My primary school was De Klimroos, a Roman Catholic school. I was a loner. The harassment usually wasn’t extreme, but occasionally it was, making the school a war zone. Every day was a battle. But I was in it for the long run to finish school. That came with thoughts like, ‘Standing with the back against the wall is not so bad because they can’t attack you from behind.’ And, ‘Humiliation is bearable as most people will forget about it after a week or so.’ Sometimes, they blamed me for things I didn’t do. Once, there was a fight between two boys. One boy’s glasses fell on the ground and broke. I was one of the bystanders. Someone might have accidentally stood on the glasses. Everyone said it was me. I had seen these glasses lying, and they weren’t close to my feet but to other children’s feet. Only no one believed me. It was pointless to argue. It became an insurance affair, but in the end, the insurers agreed that it wasn’t my fault because the glasses were already lying on the ground.
Not being good at sports was another disadvantage. Sports at school was one year of torment, but it ended on a high note. Before the summer holidays, the last lesson was monkey cage, a freestyle adventure and great fun. The teacher sometimes made the children choose teams. I was always the last one remaining. No one wanted me in their team. We had school swimming for a year. Nearly all the children got their swimming diplomas, except me. The following year, my mother made me go to the swimming pool alone to attend swimming courses early in the morning before school, between seven and eight AM. And so, I got the first diploma, A, and the year after, even the second, B. The year after that, my teacher, Mr B*****, once sent me on an errand to another class led by Mr. H*********. When I came in, some kid yelled, ‘Enasniël can’t swim.’ Mr H********* then whispered in my ear, ‘What diploma do you have?’ I whispered, ‘B.’ And then he asked the kid, ‘What diploma do you have?’ He said, ‘A.’ ‘Enasniël has B,’ Mr H********* said. And then the joke was on him.
My lucky number was twenty-six. When looking at it, you immediately see why it is such a beautiful number. So that doesn’t require any further explanation. My date of birth, 26 November, was another reason. Green was my favourite colour, also for obvious reasons. Everyone can see that other colours aren’t as green. Green is also the colour of success, while red is the colour of failure. If something goes well, you see a green check mark. If something goes wrong, you see a red cross. I dedicated a little poem to the number twenty-six. It may go down in history as one of the best poems about the number twenty-six ever written, but that is entirely due to a lack of competition. The English translation is below,
Twenty-six letters in the alphabet, Twenty-six weeks makes half a year Two litres of mercury weigh close to twenty-six kilogrammes And oh, how heavy that is.
Near the entrance was a sign attached to the fence. On it was the name of the company that had installed it. On its back, someone had written, ‘Enasniël Drogoel ís crazy.’ The text remained there for several years. Everyone could see it when passing the gate. It was nearly impossible to miss. It reminded me of what others thought of me. There was a wall around me, so it hardly mattered. One day, a teacher gave me a chore near the entrance and some tools, allowing me to remove the sign.
For many years, I had two friends, Marc and Hugo. They were classmates. Hugo came first. I ran into him when passing his home. He invited me in. And so, we became friends. Hugo’s mother had a board position in the Roman Catholic Church. His father was a manager. Marc came somewhat later. His father was a sales agent for a Swedish firm. They had a Volvo. They had a dog, a boxer named Boris. Marc had a sleeping room in the attic with his younger brother, filled with Legos and other toys. The Swedish firm sold sewing threads, so we had a lot of wires to play with. And there was a radio.
We started a few clubs. I was the instigator. Our inventions club came first. We gathered money to buy technical items and Legos and experimented with a broken television my mother had left in the attic. We opened it, inspected its interiors, removed some parts, and put them back together. Marc warned me about the capacitor, which he believed was inside it, as it had an electrical charge, and we made fun of what might happen if we hit it. We made the television work again without understanding how.
Later came the germinate club. And the antique club, which was more of an excavations club. We found pottery pieces in the ground and stored them in the shed. We also buried a tube with a document in the forest. It contained our names, signatures, a date and an explanation, and we hoped someone would uncover it after 1,000 years. And we listened to the radio. Marc and I shared a passion for the radio programme Dik Voormekaar Show, with funny voices and noises, and where everything went wrong, a brainchild of the comedian André van Duin. I truly enjoyed everything he did. Van Duin also made songs and sketches together with Corrie van Gorp. It was hilarious.
Marc was fond of gadgets. In the 1970s, digital watches from Japan came to the market. They were expensive at first, costing as much as 300 guilders, but Marc soon had one. These watches had features like a stopwatch, time zones or a calculator. Hugo was a bragger. The things he or his parents owned were always better. When his father bought a Hyundai car, these were the best cars in the world, even though a Hyundai didn’t come close to a Volvo. We had a Peugeot and no reason to boast.
One day, when arriving at school, the children were awaiting me on the path from the gate to the schoolyard. They stood on both sides and scolded me while I passed. They had all agreed on it and had perhaps organised it. Otherwise, there wouldn’t be enough kids to fill the entire stretch on both sides. Marc walked at my side like a true friend, but Hugo was among the kids scolding me. Hugo once explained his friendship as a kind of charity. He said his mother had told him it was a good deed to befriend sorry kids like me. His mother was a high-ranking figure in the Catholic Church, so she might have taught Hugo that he had to earn his place in heaven.
And then there was the strange incident with the plum. Once, I told Hugo that two plum trees were in our backyard. Hugo said that was impossible, ‘Plums grow on bushes, not on trees.’ And there was no way of convincing Hugo. He was sure I was wrong. We had two plum trees, and it was late autumn or early winter, so the trees were bare, and it was impossible to show him plums hanging in a tree. After the argument, we went to the fallow land behind the shed, which would later become my tree garden. There also was a plum tree, one I hadn’t thought of, and there, high up, hung one shrivelled plum in that tree, which was otherwise completely bare. And I pointed at the plum, saying, ‘There you see a plum hanging in that tree.’ That finally convinced Hugo. In hindsight, it is most peculiar that there was a plum. One sole plum was hanging there. The birds had not eaten it. That wind hadn’t blown it out. You could almost think it was left hanging there for me to prove Hugo wrong.
Whenever someone complimented me, I believed this person was mocking me or wanted something from me. Some children praised me for my calculating skills, but they were jeering, and I knew. They didn’t like clever kids. In the sixth grade, we had mental arithmetic, so we couldn’t use paper to calculate. Once, the teacher asked us to calculate the average of 1/3 and 1/5. And then the teacher said the answer was 1/4. Everybody had that answer except me, as I had 4/15. And so, I laid out the proper calculation, which we all had learned, loudly in the class, making the teacher, Mr R****, look like a fool. More than three decades later, my wife once went shopping with my mother in Nijverdal. Someone discovered she was my mother’s daughter-in-law, so this person said to her, ‘So, you married Mr Headstrong?’ If you are right and they are wrong, they ridicule you and call you stubborn.
And my father regularly said, ‘You are so good at tuning the radio. Can you please do that for me?’ He followed courses named Management Labour New Style. To inspire workers, you praise them and tell them how great they are to make them do what you want. Tuning a radio was a simple job anyone could do, so he was lazy, making me wonder, ‘Does he really think I am that stupid?’ Criticism worked better with me. People usually don’t lie when they criticise you.
My grades were not exceptional. They mostly ranged between seven and eight, with ten being the maximum. That is partly due to the school’s egalitarian socialist philosophy, which made getting a higher grade than eight nearly impossible. Some children were as intelligent as I was. Hugo was among them. And there was a girl named Madelon who was more intelligent. However, the combination of being clever, a strange loner and doing poorly at sports was particularly unlucky, making me a subject of pestering.
