Quantum Pranx

ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

We’re heading for economic dictatorship

with 4 comments

by Janet Daley via the Ludwig von Mises Institute of Canada (originally posted on The Telegraph)
November 27, 2012

Forget about that dead parrot of a question – should we join the eurozone? The eurozone has officially joined us in a newly emerging international organisation: we are all now members of the Permanent No-growth Club. And the United States has just re-elected a president who seems determined to sign up too. No government in what used to be called “the free world” seems prepared to take the steps that can stop this inexorable decline. They are all busily telling their electorates that austerity is for other people (France), or that the piddling attempts they have made at it will solve the problem (Britain), or that taxing “the rich” will make it unnecessary for government to cut back its own spending (America).

So here we all are. Like us, the member nations of the European single currency have embarked on their very own double (or is it triple?) dip recession. This is the future: the long, meandering “zig-zag” recovery to which the politicians and heads of central banks allude is just a euphemism for the end of economic life as we have known it.

Now there are some people for whom this will not sound like bad news. Many on the Left will finally have got the economy of their dreams – or, rather, the one they have always believed in. At last, we will be living with that fixed, unchanging pie which must be divided up “fairly” if social justice is to be achieved. Instead of a dynamic, growing pot of wealth and ever-increasing resources, which can enable larger and larger proportions of the population to become prosperous without taking anything away from any other group, there will indeed be an absolute limit on the amount of capital circulating within the society.

The only decisions to be made will involve how that given, unalterable sum is to be shared out – and those judgments will, of course, have to be made by the state since there will be no dynamic economic force outside of government to enter the equation. Wealth distribution will be the principal – virtually the only – significant function of political life. Is this Left-wing heaven?

Well, not quite. The total absence of economic growth would mean that the limitations on that distribution would be so severe as to require draconian legal enforcement: rationing, limits on the amount of currency that can be taken abroad, import restrictions and the kinds of penalties for economic crimes (undercutting, or “black market” selling practices) which have been unknown in the West since the end of the Second World War.

In this dystopian future there would have to be permanent austerity programmes. This would not only mean cutting government spending, which is what “austerity” means now, but the real kind: genuine falls in the standard of living of most working people, caused not just by frozen wages and the collapse in the value of savings (due to repeated bouts of money-printing), but also by the shortages of goods that will result from lack of investment and business expansion, not to mention the absence of cheaper goods from abroad due to import controls.

And it is not just day-to-day life that would be affected by the absence of growth in the economy. In the longer term, we can say good-bye to the technological innovations which have been spurred by competitive entrepreneurial activity, the medical advances funded by investment which an expanding economy can afford, and most poignantly perhaps, the social mobility that is made possible by increasing the reach of prosperity so that it includes ever-growing numbers of people. In short, almost everything we have come to understand as progress. Farewell to all that. But this is not the end of it. When the economy of a country is dead, and its political life is consumed by artificial mechanisms of forced distribution, its wealth does not remain static: it actually contracts and diminishes in value. If capital cannot grow – if there is no possibility of it growing – it becomes worthless in international exchange. This is what happened to the currencies of the Eastern bloc: they became phoney constructs with no value outside their own closed, recycled system.

When Germany was reunified, the Western half, in an act of almost superhuman political goodwill, arbitrarily declared the currency of the Eastern half to be equal in value to that of its own hugely successful one. The exercise nearly bankrupted the country, so great was the disparity between the vital, expanding Deutschemark and the risibly meaningless Ostmark which, like the Soviet ruble, had no economic legitimacy in the outside world.

At least then, there was a thriving West that could rescue the peoples of the East from the endless poverty of economies that were forbidden to grow by ideological edict. It remains to be seen what the consequences will be of the whole of the West, America included, falling into the economic black hole of permanent no-growth. Presumably, it will eventually have to move towards precisely the social and political structures that the East employed. As the fixed pot of national wealth loses ever more value, and resources shrink, the measures to enforce “fair” distribution must become more totalitarian: there will have to be confiscatory taxation on assets and property, collectivisation of the production of goods, and directed labour.

Democratic socialism with its “soft redistribution” and exponential growth of government spending will have paved the way for the hard redistribution of diminished resources under economic dictatorship. You think this sounds fanciful? It is just the logical conclusion of what will seem like enlightened social policy in a zero-growth society where hardship will need to be minimised by rigorously enforced equality. Then what? The rioting we see now in Italy and Greece – countries that had to have their democratic governments surgically removed in order to impose the uniform levels of poverty that are made necessary by dead economies – will spread throughout the West, and have to be contained by hard-fisted governments with or without democratic mandates. Political parties of all complexions talk of “balanced solutions”, which they think will sound more politically palatable than drastic cuts in public spending: tax rises on “the better-off” (the only people in a position to create real wealth) are put on the moral scale alongside “welfare cuts” on the unproductive.

