…it’s “better to remain silent and be thought a fool than to speak out and remove all doubt.”
This week we should have continued with coal gasification from last week but the editorial in the Daily Nation on Wednesday 21st headlined: “Economics Made Easy” made me start thinking otherwise.
The Daily Nation editorial headline is topical and needs to be addressed and discussed little further. So, in opening this discussion, I wonder if like me, you’ve also noticed that the following quote tends to circulate periodically amongst free-market groups:
“It’s no crime to be ignorant of economics, which after all, is a specialized discipline and one that most people consider a ‘decimal science’. But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” —Murray N. Rothbard.
But first: If you’ve followed me, I always have a disclaimer: that I am not an economist—but an engineer. I don’t attempt to propound economic theory or try to make overriding statements on economic matters. I often ask questions that I find troubling and report. I’ll do the same today.
I have picked on the Daily Nation’s editorial and Rothbard’s quote because they neatly summarize a problem that’s unique to economics. That is, economics is the most-discussed, but least-studied and understood field of human inquiry. In fact, most Zambians often build their opinions about our government’s economic policies on a knowledge base so small it would seem bizarre in any other discipline.
For instance, if we were to select people at random on the streets of Lusaka and ask them to debate recent advances in quantum mechanics or say coal gasification science that we were supposed to discuss today, the conversation would likely be limited, if indeed the people on the streets of Lusaka knew what to discuss at all.
Yet we could bet with equal certainty that almost any such randomly selected person or group of people would have strong views on free socialized medicine, free education, the minimum wage, the kwacha exchange rates, or indeed why maize meal and petrol prices should be controlled etc and some would even tell you with certainty which amongst their chosen Zambian economist would better be suited to be the Finance Minister and Governor of the Central Bank if the Zambian economy was to grow and prosper.
Most often, I have also discovered, I am sure you too, that when friends meet for a drink at their select hidden Guest House bar, or at any of the elite clubs such as the Lusaka Club, the Lusaka or Chainama Golf Club, or some discrete Show grounds pub, or families sit down to dinner, or your Bank teller tries to engage you as you wait for him or her to process your cheque for clearance, it’s unlikely they’ll discuss physics, real or applied mathematics, chemistry, geology, coal gasification science, metallurgy or phenomenology.
The reason is simple: many people, not only in Zambia but the world over, know little about these subjects, and have little interest in exploring them. Most importantly though, we’re all generally happy to admit it if we lack such specialized knowledge, as it doesn’t usually play a vital role in our daily lives (again assuming we’re not specialists).
But when it comes to discussing topics of economic nature, it’s a different ball game all together. Almost everyone in Zambia discusses and debates economic problems or public policies that carry profound economic implications in the nation and at the National Day of Prayers, there were many such people giving us all sorts of reasons and hope why the Zambian economy should be looking up.
All this comes about because the subject is grounded in human action and choice, economics is universally relatable, and therefore each individual tends to feel as if he has some relevant personal experience and knowledge through which to interpret economic events.
Unfortunately, this intuition is very often mistaken; hence, the Daily Nation editorial and Rothbard’s irritation.
However, while some or all of us, appreciate the Daily Nation’s editorial and Rothbard’s observation, we should realize there’s a problem with the way Rothbard’s quote and the Daily Nations editorial is being used in popular economic discussions.
What I mean is that, if we are not careful, it’s easy to fall into the trap of believing that we are safely outside the ranks of the ignorant. Thus, instead of taking the Daily Nation and Rothbard’s warning for the sobering criticism it is, we use it for a self-congratulatory pat on the back.
Put another way, and taking Rothbard’s quote in particular, I think people concentrate on the wrong parts of the quote. Most, me included, tend to focus on the parts about ignorance, while overlooking the key clause, which points out that economics is hard work, “is after all, a specialized discipline” and the Daily Nation editorial did try to refer to several such economic dynamics that have caused our current economic downward spiral. In other words, doing economics is hard work, and it’s just as easy to falsely believe we’ve mastered it as it is to believe we don’t need it at all.
Such was what I found, among the many memorable sights and sounds (and smells) of the National Day of prayer at the Lusaka showground was the young man who was opposed to holding a national day of prayers, and he was very eager to speak to me about the economy and exchange rates trading which he said had nothing to do with prayer, and he promised me, was positioned to sucker-punch the Zambian and all other African economies even more brutally than the commodity prices bubble we’ve just had.
He seemed to have a great deal of information at his command spanning from how the world’s private Banks fidget around with numbers and world monetary policy to how the US Fed has been deliberately strengthening the dollar: “The world exchange rate market is worth so many trillions of dollars and is inadequately regulated in such-and-such a way, etc”….he said. Listening to him speak for a bit, I told him I had only one question that I’d like him to answer:
“What’s an exchange rate?”
