Received opinion?

Reader question:

Please explain “received opinion”, as in the following passage (Spotify not a threat to Apple - more an opportunity, TelecomTV.com, July 30, 2009):

According to digital music expert, Gerd Leonhard, it’s actually in Apple’s interest to boost models like Spotify for all they’re worth. That’s because, contrary to received opinion, Apple doesn’t make huge dollops of money from the iTunes download side of the business - it makes a modest margin. The big money is in selling its high-margin music playing devices. Of course these include the iPod Touch and the iPhone - two gadgets capable of running a Spotify client.

My comments:

The received opinion about Apple is that it makes a lot of money from its iTunes download business. That, as the digital music expert points out in the above example, is not true – Apple makes most of its money from selling gadgets, including the iPod and the iPhone, and increasingly these days the iPad.

Anyways, received opinion is what’s of our primary concern here. The thing about received opinion is, of course, that it’s “received”. That is, opinion that’s been received from others who have formed the “opinion” first. In other words, it’s second hand.

Also known as “received wisdom”, received opinion refers to the idea most people have about what is true or false. Like “conventional wisdom”, received opinion is conventional, or commonplace.

And like “conventional wisdom”, received opinion often doesn’t hold a whole lot of water.

The received opinion about China, for example, is that the Chinese don’t care a whole lot about their individual human rights.

That is wrong. The Chinese do care about their individual rights. They just don’t always make a fuss, or scene, about it. That’s because, at least partially, they have other priorities to be occupied with. For the present, I know the Chinese people have at least three priorities put above concerns over human rights issues.

The first priority is money as they want to get rich first.

The second priority is, of course, still more money, because in spite of twenty five years of incredible economic growth, the general public find that they have not got as rich as we wanted to at all.

The third priority is, in short, money because when it comes to Chinese priorities, everything else just takes a back seat.

Nevertheless, the received opinion that the Chinese do not care so much about their individual human rights is wrong because it fails to notice the changes taking place. Received opinion, you see, speaks best about the past. In other words, if you said that the Chinese didn’t, or simply were not allowed to, care about human rights issues in the past, I would’ve readily agreed with you. In the Qing Dynasty and further back, for instance, the Emperor and authorities in general were the only ones that were treated as full humans. The people, being bundled together as the masses, did not have an individual identity to begin with, and hence therefore did not have individual human rights to speak of in the first place.

Today, however, things are definitely changing, even if they are not seen by the naked eye.

Anyways, here are two media examples of “received opinion”:

1. RECEIVED opinion earlier this year said Poland’s autumn presidential election would be boring, with the unpopular incumbent, Lech Kaczynski, losing heavily to whomever the governing Civic Platform party nominated. After Mr Kaczynski died in a plane crash in April and the election was brought forward, few gave his unpopular twin brother Jaroslaw, a divisive former prime minister, much of a chance.

Received opinion was wrong. Bronislaw Komorowski, Civic Platform’s candidate and the speaker of the lower house, proved a poor candidate and Mr Kaczynski a good one. In the first round on June 20th Mr Komorowski emerged only 5.1 percentage points ahead. He should still win the run-off on July 4th, if he can sweep up anti-Kaczynski votes cast for minor candidates. But his lineage (aristocratic and dissident) has failed to outweigh a wooden and vacuous manner. Mr Kaczynski’s camp scent an upset. Their older, poorer and more rural voters will be in Poland and voting while Mr Komorowski’s middle-class supporters are abroad on holiday.

- Poland’s closely fought presidential election is part of a wider picture, Economist.com, June 24, 2010.

2. The disintegration of Anglo-Saxon-inspired markets has come about largely because of the confluence of two tendencies of the “free market”: speculation and monopoly capitalism. Contrary to received opinion, free markets – unless subject to civil regulation, asset distribution and persistent intervention – always tend to monopoly.

Similarly, there is nothing inherently efficient about free markets – they do not of themselves promote sound investment or wise management. Rather, when markets are conceived wholly in terms of price and return, and when asset wealth and the leverage that this provides becomes as concentrated as it was in the 19th century (which is a scenario we are approaching), then markets encourage nothing other than gambling masking itself as sound investment.

For example, before 1973 the ratio of investment to speculative capital was 9:1; since 1973, these proportions have reversed. So huge have the numbers, leverage and derivative instruments become that their value now far exceeds the total economic value of the planet. For instance, in 2003 the value of all derivative trading was $85 trillion, while the size of the world economy was only $49 trillion.

These ratios have risen with the latest estimates that the value of all traded paper instruments exceeds the underlying value of the assets on which they are written by 3:1. The fact that these assets may themselves be devaluing by up to 50 per cent (US housing values have declined by 25 per cent in two years) means that the overall ratio of global paper value to its leveraged base may indeed double.

This average global figure itself masks even more extreme levels of leverage. The Carlyle Group de-faulted on $16.6bn (£8.4bn) of debt last week. The private equity firm had been speculating assiduously on its AAA-rated mortgage base – by some estimates, at the end of its life, Carlyle’s loan-to-value ratio and hedge exposure was at 36:1. There are, of course, many other private equity firms in a similar position.

This incalculable level of speculation is abetted by the huge concentration of wealth that has occurred since 1973. Why? Because if markets tend to monopoly then smaller groups of people control larger amounts of assets. The latest figures demonstrate this admirably: the richest 10 per cent of the UK population increased their share of the nation’s marketable wealth (excluding housing) from 57 per cent in 1976 to 71 per cent in 2003. Over the same period, the speculative capital that could be deployed or invested by the bottom 50 per cent of the British population fell from 12 per cent to just 1 per cent. Indeed, the wealthiest 1 per cent of the population, on current government figures, now control more than a third of all the marketable wealth – and this ignores the vast sums held in offshore tax havens.

The New Economics Foundation has shown that global growth has not aided the poor. In the 1980s, for every $100 of world growth, the poorest 20 per cent received $2.20; by 2001, they received only 60 cents. Clearly neo-liberal growth disproportionately benefits the rich and further impoverishes the poor.

Real wage increases in the top 13 countries of the Organisation for Economic Cooperation and Development (OECD) have been below the rate of inflation since about 1970 – a situation compounded in Britain as the measure of inflation massively underestimates the real cost of living.

Thus wage earners – rather than asset owners – have faced a 35-year downward pressure on their standard of living. Indeed, the golden age for the salaried worker, as a share of GDP, was between 1945 and 1973 – and not this vaunted age of liberalisation.

The trouble is that nobody in power recognises this crisis for what it is – an asset insolvency crisis brought about by massive debt leverage. Neo-liberals are still reacting as if the emergency was one of liquidity. They are wrong. Governments should bail out not banks and speculators but the customers who now have every reason to fear for the future.

- Outside View: The end of capitalism as we know it? Independent.co.uk, March 23, 2008.