Within a relatively short (147 pp. of text) book, David Kauders offers a well-grounded, in my view irrefutable, reason why on a fully global scale we are experiencing an economic and financial blizzard that could be compared, metaphorically, to a nuclear winter.
The key to his diagnosis is the concept of the `system limit'. In other words when the amount of global indebtedness exceeds the capacity of the debtors to repay. This is where we are now and Kauders makes it clear that when this has happened lenders will either not lend at all to what they fear may be profligate borrowers or only at a cost that ensures the borrowers' total burden increases. On the other hand those borrowers who recognise the mess they are in prioritize paying down the debt. In either case, economic activity withers and both borrowers and lenders, deprived of their raisons d'être, become poorer. He shows too how both lending more in the form of printing money, bail-out and writing-down debt results in more default and collapsed economic activity, while austerity in the form of deficit reduction through cuts and increased taxes has the same effect.
The reason that what has happened is `The Greatest Crash', putting 1929 into the shade, is because between the Wars the level and extent of public and private debt were far lower than now and also because sixty years of post-War socialism in the West has created a climate of expectation and entitlement that extends almost to the bottom of every society and imposes obligations on politicians that did not exist in the 1920s and 1930s.
Kauders makes cogent links between the expansion of delegated government in the UK and massive cost burdens on the productive part of the economy which are in a particularly perverse way stated to be activities that count as growth. He makes the simple and unarguable case that for healthy economic conditions credit must be invested to make a profit out of which the debt can be serviced and repaid allowing further credit to be generated. He shows how for many years credit has been used chiefly to fund consumption with debt service postponed to some rosy future. And his analysis of the consequences of PFI by which government got schools and hospitals `having it now and paying for it later', is both masterful and frightening.
In the final chapter, he puts forward some suggestions for easing or removing the system limits. These are generally based on the idea that civilisations and societies decline because they over-invest in complexity. They add levels of control and constraint that stifle evolutionary ideas and enterprise while imposing unproductive costs. Suggest to you the EU, anyone? He refers also to the need to reform professions and probably the first to be tackled are the lawyers who have greedily encouraged the `compensation culture' to which Kauders refers; who have battened and grown fat on the ramifications of business practices and regulation and happily dug their trotters into the trough of restraints on freedom of speech and opinion.
Not everything Kauders says makes sense. I found the suggestion that some form of Islamo-Communism might arise as a global movement especially hard to entertain. Nor do I think there was some `golden age' when the professions were not hidebound and self-preservative. Left to themselves the doctors would never have accepted the NHS sixty years ago. Kauders offers a description of `tax-farming' which is utterly different to the one I was taught - that tax-farming was the handing over of the right to collect (as well as the risks of non-collection) in return for a guaranteed sum less than the total possible collection.
As with many polemicists, Kauders' language and construction is frequently less than clear. The book could have done with some tighter editing and the layout is not appealing. Still, these are but niggles. It should be compulsory reading for intelligent citizens, politicians and academics.
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