Home' Trinidad and Tobago Guardian : July 6th 2017 Contents BG14 | FINANCE
BUSINESS GUARDIAN guardian.co.tt JULY 6 • 2017
The 1% and the
There has been much de-
bate about the merits, or
lack thereof, related to the
comments made by mem-
bers of the Syrian/Lebanese
The first point to appre-
ciate is that we should nev-
er paint all with a broad brush. It is dangerous
and divisive. Beyond that, there is an important
economic and finance lesson to be had from the
Rather than dwell on the specifics of the com-
ments and counter arguments, I want to focus
on a verbatim extract of a book written by John
Maynard Keynes in 1919 titled, Economic Con-
sequences of the Peace.
Keynes was one of the best economic thinkers
of his time and his work is relevant up to today. I
am certain that many times since 2008, in dis-
cussions around the financial crisis, you would
have heard the term "Keynesian economics."
The book was written against the backdrop of
the peace treaty between the Allied forces and
Germany that marked the end of World War I.
Keynes's basic argument was that the absence
of a fair and just treaty would soon lead to fur-
ther social chaos and even another war. History
has proven his argument to be correct and we
would do well to understand his rationale given
our current state.
Keynes pointed out there were times when the
concentration of wealth could be beneficial to
the society. Yet, for that status quo to remain,
the wealthy has to be judicious in the use of their
wealth. The objective should be to create a bigger
pie for all and this is the only way that the masses
would find this acceptable.
The wealthy may have their wealth but it was
impertinent to seek to flaunt it given that it was
most likely achieved by the toil of the masses.
"The duty of saving became nine-tenths of vir-
tue and the growth of the cake the object of true
Problems in the social compact are likely to
erupt when the society moves from a culture of
savings to one of conspicuous consumption. The
trend will start with the wealthy and filter down
to various classes of society.
Once we get to a stage when circumstances
"disclosed the possibility of consumption to all
and the vanity of abstinence to many" your genie
is out the bottle.
Further, once the cake begins to get small-
er continuing to flaunt wealth will erode the
"buffers" and could, in extreme cases, lead to
There are elements of this on display in T&T
right here right now. Pretending it does not exist
does not solve the problem.
Paying to keep the peace by pandering to ele-
ments of the underworld---as has been alleged for
administrations past and present---is only placing
a band aid on a sore.
The issue is not with 5,000 members of one
community, far from it. I am sure members of
that community can point to the numerous way
they have contributed and given back to society.
The issue lies with how we mobilise capital and
create opportunities. It is only when the common
man can see the path through which they can
attain similar wealth by transparent and judi-
cious access to capital and have equity in process
and stability of outcomes, that our situation will
change. It is about growing the size of the cake.
Don't take my word for it. Keynes explained it
in 1919 better than I could ever do.
Read the excerpt from "Economic Consequences
of the Peace."
"Europe was so organised socially and
economically as to secure the maxi-
mum accumulation of capital. While
there was some continuous improvement in
the daily conditions of life of the mass of the
population, the society was so framed as to
throw a great part of the increased income
into the control of the class least likely to
consume it. The new rich of the 19th century
were not brought up to large expenditures,
and preferred the power which investment
gave them to the pleasures of immediate
In fact, it was precisely the inequality of
the distribution of wealth and of capital
improvements, which distinguished that
age from all others. Herein lay, in fact, the
main justification of the capitalist system.
If the rich had spent their new wealth on
their own enjoyments, the world would long
ago have found such a regime intolerable.
But like bees they saved and accumulat-
ed, not less to the advantage of the whole
community because they themselves held
narrower ends in prospect.
The immense accumulations of fixed cap-
ital which, to the great benefit of mankind,
were built up during the half century before
the war, could never have come about in a
society where wealth was divided equitably.
The railways of the world, which that age
built as a monument to posterity, were, not
less than the pyramids of Egypt, the work
of labour which was not free to consume in
immediate enjoyment the full equivalent
of its efforts.
Thus this remarkable system depended
for its growth on a double bluff or decep-
tion. On the one hand the labouring classes
accepted from ignorance or powerlessness,
or were compelled, persuaded, or cajoled
by custom, convention, authority, and the
well-established order of society into ac-
cepting, a situation in which they could call
their own very little of the cake that they
and nature and the capitalists were co-op-
erating to produce.
And, on the other hand, the capitalist
classes were allowed to call the best part
of the cake theirs and were theoretically
free to consume it, on the tacit underlying
condition that they consumed very little of
it in practice. The duty of "saving" became
nine-tenths of virtue and the growth of the
cake the object of true religion.
There grew round the non-consumption
of the cake all those instincts of puritanism
which in other ages has withdrawn itself
from the world and has neglected the arts
of production as well as those of enjoyment
And so the cake increased; but to what end
was not clearly contemplated. Individuals
would be exhorted not so much to abstain
as to defer, and to cultivate the pleasures of
security and anticipation. Saving as for old
age or for your children; but this was only
in theory; the virtue of the cake was that it
was never to be consumed, neither by you
nor by your children after you.
In writing thus I do not necessarily dis-
parage the practices of that generation.
In the unconscious recesses of it's being,
society knew what it was about. The cake
was really very small in proportion to the
appetites of consumption, and no one, if it
were shared all round, would be much better
off by the cutting of it. Society was working
not for the small pleasures of today but for
the future security and improvement of the
race, in fact, for "progress".
If only the cake were not cut but was al-
lowed to grow in the geometrical proportion
predicted by Malthus of population, but not
less true of compound interest, perhaps a
day might come when there would at last
be enough to go round, and when poster-
ity could enter into the enjoyment of our
In that day overwork, overcrowding, and
underfeeding would come to an end, and
men, secure of the comforts and necessi-
ties of the body, could proceed to the nobler
exercise of their faculties. One geometrical
ratio might cancel another, and the 19th
century was able to forget the fertility of
the species in a contemplation of the dizzy
virtues of compound interest.
There were two pitfalls in this prospect:
lest, population still out stripping accu-
mulation, our self-denials promote not
happiness but numbers; and lest the cake
be after all consumed, prematurely, in war,
the consumer of all such hopes.
But these thoughts lead too far from my
present purpose. I seek only to point out
that the principle of accumulation based
on inequality was a vital part of the pre-
war order of society and of progress as we
then understood it, and to emphasis that
this principle depended on unstable psy-
chological conditions, which it may be im-
possible to recreate. It was not natural for
a population, of whom so few enjoyed the
comforts of life, to accumulate so hugely.
The war has disclosed the possibility
of consumption to all and the vanity of
abstinence to many. Thus the bluff is dis-
covered; the labouring classes may be no
longer willing to forego so largely, and the
capitalist classes no longer confident of the
future, may seek to enjoy more fully their
liberties' of consumption so long as they
last, and thus precipitate the hour of their
Ian Narine is an investment adviser
registered with the SEC and can be
contacted via email--- firstname.lastname@example.org
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