After reading this, you might wonder why.
After all, Uncle Sam has been injecting a trillion dollar “stimulus” into the economy. To understand why such Keynesian strategies are worse than the disease, I advise you read Robert Higgs' piece in The Beacon, titled “Anatomy of the Current Recession.” He shows how the most important indicator of recovery, private investment, is falling – not despite, but because of, the great government stimulus. I quote:
If real investment spending has taken a huge hit, however, federal government spending has raced ahead in high gear. Between 2007 and 2009, federal purchases of newly produced final goods and services—the federal government’s “contribution” to GDP—increased by more than 13 percent in constant dollars. Unfortunately, whereas private investment is the engine of economic growth, government spending (despite what generations of Keynesian economists have asserted) is the brake. Although increased government purchases by definition increase the measured national product, their substantive effect on the process of sustained economic growth is decidedly detrimental.
In other words, Uncle Sam is engaged in “capital consumption” and the USSA is therefore heading towards “de-civilization.”
Who is their only hope? Of course, Ron Paul. Here is this principled politician and Austro-libertarian writing on what he would do as President if he took over. Note how much trouble he will have dismantling “welfare.” Note how he will put an end to “warfare.” Note how he will kick the shits out of the federal bureaucracy. And note how he will put an end to federal control over education. He also says he will end federal control over the police – who should always be “local.” So there’s the only good politician in America, who swears to stand by the ideals of the US Constitution.
However, the last article I recommend today is by someone who argues, quite tellingly, that the US Constitution was designed to rob the citizens of their property. The author is Tom Mullen, and this is a post from his blog. I got the link from LewRockwell.com. It is well worth a read.
Then think: What do we do about our very own Uncle Sham?
Niall Ferguson is my favourite historian. A historian, who tells the truth, is an absolute rarity, and Niall Ferguson has been doing just that in all his books, articles and TV shows.
ReplyDeleteI would also like to mention this article by another wonderful writer, historian and political commentator, Victor Davis Hanson: http://victorhanson.com/articles/hanson030510.html. It is clear the present generation of Americans are lazy and elitist. They want a life of luxury without having to labour for it.
This generation of Americans are not the ones who created their wealth; they inherited it. And like most inheritors, they are insecure, fat, pampered and are prone to spouting leftist clichés with impunity. These guys lack the character, the sense and the integrity to manage a great empire like America. That is why they are going to loose. It is only a question of time before America becomes a third rate power.
But the problem is that the fledgling Indian democracy continues to be on an American life-support. In a world in which democratic and capitalist America is not a superpower, countries like India will find it very difficult to even continue in existence.
Majority of Indians are still not fully convinced about democracy and free market. Our rural areas continue to be in grip of Nexalites and obsolete traditionalism. Majority of Indians vote on caste and religious lines, and their only aim in life is to squabble for doles from government. Then there is the danger from unruly neighbours like China, Pakistan and others.
Right now the job of international policing is being done by USA, once USA is bankrupted ideologically and financially, there will be no one left to control the ambitions of the rogue dictators.
Decline of USA will lead to the obliteration of democracies around the world. People will loose faith in democracy and capitalism. Leftists will be able to proclaim that their prediction of demise of capitalism has come true. There will be wars more destructive than ever before in human history. We might even go back to a situation where the world gets divided into a number of Soviet Union like blocks. Or there could be unprecedented rise of religious fundamentalism and there could be massive wars in name of religion.
The ending to Niall Ferguson’s article says, “Washington, you have been warned.” But it would have made more sense to me, if the ending had said, “World, you have been warned.”
It is time for Indians to get their act together and develop our ideological and military tools to defend whatever little freedom and democracy we have got. We can’t expect the present generation of jackasses in USA to keep supplying us with capital, ideology, and with troops in places like Afghanistan.
In any case, I am extremely pessimistic about the future. I won’t be surprised, if one fine day, I wake up in India that resembles Oceania and is ruled by Big Brother (1984 by George Orwell, might come true in future).
As always,a wonderful piece. Was reading a column by Bibek Debroy in which he said that it is time we get away with the concurrent list and replace it by a Local bodies list. Too much of centralised regulation is a grave danger!
ReplyDeleteIf I remember correctly, Fergusan was also a big supporter of Iraq invasion, one of the key reasons behind US debacle. So, I will take any forecast by him with a kilo of salt.
ReplyDelete@Anoop Verma. Very well put.
ReplyDelete@Sauvik. I have a question that you may be to answer in one of your future posts. Everytime this talk comes up about public spending crowding out private investment, intelligenstia like Paul Krugman berate everybody that it is not the case, how this theory has been discredited. I remember last year when Eugene Fama mentioned this, Krugman belittled him by saying something to the effect of being ignorant. I tried to understand the opposing point view of how this is not the case but couldn't. Can you please explain the controversy?
Thanks,
Ravi.
Thanks for posting, I visit your blog daily
ReplyDeletePaul Krugman is probably the only famous economist in the world who continues to be supporter of Keynesian Economics.
ReplyDeleteSomeone should fund his trip to Zimbabwe, so that he can see with his own eyes that Keynesian Economics leads to massive inflation and a hopeless amount of poverty.
@Anoop:
ReplyDeleteWhy Zimbabwe?: Paul Krugman should be able to see the failure of Keynesianism in the USSA itself!
@Ravi: Keynesians and Austrians see the world differently, very differently.
For the Keynesians, money is a creation of The State and "macroeconomics" is the "knowledge" that The State employs the manipulate its controls over money supply in order to create "full employment."
For the Austrians, money is the gold and silver coins that people have been using on their own for millennia. To us, Macroeconomics is FICTION. And we don't think too much of mainstream "microeconomics" either.
Further, Keynesians emphasize CONSUMPTION - so they believe in "deficit financing" which will put money in the hands of the people in order to keep "aggregate demand" high.
Austrians emphasize SAVING, which goes into INVESTMENT. This is the ENGINE OF GROWTH.
Further, Austrians say that State control over money supply is the cause of booms and busts, of the endless "business cycle," of inflation, and capital consumption. That is, Keynesianism is the highway to de-civilization.
For a concise article of mine on the difference between Austrians and Keynesians on money, see:
http://www.livemint.com/articles/2009/04/22210034/Social-science-bottomup.html
hope this helps.
I mentioned Zimbabwe because this country has now reached the climax of Keynesian economics.
ReplyDeleteRate of inflation in this hapless country is above 231,000,000% and all that the govt. does is print more money, which is only good enough to be used as toilet paper.
US and countries like India are still about 5-10 years away from the climax and complete meltdown.