How did we get so low? From the 1700s to today, a micro history of the dogmas and economic doctrines that have taken everything away from us – PART 1

The economic doctrines that produced the reality we live in today

The economic reality of the last thirty years, made up of progressive impoverishment, has become the new normal. Instead it grew out of doctrines that diverted the path to prosperity. Let's find out how all this happened.

How many times do we happen to look at today's reality made up of poverty and inequality; of assignment of rights and reduction of wealth, without receiving any advantage and asking ourselves: how did we end up so low?

Yet we often and willingly hear from the words of ordinary citizens that services should be cut. That it would take more rigor and severity. That it would take more restrictions. Is it possible to understand where the deception lies and how they managed to form a self-consciousness of self-destruction in the masses?

We look to the new generations and find judges rather than allies when we criticize this system.
For those born in the late 90s this seems like a normal world. Indeed, almost ideal. It seems normal for a young graduate to earn 600 euros a month to work in a call center. That you have to work underpaid and live at home with your parents for up to 40 years. That the alternative will become living uprooted, in shared apartments with other exploited people, perhaps of different ethnic groups.

Living in an alien extra-world

That will seem like the prize of so much effort for a handful of euros. Live in an open world and enjoy the mix of cultures; thus, as if life were the contemplation of precariousness seen as an added value.

Who explains that until 30 years ago, not centuries, Italy, Europe and the West were the exact opposite?
It is not enough to show him the graphs that describe the average life in Italy, where a single-income family bought a house, went on vacation every year with their car, sent their children to university and set aside 25% of their income.

They tell you that we lived beyond our means without explaining to the detriment of who or what, given that even in full austerity, as we have been for twenty years, the public debt has continued to rise.

Well, there is a book that dedicates an entire chapter to the brightest minds that have shaped this reality for both good and bad. In the book of easy explained economics , best seller on Amazon, there is a chapter entitled THE GREAT THINKERS.
This traces the profiles of the personalities who have had the greatest impact on our culture and on today's liberal ideology, as well as in the Italian economic renaissance of the economic boom.

The history of economic doctrines and how
today we live as in the 1700s

In this two-part article we will look at how we ended up living poor in a world where the very rich enjoy 90% of the resources.
It seems impossible but it is all a question of dogmas and doctrines, economic.


Adam Smith by economics explained easy This gentleman is called Adam Smith and it is from him that our story begins, because he is considered the first real economist and in any case one of the founders of economics scholars.

Before him, the empirical analysis of the economy spoke French.

Furthermore, at the time, the approach to economics took place on a very approximate, superstitious basis, without a real observation of reality and with an almost exclusive purpose: to oppose the excessive commercial power of the Dutch at the time.

Thus, before Smith, the economy was seen as a weapon of redemption and dominance over other economies and not as a means of collective social development.
adam smith, with his work, lays the foundations to help us understand the dynamics of economics as a social science.

However, Smith too is a man of his time, made up, like ours, of strong illusions of economic theories and above all of deeply rooted convictions, which make him believe that the economy is a natural factor and that therefore it obeys divine laws. this too is a real superstition. A belief that still today makes the rich believe that they deserve their fortune as a sign of destiny or a reward for being part of an elite blessed by fate.

That of dogma will be a constant in all economic doctrines in history, including the dominant one today, and we do not call them 'doctrines' by chance.

We owe to Smith the invention of the famous concept of the invisible hand of the market, even if, in reality, economists have handed down to us a very different interpretation from that originally conceived by Smith.


A new economic doctrine that changes the world

Smith in his time stood in the middle of the confrontation between two currents of thought of the times that were fiercely opposed: on the one hand the capitalists and on the other the physiocrats.

The capitalists

Capitalists like Colbert argued that what created value was capital (money and capital goods destined for production). So those who are richer have the keys to progress and to create wealth. Colbert senses that to dominate other nations it is necessary to export goods and import silver in their payment.

This is called mercantilism and it is something very similar to the role played by Germany vis-à-vis the other members of the eurozone.

To achieve this goal it is important to set tariffs on the goods of foreign nations and to optimize their production by strictly regulating them.
It means that the artisans will have to comply with virtuous production criteria (what we now call, increase productivity) that would allow them to produce more competitive goods than foreign ones.

The Physiocrats

Physiocrats like Quesnay , on the other hand, argued that the means of value creation was the land, while industry has only the task of transforming and commerce of distributing production.
They were against the regulations of the capitalists. They pushed so that there were no limits to circulation, since they believed that in the economy, considered like a natural law, like the blood of a nation, goods should circulate freely.

Their observation of reality was limited to the agricultural world, despite the fact that it was at the beginning of the transition towards a capitalist economy in which other productions were gradually acquiring more and more importance.


Increase productivity

Productivity is a problem of all ages. Even today Italy apologizes for having an industry that is not very competitive in terms of competitiveness. Of being technologically backward. Not knowing how to produce like other industries.

Where does this problem arise?