After initially being timid, I grew more courageous over time while liking a good joke. I prepared a smoking device and lit it near the paper storage next to the bicycle shed, making it appear that the papers had caught fire. At eleven, I had become the tallest boy at school, had grown fearless, settled some scores, and intimidated those who stood in my way. Once, there was an incident with fountain pen refills. We had fountain pens. They had refill cartridges, which some kids, including me, collected to make rings or other objects. Some kids played with them in class, so the teacher took the cartridges from them and put them in the bin. I took them out, probably on the way to the toilets, and they saw me doing it. They demanded them back and threatened me, but I didn’t return them.
Another incident was at a school camp. We were biking, and another kid tried to push me off the road. I didn’t budge and crashed into him, which severely damaged my bike’s wheel. It folded. The teachers made a school camp newspaper with jokes about the damaged bike. I gave the perpetrator a bloody nose, but I don’t remember whether that was at school camp or later. There probably were a few more incidents. The final year’s school report has gone blank because Mr. B****** had used a different type of ink that didn’t stand the test of time. Still, I vaguely remember him expressing concern about my increasing assertiveness and the clashes with other children.
I was also a sensitive kid. Once, I accidentally hit a girl or broke something of her. She kept complaining about the incident, making me miserable because I had wronged her. Ultimately, I could make her happy with a guilder, which settled the matter.
Twenty-five years later, we had a primary school reunion. My former schoolmates gave me a hero’s welcome. They all cheered when I came in. It felt like being an Olympic gold medal winner returning to his home village after the games. One of them said that they appreciated my coming. They believed they had made my life so miserable they had expected that I wouldn’t come. All the other black sheep hadn’t shown up. But the thought of not coming had never crossed my mind.
A few hills surround Nijverdal, and locals call them mountains. Evers Mountain is fifteen metres high. The Netherlands is flat, so fifteen metres can be impressive to some, especially if they are on a bike. Nijverdal is a small town, even though locals still call it a village. It didn’t exist before the Industrial Revolution. It is there because a British entrepreneur found it a superb location for a factory. My life in Nijverdal got off on the wrong footing. A few days after relocating, my mother sent me to kindergarten. A new home, a new village, going to school and being without my mother for the first time in a matter of days was too much. I cried for over two weeks in a row and incessantly. They just let me cry. The teacher then put me in another classroom with another teacher, and I stopped crying.
That was tough love. No one seemed to care. Being four years old, I concluded I was alone in this world. It was the first turning point in my life. From then on, I depended on my judgment only, not expecting anything from anyone, not even my mother, who had left me there. And so, I erected a wall around me, and the hard times began. Nijverdal is part of the Hellendoorn municipality. Also, in Dutch, that name starts with hell and ends with thorn. It might refer to thorny bushes on a slope.
My parents had grown up on small farms. They had been poor, and their lives had not been easy. They ignored my complaints just like their parents had ignored theirs. That was not a lack of love. Harsh conditions can make you stronger, so making your children weak is a lack of love. When I was two years old, my mother made me a pair of trousers. They gave me an intolerable itch, but I had to wear them every other week as I only had two. Luckily, I grew out of them after some time. My father was tough, but my mother was tougher. She often said, ‘Kan niet ligt op het kerkhof en wil niet ligt ernaast.’ It means something like, ‘If you say you can’t, you probably mean you don’t want to, but you will have to.’ And children, she never said children but always brats, can never be right, even when they are.
I could read and write numbers and calculate before I could read and write words. At kindergarten, I became intrigued by numbers. I chalked them down on the pavement. I associated numbers with genius and wisdom, so I embarked upon a personal project you might call counting to infinity. At first, I recited numbers on the way back home from kindergarten. My mother was biking, and I sat on the back, counting. I could ask her questions. After arriving at 99, I asked my mother, ‘What comes after 99?’ ‘One hundred,’ she said. And I continued. The next day, I still counted, ‘998, 999, ten hundred.’ ‘No, not ten hundred, but a thousand,’ my mother said.
Soon, I mastered the number system and knew what came after what. Then, I asked my mother, ‘How far can a university professor count? Is it a million?’ ‘Yes, a university professor can count that far,’ my mother answered. But I wasn’t planning to stop at a million. I was aiming for infinite wisdom. I soon found that counting to infinity would be laborious and take a long time. And so, I divided the effort into parts and started counting in bed in the evenings. And then, I fell asleep and lost count. And so, I had to start over again the next day from a number I was sure I had already recited to ensure that I hadn’t missed a single number. Otherwise, it didn’t count. Somewhere near 16,000, I realised it was pointless and gave up.
And money intrigued me. Once, my mother bought some groceries. She paid with one banknote and received several banknotes and coins in return. And so, I asked her, ‘How is that possible? You give one banknote and get groceries, more banknotes and coins in return.’ She said, ‘I gave a one hundred note and received two of twenty-five, one of ten, and some guilders and cents, which is less than one hundred.’
One morning, a pile of banknotes lay on the table in the living room. The amount was 750 guilders, seven notes of a hundred, and two of twenty-five. I took a one hundred out and hid it in my room to marvel at it. I was six and had some awareness of my deed not being right. I took a one hundred, not because it was worth more but because there were more of them, so its disappearance would be less noticeable. I showed it to my sister, Anne Marie, who told my mother.
I was about to receive my first pocket money, so my parents postponed my pocket money by nearly a year. She had left this money there for my father for expenses at work. He had requested 750 guilders, and when he found only 650, he thought my mother had made a mistake and didn’t discuss it with her any further. In this way, it could go unnoticed for weeks. Once I did receive pocket money, I saved it to buy a globe. It had a light inside. You could see the world’s countries in different colours if you put it on. The next thing I saved for was a microscope.
I often woke when daylight broke. In the Summer, that could be as early as 5 AM. I wasn’t allowed to go out of bed that early. So, I lay awake in bed for hours, staring at the ceiling and watching patches of sunlight gradually move on the wall as time passed, probably just thinking, and I sang songs. I waved my father goodbye from my bedroom window when he left in his car to work around 6 AM.
My father and I were very different, but we both enjoyed watching old-style cartoons like Tom and Jerry, Tweety and Silvester, Droopy, Buggs Bunny and Elmer J Fudd, Donald Duck, the Pink Panther, and Roadrunner and Wile E Coyote. And we often went with him to Cafe H* in Daarle, where his friends gathered. It was a traditional Dutch pub called a brown cafe, where the hunters in the area hung out. There wasn’t much to do, so you could go outside or sit inside and hear the hunter’s tales. There was a billiard table, and there was a slot machine. Sometimes, one of my father’s friends gave me a guilder to play it. I had no qualms about hunting but noticed that hunters lived a life of excess. They found it a poor showing if there wasn’t too much meat.
Featured image: Royal Steam Bleachery: Exterior Overview Complex With Halls. A. J. van der Wal. CC BY-SA 4.0.
Mainland Europe and the Anglo-Saxon world, and most notably, the United States, are culturally related but have significant differences in views on law and morality that underpin their societies. These differences greatly influenced history, but their causes also lie in history. In the Middle Ages, individualism was already strong in Western Europe. While England developed its law system, the bureaucracy of the Catholic Church introduced Roman civil law on the continent. It had the following outcome:
Common law has become the basis of law in Great Britain and many of its former colonies, including the United States. Individuals are sovereign. Common law works bottom-up by generalising rules from judges’ verdicts in individual cases.
