Hi Ed,
This is just a quick reply for the time being because I haven't yet read
the Sowell interview you show below and I must read it. However, I've read
one of Sowell's books ("Applied Economics") and although he says a lot of
sensible things in it I was not terribly impressed as a whole because he
never seemed to have got a grip on the subject as a whole. He was just
feeling the various parts of the elephant. While I think that Howell and
the body of Austrian economists are a great deal more perspicacious than
Keynes (that is, as before he had doubts about his own theory and told
Hayek so) they both fluff a very important issue. This is the nature of
money. They trivialize it by saying that it has no intrinsic value of its
own. They grant that it's a useful medium of exchange (a sort of temporary
bridge in an essentially bartering economy), and that it is a unit of
account (in measuring stored-up potential). But money, as it's always been
in the history of civilization until 1914, really did have intrinsic value
also. It had intrinsic value in the same way that a Picasso painting, more
recently, has intrinsic value. Anybody who possesses it is accorded high
status. Such a person will generally have other assets also which, if sold
in part, can command the labour and obedience of other people. In short,
Keynesianism and Austrian economics both came along too soon to understand
what the latest science, evolutionary biology, is now telling us is the
most powerful motivation of all -- status. The status of the male is
indissolubly linked to sex. Status and sex together make the world go round
-- whether it's family-making is or also ambitiousness. Gold just happens
to be the physical item which has been the longest historically to have
been closely linked to status by means of personal ownership and display,
just as a Picasso painting happens to be a recent addition. Although gold
retains an intrinsic value as jewellery today it is effectively treated as
an economically useless currency by both Keynesians and Austrian economists.
Well, tell that to the central banks of Europe and America which are
hanging onto their gold like grim death now that they've realized that they
haven't managed to persuade the rest of the world over the past 70 years
that it's useless as a currency!
But where Sowell (from what you say he's saying) is naive is that, even
though governments have gone badly wrong in foisting paper money on us and
simultaneously making us addicted to state-given welfare (which, these
days, is actually more to the benefit of the voting, middle-classes than
the really poor), then governments can't start reneging on the whole game
just now. The other side of the "humanity coin" of status-striving is
altruism. By all means start de-constructing the state welfare game but, at
the same time, we also need to re-construct the sorts of communities in
which personal welfare can once again flourish. Howell says nothing about
that. He seems to be on the side of the really nasty edge of politics which
is now rearing its head in many countries of Europe and in America, too.
Keith
At 07:28 23/10/2010 -0400, you wrote:
Good morning (over here), Keith,
You raise the question of how desperate the US government may be. A
friend recently asked me for comments on an interview with Thomas Sowell,
an American academic now 80 and retired. The interview may be found at
<http://fora.tv/2010/08/06/Uncommon_Knowledge_Thomas_Sowell_on_Dismantling_America#fullprogram>http://fora.tv/2010/08/06/Uncommon_Knowledge_Thomas_Sowell_on_Dismantling_America#fullprogram
The following are the comments I sent to my friend:
Hi Friend:
I said that I'd give you further thoughts on the Thomas Sowell interview,
and here they are. The interview gives me a chance to put some of my own
thoughts in order.
First, one has to understand where Sowell is coming from. As a kid, he
was a highschool dropout, but bright enough to get into Harvard after
fighting in the Korean War. He did his doctorate in economics at the
University of Chicago, which at the time was, and may still be, the very
centre of right wing economics based on the "Austrian School" thinking of
people like Ludwig Von Mises, Friedrich Hayek and Milton Friedman. The
Austrian School's central argument is that the market must be left alone
to operate with complete freedom. Government must not interfere with
it. If there is a depression or recession, the market can be expected to
readjust on its own without government intervention. The opposite
argument, initially put forward by John Maynard Keynes in the depression
of the 1930s, and generally accepted in some form by most economists
today, is that the market may not make the necessary corrections on its
own and government may therefore have to intervene to help it do so.
What I felt was most disturbing about the interview is a lack of
recognition of the fact that the American polity and economy are in a
terrible state right now. The following kinds of things were simply
glossed over:
* The US is deeply in debt both in foreign and domestic terms partly,
and perhaps largely, because of its huge international military
undertakings.
* The unemployment rate is very high. Officially it stands close to
10%, but if people who have simply stopped looking for work because their
chances of finding it are zero are factored in, it may be as high as 16%
to 20%. A major problem is that jobs which Americans did just a few
years ago have been packaged up and sent en masse to Asia, where labour
is much cheaper. Unions able to protect the rights of workers have
almost become a thing of the past.
* Since the 1970s and especially since Reagan's tax breaks for the
rich, the incomes of the wealthiest Americans have surged enormously,
while the incomes of poorer Americans has stayed about the same. Much of
the middle class has eroded away.
* Manufacturing which was the mainstay of the US economy is being
displaced by FIRE (finance, insurance and real estate). The FIRE
industries tend not to operate openly, but in shut away offices connected
by the Internet. What harm they can do has been demonstrated by the
sub-prime mortgage crisis of recent years.
