The Poets’ Guide to Economics: a review

‘Justice’: a detail from The Allegory of Good and Bad Government by Ambrogio Lorenzetti

John Ramsden’s new book The Poets’ Guide to Economics could not have been more tailored to capture the eye of one who, like me, writes about finance but reads as much literature as time away from the markets will allow.

Ramsden considers an era when poets rather more easily assumed the role of public intellectuals than today, spanning the outset of the industrial revolution to the tumult of the inter-war years, believed by themselves and their often considerable readerships to have something to say on economic matters. Indeed they felt it their duty to do so. Unfettered capitalism was generating vast wealth for a few and immiseration for many, and William Blake’s ‘dark satanic mills’ were transforming an ancient landscape. As Ramsden suggests, poets, ‘who saw themselves as the guardians of civilisation, the heirs to Homer, Dante and Milton, could not ignore the challenge.’

All of his subjects, ranging from Daniel Defoe at the turn of the 18th century to Ezra Pound (Blake himself is perhaps something of an omission), passed judgement on the revolution’s guiding philosophy, the ‘Political economy’ most closely associated with David Ricardo and Adam Smith, which, in its crudest formulations, held that the market should be left to find its equilibrium without state intervention, and cast its human actors as self interested agents. It was an austere intellectual framework with a certain cold aesthetic grandeur that held sway until the early 20th century. John Maynard Keynes, who did more than any other to deconstruct it observed: ‘That it reached conclusions quite different from what the ordinary person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty.’

For Keynes, and Ramsden’s poets, commerce had to be subject to the welfare of the community. To put it in Samuel Taylor Coleridge’s terms, society should be governed not merely by ‘Mechanistic understanding’ but by ‘Reason’, the accumulated wisdom afforded by philosophy and the great religions. Ramsden shows that Coleridge and his other subjects submitted many imaginative and ingenious ideas and programmes that anticipated broad strands of contemporary economic thought. And much that was plain unworkable. He takes a few liberties in identifying his ‘poets’ — some are much better known for their prose than verse, including perhaps Thomas de Quincey and George Bernard Shaw. But he follows one of those profiled, Percy Bysshe Shelley, in the belief that the ‘distinction between poets and prose writers is a vulgar error.’

Ruskin: ‘a violent Tory of the old school’

One of Ramsden’s most formidable subjects, John Ruskin, is a good case in point, much better known for his essays than his poetry, but far too interesting to leave out. A child of evangelical parents, Ruskin’s moral fervour and fierce eloquence established him as the foremost social prophet of the Victorian era. Describing himself as both ‘a violent Tory of the old school’ and ‘a Communist, reddest of the red’, Ruskin cannot be classified according to today’s political categories. He was radical in the true sense, going back to the roots, finding his model for the ideal society in the Middle Ages. He had no doubts about the importance of what he wanted to say. The introduction to one collection of essays Munera Pulveris declaimed that the ‘following pages contain, I believe, the first accurate analysis of the laws of Political Economy which has been published in England.’ There, in Unto this Last, and in many other articles and lectures, he denounced orthodox political economy as a ‘mass-delusion’ based on profoundly flawed assumptions about what it is to be human.

For Ruskin, the human heart could not find fulfilment in the narrow pursuit of financial gain. According to his famous maxim, ‘THERE IS NO WEALTH BUT LIFE … That country is the richest which numbers the greatest number of noble and happy human beings’. Economic activity should not be oriented according by the profit motive, but by the imperative of human flourishing. The merchant’s business should be to oversee the production of quality goods at an affordable price by engaged and fairly compensated workers. Ruskin considered it ‘no more his function to get profit for himself out of that provision than it is a clergyman’s function to get his stipend.’ Finance should be regulated to ensure capital is channeled towards projects that serve the common good. As Ruskin quite wonderfully put it: ‘Three fourths of the demands existing in the world are romantic; founded on visions, idealisms, hopes and affections; and the regulation of the purse is, in its essence, regulation of the imagination and the heart.’ And he warned against the subjection of nature to the demands of industry, prophetic essays such as The Storm Cloud of the Nineteenth Century describing the rising tide of industrial pollution in apocalyptic terms.