Civil law has become the basis of law in mainland Europe and most other countries. The lawmaker is sovereign, thus the king or the people as a collective via parliament. It works top-down by applying general rules to individual cases.
Common law resulted from the efforts of English kings to build a coherent law system based on local practices. In 1215, the Magna Carta limited the power of the English kings. England then had a strong state where the rule of law limited the king’s power. There also was individual liberty in Western Europe. There were few strong states while merchants ran independent cities. Still, the rule of law later came from the state’s power because of the differences in law foundations. These differences relate to views on ethics:
In Great Britain, philosophy, including ethical philosophy such as David Hume’s, is pragmatic. It says moral rules are an agreement in society, so good and evil depend on popular sentiments, freedom is being able to do as you please, and outcomes matter more than intent.
In continental Europe, idealism dominates philosophy, including ethical philosophy, such as that of Immanuel Kant. It says good and evil are absolute, freedom means liberating yourself from your lower urges, thus becoming rational and morally upright, and intent matters more than outcomes.
If ethical rules are relative, they emerge from popular sentiments, thus bottom-up, and if they are absolute, they come from principles and work top-down. The English philosopher John Locke imagined the state as a voluntary agreement of individuals to cooperate for mutual benefit. If you believe in individual sovereignty and moral relativism, that must be why there is a state. But it is incorrect. We will not voluntarily agree to a state if there is none but fight each other until there is one.
These differences later shaped the debate on the economic system, hence the intellectual battle between capitalism and socialism. Adam Smith wrote a practical recipe for running an economy in the British tradition. In continental Europe, the debate became fundamentalist and infused with moral sentiments. Frédéric Bastiat claimed socialism is an organised plunder of private property, while Karl Marx argued that capitalists steal the value workers create.
In the United States, with its moral pragmatism founded on individual freedom, the collectivist ideology of socialism never caught on. Still, progressives in the United States pursued reforms to rationalise the government according to modern bureaucratic principles, and there were unions. Great Britain became caught in the middle as Brits had a more favourable view of government than Americans and a strong socialist movement.
When, after World War II, the Soviet Union became an existential threat to the United States because the communists planned to overturn the capitalist order with violent revolutions and were building a large army, the defence of individual autonomy and moral pragmatism itself turned into an idealist moral crusade, also because the Soviets aimed to end religion and persecuted religious people. Most US citizens identified as Christians, so they came to see the Soviet Union as an evil, godless empire.
Hegelian Dialectic and Marxism
Around 1807, the German idealist philosopher Georg Wilhelm Friedrich Hegel devised a theory of how history would unfold according to God’s plan. It would occur by challenging the prevailing ideas and social order. The French Revolution had just swept away the old aristocratic French regime. The French adopted revolutionary new ideas from the European Enlightenment, modernised their government and introduced an army of conscripts, allowing Napoleon to conquer Europe and spread these ideas and reforms. Hegel was the proverbial fly on the wall, taking it all in. He was impressed. That was progress! Modern ideas wipe out old ones. A bureaucratic government with conscripts eliminated an aristocracy with mercenaries. The German Christian idealist philosophers like Kant and Hegel, and later, atheists like Marx, Nietzsche, and Heidegger, dedicated themselves to hard questions pragmatic people would never bother to spend a lifetime on.
As a profoundly religious man, Hegel thought that our knowledge and ideas progressed and that God’s plan worked like so. He believed humanity had a collective consciousness in which these ideas reside. He surmised we are progressing towards our final destination, God’s Paradise, by replacing our prevailing ideas with better ones. An example is our views on slavery. Slavery existed since time immemorial and was generally accepted, but most of us now see it as evil. These views we all share are what Hegel meant by collective consciousness. It evolves over time and thus progresses according to a stylised scheme called Hegelian dialectic. It works like this:
(1) there is a status quo (the thesis) (2) new ideas or conditions challenge the status quo (the antithesis) (3) from the challenge emerges a new status quo (the synthesis)
A synthesis is a more profound truth rather than a compromise. You can’t bargain on the truth. Hegelian dialectic is a ruthless pursuit of truth and accepting its consequences. Hegel is the philosopher of progress, not economic or scientific, but progress in society and its institutions. It is nearly impossible to overestimate his influence on politics in the centuries that followed as it often was about progressives versus conservatives, thus applying new ideas from philosophy and the sciences versus keeping things as they are. Not all new ideas are better, so the outcome can be that nothing changes. Ideally, the synthesis is the best solution that emerges from the challenge of the status quo. If the new ideas are superior, they wipe out the old ones. That requires revolution and violence, such as the French Revolution and the Napoleonic wars.
Being more pragmatic, the British reformed in smaller steps. The principal problem with Hegelian dialectic is that the scheme can have disastrous consequences if you don’t know everything. Your logic can be perfect, but if your assumptions are not, a small oversight can cause ruin, as in Barataria. Chaos theory says why. The leading conservative British thinker, Edmund Burke, aimed to improve the government, but only if necessary, because changes have unpredictable consequences. The British could do that because they already had a government open to reforms, while the French did not. A revolution was their only option to rid themselves of the corrupt old regime and clean the slate.
Karl Marx took the bait. We could achieve paradise ourselves here on Earth, he claimed. Scholars had already found out that much of the Bible was fiction, and Charles Darwin had just published On The Origin of Species with evidence indicating plants and animals emerged in a competition between species that has lasted millions of years rather than being created in six days 6,000 years ago. The sciences had proven religion wrong, so Marx thought religion keeps people dumb. Christians would wait for Jesus, who hadn’t shown up for over 1,800 years, and not take matters into their own hands. Marx also noted that Christians had betrayed their religion by adopting the ethics of the merchant. According to Acts, early Christians lived like communists.
Marx claimed capitalists profit by stealing some of the value workers create. He based his allegation on the labour theory of value, which economists of his time considered valid. The theory says that the price of an item equals the cost of labour required to make it, thus including the labour to produce the raw materials. If making a pair of shoes takes twice as much labour as making a pair of trousers, shoes cost twice as much as trousers. Marx then asked, ‘If that is correct, how can there be profits?’ It is because the theory is wrong. There is no objective measure of value. In a market economy, the price of an item depends on what people are willing to pay for it, not what it costs to make it. Otherwise, you could work a year on building a better mousetrap and sell it for € 50,000. Perhaps, after spending another € 50,000 on building a brand in a marketing campaign, you can sell it for € 200,000. That is how markets work.
Value is what we believe it is. Nothing is sacred. Everything is for sale, including the rainforests and even the Earth. The so-called owners think it is all theirs and can do with it as they please. In the market, a message becomes true if you can sell it. It works with advertisements or denying climate change. It is the evil in the ethics of the merchant, and because money represents power, we stare into the moral abyss. If you ever wonder why communists called their newspapers The Truth, that is why. But in a world without God, there is no truth, and communism is just another message on the marketplace. The communists appealed to the workers’ self-interest. And that was a poor sell because workers were worse off under communism. It is why communism was doomed to fail, not because it is impossible to live like communists. Early Christians did. Rather than concluding he had just proven the labour value theory wrong, Marx claimed capitalists stole from their employees.
Marx further said that producing for markets alienates us from what we make. Many workers experience this. It is why Dilbert comics are so successful. Marx claimed we could be free, creative beings, but the modern, technologically developed world dictates our lives. Marx believed ending the market mechanism and replacing it with democratic planning would liberate us. So if workers received what they owed and we replaced capitalism with democratic planning, we would live in a paradise where we can do the jobs we like and have everything we need. That is a silly idea. Many want to be a Hollywood star, but few want to be a cleaner. Immigrants do those jobs. Communes don’t attract farmers and construction workers but artists and reiki healers. We need food and homes, not art and quacks. Work is doing something useful, and if it isn’t useful, it isn’t work. And even if everyone contributes, planning will never do as well as markets. You could live with that if you have enough. You might want a pear, but you could settle for an apple. And you have heard of oranges but never tasted one.
