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Economy
Related: About this forumBubbles Always Burst: the Education of an Economist - Michael Hudson
...(Long, Good Read)...... I quickly discovered that of all the subdisciplines of economics, international trade theory was the silliest. Gunboats and military spending make no appearance in this theorizing, nor do the all-important errors and omissions, capital flight, smuggling, or fictitious transfer pricing for tax avoidance. These elisions are needed to steer trade theory toward the perverse and destructive conclusion that any country can pay any amount of debt, simply by lowering wages enough to pay creditors. All that seems to be needed is sufficient devaluation (what mainly is devalued is the cost of local labor), or lowering wages by labor market reforms and austerity programs. This theory has been proved false everywhere it has been applied, but it remains the essence of IMF orthodoxy.
Academic monetary theory is even worse. Milton Friedmans Chicago School relates the money supply only to commodity prices and wages, not to asset prices for real estate, stocks and bonds. It pretends that money and credit are lent to business for investment in capital goods and new hiring, not to buy real estate, stocks and bonds. There is little attempt to take into account the debt service that must be paid on this credit, diverting spending away from consumer goods and tangible capital goods. So I found academic theory to be the reverse of how the world actually works. None of my professors had enough real-world experience in banking or Wall Street to notice.
I spent three years at the New School developing an analysis of why the global economy is polarizing rather than converging. I found that mercantilist economic theories already in the 18th century were ahead of todays mainstream in many ways. I also saw how much more clearly early economists recognized the problems of governments (or others) relying on creditors for policy advice. As Adam Smith explained, a creditor of the public, considered merely as such, has no interest in the good condition of any particular portion of land, or in the good management of any particular portion of capital stock. He has no inspection of it. He can have no care about it. Its ruin may in some cases be unknown to him, and cannot directly affect him.
The bondholders interest is solely to extricate as much as they can as quickly as possible with little concern for the social devastation they cause. Yet they have managed to sell the idea that sovereign nations as well as individuals have a moral obligation to pay debts, even to act on behalf of creditors instead of their domestic populations...
... The disabling force of debt was recognized more clearly in the 18th and 19th centuries (not to mention four thousand years ago in the Bronze Age). This has led pro-creditor economists to exclude the history of economic thought from the curriculum. Mainstream economics has become blindly pro-creditor, pro-austerity (that is, anti-labor) and anti-government (except for insisting on the need for taxpayer bailouts of the largest banks and savers). Yet it has captured Congressional policy, universities and the mass media to broadcast a false map of how economies work. So most people see reality as written by the One Percent, and it is a travesty of reality.
Spouting ostensible free market ideology, the pro-creditor mainstream rejects what the classical economic reformers actually wrote. One is left to choose between central planning by a public bureaucracy, or even more centralized planning by Wall Streets financial bureaucracy. The middle ground of a mixed public/private economy has been all but forgotten, denounced as socialism. Yet every successful economy in history has been a mixed economy.
/... http://www.counterpunch.org/2015/09/28/bubbles-always-burst-the-education-of-an-economist/
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Bubbles Always Burst: the Education of an Economist - Michael Hudson (Original Post)
Ghost Dog
Sep 2015
OP
DemReadingDU
(16,000 posts)1. Interesting background and work of Michael Hudson
Thanks for sharing!
Hudson's new digital book can be ordered online via Counterpunch:
Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy
http://store.counterpunch.org/product/killing-the-host-digital-book/
More interesting digital books at Counterpunch
http://store.counterpunch.org/product-category/books/
Ghost Dog
(16,881 posts)2. Yes, interesting background on the man & his academic work.
Thanks for commenting!