This is not even a recipe for standing still: tax rises prevent growth and job creation, as well as reducing tax revenue. It is a formula for permanent decline in the private sector and endless austerity in the public one. But reduced government spending accompanied by tax cuts (particularly on employment – what the Americans call “payroll taxes”) could stimulate the growth of new wealth and begin a recovery. Most politicians on the Right understand this. They have about five minutes left to make the argument for it.

4 Responses

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  1. Thank you.

    Date: Thu, 29 Nov 2012 11:13:10 +0000 To: rickycook21@hotmail.com

    rcookie

    29/11/2012 at 2:09 pm

  2. This is an interesting point.

    The exercise nearly bankrupted the country, so great was the disparity between the vital, expanding Deutschemark and the risibly meaningless Ostmark which, like the Soviet ruble, had no economic legitimacy in the outside world.

    Now think what would have happened had there been no Eurozone. The Drachma, the Peso, Escudo and the currencies of the less efficient nations would be scraping the floor now. The markets would have acted with their gentle mendacity and thrown millions to starvation. Sure, the DMark would be all-powerful – not so much of a problem for an economically effective country – THAT CAN BALANCE ITS BOOKS.

    When you can do that, you have far more control over who says what and to whom. Those who cry that they have been manipulating their currency forget that Greece has too – plus they squandered their opportunity to get their affairs in order whilst they had the chance to borrow at 3% not 35%. Or higher.

    The Eurozone holds until the US deficit is finally tamed. That is when the NordEuro-Russia-China axis rears its head.

    Now that would be a truly democratic institution …

    Gemma

    30/11/2012 at 12:02 pm

  3. I believe that rather than a fixed stasis result the outcomes currently coming into focus will require a quintiessential so-called American pioneer response. The reality is the economy of the USA has for awhile been non free market in the classical sense and what is coming into view is culmination of that. This is at least thirty years of decisions, social dynamics and globalization that are now cominng to a head.
    The one certainty is that nothing will be the same when the dust settles.

    Whenever there is serious imbalance a change occurs. Now if this change is one that promotes prosperity or promotes a kind of bastardization between communism and fascism(or corporatism-what we have now)will depend on the enlightenment of the average American. Relying on any economic religions of the past will not move the Western economy forward and that is what is very plain to see right now.
    Therefore rather than sackcloth and ripping at the shreds of a dying paradigm it would be productive to consider hwo to master the new age of scarity.

    Cheers,

    John Donohue

    John Donohue

    02/12/2012 at 1:07 am

    • John, your thoughts are genuine and I find them expressed often. The problem is that our Western society is in no way fitted to existing in “scarcity mode”. Be warned that much of modern society – especially business orientated society – is held together by mutual distrust, fear and above all, hate. None of this is beneficial to any future society as such preparation only fits them to shoot or steal from one another.

      Americans can pioneer, have they really got the skills today? Just how many of them are there compared to the millions who live in the cities and whose thoughts about bread – should they think about it at all – stretch to whether it should be for toasting or for sandwiches.

      Please note that most of the things around you will be made, transported, harvested, or processed by a machine. Perhaps one thing in two hundred is not made by machine in our modern world. Even an organic parsnip will have been sown, tilled, lifted and washed by machine. This is the foundation for understanding how to work with what you call scarcity. Because scarcity means doing without machines. I would like to point out that a pint of seed on an acre will yield a ton of grain – along with a great deal of hard work over a great deal of time.

      I grow my own food. I know just how hard it is to sow, cultivate, harvest, store and above all, keep your own food. All of which assumes you have a fertile soil in the first place, assumes you know even the basics of growing a plant for seed, knowing when to harvest it for seed and not for food. Weeds inured to millennia in the same place find it easy to grow on the poorest of soils (my allotment) whilst even my self-saved seeds struggle to get out of the ground, let alone bear fruit.

      Believe me, in the last hundred years, humankind has lost practically all the knowledge it needs to survive on this beautiful planet that is so generous and abundant. Is that not something we need to reflect on? Out of a good soil comes all we need to live.

      If only we let it.

      Gemma

      02/12/2012 at 2:26 am


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