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Economists today are interested in money, not in the truth
on 10 November 2014
In these hard-hitting comments, Paul Craig Roberts is searching for the truth on the economic, social and political front in his home country, thereby contesting the vision of other economists on such fundamental notions as growth, market capitalism or free trade.
As the author states, the notion of economic growth should include its ecological and social costs (depletion of natural capital and pollution), which are perhaps larger than the value of production increases.
Market capitalism means profit maximization and globalism, the latter being a shield for the pursuit of absolute advantage, which is the antithesis of free trade.
Markets are not self-regulating. They created ‘too big to fail’ financial institutions, which provoked an implosion of the whole system.
A ‘free market’ system is in no way socially efficient: in the latest financial disaster, up to 16 trillion US $ were needed to bail out US and foreign banks (their shareholders), while nothing was done to aid the millions of US families who were foreclosed out of their home.
Profits are not a measure of welfare. To the contrary, they are creating unemployment by joboffshoring and a decline of the living standard of nearly the whole population. The US unemployment rate is actually between one-fifth and one-fourth of the work force, not the officially published rate.
Political and financial issues
The US population lost its representative government and its civil liberties. Its government is only accountable to the mega rich.
The US budget deficit can easily be resolved by ending (illegal) wars, by closing military bases overseas and by cutting the defense budget. But, this means that the US must give up its goal of world hegemony.
For the dollar, the author asks: how long can the US retain the reserve currency role, when its economy doesn’t make things to export, when its work force is employed only in domestic services and when its foreign creditors own its assets?
Internationally, P. C. Roberts suggests that Germany with its industry, technology and financial rectitude should leave the EU and enter a partnership with Russia (energy and raw materials).
For the social issues, some of the author’s comments are correct for one country in particular, but not strictly exact on a world level: job arbitrage (offshoring) is positive for the country which gets the jobs (locally and by emigration).
P. C. Roberts exposes Keynesianism as a monetary policy: an expansion of the money supply by the government. But, this is not the end of the story. A government has to use the money, either through its own channels (its bureaucracy) or through private subcontractors.
This outspoken book is a must read for all those who want to understand the world we live in.