Adam Smith's 'invisible hand' wasn't perhaps what people thought it was, but, by the end of the industrial revolution and the beginning of the population level-out period, it had finished its work.

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The ‘Hidden Hand’ Exposed?

“But the free market is not primarily a device to procure growth. It is a device to secure the most efficient use of resources.” — Henry C. Wallich, a Governor of the Federal Reserve System from 1974 to 1986.

Researching inflation has been an eye-opener: What is the best definition? Either we’ve lost the plot or there isn’t one, just some platitudes:

“The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index.”

“A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.”

They all come down to: ‘A sustained, rapid increase in general price levels.”

What causes it? Now, that’s a toughie.

“There is no one single, universally accepted cause of inflation” … So the modern economist gives us three:

1. Cost-push inflation, which is due to wage increases that cause businesses to raise prices to cover higher labor costs, which leads to demands for still higher wages to pay for the increase in prices, called the wage-price spiral.

2. Demand-pull inflation which results from increasing consumer demand financed by easier availability of credit – a little greed here – and,

3. Monetary inflation caused by the expansion in the supply due to printing of more money by a government to cover its deficits.

All of the above are pure hogwash especially the obvious wage-price spiral 'definition'.

Adding pewter to Roman gold coins (monetary inflation) didn't fool the merchants then, but economists generally agree that adding pewter (printing lots of paper money) causes a high rate of inflation in today’s money supply.

But because economic reality is so simple when viewed in relation to broader historical events – which it isn’t – it is fed to us in ‘economic theories' that have to sound complicated.

It does look circular, though and because so far no cause, no cure, I have had to either invent or find one for myself

THE STORY SO FAR:

Before Zero Population Growth (ZPG), manufacturers had to make more goods every year because there were more people every year.

So every commercial enterprise linked to population growth expanded, and ‘growth’ became an invisible source of expansion, eventually an integral part of the general western economic paradigm.

Tom Peters said something like this on his 90's lecture tour: In the sixties and seventies you couldn’t kill a Fortune 500 company if you tried.

‘Growth’ insidiously assumed itself into all western economies and became as necessary as air.

Adam Smith’s ‘invisible hand’ wasn’t perhaps what people thought it was, but, by the end of the industrial revolution and the beginning of the population level-out period, it had finished its work.

The basic source of growth – population expansion – was drying up without being noticed and what I think may have been Smith’s ‘Hidden Hand’, having writ, moved on.

What we lost sight of is the fact that when the population stopped growing at the rapid rate western economies were used to, demand for growth-generated profits didn’t.

Now without the 'invisible hand' we had an 'invisible' problem. We couldn’t grow in the 'normal' way because the population wasn’t cooperating. So it soon became obvious that we were all competing for the same market!

Time-And-Motion specialists in full fiscal drag disguised as economists told us to “Get lean and mean" if we wanted a bigger market share.

Well, it got more sales … and growth in profit through efficiency but not through more customers because First World populations stayed celibate in economic terms and Zero Population Growth (ZPG) became a buzzword.

And now we’re so lean and mean we can keep up with shareholders’ demands for MORE PROFIT! Next Crunch - everyone's lean and mean!

Computers arrived and took over expensive, profit-eating middle management functions – compiling quarterly pie-chart reports worked for a while, but plugging into the factory floor in 24/7 real time was huge. And saved enough in wages to post an annual profit growth over the ten years between 1980 and 1990.

During which time the First World became host to fifteen million ex-middle managers running Small, Medium and Micro Enterprises (SMMEs): A Whole New Resource-based Sustainable Economy in our very midst!

THE ‘HIDDEN HAND’ HAS LEFT THE BUILDING;

But still just guys scratching for a mortgage, education for the kids and a pension.  growth’ was generic to industrial revolution- population growth-geared economy.

Today it’s a completely different ball game.

For more customers = population growth, the First World has turned to the ‘developing’, high population-growth Third World for the embedded ‘necessity’ for profit growth.

After the computer age put middle management out to work to invent a new economy and before Third World intervention the Age of Leveraged Buyouts, Hostile Takeovers and Mergers came upon us as the only way to satisfy the ubiquitous (and now labeled ‘greedy’) shareholders’ demand for annual profit increases.

“Sustainable” is still waiting in the wings with the SMMEs.

Back in the ‘30s? Just like today: Foreclosures: Expensive labor outsourced, cheap labor brought in and price fixing so bad Woody Guthrie made note of a truly unbelievable economic ‘solution’ to the starvation caused by The Great Depression: destruction of food.

“The crops are all in and the peaches are rott'ning,
The oranges piled in their creosote dumps …”

Right now, with that bit pocket history in mind, take note of what the American banks are doing with the ‘bailout’ money given to them by taxpayers to lend back to taxpayers.

I say they're creating an even Greater Depression.

Authors Website: under construction

Authors Bio:
Tom is a contributor to public debate on issues affecting our survival; works with a London and a South African think tank, is a working journalist and author.