To this extent Ruskin anticipated ‘stakeholder capitalism’, the insistence that the market is a means to the end of serving society, not an end in itself. But the supreme importance he attached to the value of work continued to push him in more radical directions. For Ruskin, finding satisfaction in one’s vocation is the essence of what it is to be human: he could never accept that fulfilment should be subordinated to the utilitarian principle of division of labour. His sentiments are similar to those expressed in Marx’s writings on alienation, but in a different register.

He set out his ideal of engaged labour most fully in The Stones of Venice, a shimmering vision of a city state dedicated to beauty, where workers were given free reign to pursue their particular creative gifts, most famously the architects and masons who designed and carved its gothic architecture. Ruskin came to realise that the privileging of craftsmanship over utility could only be realised by moving beyond the market. He advocated its replacement with a medieval-style guild system that would regulate production, ensuring everything would be made according to an approved quality and standard. ‘Government and cooperation are in all things the Laws of Life,’ he wrote, ‘Anarchy and competition the Laws of Death.’

The later Ruskin elaborated a radical communitarianism that, as Ramsden notes, shaded into authoritarianism. A free society, where different value systems collide, seems to require some form of market. How else can a criterion of value emerge? But Ruskin’s understanding of human desire for meaning, always expressed in high style, retains its power to move.

Morris: the primacy of the aesthetic

As does the thought — and life — of William Morris, Ruskin’s contemporary, with whom he is often bracketed. Like Ruskin Morris believed the economic system must be built around the dignity of labour, motivated by aesthetic rather than material considerations. For Morris ‘All other work but this is worthless; it is slaves’ work — mere toiling to live, that we may live to toil.’ And like Ruskin he idealised the guild system of the Middle Ages, which by organising labour cooperatively would set workers free to concentrate on quality rather than utility: ‘The mediaeval craftsman was free in his work, therefore he made it as amusing to himself as he could; and it was his pleasure and not his pain that made all things beautiful that were made, and lavished treasures of human hope and thought on everything that man made, from a cathedral to a porridge-pot.’

Morris had the anarchist’s faith that, freed from market discipline, people would volunteer for different jobs, taking turns to undertake mundane but ‘social necessary’ tasks in the knowledge they would have plenty of time to pursue their favoured occupations. Morris thought ‘very little of … a stout and healthy man who did not feel a pleasure in doing rough work; always supposing … that it was useful (and consequently honoured), and that it was not continuous or hopeless, and that he was really doing it of his own free will.’ In his celebrated utopian novel News from Nowhere he imagined London transformed into a garden city whose citizens laboured for pleasure rather than gain and fear of poverty.

Like all anarchist prototypes it’s an ideal that rather depends on everyone being on board. Ramsden quotes Michel Houellebecq’s observation in the French novelist’s book The Map and the Territory that ‘the model of society proposed by William Morris would not be utopian at all in a world where everyone resembled William Morris.’ But Morris is scarcely less popular today than in his lifetime, inspiring idealists in each new generation in pursuit of meaningful and rewarding work. His insight that judicious consumption of quality produce fosters just working conditions was surely correct.

Belloc: a plot of land for all

Hilaire Belloc, the early 20th century Catholic poet and essayist, was an interesting successor to Ruskin and Morris. Indeed his particular efforts to propose mechanisms through which the market might serve the common good have been perhaps more influential upon contemporary political thought. He too idealised the Middle Ages, but under the influence of Catholic social teaching, particularly the 1891 encyclical Rerum Novarum, in which Pope Leo XIII sought to recognise widespread dissatisfaction with unbridled capitalism without endorsing rising revolutionary sentiment. Against the socialists the encyclical argued that it was a natural human desire to own property, and to pass it on to children. Against market fundamentalists it held that property ownership should not be left to the drift of supply and demand, but should be widely shared.

Concurrently with fellow Catholic writer G.K. Chesterton Belloc proposed a ‘Distributive State’ that would secure for each person the means to earn a livelihood, whether through ownership of a farm, a workshop, an inn or a store. He believed this was the norm throughout human history before ownership had been concentrated under capitalism: even under feudalism workers had effective ownership of the land they ploughed. But that security had been undermined by capitalist relations of production, which subjected all to the harsh winds of the marketplace.

Belloc argued that the economy should once again be regulated so as to foster and protect small scale, localised production. As Ramsden puts it: ‘Townsfolk should own their own houses. Leaseholders should own their freeholds. In the country small peasant farm holdings should be the norm. The aim was not more output or profit but as many viable smallholdings as possible, on which families could make a modest but independent living.’ A significant element in such a programme would be the thoroughgoing reform of the financial system, to ensure the appropriate channeling of credit. Small cooperatively owned banks, tailored to serve particular regions or trades, would replace the big private banks.