Marx also claimed that capitalism causes misery as adding capital means doing more with fewer workers, which reduces the need for labour, pushing wages below the subsistence level and leaving workers to starve. At the time, most economists believed wages would remain close to the subsistence level. If wages increased, more people survived, expanding the labour supply. And so, wages would decrease, and more people would starve. The market would keep population levels in check. Marx argued that making more stuff with fewer people was impossible because the unemployed couldn’t buy it, and capitalism would bankrupt itself. It didn’t happen because of Say’s Law, as things became cheaper. And we can create money from thin air. When capitalists produce more, they must sell their merchandise, and you can make people borrow money, so the general level of opulence rises. Marx vastly underestimated human ingenuity in finance, marketing and job creation in the services sector and government, the so-called bullshit jobs in the bullshit economy. These jobs make sense because they solve problems in our complex society, but we could do without many of them when we live simpler lives.
Marx believed he was scientific and rational. He devised a theory of history using Hegel’s dialectic, arguing that power structures in society reflect economic conditions. To Marx, it was not new ideas challenging the status quo but economic conditions driving change in history. He would say that the status quo of serfdom in Europe ended because towns challenged it by providing alternative jobs for serfs. Lords had to compete with them for their labour. And so, employer-employee relationships replaced serfdom, which became the new status quo. Marx also believed nationalism was a temporary phase, as economic conditions imposed it on us. Industrialisation required larger markets, thus societies rather than communities. Nationalism allowed the elites to divide and rule the working class. And because capitalism would eventually bankrupt itself, Marx predicted, as if it was a logical certainty, communism would replace employer-employee relationships, and everyone would become free and equal. In reality, people aren’t free or equal under communism, and a new elite of party bureaucrats replaced the capitalists.
Marx’s plan for the future included violently overturning the existing capitalist order in revolutions like the French Revolution and Napoleonic wars. Karl Marx became the prophet of the most successful cult in recent history. Despite the failure of communism, the capitalism-socialism debate continues because Marx raised pressing concerns that are still valid today:
Instead of saying capitalists steal value from workers, you can argue we work to make the rich richer. Despite stellar economic growth in the United States, many workers still can hardly get by. And that is not because they are all lazy or stupid.
Instead of saying the system alienates us from what we produce, you can argue we are part of a system over which we have no control. We can’t democratically decide on issues like implementing artificial intelligence.
Instead of saying capitalism causes misery, we can argue it improved billions of lives, but it probably ends in a total disaster. We may know for sure once the ecological or technological apocalypse materialises.
Instead of saying we will enter the communist paradise as a historical necessity, we may argue the script is that we are about to enter God’s Paradise, which could be a Hegelian synthesis of Marx’s challenge of the existing capitalist order.
The moral void
European moral idealism and American moral relativism have consequences you might not think of. German philosophers from the Frankfurt School, knowing our religion, if we have one, depends on our birthplace, that Jews invented the Abrahamic God and that much of the Bible is fiction, sought more absolute foundations of morality, such as equality or preventing harm to other people. They embrace LGBT rights like marriage, as there is no objective moral reason to deny them. Even if you think gay marriage is unnatural because a gay couple can’t produce offspring, there still is no objective moral reason to deny them these rights, no matter what the Bible says. Idealism also drove Germans to endanger their energy security by closing nuclear plants and betting on solar and wind.
American moral relativism drives conservative Christians to impose their views on others, as they don’t ask hard questions, ignore evidence contradicting the Bible, and think they can do as they please rather than act as a rational, morally upright person. Critical theory, thus cultural Marxism or Woke, comes from German philosophers daring to ask hard questions to seek the absolute foundation of morality. Critical theorists also indulge in speculation. Many of their theories lack solid evidence. Believing, like Marx, that their ideas are superior, the Woke use Hegelian dialectic to attack conservative Christianity and impose their views on society. That is why Woke people are so annoying. In recent years, that debate has escalated rather than synthesised. It has turned into a culture war.
Conservative Christians, most notably those in the United States, are a peculiar bunch. Humans are the most destructive species that ever roamed the Earth, and there are far too many of them, so it is evil to ban abortions. If there is a moral objective measure for preserving a life, it is its degree of sentience. A human newborn can only suck milk, and no one remembers being born, while cows, horses and pigs stand upright and walk after birth. A cow or a pig is more conscious than a ten-week-old fetus, yet we slaughter them by the millions after treating them horribly in conditions as miserable as concentration camps. It is a Holocaust. You can better be dead long before you are born. Christians corrupted Jesus’ teachings to take away women’s rights and claim trans people are evil after giving God a sex change. They harp about an alleged conspiracy of Satanic child molesters in government while electing a sex offender who regularly attended Epsteins parties.
Liberals might think many Christian conservatives are crazy to believe raving nutcases like Qanon, but we cooperate using shared imaginations, so it is perfectly normal human behaviour. How do you think religions survive despite the facts disproving them? And the only measure of success is success. Truth hardly ever is the reason why beliefs prevail. Even scientists have invisible imaginary friends like gravity. Believing that gravity exists makes you succeed in engineering. The foundations of liberalism and socialism are also incorrect, like human nature being inherently good. We like to think we are good, so these ideologies have been successful. And success breeds stupidity. If you fail, you might ask the correct questions, but when you are successful, you have no reason to. And so, rational government is an uphill battle against our inner nature, and real change is only possible after complete failure. Christianity is much closer to the truth. We are morally depraved, incapable of fixing ourselves, unworthy of God’s grace, and in need of a saviour.
Liberals are wrong and foolish because the evolution theory they believe in says the struggle for existence is brutal. They should have reasoned, like Friedrich Nietzsche, that God is dead and that the strong should rule the weak. Somehow, they couldn’t rid themselves of their Christian slave morality. The former right-wing Dutch politician Pim Fortuyn called them the Leftist Church. Without God, we get lost in the moral void, and it is pointless to try to achieve Paradise on Earth. After several wars to impose liberal Western values on countries like Vietnam, Iraq and Afghanistan, we can say good intentions usually make things worse rather than better. Why send money and weapons to a corrupt country like Ukraine to let it fight against an even more corrupt country like Russia? And why do liberals support the corrupt establishment of big banks, big pharma, the mainstream media and the military-industrial complex they objected against in the past? But many Christian conservatives don’t even make a small effort to become slightly less evil, like skipping meat one day per week. Appeals to moral reason infuriate them. And now the crazies organise a witch hunt against science and the rule of law. The road to hell may be paved with good intentions, but being intentionally evil is a shortcut.
Suppose Jesus was human like us with the knowledge of his time, which non-religious biblical scholars would agree on, and someone else finds himself in his position today. What could he do? He could wait for God to tell him, but if God doesn’t, he might think, like Marx, that he has to figure it out himself. As far as we can infer from the scriptures, Jesus acted independently but according to God’s will. He was like an actor following a script. His successor has the benefit of today’s knowledge, including the simulation hypothesis and the sobering outcome of the communist experiment. He might grasp the greater picture. The Marxist challenge of the existing order could have been God’s way of showing us the choices we face, our alternatives, their consequences, and what the synthesis might look like. That makes Hegel one of the greatest prophets of modern history.
