Back to Basics

This column will be printed on Thursday night, but the exigencies of the calendar demand that it be written on Tuesday. Any attempt to be current is therefore pointless, because during the period between writing and publication, virtually anything might happen. However, this provides a useful opportunity to focus on more basic and hence longer-lasting ideas.

Thus, although it is quite impossible to predict anything for tomorrow or next week, we know – insofar as we can ‘know’ about the future – quite a lot about the coming year. Since none of it is good, if you want to get into the mood for Sukkot, the ‘festival of our joy’, try the entertainments page. There you will find details regarding the enormous number of festivals and cultural events that are held all over the country during Sukkot. In general, these have been impacted by the global financial crisis – this year. Since that will not be the case next year, all the more reason to enjoy the abundance whilst it lasts.

Culture is as good a place to start as any, so let’s ask how we can be so sure that next year there will be a lot less available than this year. The answer requires revealing the amazing truth about cultural activity – and pretty much any kind of activity – which, although perfectly obvious, is usually completely ignored by most people (especially culture buffs). This is that it costs money. Somebody has to pay. So, as a very useful rule of thumb, try asking the following two questions about any form of activity you come across: who pays for it and where does the money come from?

Again, culture is a good example. Some saps apparently believe that the price they pay for the entrance ticket covers the costs. In reality this is hardly ever the case, but let’s pretend for a minute that it is. In an environment such as the one that will characterize the next year (at least), of higher unemployment, falling living standards and a severe ‘wealth effect’ (meaning that the declining value of their houses, shares and other assets make people feel poorer and act stingier), fewer people will pay the entry price to cultural events – so there will be fewer of them.

Now back to reality: most of the money for culture comes from rich individuals and entities (firms, trusts, etc.), or from the public sector (local or central government). These sources of finance, whether private or public, will be severely squeezed next year, because there will be greater demands on their budgets while the resources available (tax revenues, profits, investment income – whatever) will fall, probably considerably.

As an exercise in analysis, try rereading the preceding two paragraphs, but substituting the word ‘welfare’ for ‘culture’ and ‘national insurance/ social security’ for ‘price of the entrance ticket’. Then do it using ‘higher education’ and ‘tuition fees’. For homework, make up your own examples. Now that you have mastered simple economic analysis, you can move to the intermediate level, where the question you have to answer is more complicated: ‘I understand that there will be less money available for (anything and everything) in the future. But where did all the money that used to be available come from? Why was funding – whether from the public or private sector — no problem until now?’

Good question, as politicians cornered in interviews tend to say. The answer is that until very recently, funding was no problem for anybody – from dance ensembles, to research institutes, to investors in projects building shopping malls in rural Albania – because they gave you money. ‘Who is they?’, you say – and the answer is banks and other outfits that acted like banks. But don’t ask why they don’t do that anymore – just accept as an immutable fact that, for the foreseeable future, there will be no money available. And, above all, don’t ask where they used to get it from. If you keep asking these kinds of questions, you’ll discover that they created the money out of thin air – and that’s where it went back to.

Once you grasp that it’s possible to create make-believe money that lasts as long as everyone believes it’s there but goes poof as soon as this belief if questioned, then you won’t believe any more in the whole spiel. And once most people stop believing – indeed, become active unbelievers – then there’s no money for a long time. That’s what analysts call a serious recession and that’s where we are. So, now you understand the whole thing – aren’t you sorry you started asking questions? If people like you had just taken everything on faith, how much happier and richer we would all be.

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