23 Jul 2012

Four Horsemen: The Survival Manual. A Review

The big lie of the moment is that there is no alternative. Here is proof that there are multiple alternatives. As the title of this book suggests the authors see a potential apocalypse ahead, but are not without hope for survival. Their solution is totally unlike anything you have heard from the government.

The apocalyptic introduction makes better sense in the context of the film the book accompanies. The film introduces us to a number of expert witnesses all of whom seem to be in agreement that the status quo is not sustainable, and that we are on the cusp of a paradigm shift which could go either way. The broad scope of the book takes in almost every aspect of society, but with a focus on how economics plays a role in each. However the book is aimed at a general readership so each concept is explained for the beginner.

One thing it is important to keep in mind, and something that is emphasised in the film, is that the authors see themselves as capitalists rather than socialists. Their informants are also mostly capitalists. The argument put forward is one that tries to get away from the simplistic left/right dichotomies that tend to stymie political discourse. Reshaping the economy away from free market capitalism, which has been so disastrous for the whole world, is not a socialist project. Capitalism can work, just not this form of capitalism.

The introduction redefines the powerful image of the four horsemen of the apocalypse in modern terms. These are:
Black Horse: A rapacious financial system.
Red Horse: Organized violence & terrorism.
White Horse: Poverty.
Green Horse: Environmental breakdown.

The book focuses largely on first horse. Chapters 2-4 cover economics, banking and finance, and the special topic of rent seeking. Chapter 5 covers violence and poverty, and Chapter 6 looks at resources and the environment. Chapter 7 deals with how we might progress, and the last part of the book is a summary in 27 ‘principles’.

Chapter one discusses an essay by General Sir John Glubb called The Fate of Empires. Glubb’s study of European and Near Eastern empires shows that all of them share certain characteristics and stages of development. The main point being that most first world countries show every sign of being in the final stages of decline. This is more credible in light of the Four Horsemen film. Since the collapse of empires is usually followed by a period of barbarism we ought to be very concerned. The authors’ position seems to be that change is coming and we can either allow things to take their course, or we can act to influence the outcomes. If we can latch onto new paradigms then we might have a change of avoiding the coming catastrophe.

Chapter Two gives a brief over-view of the history of economic thought. One of the most important points made in this chapter is that politicians on the whole are following a particular school of thought called Neo-classical economics. It is a school of thought which has temporarily won the spotlight, but which is far from representing a consensus amongst economists. In fact has created more problems as it has solved.

Economists these days claim that they have made science out of their subject, but the authors point out that this claim is greatly exaggerated. All scientific explanations are reductive in the sense of explaining more complex phenomena in terms of simpler phenomena, but mainstream economists make “frankly absurd assumptions” and seek observations which confirm their theories. Mainstream economists completely failed to predict the current economic crisis because their models don’t allow for recessions, and in fact leave out the major causes of recessions. But these same people are still making ideologically driven economic policy.

Chapter three looks at how economic ideology manifests in the realm of banking and finance. The chapter begins with the important distinction between wealth and money which I found a bit difficult to follow. Most of the rest of the chapter is about money rather than wealth. The authors are highly critical of the present system of fiat based currency in which money is simply created out of nothing by banks. They discuss the option of a commodity based currency—e.g. the gold standard—but find that it too presents difficulties. What they opt for is alternative which involves a stable money supply, linked to population. What is clear, in this book, but also from many of heterodox economists, is that our present crisis, like the crisis of 1929 and the various recessions since the 1970’s, is that banks are free to create money in the form of debt. 97% of all money in the UK economy is debt. They advocate removing this power to create money from banks, and breaking them up so they are no longer too big to fail.

Chapter four was entirely new to me. It discusses rent seeking which refers to unearned wealth. The most obvious example of this is land ownership. When government improves amenities near land, the value of that land increases. The landowner is wealthier without having made any effort. And of the three factors of production—labour, capital, and land—only land is not taxed. Taxing effort and enterprise has a depressing effect on them. Meanwhile the effortlessly gathered wealth of landownership is not taxed at all. And land ownership is limited to a tiny portion of the population: in the UK 70% of the land is owned by 1% of the population.

To their credit the authors begin their chapter on organised violence with Steven Pinker’s recent observation that the world is less violent than it used to be. Their argument is that this progress is admirable, but has not yet gone far enough. Violence is often portrayed as cultural or religious, but the authors ask is to look at the roles economics, and particularly economic inequality play in creating and sustaining violence. “It follows that economic justice between nations is key to reducing the number of wars”. The book discusses terrorism and concludes that most terrorists are more interested in self-defence than in waging war. They cite Clark McCauley who says “Terrorism is the warfare of the weak, the recourse of those desperate for a cause that cannot win by conventional means.” Our so called “war on terror” has probably produced more recruits than it has killed. Most people just want a fair chance to earn a living and feed their family. But First World countries have perpetuated inequality for their own ends, for their own enrichment.

