall,” it really was as if there was a wall between him and my broader, if less experienced understanding. A mite of understanding will  overcome a lifetime’s knowledge.

So when it comes to a government that has found itself in financial trouble, they find themselves being told that saving money is the only way forward. Since both the people advising the government and the government officials themselves got their jobs because they had been trained at high ranking colleges and universities that peddle Purchase Money thinking, they are in the right place to accept that austerity is going to be good for their future.

They can’t think of anything else to do.

 

(1) Meeting A Successful Businessman.

A businessman who knows how to sell.

Hitting The Wall.

Last night I was invited to dinner by my friend, Henrik; and we met Jan, Henrik’s cousin and erstwhile business owner.

I stated to him the simple truth of economics: “The customer values your product more than you value your money; the businessman values your money more than he values his products.”

 

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6 thoughts on “The Austerity Craze.

      • My insight is pretty much the same as yours. People are really too passive and too easily led. They need to wake up and soon if we want any real change. Eve

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      • Gemma says:

        Most people value their comfort above any other consideration. Motorcars, detergents, central heating, ready-made meals in not-so-healthy packaging…

        Do you really think people want to wake up to a world where they have to walk ten miles to work, clean their dishes with sand and cold water, chop wood to keep warm in winter, actually make their own food? Where will they get the time when their boss wants them to work longer hours for less money???

        Liked by 1 person

      • Well, i don’t think they will have much of a choice because the planet is not going to be able to sustain life as it is today.. sigh!

        eve

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      • Gemma says:

        I agree.

        But how many of us can make our own entertainment, leave alone clothes? Those are just the basics… and people will want to go to Spain for their holidays. There are going to be some very unhappy, very bored and very hungry people.

        They aren’t going to take it lying down. The problem is that they aren’t going to be able to deal with the situation – especially their hunger. Yet there will be dandelions growing all around them!

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