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Nanny Society - Loser Economy

Economics / Government Spending Jan 30, 2013 - 12:54 PM GMT

By: Andrew_McKillop


Wikipedia defines "the nanny state" as a system or process where governments play the role that a nanny has in child rearing. This could seem good, but as early as 1965 British MP Iain Macleod lashed out at the underside of the nanny state: authoritarian, interfering, overprotective, repressive. Since then, this politically correct mix has taken over in almost all Western states, becoming ever more intense,  and is now a sure and certain driver of economic failure. The process is simple: the state "babies" its governed population, but pretends to be aghast at the consequences when it finds out that creating and sustaining a nation of zombies with no interest in creating wealth - only consuming it - is a loser.

Today, large sections of the US population and the populations of nearly all European countries, and Japan have been turned into zombies. They are public sector retirees. Medicare dependent, food stamp dependent, their chidren are unemployable - they are disabled in all the senses of the term. Even if they are in no way necessarily bad people, dishonest or lazy their specific economic role is to always consume wealth - never to produce it. The multitude of crisis signals this generates are supposed to "only have come recently", especially with the  post-2008 crisis, but the Nanny Economy is embedded or even "structural", and is the one way street to The Downside.

As far back as the 1930s, Joseph Schumpeter railed at what "nannyism" did inside large corporations - Apple is a good example - through destroying real initiative and replacing it with fake, conformist and politically correct MBA-style initiative. One simple but theoretical solution would be the automatic break-up of large corporations once they attain some critical threshold, but the problem is a lot wider because it also cultural.

Big government, except in civil war or in very exceptional circumstances cannot be broken down into smaller and more responsive entities, like municipal city states. And big government wants the Nanny State. Examples are so many that we have to conclude it is the rule, today. For at least 30 years, since the early 1980s economic meltdown of the Thatcher-Reagan years, industry upon industry in almost any Western nation became a layer cake of subsidies, loan guarantees, tax benefits, cash incentives, and zoning ordnances which even decide exactly where that industry will be located. Any industry, from hi-tech through green energy to car assembly plants or the defence industry - not forgetting government itself - has been set to zombie rule. These are born-to-lose industries, Sunset in every sense of the term.

The financial industry as we know it and fear it would not and could not exist without Nannyism. For all its vaunted risk-reward metrics and abundant rhetoric about "free markets", as the 2008 crisis and its sequels have abundantly shown, the finance industry both expects and relies on Big Government to save it. Otherwise, it threatens at the push of the talk button, it will shut down.

The needed question is very simple: What does the State know about finance?

We can be totally sure and certain that without nannyism, huge parts of the financial industry would have been swept away in the financial storm of 2008-2009.  Astoundingly, even so-called intelligent persons able to use an iPhone do not instantly conclude that they have been spun the most fantastic fairy story about this financial storm and "how it was resolved and settled"

All and every government-friendly media, whether it concerns Nobel economists or airport bookstand pulp fiction finance thrillers, and TV expert panel discussion shows have pumped out the storyline as follows.  State authorities acted heroically and responsibly, saving us all from the worst depression "since the 1930s", and our friends in the banking sector have the sincere intention to pay back the money they were given "in the fullness of time". Today, at the same moment this article is being written, the same storyline is being beamed out of Davos, Switzerland with the minor frill that "world economic deciders" say they want different free gifts from the Nanny State, now that the banks have filled themselves up so full on billion dollar handouts that they are having trouble losing it at the rate they are accustomed to.

As we know, the nanny-dependent banking subsector of the finance industry has a strangely schizoid relation with its Mother surrogate, reminiscent of the Sandy Hook video game-deprived gun boy. In the US case, since 2008, the Federal government transferred nearly $2 trillion in various ways and forms, from the public purse to the pockets of the financial industry, enabling nearly all the "tried and trusted firms" to survive, with a tiny few Sacrificial Goats like Lehman Bros and Bear Stearns. This strategy had more than one underside because, in this way, the new firms which should have replaced the Nanny Finance team were virtualized, cancelled and magicked out of the public mind and out of the real world. No change was possible because any Nanny will tell you: all surprise is bad surprise.

The nanny economy as we all know to our direct cost is based on industries that need to be sustained by the government because they cannot sustain themselves. Despite this being the exact definition of self-defeating and unsustainable investment, through putting capital and energy into investments that without Nanny couldn't survive, public and even corporate accounts are tricked out to show this is profitable. Unfortunately, real economic indicators when stripped of the crony capitalist tinsel show that the drain on resources — human and material — due to this zombie circus show produces net outputs with less total value than the inputs and costs for making them. Unsurprisingly, this eats into the productivity of capital and labour, the economic system and society, and exercizes a constant downward pressure on economic growth. Absurdly, this fatal result of Nannyism is treated with aghast surprise by the state and its supine government-friendly propaganda machine, called "the free media".