Sputter, stutter, stammer, hem and haw. He had no idea. It was something even the Bank teller processing my cheque for clearance and even the Bank of Zambia whiz- kid types did and it was… bad.
Manually dislocating one’s opinions from one’s lower intestine is not a vice unique to soapbox speakers on public squares.
Yet if this Anti-Prayer Day young man I met at the showground had simply answered that, an exchange rate is the value of one currency for the purpose of conversion to another, it would have been satisfactory.
But about the American dollar and economy— what is not discussed and taken into consideration by many is that this American dollar we desperately want to exchange with our kwacha is backed by nothing but debt— the American debt is also backed by nothing tangible it has zero collateral and is too large for the American people to even contemplate paying it back in this century. When divided amongst every American baby and adult owes the world US$49,000 per head compared to every Zambian owing the world a meagre US$429 per head.
It means every American owes the world 114 times more debt than their Zambian counterpart. The majority Americans live on debt. The only advantage the Americans have, at least for now, is that they can print dollars that the world has since 1971 been accepting as a reserve currency printed on useless pieces of paper and we have all been clamouring for them to exchange with the real things that we produce such as our copper.
And this, I can assure you — like all empires before them who also acted foolishly, can’t go on forever. Already we can see emerging countries rushing to the exits, Brazil, China, Russia and Norway included, are selling American treasuries back to the already debt ridden Americans.
All this is hard to believe.
Some of us attended the National Day of Prayer because we’re aware that many of life’s problems and challenges have no answers; we can only live with and through them. Problems and challenges, however, can be faced and lived through with more peace and resilience if people know that they are not alone.
With $220 trillion of debt that can never be repaid, the world cannot continue at these levels, even with interest rates at zero or negative in some countries. Governments believe that they have abolished the laws of nature by manipulating interest rates.
But like all manipulations, this one will fail too. Like we mentioned earlier, China and Russia are selling their U.S. Treasuries. And when investors realize that they are holding worthless pieces of paper, there will be a stampede of selling government bonds worldwide.
This will drive interest rates all over the world to levels seen in the early 1980s of nearly 20 percent and possibly a lot higher, and even higher and higher in developing countries. Money printing will then be in the hundreds of trillions and probably in the quadrillions as the derivatives bubble implodes. But we don’t know for sure.
The world is now at maximum risk economically, financially, and geopolitically. Wealth preservation will be even more difficult for emerging and developing countries like Zambia, and perhaps prayer and repentance about how the world governments have gone about messing around their economies and those of poor commodity producing countries is what is required. But even the window for prayer is also getting smaller.
In case you’ve forgotten, economic ignorance is around us and may show up in many unexpected forms. Immediately after the 2011 elections, there was this big story about a lot of money that was printed prior to the elections from a qualified accountant who also became the Minister of Commerce when he claimed that the defeated MMD government had printed 3 trillion kwacha and this money was in circulation and that’s why the kwacha was weak. Some ignorant of economics believed the nonsense.
Late the following afternoon I received a panicky call from a radio talk show- producer also a close young colleague inviting every “expert” in his contacts list to high-tail it to the studio for a live segment but which was at that moment short on expertise on money printing. I am about as much of an expert on money printing and money supply as I am on the space-engineering challenges, and for a gleefully malicious moment I was tempted to go on the show and do something funny. I thought better of it.
But there are people who care a great deal more about being on radio talk show programs than I do, and who will respond to any invitation, regardless of their level of relevant knowledge.
And I’ve made that mistake, too: Occasionally on that long live telephone call in panel shows, you’ll get asked about something you weren’t expecting to speak about, and the perceived need to say something is an invitation to error that I have, in the moment and to my shame, answered.
It turned out the money printing story, coming from a qualified accountant and the Hon Minister of Commerce at the time, was based on shear economic ignorance…
“Ignorance” is a word with deeply pejorative connotations that it does not deserve. Ignorance is the natural state of human affairs, and all of us, from addlepated radio talk show to reality-television enthusiasts to theoretical physicists, are almost entirely ignorant of almost everything. The sum of human knowledge is far too vast for any of us to truly master more than a few bits of it.
But we feel inadequate when we are confronted with a question that is beyond our range, and the anxiety is so intense that we frequently ignore Abraham Lincoln’s advice that we’ve borrowed and used for our headline today that it’s “better to remain silent and be thought a fool than to speak out and remove all doubt.”
The Daily Nation editorial and Rothbard’s words are much more than a simple criticism. The challenge is never to become complacent about the knowledge we have, and never to stop learning and praying to our creator for more wisdom. I think that if we rise to this challenge, we shouldn’t be surprised to find ourselves reconsidering some of our own loud and vociferous opinions.
Just a thought,