Adam Smith, on the other hand, bases his theories on the observation of what happens in factories and realizes that within the chain of processes with which a good is produced, if a single, single specific, limited and repetitive task is entrusted to each worker – instead of continuing to give each worker the task of producing the good by himself, taking care of all the processes from start to finish – production increases albeit at the same time and with the same use of resources.

Thus productivity increases.
Adam Smith then establishes a fundamental new economic aspect that will be an inspiration for Marx.
It is the idea that the factor that produces value is in reality neither money nor land, but labor, therefore the worker. What today we are used to calling, human capital.
Smith deduces this because by calculating the time needed to produce the goods it is possible to establish the correct value ratio between different goods.

Here was also born the idea of ​​specializations that later will be introduced also in education, with the aim of training a workforce already addressed to the specializations required by the market.


The invisible hand

It is a concept that the most observant will have heard mentioned many times.

According to Smith, there is a kind of collective consciousness that makes each artisan, baker, etc. behave in an economically ethical way and this ensures that everyone produces the best quality they are capable of.
Therefore it is necessary to learn to distinguish between moral judgment on the person and the opinion one has of the professional; because it is in his own interest that the baker will bake the best possible bread at the right price.
Only in this way will he be able to have a satisfied clientele willing to return to his shop and limit the intrusion of competition into his business.

Since it is in everyone's interest to offer the highest quality and to keep their customers loyal, this act of conscience acts as a regulator of the economy, ensuring that prices remain stable and there is the right level of competition between economic subjects.
Thus the market regulates itself, as if there were an invisible hand that governs it, pushing individuals to achieve personal successes which, however, benefit the community.

The market must therefore be left free to expand, eliminating customs barriers, but remaining within the limits imposed by the state which has the duty to monitor the equity and honesty of the capitalists.

Beware of the capitalists!

Adam Smith believed that the market should be free even within state regulations that safeguard the rights of all.

He warns us against capitalists, because, since his time, capitalists have tended to ask rulers for rules and laws that safeguard their interests.

Doesn't that remind you of something?

the capitalist doctrine

In particular, the capitalist doctrine also provided for agreements between industrialists, which allowed them to derive maximum profits from trade and the exploitation of labor.
So already in the eighteenth century, over 300 years ago, Smith realized that these agreements were used to create monopoly labor cartels, capable of compressing wages, since the worker represented only a cost.

Likewise, thanks to ad hoc laws, the industrialists and capitalists were able to impose low wages and at the same time higher consumer prices, with the obvious aim of making the most profit possible.


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Thomas Malthus - economics explained easy Robert Thomas Malthus and David Ricardo
"The scientists"

Malthus is among the first to introduce elements of mathematics into the study of economics.
As a demographer, the most important observation he draws from his studies is that the population grows on a larger scale than our ability to produce goods in sufficient quantities to satisfy everyone.

This is because, while nature is finite, mankind, unlike other animals, is destined to grow indefinitely.

It is truly medieval thinking and yet it is so similar to the recent slogans coinciding with the launch of the propaganda in favor of the ecological transition.

Pay attention …

Cingolani - ECONOMIES / GRAM

The medieval thought brought back to the present day by Minister Cingolani – source book ECONOMI / GRAM


The neoclassicals and the Austrian school

But the closer we get to the economic doctrines most inimical to man, the closer we get to people who transform – according to them – economics into an exact science. And so they make the world go wild.

The “neoclassicals” and the “Austrians” elaborate quantitative theories on the basis of Smith by dividing the shares of wages on the basis of the hours of work employed in production.

liberalists - economics explained easy

If Adam Smith is considered a classical economist, from Vilfredo Pareto on we speak of neoclassicals and libertarians. They are those economists who elaborate Smith's theories in an increasingly liberal way, with an approach to the subject characterized by considering it as an exact science.
They tend to see inequality as a problem that the state should take on,
leaving the reins of the economy to the market.

In particular, von Mises and von Hayek, respectively the founder and the first proponent of the Austrian school, reduce the role of the state to a mere executor of conducts aimed at facilitating trade and providing small forms of subsistence to the poor.

The Austrian school detaches itself from the neoclassicals because it believes that economics should not be treated as a natural science, but rather that it should be treated exclusively with a rational approach, which excludes socialism from the political philosophies suitable for implementing this theory.

For von Mises the cardinal principle is that there is a superiority of the market over state economic planning.


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In the second part we will see how the neo-liberal doctrine has taken over the world economic system. But we will also see how the West discovered that with widespread prosperity the economy was even healthier than it is today.

We will meet: John Maynard Keynes, Milton Freedman, the gang of Italians with Ciampi, Draghi and Prodi at the forefront. But also great personalities such as Enrico Mattei, Adriano Olivetti and others who followed one another, from the reconstruction to the new destruction of Italy.

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The article How did we get so low? From the eighteenth century to today, a micro history of the dogmas and economic doctrines that have taken everything away from us – PART 1 comes from ScenariEconomici.it .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/religioni-economiche/ on Thu, 31 Mar 2022 09:31:12 +0000.