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Blog #1
by Dr. Lawrence Nannery
2012-01-24 08:19:07
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I have a lot to say about politics, having paid attention to it since I was 8 years old, watching the Army – McCarthy Hearings on TV after I got home from school.

My latest apocalyptic issue is the budget deficit.  Economists get everything wrong about 90% of the time, just like psychiatrists.  Economics is not a science, and no one should ever receive a Nobel Prize for writing about it.  Those economics professors who wrote the bills for the Bush tax cuts and thereby contributed mightily to the depression that followed now have been restored to their cushy jobs in academia, specifically Ivy League posts.  What an injustice!  They should have been run out of town for the disservice they rendered this country.

Except in certain basic functions like gathering data, economics is not a science.  The graphs and equations they put forward are almost all nonsense.  On the other hand economic history is worth studying, because you can learn lessons from it.  Relevant to our current economy are only the experience of systems like ours, namely, the industrialized economies of modern societies.  The US has had an industrial economy since about the end of the Civil War.  Looking at the big picture, one can easily notice that this type of economy has a depression about once every eight years.  You could look it up.  Using this as a guide, the only sensible economic policies are those that embody common sense, and one should be forward-looking.  This means using real measures of well being in the population, and investing in the future.  It also means government intervention in the economy for “the general welfare,” a phrase in the U. S. constitution.

In the end, the most important lesson to be learned from economic history, in real life, only one factor controls all the others: and that is called effective demand.  In industrial economies this is the mainspring that makes all the other factors work for the people.  The stuff the economists indulge in, over and above measuring economic performance, is nothing more than a smile and shoeshine in comparison. Effective demand can be proven to be the most important factor in modern economies, from start to finish.  Take the Irish Potato Famine of 1845 – 1848, in which about 25% of the population died of starvation, and another 20 – 25% had to emigrate to survive.  This gruesome result was the product of a newly elected laissez faire policy adopted by the government in London.  The people were starving, but at the same time food was being shipped out of the country because there was no shortage overall.  The economic rationale for this policy was that they were not going to just give food away to starving people, because they had no money to pay for it!  No wonder the Irish have a saying: “as cold as charity.”  

Laissez faire means no government interference in economic affairs whatsoever, and so the poor were consigned to death because they had no money.  They had a need for the food, i.e., demand, but no money, i.e., no effective demand.  The same economic ideas guided Reagan and Thatcher 150 years later, with a similar result.  Following the crazy theories of Milton Friedman (“Uncle Miltie”) their policies made the rich richer and the poor poorer in every country the policies had any effect.  The American family was much better off economically in the 1950’s through the 1970’s than at any later time. 

As it was the beginning, so it is at the end.  In recent decades there has been a revolution in American agriculture and in international trade practices.  In the first case farmers have adopted the practice of growing to order.  In other words, they plant only when they have a guaranteed sale, in contract.  The same exact mentality governs the relationship between Walmart and Chinese industrial managers.  Things are made, literally, to order.  This is once again “effective” demand in action.

In times of economic downturns, which have occurred so regularly in capitalist societies, the only sure way out is government intervention.  Put people to work, and the income they earn will increase effective demand, and the society will soon be out of the depression.  It is the only sure way out, and the more massive the intervention the better it will work.  This is proven by recent events in China and the US.  Faced with a world-wide downturn in all economic activity, the ministries of the Chinese government unabashedly pumped large amounts of capital into factories and basic infrastructure projects and the strategy worked very well.  In the US there was hesitancy and underspending, and so we are still in the hole today.  There are precedents in recent history for this, such as the paring down of government aid to the economy after the election of 1936 here in the U.S., with a near collapse of the entire economy, which had been gradually improving.  Only the war got us out of the depression, starting in 1942.

In the past 45 years or so, Republican administrations have generally ruined the economy by overspending and undertaxing.  But, both Nixon and Bush fils found that they could get out of the mess the economy was in by starting a war, in fact several wars.   In fact, in his trip to South America he recommended to the presidents of Argentina and Chile that such a policy would help their economies.  So, the party of low taxes seems to have evolved into a militarist party, with a series of never-ending wars. 

Laissez faire is not an economic policy at all.  It is a materialistic theology, and is an ideological weapon wielded by the rich, in their never-ending desire to have everything for themselves and leave nothing for anyone else.  Their ultimate goal, probably unknown to themselves (for, after all, most of them are not smart) seems to be to reinstate a class system like that of pre-industrial societies.  After all, they fancy themselves aristocrats, do they not?


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Emanuel Paparella2012-01-24 20:34:28
Indeed, Larry, a personal anecdote, if I may, which may or may not confirm some of the above statements on economy conceived as a science. Some time ago I attended a lecture on economics by a professor at Florida International University. He put on the board some rather complicated formulas and equations to explain “scientifically” what the so called “free market” is all about. He made it sound as if the market was a self-correcting mechanism. If one simply left it alone, it would take care of itself so the greatest amount of utilitarian good would rebound for the good of society in general. At the end of the lecture I raised a simple question which seemed common sense to me: where in those equations would you place human greed and how would you assess Plato’s assertion that poverty is not so much what one has or has not but how big one’s desires are. The answer came back promptly without batting an eye and was something to this effect, and I paraphrase: nowhere, it does not belong within a theory that purports to be scientific. That’s when I realized that what the man had claimed to be a scientific elucidation of sort was really a mystification.

Eva2012-01-24 21:59:15
Interesting, with a lot of good points!
I don't know much about economics, but I'm constantly surprised how short-sighted today's economists/leaders seem to be in their "governing".
In the end it all boils down to selfish needs and wants anyway.. who gives a damn what happens as long as you can make a fast buck?

James Woodbury2012-02-11 04:15:31
Dear Larry.
On the whole this is an excellent "blog." It should be read by people like Gerard who, albeit with the best intentions, think too little about economics, and sociology. I like your concluding reference to laissez faire as really being
materialistic theology! Ron Paul, the oddball of the Republican field, is right about one thing--we should go back onto the Gold Standard. So should the world as a whole. Uncoupling the U.S. economy completely from any link to the Gold Standard was Nixon's worst mistake, not Watergate.
James W.

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