Most people in the West now believe there is no alternative to capitalism, even though we may need some socialism or government to contain its ills. That could make our economy less competitive, which could cause us to lose the competition. So, in the end, there is no alternative, not because we can’t live happily in another economic system but because other systems can’t compete. Other ethical systems can’t compete with the ethics of the merchant either, which says you can do as you please and take what you can. It is much easier to break a collective effort like combating climate change than to build it. Only one major country needs to step out. In competition, those with the most depraved ethics win. The Dutch would say the merchant always wins from the vicar.
Only there needs to be an alternative. The profit motive is the severest threat humanity has ever faced. It pushes for permanent innovation, a process of creative destruction over which we have no control. We have started a fire in our midst that grows until it consumes us. Our greed is its fuel, and we can’t stop it. We may soon destroy ourselves creatively. We can’t kill the beast, the system, and the beast within ourselves, our greed. Communism is oppressive, kills creativity, and promotes stagnation by eliminating the profit motive. That sounds awesome because that is precisely what we need.
It looks like a cure. If your disease is cancer, and the cure is chemotherapy, you take the poison, and you accept becoming sick and losing your hair. Otherwise, you die. You could visit a witch doctor or a quack, and you also die. Many fall for snake oil salespeople because science doesn’t always have the correct answers. But despite their limitations, the sciences and the evidence from history are our best knowledge. If capitalism and communism are the only options, a sensible person chooses communism. Communism has brought a lot of misery, and we haven’t seen the end of civilisation yet, so we can still believe it will work out fine as long as markets remain operational and bring together supply and demand. That is perhaps the biggest lie ever.
If you don’t get by now why the ethic of the merchant is the greatest evil of all times, you are a moron, and there is no point in trying to convince you. By electing Donald Trump, Americans demonstrated their willingness to let Satan run their country. If following Satan seems the lesser evil, then something must be profoundly wrong. The corrupt old order of the military-industrial complex, big pharma, big banks and other interest groups seeking to profit from the state has ended the legitimacy of the US government. The other candidate and the billionaires backing her believed they could buy the presidency by spending billions on her political campaign. And for the record, Donald Trump isn’t Satan, not even the Antichrist, but just a huckster with the most depraved moral values and the ultimate embodiment of the ethics of the merchant, the ultimate evil.
In a world without God, there is no justice. And we can’t halt our descent into the moral abyss. And we have the ultimate proof. Once the technology is there, some of us will become like gods, live for thousands of years, make virtual worlds in which they force everyone to comply with their wishes, and murder people for merely standing in the way or for any other arbitrary reason. It is why we exist. God is an individual from an advanced humanoid civilisation who wants to have some fun. You are nothing, even less than a worm, as a genuine worm decides for itself how to grovel and when. Let that be a warning. And you own nothing. Believing you are entitled to something is thinking you can steal from God. With these words, I conclude my sermon. Now, let us pray.
In a world without God, there is no justice. And we can’t halt our descent into the moral abyss. And we have the ultimate proof. Once the technology is there, some of us will become like gods, live for thousands of years, make virtual worlds in which they force everyone to comply with their wishes, and murder people for merely standing in the way or for any other arbitrary reason. It is why we exist. God is an individual from an advanced humanoid civilisation who wants to have some fun. You are nothing, even less than a worm, as a genuine worm decides for itself how to grovel and when. Let that be a warning. And you own nothing. Believing you are entitled to something is thinking you can steal from God. With these words, I conclude my sermon. Now, let us pray.
Third ways
There have been several attempts to come to a synthesis of capitalism and socialism, which is often called the Third Way. The challenge of Marxism, the antithesis of capitalism, fuelled a lively debate about economic systems in the second half of the 19th and the first half of the 20th century. Silvio Gesell, who wrote Barataria, was one of the central figures in this debate, as was Henry George in the United States. Since the Cold War, the debate has narrowed down into a struggle of communism versus capitalism or individual freedom versus enforced collectivism. With the collapse of the Soviet Union, the discussion in the West ended with the conclusion that Marx may have had valid concerns, but we can’t fix them, and his solutions are counter-productive. The Chinese government, however, kept innovating and remained determined to make socialism work.
You can’t compromise with ultimate evil. That reasoning made the Soviets replace markets with state planning. And it made their repression so ruthless and bloody. Millions died of starvation, and millions more ended up in concentration camps. In the end, it is better to be a slave in Paradise than a free man in hell, except when hell looks like Paradise and Paradise is like hell. But profit and greed corrupt everything. Self-regulation under neoliberalism, thus allowing corporations to set and enforce their rules, demonstrated why corporations need a tight leash and operate for public benefit rather than private profit. So, the question remains whether a third way is possible at all. Or can we only make socialism work better and more agreeable?
Such a change requires the support of a large majority of the people. The Russians lost faith in the Soviet experiment as central planning produced poor outcomes. Still, the Chinese economy has baffled the proponents of capitalism. The Chinese allow the profit motive to exist as long as businesses conform to the Chinese Communist Party’s objectives. State ownership of enterprises further ensures that. Similarly, you can allow profit motive within society’s goals and place large corporations in sovereign wealth funds. To clarify the discussion, as there is confusion in terminology, it may be best to provide you with definitions of economic systems. Their differences centre around ownership of resources, capital, and labour.
resources
capital
labour
communism
state
state
state
socialism
state
public
private
third way / mixed
varies
varies
private
capitalism
varies
private
private
Under communism, the state owns everything, including your labour. You can’t even decide on the job you take. Under socialism, you can choose your occupation, but capital is public, thus owned by workers or the state, and the state owns the natural resources. In mixed economies, ownership of natural resources and capital varies. You may own the ground, but if oil is underneath, it may belong to the state. There may be state-operated corporations like railways alongside private corporations. And you are free to choose your occupation. Under capitalism, everything is private. There may be public services, but there are no public corporations. And few countries give their resources away for free, and governments nearly always want a piece of the action. Not even the United States is fully capitalist. Libertarians think that is the problem, so if we gut the government and make everything private, the invisible hand, thus greed and competition, will fix things as if being foolish doesn’t help, being more foolish might.
The same model still gives different outcomes under different circumstances. A crucial factor is the culture or spirit of the nation. There were substantial differences in living standards in the Soviet Block. Czechoslovakia did relatively well. Yugoslavia suffered from high unemployment, but the Slovenian unemployment rate never exceeded 5%, while Macedonia and Kosovo had rates of over 20%. These were extreme differences within one country and the same system. China has developed its economic model, a state-run socialist market economy, which now outcompetes the West. Its success depends on the Chinese people’s hard work and ingenuity, China’s long-standing tradition of a modern bureaucratic government, and Confucianist ethics, making the government work in the public interest. The Chinese had a modern bureaucratic government on rational principles 2,000 years before Europe. And so, this economy wouldn’t have emerged elsewhere.
Making idealism work still requires pragmatism because good intentions can give horrible outcomes. Americans are pragmatic and gung-ho, thus eager to get things done. So once they realise God’s vision for the future goes against some core principles of American society, like individual liberty and capitalism, they might reverse course and take up the challenge with zeal. Europeans are not like that. They have a wait-and-see attitude at best. The Germans will try to engineer an even better system. The Dutch will deliberate the proper procedure and hire consultants to write reports. The Italians will bumble. And the French will go on strike. Many Americans are also more religious and more willing to embark upon an outlandish plan if they believe it is the way forward.
