Archive for June 2009
Anyone who’s interested in failings of empiricism should read the article “Bad Distribution of Income Led to Great Depression: History Repeats in 2008“. It refers to John Kenneth Galbraith’s claims that maldistribution of incomes led to the Great Depression, and was a contributing factor to the Great Recession.
Simply becuase the income share of the rich increases during a boom doesn’t mean that it is a trigger for the economic collapse. In fact, they are more likely to be a consequence of the manic boom than anything else. Without a sound economic theory to underpin discussion of real events, we’re simply going to be stabbing in the dark for cause and consequence.
Everybody should know that Nobel prize winner and archetypal mainstream Keynesian economist Paul Krugman was demanding a housing bubble in 2001 and 2002.
To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
The little problem that the economics profession won’t face up to yet is that Keynesianism has been dead wrong from its very conception. The urgent task for everybody else is to stop these people from inflicting their policies on us for any longer.
I’ve been a long time follower of mr1001nights’ youtube channel, however I never considered discussing his videos at length before. However, his latest piece “Can I wash your car for $10” warrents a decent response, as it claims to refute several capitalist defences of the market system. For me, mr1001nights’ videos often present more questions than answers and this piece is no exception.
Here, even if I fall short of a complete refutation, I will at least attempt to ask those questions.
Obviously a capitalist at the top of a corporate hierarchy – a corporate empire – with thousands of wage slaves does not compare with John paying Peter to wash his car.
As mr1001nights recognises, individual examples do serve a larger purpose. Robinson Crusoe narratives are particularly useful in stripping down economic ideas into their bare essentials. However it is important to ask: in what sense do corporate hierarchies not compare with John paying Peter to wash his car? Both John and the “wage slave” are being paid a sum of money to perform a particular function on someone elses property using only their labour. Are these both exploitative acts? Is one exploitative and the other non-exploitative? Is one more coercive than the other?
As I have said many times, the objection has to do with subordination to a boss under threat of starvation, poverty and social stigma, which arises out of a class situation.
The above quotation is the crux of most of mr1001nights’ videos. However it is fundamentally flawed as a criticism of market economics. But before I get to this, a short note on coercion.
I contend that the manner in which non-capitalists use the words “force” and “coercion” are fundamentally flawed. As such it is important to challenge them. Force simply pertains to violence against person or property. Nothing more, nothing less. Although many other definitions of “coercion” have been put forward (see F.A. Hayek’s dubious definition), it is the only one that does not devolve into absurdities. Try this on for size: “Women who are single are faced with the fear of being alone, as well as social stigma. Therefore, although entered into “voluntarily” by participants, marriage is actually a coercive institution.”
Secondly, even if we were to acknowledge that “the threat of starvation, poverty and social stigma” do indeed constitute “coercion”, this criticism still fails as a challenge of market economies. Starvation and poverty are not a threat specific to capitalist economies. Humans still have to produce to consume. And despite mr1001nights’ insistence on separating “subjugation of man by man” and “subjugation of man to nature”, he constantly insists that economic scarcity is a strike against market economies. Similarly, in a non-capitalist society – presumably one where consumer goods are available to all who want them – the threat of social stigma still remains as well. In fact, it may well be one of the driving factors in ensuring compliance with social goals.
In short, “starvation, poverty and social stigma” do not disappear in a the non-capitalist society, and mr1001nights, through slight of hand, makes it seem that they are created through class conflict to boot.
I’m currently reading “For Good and Evil: The Impact of Taxes on the Course of Civilisation” by Charles Adams and I came across a fascinating description of tax theory during the time of Louis 16th in France. I quote:
Economists in the ancien régime believed that the best medicine to cure poverty was heavy taxation. Indeed, the poorer a region was the heavier it should be taxed. Increased taxation, said these experts, would increase productivity and benefit everyone; consequently, taxes were the appropriate tool to combat poverty.
The poor were like grass– the more they were cut down, the stronger they would become.
Adams is definitely not a libertarian but here he lays out the retarded philosophy that has plagued man since time immemorial, that taxes are a good thing.
Incidentally, the only way to avoid taxes was to become a nobleman by issue of the King or work for the State. Noblemen despised work, as all good aristocrats do. I find this outlook on life compelling when one considers the lens from which Marx, the wealthy landed aristocrat, looked at the world and how much he despised and refused to work for a living, thinking it was beneath him. As has been pointed out before, the intellectuals of today have a lot in common with the aristocracy of 300 years ago: they love the State for the privileges it grants them but they also despise work.
I’ll revisit this in another post once I’ve finished the book but Adams demonstrates how the feudal system resulted from the savage taxation from Emperor Commodus to the collapse of Rome in which farmers preferred to become chattel slaves to the local biggest landowner (who was normally exempt from tax and was granted his land as a political favour) than actually pay the taxes and starve. Parents used to sell their children as slaves just to pay the tax collectors.
We’ve got new central bank figures:
Monthly statistics from the Central Bank show the first net fall in mortgage lending since 1990. The figures also show a sharp fall off in credit card spending…
It is the first time that repayments on existing mortgages has been greater that new mortgage lending since the Central Bank began this monthly statistics series in 1990. The figures show that, overall, mortgage lending fell by over €100m last month.
Contrary to what most people think, deflation is a good thing. Under a free market monetary system, this imaginary digital “credit” would never have been brought into existence in the first place. As loans are paid in faster than they are being created, with the most speculative loans already in a state of default and evaporating from the system entirely, the money supply more closely reflects that which would prevail in a deregulated, decentralised system (however a pale imitiation it might be).