Chapter six looks at resources. To me this chapter has the most radical ideas. We live in a world where some people are dying of poverty and some are dying of obesity. Current economic models see growth as the only way to have prosperity. The authors argue that when resources are finite this doesn’t make sense, and indeed when one of the results is environmental degradation this is madness. Indeed the setup which encourages growth tends to increase inequality. Instead that we should aim for a steady state economy. “An economy where the bulk of business revenue is paid as wages to those who create the wealth, is an economy that doesn’t have to grow endlessly.” Also a world in which there is less inequality will be more likely to slow population growth. Large families are linked to high infant mortality, poverty, poor access to education and contraception. by reducing poverty (to zero?) then we would achieve a stable population level, or even presumably a falling population level.

The most radical suggestion in the book is that the world should see the planet’s resources, particularly mineral resources, as common property; that nations should not be able to profit from the accidents of nature that places oil, coal, or aluminium under their feet. This argument is logical enough, but it fails to convince. I think perhaps because I simply cannot imagine countries ever giving up these advantages under any circumstance. One suggestion I do have sympathy with is the plea to be less obsessed with possession and to seek contentment with what we have rather than always aspiring for more. Sadly I think this is very blue sky. A multi-billion pound industry, employing experts in psychology are dedicated to stimulating our desires, and creating the demand for the useless products of our consumer culture. Overall this chapter makes some very good points about inequality, and finite resources.

Chapter 7 gives a broad outline for a program of change which the authors believe would make for a fairer economic system. This requires changes in three areas. 1. Our monetary system should be stable overall with allowance for short term fluctuations. There are a number of ways to achieve something like this, including the gold standard, full reserve banking, and reducing bankers to being brokers for peer to peer lending. Each solution also has downsides. 2. Taxation needs to be more fair, and in particular needs to include the third factor of production, land, though perhaps with an exception for residential homes. Some services, such as public transport or roads have a natural monopoly and these should be delivered by a government funded by a share of public wealth. Tax wages and profit (from labour and capital) provides a disincentive to effort and enterprise. Wealth from land is unearned, and presently untaxed. The authors also suggest tackling other unearned wealth in the way that radio spectrum is rented out to providers. We must begin to use tax to offset the adverse effects of economic activity such as climate change. 3. The finance system must serve the economy, and “the interests of speculators are diametrically opposed to those of the ordinary saver.” Borrowing to speculate must stop as it distorts the economy by driving the expansion of money, and takes wealth from those who create it.

Markets are good at determining prices under ideal conditions, and should be allowed to work where appropriate. They don’t work when there is high inequality of income distribution and they are open to manipulation by speculators and rent seekers. Similarly the accumulation of capital is necessary to create investment. Creating value requires cooperation and we need to move away from seeing competition as the main driving force of economic progress.

Clearly this progress would require global cooperation. Personally I am extremely pessimistic about such cooperation as recent history shows that it is very difficult to achieve the kind of consensus required. As they say we’d need to transcend national boundaries and established party political models. As much as I appreciate the vision, I think here the idealism loses contact with the ground. To get to the point where even the First World agreed to all adopt cooperative economic policies last time it happened required the shock of a World War. And it lasted for just 25 years, and was brought down by national governments acting selfishly.

The last part of the book is a kind of summary in 27 principles. And having written that last paragraph and now reviewing the central argument of the book, I find myself reconsidering, which I think shows the value of the summary. I do find the picture painted of a civilisation potentially in its death throes and threatened by the Four Horsemen a compelling one. It’s clear that we do need a new vision. It’s clear that the vision enunciated in this book is cogent and coherent. I suppose what’s missing is the strategies and tactics to bring it about. A revolution requires organisation and planning. It’s very easy for us to spin our wheels talking about these things, and find we are going nowhere. The problem is all too clear. The ideal we’d like to get to is also clear. But just how we get there, how we bring about a revolution in social, economic and political thought and practice across the entire planet is still not clear. The 27 principles would also make a good focus for discussion of the ideas in the film and book.

One minor complaint about the book is that the index is minimal. For example ‘debt slavery’ is an important concept, but seems to just come under ‘debt’. Other terms I expected to find like ‘ponzi scheme’ were also missing.

On the whole I found the book well written and engaging. It does go best with the film which helps to contextualise it. The explanations assume no previous knowledge and generally manage to convey the important points well, though I did find the distinction between money and wealth slightly confusing. As someone new to economics I found it increased my knowledge and understanding of the subject, and the implications of the economic policy decisions our politicians make. It’s clear, from this material and from the contributions of intellectuals in many fields, that something is going drastically wrong in the world and there is a danger than if we don’t correct our course we will come to grief. I think this book is a valuable contribution. I suspect that it will leave readers thinking “now what?” but also give them the motivation to start becoming politically active. And this seems to be exactly what we need.

Book: Four Horsemen: The Survival Manual. Motherlode Ltd,  2012.
ISBN: 978-0956398512. £9.99.

Film: Four Horsemen. Guerilla Films. 2012.
ASIN: B007AFCQWS. £10.99.

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Keep is seemly & on-topic. Thanks.