Thought for this Day: Cultivated Mythologies
Keith Rankin, 2 June 2015
In The Daily Blog on 30 May, I wrote about inflation as a potential rebalancing solution in a financially unbalanced world. In the article I presented an analysis of the Great Inflation of the 1970s, and suggested that inflation is much more difficult for policymakers to generate than is commonly supposed. I finished by suggesting that we may be moving significantly into a deflationary environment which constitutes unknown territory for policymakers.
Asked about "what will happen" I replied:
"I would say there’s a tension between demand deflation and cost inflation, given that the low-hanging environmental fruit have largely been picked. Whatever happens, it will not be much influenced by the quantity of money, which is what [Milton] Friedman and his [monetarist] acolytes believed was paramount.
The price of debt should be negative when, as has been true most of this century, more parties want to save than to borrow. It will be interesting to see whether market forces are allowed to prevail, or whether saver interests manage to continue to control interest rates above their market-clearing levels. The key symptom of overpriced debt is the relentless marketing of debt to both the poor and the propertied.
We are in new times. While good history can help our understanding of new situations, what is taken for history by most of us is largely cultivated mythology. Such mythological history, even where it contains half-truths, is probably worse than useless in helping us to navigate the future."
Monetary inflation in individual countries can coexist with global deflation, as it did in the early 1920s, for example, thanks to dramatic changes in the exchange rates between one kind of money and another. But to convert that idea into a general proposition that inflation has always and everywhere been a monetary phenomenon is an example of cultivating a mythology.
The classic example of cultivated mythology in New Zealand is the depiction of the Muldoon Years as being like a Cold War "Polish Shipyard". (For a debunking of this myth, see Shaun Goldfinch's 2007 article The Polish Shipyard: Myth, Economic History and Economic Policy Reform in New Zealand in the Australian Journal of Politics & History.) New Zealand's 1984-94 neoliberal policy revolution was predicated on a cultivated myth, in which the major cultivators were not Roger Douglas and Ruth Richardson, but the ideologues promoting them, and acting through their frontpeople to stifle alternative views of New Zealand's prior history and development.
It's interesting to see Chris Trotter's recent (25 May) contribution to The Daily Blog (Tricky Customer) in which Trotter intimates that recent allegations of National lurching to the left may be reminiscent of some of those earlier cultivated mythologies from the neoliberal era.
Another example of a cultivated mythology is the perpetually repeated assertion in the media and elsewhere that near-universal home-owner-occupation is the recipe for social stability and happiness. It's a mythology that prevents us from properly addressing the real housing problem in New Zealand, the state of the rental market.
Ideological movements depict their political and philosophical foes in inaccurate and deceitful prose. We should be much more aware of the agendas behind many of the assertions about history that such activists make. Sadly, in these overly competitive times, literacy in history – let alone in economic history – is seen as a 'nice to have' rather than an essential component of enlightened citizenship. Out of ignorance, we too easily fall for the well-marketed myths.