The Nanny society is by no means a free service for the zombie public. They are paying for it - not Martians! Fooling the couched potato public into believing they are getting a free ride is now a pernicious and longstanding "tradition". One important apsect of this Ponzi game is through mixing the personal interests of the self-elected and self-promoted Nannies - politicians and crony capitalists - with the interests of society and the nation. Because the political and corporate cronies live high on the hog and the pork barrel, the media tells the couched potatoes, you also are living "the best years of your life". Woe betide you if you step out of line!

The average zombie consumer, in the Nanny societies, is a lot more than "invited" to believe that the outright corruption of crony capitalist market fixers and insiders is "creating wealth". Giving this the frills and thrills of old style or traditional "social class conflict", the couched potatoes are told to think they are "middle class", even if they do not know how to use an iPhone! All they have to do is consume, not produce, and vote for Nanny politics. A wonderful life in the best possible of all worlds.

That way, upstream Big Nannies feel good and continue their heavy, one-way migration to "where the cash is", which inevitably means diverting more resources from the productive sector to their own personal consumption, which is deliberately confused with the nation and national wellbeing. In a very clear and stark way, the Nanny class thinks "L'etat, c'est moi!". I am the State.

Surprisingly perhaps this did happen before, but an awful long time ago - in the late 18th century, when so-called Liberal Economics was the New Thing. It was invented by Adam Smith and his French friends or heroes headed by Francois Quesnay and Robert-Jacques Turgot, this second writing a book on the wealth of nations, before Smith, with exactly the same title. All three of these "early liberals" said point blank that the service sector is entirely parasitic. In today's Nanny societies, around 85% of the economically active population ("active" for zombies that is) operates in the service sector.

Quesnay, as chief court charlatan and soothsayer to Marie Antoinette, provided this comfort lady of the King with a rich set of idiot one-liners for the royal dinner table - "laisser faire" is the answer to everything and a great way to feed the masses! - but Marie, like her King and bedmate found out where that led: to the guillotine. Between times, and before the mass rears its ugly head, the trick is creating a parasitic "rentier class", most starkly through outplacement of all and any manufacturing industries and even the service sector feed-off jobs they generate.

Today, the modern Nanny state is proud of its environmental record - there are few or no smokestack industries anymore - but in exactly the same way as the reigns of last two King Louis of France, the trick is based on consuming accumulated and previous wealth, and is only a trick. Today's rentiers are now the entire Western developed world, a class of zombies who contribute absolutely nothing to either national or global prosperity.

Long before the French revolution of 1789, the "rentier class" and especially its royal summit of the monarchy were short of funds: my oh my, where did that money go? The problem was, and still is today, the one word "entitlement". Favored groups were able to secure special privileges and monopolies giving them the right to income. Never mind if this affects the economy and your "laisser faire free market".  The early answer, from another Scot helping the French, came with the run up Ponzi scheme, called the Mississippi Company, which preceded the 1721 Paris bourse collapse - the world's first modern stock market crash, organized (if that is the right word) by Scotsman John Law.

Entitlement had run riot in France long before. The French crown raised funds by selling the right to earn a "rent", one example being Turgot's specialty of selling the rights to levy cross-country road tolls and taxes: with free enterprise brigands doing it their own way. Unfortunately, and as the Sorcerors Apprentice childrens story recounts in its own way, too much of a good thing does harm. Very quickly, the rentiers found they had problems collecting their "easy money", and the resistance did not only come from the Dick Turpins.

The resistance came from too many zombies and not enough producers, but in our modern, developed societies the number, types and forms of entitlement have run riot. It is difficult to know where to start and to accurately gauge which are the most noxious, the most toxic. As one example, the "liberal democratic" party machines and systems of the Western developed countries, and their promises to voters, are so intensely Nannified that reforming this system is probably impossible.

By the close of 2012, the Nanny state and its economic system were deeper in debt than ever, despite this being a somber miracle. Exactly as it was during the times of the later dynasty of "Louis Kings" in France, which lasted for around 190 years from 1601 and only got worse, the dysfunctionality of creating but not sustaining entitlement resulted and results in an attempt to cover this with a mix and mingle of repression and nannyism, of the 18th century type in Louis times. Today's version is only more overblown, more insidious and more incoherent.

Nannyism is stilted and delayed adulthood, the refusal to face up to the future, even the denial and rejection of the future. All previous types and outbreaks of this disease of society and the state have ended in mass unrest or international war. Why it should be different this time, is hard to believe.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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