Free Economy
There are other options than communism or socialism. They can be safe as long as the ethic of the merchant doesn’t reassert itself. As soon as you allow it, the moral depravity spreads like cancer and will destroy society, like in the tale about the imaginary island Barataria. Only communism and brute repression are 100% safe. Religion can inspire us to stay public-spirited and be content with what we have. So if God exists and sends a messiah, we could play it less safely because whatever happens is God’s will.
For a while, Barataria had an economy with free enterprise and private ownership of homes but without capitalists, bankers, and merchants. Barataria had no income taxes, but the lands were public, and farmers rented them, which paid for the small government. Because the Baratarians were public-spirited and helped each other, and most notably, because there were no merchants, they didn’t need much government. That might be as close to Paradise as we can get. But it will only work if we live simple lives.
Silvio Gesell believed in economic self-interest as a natural and healthy motive for satisfying our needs by being productive. He aimed for free and fair competition with equal chances for all. He proposed the end of legal and inherited privileges, so the most talented and productive rather than the most privileged would have the highest incomes without distortion by interest and rent charges.
After experiencing an economic depression in Argentina in the 1890s, Gesell found that economic returns sometimes didn’t meet investors’ minimum requirements. It caused investors to put their cash in a vault like Scrooge McDuck, emptying the money flows and collapsing the economy. A holding fee can keep the currency in circulation, as low returns are more attractive than paying that fee, which amounts to a negative interest rate. Gesell’s economic system was well-known in Germany as the free economy.
European Union
European economies are mixtures of capitalism and socialism. Many Brits found the union too socialist and bureaucratic, so they left. These sentiments relate to the age-old differences in law and morality. The European Union tries to tame the beast of capitalism with regulations, which may fail if the competition continues and intensifies, but many Europeans now live a good life. Well-being is hard to measure, but European societies are among the world’s most agreeable if you believe the rankings. And if every country kills innovation with legislation like the bureaucrats of the European Union, we wouldn’t need to fear artificial intelligence, genetic engineering or any other new technologies.
Europe has a collectivist tradition with Christian and socialist roots with worker and consumer protection laws. Europeans live longer than Americans, partly because the European Union has banned unhealthy foods available in the United States. At the same time, governments run the healthcare systems, so most healthcare is for the public interest rather than private profit. In Europe, it is harder for corporations to pass business-friendly legislation by bribing politicians. That is also because Europeans believe in the common good more than Americans do. Like the invisible hand, our imaginary invisible friend, the common good, has a few magical powers.
As in the United States, immigrants do much of the hard manual labour in Western Europe, often for lower wages, without these protections and crammed in poor housing. There is a profit in dodging regulations for shady merchants. Western Europeans may be lazy because they work 36 hours per week and have five weeks of holidays each year. Still, their lives are the closest to what life should be in Paradise, except that European energy and resource consumption require a drastic 75% cut to make their economies sustainable. But if we dismantle the wasteful bullshit economy and set the right priorities, we could work fewer hours than Europeans do today and still have an agreeable life.
Nazi Germany
The Nazis produced an economic miracle during the Great Depression. The success came from deficit spending for rearmament and limiting trade with the outside world, so the expenditures boosted the German economy while not causing trade deficits. It is similar to Keynesian economics. It worked like the miracle of Wörgl, except that the German government accrued a large debt while the council of Wörgl did not.
Factories were idle, and many people were unemployed, so the scheme didn’t result in high inflation. Price, wage and rent controls also helped keep inflation in check, but it hurt small farmers. The Nazi economy was a mixture of state planning and capitalism. Germany was rearming and preparing for war. It was a war economy. Countries organising for war take similar measures to mobilise their industries for warfare.
Yugoslavia
Yugoslavia was socialist rather than communist. It combined state planning with markets and decentralised decision-making or worker self-management. The Yugoslav economy fared much better than that of fully communist countries. The country was more open, and living standards were higher. However, it began to suffer from mass unemployment, and the economy collapsed in the 1980s as it couldn’t compete with capitalist economies. Generous welfare spending further contributed to Yugoslavia’s economic demise.
The oil crisis of the 1970s magnified the economic problems, and foreign debt soared. The country implemented austerity measures like rationing fuel usage and limiting the imports of foreign-made consumption goods. Unlike the Soviet Union, Yugoslavia had been able to feed its people until then. From the 1970s onwards, the country became a net importer of farm products. Yugoslavs were free to travel to the West. Emigration helped the economy by reducing unemployment and bringing in foreign currencies as emigrants returned money home to support their families.
Its openness to foreign competition contributed to the collapse of the Yugoslav economy. Yugoslav consumer products were often inferior to Western products. To compete, businesses laid off workers to become more efficient. The Yugoslav economic system might have worked if all countries had operated their economies like Yugoslavia. Yugoslav products would have sufficed if there were no better alternatives. Mass unemployment might not have materialised in that case, and Yugoslavia could have managed, perhaps, with less generous welfare. That is a few maybes, but it is plausible.
China
The stories of Airbus and Boeing demonstrate that state ownership of large businesses can work better than private ownership. Boeing was the industry leader but ruined itself by focusing on shareholder profits. Reducing quality brought short-term cost savings, boosted the stock price, and generated management bonuses. That seemed all fine until the Boeing aeroplanes began dropping from the sky. The largest holders of Airbus stock are European states, allowing the corporation to focus on long-term goals. The state-owned aeroplane industry is one of the few areas where Europe is still at the top.
Traditional communism gave subpar results, but the Chinese managed to get it right. The Chinese socialist market economy (SME) has private, public and state-owned enterprises (SOEs). China is not capitalist, as the Chinese Communist Party (CCP) retains control over the country’s direction. It is a command state-market economy like Nazi Germany was. Unlike Nazi Germany, which aimed for maximum self-reliance and ran on military spending, the Chinese economy integrated into the world economy and ran on exports. It resembles other Asian Tigers, such as Japan and South Korea.
The CCP’s vision behind starting market reforms is that China was underdeveloped and that a fully developed socialist planned economy would emerge once the market economy fulfilled its historical role, as Marx prophesied. Thus, the CCP believes it has incorporated a market economy into the Chinese socialist system. Others call it state capitalism, as the SOEs that comprise a large portion of the economy operate like private-sector firms and retain their profits without returning them to the government.
China eliminated extreme poverty, which declined from over 90% in 1980 to less than 1% today. It also became the world’s leading manufacturing economy and the world’s leading producer of unnecessary items that end up in our landfills. Despite its leadership in renewable energy and electric cars, China has also become the world’s leader in pollution and carbon dioxide emissions. However, China’s status as an exporter distorts the picture. By importing from China, other economies appear to be less pollutant.
The Chinese economic model forces corporations to align with society’s goals and make profit secondary. At the same time, it achieves acceptable living standards. It is modern and outcompetes the US and European models. If our society’s goals change from growth to sustainability and happiness, the Chinese economic model can help align corporations with public policies. China is a dictatorship, but its economic model will also work in democracies. Airbus provides the evidence.
State control and ownership of businesses, like China’s, also seem to be the only viable way to pursue political goals such as protecting nature and reducing poverty. Business objectives like profit should be secondary to these political goals. With state ownership, you can ban products or subsidise others without harming or favouring private entrepreneurs, thereby removing the incentive for corruption. China is on the right track as political objectives precede profit. And so we have evidence. China’s economy produced spectacular results, so we can have confidence that it will bring us acceptable living standards while allowing us to live in harmony with nature and end poverty.
Imagine there is a lake in a distant forest. On its surface grows a plant. Its leaves darken the water, so all life below it dies. The plant was at first tiny, and it has been there for 1,000 days. But it doubles in size every day. So, here is a question. If the plant blankets half the lake, how many days are left to save the life there? The correct answer is one day. Behold the power of exponential growth. If the plant depends on life in the lake, it will also die.