Belloc was vague about how all of this might be achieved, particularly given his profound scepticism regarding the effectiveness of parliamentary democracy: he had spent a few unhappy years as an MP. He seemed to hope that the force of the Distributive ideal would assert itself spontaneously, sweeping away parliament altogether in favour of a system of chartered guilds, an anarchist impulse shared with Morris. But elements of Distributism have found their way into today’s Blue Labour and Red Tory philosophies, which maintain that faith in some kind of market system will only persist if a sufficient number of participants have access to capital.

Pound: prophet of Modern Monetary Theory

Ezra Pound also proposed a form of Distributive economics, but was much less hesitant about advocating a strong role for the State than Belloc. Pound’s ambitious book The ABC of Economics elaborated a ‘Social Credit’ system first outlined by C.H. Douglas. Following Douglas Pound argued that contrary to what classical economics claimed, capitalist economies had a chronic tendency to disequilibrium. The money that owners paid out as wages, salaries and dividends always worked out at less than the total price of factory output. There was a consistent demand deficit, the community’s income insufficient to buy what it collectively produced. Consumers could only afford to buy the goods they had worked to produce by taking loans from banks. The logic of the system was geared towards financiers.

For Pound, therefore, the fundamental problem of economics was one of distribution: ‘There are enough goods, there is superabundant capacity to produce goods in superabundance.’ The solution was the complete reconception and retooling of the financial system. Money should be considered a public good, to be administered through a banking system run by and for the community. Publicly owned banks would distribute money as a kind of ration card — ‘tickets’ or ‘tokens’ commensurate with each worker’s labour — affording them access to their fair share of goods and services.

Pound believed he had found a model of how such a system might be implemented in Mussolini’s Italy, where he had made his home in the early 1920s. Italy seemed somewhat sheltered from the Great Depression that beset the US and much of the rest of Europe, its economy secured by the strong hand of an active State that took upon itself the task of generating continued economic growth, and distributing the proceeds equitably. Pound held up the venerable Monte Dei Paschi of Siena, founded in 1472, as an example of a ‘virtuous’ bank, backed by productive grazing lands, a natural source of wealth, and committed to the use of its resources for the public good.

Pound’s reputation has been marked by his seduction by fascist Italy. But Ramsden notes that some of his ideas on how money might be managed to manage economic demand paralleled those that received their classic formulation in Keynes’ General Theory of Employment, Interest and Money. Pound and Keynes challenged Say’s Law, one of the oldest in economics, which maintained that because capitalists had to pay workers to make their products, suppliers to provide the means of production, and dividends to shareholders, there would always be sufficient demand to buy what was produced. Keynes argued that though the law was formally correct, it could take a very long time to operate. In the meantime governments should intervention to inject spending power into economies, making up for the shortfall in private sector demand. And, indeed, it was state spending, in the form of the New Deal in the US, and re-armament in Europe, that pulled the world economy out of the slump.

Pound’s views on the State’s duty to generate money anticipated a more recent economic concept, Modern Monetary Theory (MMT). He thought it absurd that governments should have to borrow money from banks: a State with sovereignty over its currency should simply print money and distribute it directly. There was no need to levy taxes to raise money: taxation should be reconceived as a tool for managing demand to ensure economies do not overheat. And, like MMT advocates, he argued that the amount of currency in circulation should grow in line with production, creating the opportunity for future growth.

Coleridge: Keynes foreshadowed

The inequities of the banking system were also highlighted by another of Ramsden’s poets, Percy Bysshe Shelley, who noted the great power it afforded to those with the wealth and connections necessary to obtain and extend credit. Capitalists seemingly able to summon money out of the air were able to dictate terms to those whose livelihoods depended solely on their labour. Shelley, the radical, wanted to steer production away from the marketplace altogether. But his fellow Romantic poet, Coleridge, took a more moderate view. Indeed Coleridge offers perhaps the most impressive insights of all those profiled, anticipating several economic ideas that have since passed into the mainstream.