* Perhaps worst of all in terms of threats to democracy, many American
politicians are increasingly being financed by business interests, which
makes them lobbyists rather than representatives of the people. This has
been aided and abetted by a recent Supreme Court ruling that puts no
limits on the amounts that private companies can donate to election campaigns.
* And, though you may not agree, religion has tended to move out of
the little church on the corner and to morph into business, often big
business.
No wonder people are marching around, some with guns, trumpeting the need
to adhere to the Constitution, a document that few of them really
understand. It's a mess, and it's no wonder people are confused and
angry, and confused and angry people need someone to blame. Who's to
blame? Why government of course.
What was really sad about the Robinson - Sowell interview was that the
whole mess that Sowell had identified in his book was to be laid on
Obama. When Robinson asked Sowell what Obama should do, Sowell said that
Obama should resign. What wasn't recognized is that Obama and his team
had been doing everything they could to pull the US out of its recession
and bring some stability back into the economy. It may not happen, but
they are trying. And the problems now affecting the US may be partly,
even largely, the fault of past governments (Reagan's tax cuts, G.W.
Bush's need to "git Saddam and Osama") but not the fault of the government
that has inherited the mess.
Also quite sad was Sowell's deprecation of things like community activism
and universal health care. He took issue with Obama's health care act
partly because he believes people should pay for their own health care
even if they can't afford it, but also because it was some 2,000 pages
long. He didn't seem to recognize that it's length had a lot to do with
the huge number of amendments that were made to it in order to get it
though both Congressional houses. As for community activists, surely he
would have seen them do some good things when he was a kid in Harlem. He
might also have recognized that, with the employment rate as high as it is
in the US, activists may be badly needed as a counterforce to kids doing
things like forming drug gangs, etc.
I really wonder where the US is going with its Tea Party and heroes like
Sarah Palin and Glenn Beck. Perhaps it'll shake it all off and rise
again. I certainly hope so because I've known a lot of Americans who were
wonderful people and don't deserve the kind of crap that's blowing around
them. And thank you for this opportunity to get my thoughts
together. You may not agree with them, but that's not my problem.
Ed
----- Original Message -----
From: <mailto:[email protected]>Keith Hudson
To: <mailto:[email protected]>RE-DESIGNING WORK, INCOME
DISTRIBUTION, ,EDUCATION
Sent: Saturday, October 23, 2010 2:33 AM
Subject: [Futurework] Having a good night's sleep
Just how desperate is the American government? Desperate? Very desperate?
Very very desperate?
We already knew that the US Treasury Department was desperate from the
way that Tim Geithner, its Chief Secretary, has been sounding off at
China in recent months. Never mind that a significant proportion of
China's export surpluses with America are, in fact, the profits of
American corporations in China.
We could say that Tim Geithner is very desperate because the present
week-end meeting of international finance ministers and central bank
governors (in preparation for next month's G20 in Seoul) has already
started in South Korea with an all-night session. Never mind that the
judgement of half of the attenders must be badly affected by jet-lag,
President Obama needs to know as soon as possible. He would love to be
able to announce the deliverance of a "new world currency order" (though
not a new world currency!) in time for the Congressional elections on 2
November as well as a "done and dusted" agreement to place before Prime
Ministers at the actual G20 meeting in Seoul on 11-12 November.
We could say that Tim Geithner is very very desperate because the US
dollar now has every sign of starting a double-dip all of its own. And
once that happens then the present "currency war" will become a currency
chaos which would make the 1930s Great Depression seem like a stroll in
the park.
Needless to say, America's "solution" is also very very desperate. It
wants to put a limit of the export earnings of any one country --
supervised by the IMF, its own special creation and friend. In fact, the
solution is very very absurd because it doesn't have a chance of being
agreed by countries such as China, India, Russia, Japan, Germany, Brazil
and many other smaller countries that are trying to hoist their economies
up to American/European standards.
The American dollar was able to dominate the currencies of the rest of
the world after the summit at Mount Washington Hotel, Bretton Woods in
1944 -- when the end of World War 2 was in sight -- because America was
the only vibrant economy in the world at that time. The European Allies
were bankrupt, Germany and Japan were destined for imminent physical, as
well as financial, destruction, China was well-nigh destroying itself in
its own internal war between the communists and the nationalists, Russia
was sending the cream of its intellectuals to the gulags, and India was
struggling to regain its independence from the British.
This time, however, America is not the predominant power in the world. No
country is. If America wants a "new world order" -- as prematurely
announced by President Bush Senior in 1991 -- then it will have to be
created by the new world in conjunction with America. Perhaps we'll know
tomorrow when Tim Geithner has had a good night's sleep -- one hopes --
and can listen carefully to what China, Brazil and other countries have
to say. I don't suppose they'd have any objection to the dollar remaining
pre-eminent, so long as it's a stable World dollar and not a
fast-depreciating American dollar.
Keith
Keith Hudson, Saltford, England
----------
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Keith Hudson, Saltford, England
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