Behold the power of exponential growth. The plant doubles in size each day. And so, it covers the entire lake tomorrow. It doesn’t matter how long it has been there already. It stops growing once there is no more room. As soon as the lake is fully covered, life in the lake ends. And if the plant depends on that life, it will also die.
The lake represents the Earth, the plant humanity, and the leaves are people like you and me. The graph above shows the human population numbers over the last 12,000 years. These numbers had been very low for a long time. In 1804, there were one billion people. Since then, the human population has gone berserk. There were two billion humans in 1927, three billion in 1960, four billion in 1974, five billion in 1987, six billion in 1999, seven billion in 2011, and eight billion in 2022.
The experts expect the number to decline in the future. Only, how will that decline occur? That is anyone’s guess. The signs are ominous. Currently, humans use nearly twice as many resources as the Earth can deliver.1 We can do that for a short while, but it will end badly. The lifestyles of the rich are unsustainable, but so are the number of children many people have. Rich people with many children are the worst. Continuing their current lifestyles will lead to an apocalyptic event, and it will happen sooner rather than later.
In 1972, a group of scientists known as the Club of Rome ran a computer programme predicting an apocalypse when natural resources would run out shortly after 2000 AD.2 Their computer printed out a scary diagram detailing how, demonstrating we should be very, very afraid. So far, the reckless have had numerous opportunities to point out how foolish the cautious have been, and the ultimate laughing stock is the man with the sign saying, ‘The end is near.’
Share of the world population living in poverty. CC-BY. Max Roser. OurWorldInData.org.
According to the World Bank, extreme poverty dropped from 76% of the world’s population in 1820 to 9% in 2018. Their definition of extreme poverty is dubious, but it is beyond doubt that the percentage of destitute people has declined. The Club of Rome lacked sufficient and precise data, and unanticipated developments affected the outcome. New technologies enable the extraction of more resources and the more efficient use of existing ones. Some oil reserves have become accessible with new or improved extraction methods. And if you use the oil to produce a solar panel, you get several times as much energy during the solar panel’s lifespan as from burning the oil itself.
Essential resources, such as oil and freshwater, are becoming increasingly scarce or may soon be in short supply.3 With current consumption levels, proven oil reserves may last until the 2060s. Total oil reserves are more than twice as large, but pumping the remaining oil could be costly,4 while climate change could prevent us from burning it. PFAS, microplastics, and other pollutants are everywhere and accumulating in our bodies. Brain samples collected in early 2024 measured, on average, about 0.5% plastic.5
Life has never been better for most people. Are we on the verge of the apocalypse? The problem is growth in a limited area. When there is growth, the increases add to the existing total. The plant can’t grow beyond the pond’s size, so once it reaches its limits, for every leaf that grows, another must die. The Earth is stressed. We disrupt the balance in nature, but we can’t predict what will happen and when. We can’t overuse the Earth for long. The day before growth ends could be our best.
Scientists have identified nine processes that regulate the Earth’s stability and resilience. These are climate, biosphere, land use, freshwater, nutrients, ozone, aerosols, and ocean acidity. These processes have boundaries that are unsafe to cross. By exceeding these boundaries, we risk triggering irreversible environmental changes that could lead to catastrophic consequences for both human civilisation and natural ecosystems, these scientists argue. As of 2024, we have breached six of these nine planetary boundaries.
Humankind has gone batshit crazy. We delude ourselves into thinking that economic growth will solve our problems. We are like cancer cells telling each other that our aggressive growth strategy has paid off handsomely so far, so that more cancer will make things better. That is, of course, until the host dies.
Barring an apocalyptic event, such as the planet reaching a tipping point due to climate change, World War III, or a technology like artificial intelligence or genetic engineering going wrong and out of control, doom will likely be piecemeal, occur over decades, and not affect everyone equally. Many might survive and enhance themselves using technology, turning themselves into post-humans. If we compare humanity’s lifespan with 1,000 days, we live on the proverbial last day.
We can step out. The Old Order Amish, also known as Pennsylvania Dutch, live modestly and choose which technologies they use. More and better stuff doesn’t make us happier once we have enough, feel secure, and live in a supportive community. Surveys suggest the Old Order Amish are happier than the average citizen. They show us that we can live simply and don’t need new technologies and products. We don’t have to go that extreme. We can choose the technologies we use and make different choices. And our lifestyles need not be that austere as long as we don’t stress the Earth.
Latest revision: 2 July 2025
Featured image: Amish family, Lyndenville, New York. Public domain.
1. overshoot.footprintnetwork.org 2. The Limits to Growth. Donella H. Meadows, Dennis L. Meadows, Jørgen Randers, William W. Behrens III (1972). Potomac Associates – Universe Books. 3. Theworldcounts.com. Depletion of Natural Resources. 4. Plummeting ‘Energy Return on Investment’ of Oil and the Impact on Global Energy Landscape. Siddharth Misra (2023). Journal of Petroleum Technology. 5. Microplastics are infiltrating brain tissue, studies show: ‘There’s nowhere left untouched’. The Guardian (2024).
In the current financial system, central banks manage the money supply via interest rates. When the central bank lowers interest rates, borrowing money becomes cheaper, making it more attractive to go into debt for consumption or investment. As a result, the money supply increases at a faster pace, which then boosts consumption and investment. When the central bank raises interest rates, the opposite happens, and the money supply increases at a slower pace, or even decreases.
Central banks boost the money supply because usury promotes a money shortage. Most money is a debt, on which debtors pay interest. Debtors must return more than they borrowed. That money may not be available if those with surpluses don’t spend their balances, requiring more borrowing to prevent a disruption in the money flows. Classical economics questions this idea. If the money flows become interrupted, sellers lower their prices, and those with money will spend more to pick up these bargains.
Transmission via the bond markets
Based on estimates of future short-term central bank interest rates, financial institutions such as banks borrow short-term money from the central bank at the interest rate set by the central bank to buy longer-term government bonds. If banks expect the short-term interest rate to remain below 2% in the coming year and 1-year government bonds yield 3%, they may borrow short-term money from the central bank to buy these bonds, repay them when they mature, and pocket the 1% difference.
The trade creates demand for these bonds, causing their price to rise and their yield to drop. Perhaps traders stop buying the bond when the interest rate drops to 2.5% because there is always a risk that the central bank will raise interest rates during that year. If 10-year bonds yield 4%, another trader might sell 1-year bonds and invest the proceeds in 10-year bonds, thereby lowering their yield as well. Usually, this happens in future markets, so traders often don’t own these bonds.
Altering markets
Central bank critics argue that they distort markets by eliminating the market mechanism. Central bank interventions have a profound impact on the operation of financial markets. As a result, there is more lending than would have occurred otherwise. Central banks create liquidity in financial markets by providing short-term funds that banks use to buy bonds with different maturities. It allows banks to buy and sell these government bonds, enabling them to match their lending and borrowing needs at any time.
So, how does that work? Apart from lending to customers, banks invest in government bonds, which they can sell at any time, as they can trade government bonds in financial markets. If a corporation requests a one-million-euro loan that matures in five years, the bank might sell a five-year government bond. In that case, the bank eliminates the interest risk, as it knows the amount of interest it would have received by keeping the bond and the interest it will receive from the loan.
In the past, banks had to be careful because they couldn’t borrow easily from the central bank, nor did they invest in or trade government bonds. So, if you applied for a mortgage, the bank looked for matching term deposits. Perhaps you could obtain a 5-year mortgage if there were sufficient 5-year deposits available. If, after five years, the bank lacked adequate deposits, you would not be able to renew your mortgage and might have to sell your home. And so, you would think twice before getting a mortgage.
