Posted by: CS | July 10, 2013

The Economic Nonsense of a Globalist Mouthpiece

In one of his more coherent diatribes against my post about the causes of Western economic stagnation, Ron H. quoted me as follows:

What does it take for an economy to grow? More production, obviously.

And what does it take to increase production? More demand, obviously.

And what does it take to increase demand? More income, obviously.

He then adds:

And what does it take to increase income? More production, obviously.

Oops! This looks like a circle.

By which he presumably meant, a causal loop, from which it can be inferred that all is for the best in the best of all possible economic worlds, such that production generates income that creates demand for even more production until the whole “circle” is spinning at the speed of light.

But in a globalizing world economy where technology is transforming the processes of production, distribution and exchange at an ever accelerating pace, there is no obvious connection between production and income. Far from it. When production is off-shored from high-wage, and highly regulated economies to low-wage economies with minimal workplace health and safety standards, income in the country doing the off-shoring declines, even as the profits of the corporations doing the off-shoring increase.

Technology has the same perverse influence on the economy. If the baker and candlestick maker each employs new technology that enables them to reduce the number of their employees, their profits will increase, while consumption declines as their former employees subsist on welfare or die of starvation. Unless, that is, the baker and candlestick maker invest their additional profits in manufacturing, say, washing machines, thereby re-employing the labor the just shed.

But there’s nothing automatic about such adjustments. Moreover, the baker and the candlestick maker are in no way compelled to invest in their own country the profits they reap from idling their former employees. Under the current globalization regime, they would most likely invest their spare capital in a factory overseas to exploit cheap foreign labor, importing the product at a price that forces the local competition into bankruptcy and idles more of their own compatriots. And once the demand for labor falls beyond a certain point, capital is in a position to drive wages to the starvation level. This is what we now see in the West. It is the long-delayed verification of a central tenet of Marxist economic analysis.

Workers are now in a position to be shafted. Union power to control the price of labor has been destroyed. The freedom of democratically elected governments to establish national economic policies that protect the interests of their own people has been signed away with institution of the World Trade Organization. Stagnation and decline in consumption and therefore in overall economic output are the necessary consequences. As workers incomes decline output of the economy must decline with it compensated only by increased spending by the managerial and capitalist classes, which although grotesquely extravagant, cannot keep pace with the impoverishment of the masses.

But in Ron H’s libertarian Happy Land, the American economy is is a perfectly tuned self-regulating mechanism that automatically maximizes output, thereby assuring all but lazy bums a fine wage. Thus, in Economic Happy Land, welfare or any other governmental intervention in the economy for the greater good is a moral crime against rich people.

In fact, the state of the economy is the result of the independent decisions of millions of individuals and corporations, plus a few monopolistic or oligopolistic entities and the biggest actor of all, the government. To assume that the actions of these participants, each serving their own interest, will automatically lead to the perfectly happy economic outcome where everyone prepared to do an honest day’s work will be assured an honest day’s pay is utter foolishness promoted by billionaire libertarian mouthpieces such as Ron H only because it serves their masters’ interest.

That no one actually believes in the Happy Land free market economic model is evident from the fact that every economic actor, so far as they are able, seeks to promote government regulation of the economy in their own interest.

Giant corporations in the West naturally oppose restrictions on their freedom to move capital, goods and people wherever production is cheapest, prices of end products are highest, wages are lowest, environmental law and workplace health and safety regulations are laxest, and taxes payable are lowest. But at the same time, these “libertarian” corporations insist on the strictest governmental enforcement of their “intellectual property rights” and all of the privileges negotiated on their behalf under international trade agreements. Workers in the West, insofar as their interests are represented in government, which is now rarely, naturally seek precisely those restrictions that capital wishes to eliminate; particularly those that restrict the export of jobs and the capital and technology that goes with those jobs.

The real political issue concerning the economy is not, therefore, to intervene or not to intervene, but whether to intervene in the interests of the money power or of the people. In the West today, the tide of economic influence runs strongly against the people.

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