Will Brown tries to take the pain out of economics.
Getting to grips with economics is a daunting task. Most of us reserve our energies for less muddy waters – and leave matters economic to a few twitchy anorak types. But as the world economy collapses round our ears it affects much we hold dear. Some of us feel compelled to try to understand things economic – if only to judge where the world is heading. Below are suggestions to anyone embarking on this journey.
Do it collectively
There is no substitute for learning about economics with other people. In Bristol there are at least two groups where people meet monthly to discuss the world economy. We take it in turns to introduce a topic (‘banks’ say, or ‘the US car industry’) and then discuss it. Between us we can usually come up with explanations of how things work. And we can draw on the range of economic experience the group has – of different jobs, of visits to various parts of the world, of memories of past events. While our culture continually emphasises the lonely achievement of isolated individuals – ‘great minds’ – in reality thought and understanding is socially generated.
Get your head round numbers
Economics is about numbers. This puts a lot of people off. Economics is the study of humanity’s collective productive power – about how our material existence is produced and consumed – about wealth, work and power. Human actions and processes have to be divided into categories and numbers are use to measure the scale of these categories. So a key skill is to be able to conceptualise large numbers. For example, ‘there are 160,000,000 cars in the USA and before the market bombed 16,0000,000 were produced every year’. Does your mind go numb when you read that sentence? How can we imagine 160,000,000 cars? There are 10,000,000 people in London – imagine 16 Londons laid out next to each other. Think of a cube 1cm on an edge. Say a playing dice. Imagine a line 1,000 dice long – that’s 10metres. Now imagine covering the floor of the gym with a square of dice 10 metres by 10 metres. That’s a million dice. Picture them all. Now stack layer upon layer of dice on this square till you have a block of dice 10 metres square and 10 metres high. Picture it in your mind – demolish a corner of it. That’s a billion dice – a thousand million. Think of a skip full of red lentils – that’s about a billion. Or think of a tea chest full of dried sand. Stick your hand in. That’s a billion grains of sand.
The world runs on oil. Humanity uses 60 million barrels a day. A barrel is 2 foot across and 3 foot high. It’s easy to work out how many barrels would cover a football pitch. And how many layers of barrels the pitch would need to be covered in to get you 60 million barrels. ( Answer – football pitch is 100yds by 50 yds so it would take 11,000barrels to cover the pitch. So you’d need a stack of 5,300 layers of barrels – about 3 miles high – to hold a days supply of oil. Not that we’ll ever run out of course)
Build a model in your head
So a big part of understanding the world economy is to build a model in your head. What are the main industries? How are they organised? What are the main companies? Where do the raw materials come from? What do the inside of factories look like? Who has the money? Economics is fraught with specialist terms. Seemingly every article you read is writhing in credit default swaps, minimum lending rates, LIBOR or fiscal policy. What do all these terms mean? The only thing to do is slowly compile a glossary of the different terms. Reading about the world economy becomes less painful. Wikipedia is a fantastic source for such definitions – Google an unfamiliar term and almost always Wikipedia will be able to give you a concise working definition. Indeed, its now possible to get a working knowledge of the world economy simply through Google and Wikipedia.
Use good sources
The Financial Times is by far the most important single source for economic information. Clearly written and powerfully resourced it is long on information and analysis and short on waffly opinion. It has two sections – general economic/ political news and detailed news about companies and markets. It also has an opinion page where it invites leading figures to write briefly on key issues. Contributors in the past months have included Henry Kissinger, George Soros, the CEO of General Motors, the Russian President and the CEO of Lehman Bros. The Saturday edition presents an overview of the week past. The FT has a consistent editorial policy requiring that every article explains economic categories and mechanisms above a basic level. Most other British media financial news just echoes the FT. For current market information the BBC News (Business) website is very useful. It gives real time and historic data on all world markets and plenty of background stories. Robert Peston is very annoying, Newsnight’s Paul Mason is good . The BBC and the FT inevitably have some degree of UK centric bias so it is interesting to occasionally read alternative sources. International Herald Tribune and Business Week are good for a New York perspective. But the world economy is very global – all good sources will have economic stories from the Pearl Delta in southern China to the North Alaskan Oil slopes to collapsed Icelandic hedge funds.
Ask good questions
To find out about economics the key is to ask good questions. A good question is one that is very hard to answer – you’re forced to gain a profound understanding to answer it. I always have a few questions in my mind that I think about for years. Recent favourites have been ‘what is money?’, ‘how much control do governments have over the economy?’ and ‘what are banks?’
Study history
Of course the economy changing all the time. To try and understand it is to try and paint a big moving thing. Large, complex industrial sectors didn’t exist not so many years ago. They were born and then grew. To understand them now it is good to think about their history. Think about the aircraft industry from the first flight at Kitty Hawk, 17th December 1903. The rise of the aluminium industry, Boeing, avionics, Heathrow, the spitfire and helicopters. Think about the workers, the money and the technology. Then think about it all now – the Boeing /Aerospace duopoly, crisis at Altalia., world aluminium prices collapsing, the fate of the big smelters in Iceland, Rolls Royce announcing job cuts, holiday firms in crisis.
Criticise a theory
Of course there is no basic agreement even about the fundamentals of how the world economy works. Mainstream economic theory (also called ‘academic’ or ‘bourgeois’ economics) takes capitalism as a given and seeks to explain ‘how it works’. Its not good on why its history is littered with crisis. Even within this framework there is plenty of dispute – primarily between followers of Keynes and the monetarists. A more critical approach is taken
by the Marxist tradition which seeks to place capitalism within a much broader context of humanity’s historical development and emphasises the conflicts and contradictions within the capitalist system. Within the Marxist tradition there are numerous variants and disputes. And in recent years there has been a mushrooming of economic analysis that considers economic processes from an ecological point of view – examining the relationship between human activity and the eco system.
A powerful idea from the Marxist and anarchist traditions is that ideas are socially produced rather than being the exclusive creation of towering geniuses. These traditions generated by the combined efforts of thousands of working class activists and radical intellectuals battling to understand the violent and revolutionary world of the new capitalism growing around them. We shouldn’t give up trying to understand economic processes around us and just rely upon the infallible pronouncements of chosen gurus, rich people or politicians. The premise of the Left has always been that ordinary people are capable of understanding economic process – and that it is for this very reason they will ultimately be able to take control of our own labour power.
Will Brown
Totterdown
Bristol
Liam redux 
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