Economists call these markets inefficient. You couldn’t get a 30-year mortgage. The operation of central banks has altered financial markets, making them more efficient. That can be beneficial for the economy. The Industrial Revolution started in England. England had the most efficient financial markets. The central bank needs the trust of financial markets. Financial markets can lose confidence, which can lead to a decline in the currency’s value. A central bank can try to restore trust by raising interest rates.
Subsidising the financial sector
Central banks reduce the risk of bank failures. When borrowers repay their debts, banks are solvent. However, they may find themselves short of cash in their vaults when depositors withdraw their deposits. Central banks create this money if needed, so banks need less cash in their vaults. Central banks can also rescue banks in trouble, thereby reducing the risk to the broader economy. After all, a financial crisis can lead to an economic crisis, such as the Great Depression. That nearly happened in 2008.
There are public benefits to stabilising the financial system, but these benefits exist due to interest on money and debts, thus usury. Usury creates a shortage of funds that requires management. Central banks subsidise the financial sector in the following ways:
Central banks mitigate the risk of systemic failure, enabling financial institutions to take on more risk and lend more. Banks may make risky loans to profit from higher interest rates, assuming the central bank will bail them out if things go wrong.
Central banks signal their intentions to financial markets. When the central bank intends to change interest rates, it provides advance notice so financial institutions aren’t caught off guard and can adjust their bond portfolios accordingly.
The supply and demand of funds in the financial markets ultimately determine interest rates. Still, these markets would operate differently without central banks, with significantly less borrowing and lending. Central banks make the financial system function more smoothly and reduce the risk of systemic failure. As a result, interest rates are lower than they would have been otherwise.
Central banks are powerful, undemocratic, technocratic institutions. Since the 1970s, they have become independent from governments. Before that time, governments used their central banks to finance their deficits through money printing, leading to inflation and a loss of trust in currencies. Making the central bank independent from politicians and giving it a mandate to keep inflation low was a move to instil confidence in fiat currencies.
The argument in favour of central bank independence is that a government must be trustworthy to its creditors. Creditors, like most of us, don’t trust politicians because they spend other people’s money. Since then, governments have borrowed in financial markets and paid interest on their debts. Central banks still buy government debt and return the interest to the government, which is the same as printing money outright.
Central banks can impede the functioning of financial markets by mispricing risk. Central banks can save banks in trouble by printing money. Without central banks, financial institutions would have to be more careful. Bank failures would occur more often, and banks would pay more interest to depositors to compensate for that risk. That negatively impacts economic growth and leads to crises. That is why central banks exist.
Signalling intentions
Central banks signal their intentions in advance to prevent traders from being caught off guard, thereby avoiding chaos in financial markets. That issue became at the centre of a drama that played out in the UK bond markets in September 2022. Interest rates spiked after the government announced a massive spending package. It suddenly became clear that the Bank of England might have to raise interest rates much further than previously thought to contain inflation. The spending plan caught financial institutions off guard. The Bank of England had to intervene in the bond market to bring down interest rates.
Financial institutions borrow short-term money from the central bank and invest it in the bond market. To borrow this money, financial institutions pledge these bonds as collateral, just like your house is the collateral for your mortgage. If interest rates rise, the value of these bonds decreases due to discounting the interest. A UK bond trader noted, ‘If there was no intervention today, yields on UK government bonds could have gone up to 7-8 per cent from 4.5 this morning, and in that situation, around 90 per cent of UK pension funds would have run out of collateral. They would have been wiped out.’
An institution might bring in £1,000,000 in equity to borrow £9,000,000 from the Bank of England at an interest rate of 1.75% and invest £10,000,000 in ten-year bonds at 3% interest, pledging the bonds as collateral for the loan. The institution could earn £142,500 per year on a £1,000,000 investment, yielding a handsome 14.25% return if market conditions remain stable. But it is a dangerous bet due to discounting. The price of a bond is its net present value. If the yield on ten-year bonds were suddenly to rise from 3 to 4%, the institution would incur a loss of £811,090, which is the difference in net present value of the bond. That would nearly wipe out the entire equity. And that happened that day.
In the past, pension funds invested in bonds for the long term, but bond yields were low. Pension funds have fixed obligations, such as paying a retiree €1,000 per month until they die. If interest rates are low, you have to pay more in pension premiums to arrive at that amount. To pump up their revenues, pension funds invested in stocks and speculated in the bond market using leverage. It seemed like easy money because central banks signal their intentions in advance. This time, however, the government took the traders by surprise, so the central bank had to rescue them.
Permanent liquidity
When there is liquidity in financial markets, you can buy or sell financial instruments like stocks and bonds at any time. In other words, you can sell them in the financial markets for currencies like the euro or the US dollar. During a financial crisis, liquidity becomes scarce, and it becomes harder to sell financial instruments. Their price collapses because there are many sellers and few buyers. Only cash and government bonds perform well in those times. Financial pundits refer to it as a flight into safety. To prevent a crisis, central banks inject liquidity into the financial system. In other words, they lower interest rates, making it attractive for investors to borrow from the central bank.
In this way, the central bank prints new money. It can end the crisis because investors can use this new cash to buy stocks. Since the 1987 stock market crash, central banks have increasingly resorted to adding liquidity or printing money to quell financial crises. If currency is plentiful, short-term interest rates drop, and stocks and bonds become more attractive investments, so there will be buyers. Once interest rates are near zero, the central bank can’t lower them; market participants may accumulate central bank currency rather than invest in stocks because they find an interest rate of zero more attractive.
In such a situation, investors will not invest but instead hold onto their cash. With interest rates near zero, traditional methods for addressing financial crises have become ineffective. That is why central banks adopted extraordinary measures, such as quantitative easing (QE), in the aftermath of the 2008 financial crisis and the 2012 euro crisis. Investors say, ‘Cash is king.’ It is the ultimate means of payment. If your bank goes bankrupt, your deposit might be gone. But you can still pay with banknotes, which are the central bank’s currency.
During a financial crisis, people worry about whether their stocks will retain value in the future, as the economy may collapse. That is why investors also prefer central bank currency. But that is only due to the interest rate on cash. If there had been a 12% annual holding fee on central bank currency and cash, investors would seek alternatives to cash and central bank currency, and the market would always maintain liquidity, so that the central bank doesn’t have to take action. In that case, we may not need a central bank, and central bank currency becomes a unit of account or administrative currency.
In times of crisis, investors often rush to buy safe financial instruments, such as government bonds. With Natural Money, administrative currency is unattractive because of the holding fee. Holding on to the currency will cost you 12% per year, which means that a euro will be worth 88 cents after a year. And so, interest rates on government debt may be as low as needed, such as -5%, to make other investments more attractive and bring liquidity back into the markets. And so, there will always be liquidity.
No one wants to own currency that costs 12% per year to hold. It will mark the end of the administrative currency’s role as a reserve. Currently, banks are required to keep the central bank’s currency to meet their reserve requirements. That is unnecessary. Equity requirements are more helpful than currency reserve requirements. Government debt can also serve as a suitable reserve. Currently, banknotes are also the central bank’s currency. A 12% holding fee would make cash unattractive to use. Cash should have a backing of short-term government debt with a more favourable interest rate.
Latest revision: 13 November 2025
Featured image: Ara Economicus. Beverly Lussier (2004). Wikimedia Commons. Public Domain.
The Plan For The Future 