Coleridge is usually folded into the conservative political tradition. And after engaging with various anarchist projects as a young poet he did come to identify as a Tory. His thoughts on economics have helped inform the One Nation tradition. But they also look forward to centre-left social democracy. He regarded markets as an effective means of allocating resources: ‘To buy in cheapest and sell in dearest market is a legitimate maxim of trade.’ And he seemed to accept Smith’s invisible hand, the capacity of the play of self-interest in a marketplace coordinated by the price mechanism to serve the general interest. But he believed commerce should serve society, not govern it. He spoke of a ‘clerisy’: a wise ruling class with the judgement and technical skill necessary to manage the economy for the common good. It’s an elitist notion in the tradition of the noble Guardians imagined in Plato’s Republic. But all of today’s representative democracies in effect vest power in a political elite, a web of politicians, think tanks and civil servants entrusted to govern on behalf of the wider population.

Indeed Ramsden suggests Coleridge looked ahead to Karl Polanyi’s The Great Transformation, a foundation text for post-war social democracy which sought to define the moral boundaries of commerce, identifying those things that stand outside the market that cannot be treated as commodities, notably people and land, and emphasising that capital and credit are social constructs, designed by and for the benefit of society, not impersonal forces to which it should be subject. As Coleridge put it, commerce should not trespass on the State’s own ‘inalienable and uncomfortable property — I mean the health, strength, honesty and filial love of its children.’ Capitalism cannot survive if it tears apart the social fabric on which it ultimately depends.

Coleridge’s belief in an active state generated several ideas that would be developed by Keynes and other 20th century economists. He pictured the economy as a ‘reservoir and water works’ through which money flowed, a hydraulic framework that should be pumped and primed by the State, which by leveraging the banking system could introduce new money to the economy to ensure continued growth. New ventures opened new opportunities for money to be employed, generating a virtuous circle. Here Coleridge seems to be reaching for the words to describe something like the ‘multiplier effect’, the key Keynesian insight that money injected into the economy can have an exponential effect, seeding new growth as it continues to circulate.

Like today’s central bankers, he thought a degree of inflation served as an important economic stimulus, encouraging savers to put their money to use rather than see its value eroded. And he narrated the market’s chronic tendency to boom and bust with extravagant eloquence becoming of the poet: ‘For a short time this Icarian credit … this illegitimate offspring of confidence … seems to lie stunned by the fall; but soon recovering, again it strives upward … alarm and suspicion gradually diminish into a judicious circumspectness; but by little and little circumspection gives way to the desire and emulous ambition of doing business; till impatience and incaution on one side, tempting and encouraging headlong adventure, want of principle, and confederacies of sales credit on the other, the movements of trade become yearly gayer and giddier, and end at length in a vortex of hopes and hazards, of blinding passions and blind practices which should have been left, where alone they ought ever to have been found, am one the wicked lunacies of the gambling table.’ Here Coleridge foreshadows the work of contemporary economists like Hyman Minsky to chart the psychology of the economic cycle.

The end of the story?

Ramsden’s engaging survey concludes with Pound: ‘In 1944, when Pound was led away to his cage, Maynard Keynes was in the USA planning the post-war economic order: the IMF, the World Bank and the policies that would deliver thirty years of growth. Economics had finally come up with some answers. The days were over when a poet could rewrite the text books. Pound had tested the genre to destruction. For better or worse, poetry and economics now went their separate ways.’

Maybe. Poets and novelists do continue to comment on economic issues, both through their literary work and articles: consider for example Arundhati Roy, John Lanchester and Margaret Atwood, all of whom have written essays on economics. But the crossover is not as seamless today, when economics is a distinct discipline with a forbidding technical grammar. It may be, however, that the age old engagement of the arts with economics has encouraged economists themselves to seek to humanise their discipline. Keynes and J.K. Galbraith were concerned that markets should serve society, and wrote engaging prose suffused with literary allusions. Today Robert Shiller, Ha-Joon Chang, Yanis Varoufakis have found wide readerships by seeking to bring their discipline down from the realms of abstraction. Ramsden himself quotes Robert Skidelsky’s ambition in What’s Wrong with Economics to ‘reclaim economics for the humanities.’ The Poets’ Guide to Economics is itself an enlightening contribution to that tradition.

The Poets’ Guide to Economics by John Ramsden is published by Pallas Athene Books.

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Justin Reynolds

Justin Reynolds

A London-based business writer and essayist. See justinreynoldswriter.com and @_justinwriter.