Disappointed in Austrian EconomicsSubmitted by dimaniac on Sun, 11/28/2010 - 11:05
First some axioms:
1) Existence/continuity AND progress of humanity
2) well-being of individuals is less important than 1)
I was big fan of Peter Schiff and I still listen to his show but I don't consider myself austrian anymore, I think that Soros's reflexivity theory has better explanation of economics.
In my opinion both Austrian and Keynesian explanations of Great Depression are wrong. Austrians blame government and Keynesians blame free market. In reality only humans can be blamed for it. "Goal of economy is to eliminate all jobs" - Peter Schiff(I think he doesn't fully understand what he said) "I create nothing. I own" - Gordon Gekko. Capitalism means that people who own means of production can live without working, they can just collect dividends. More important is that means of production evolve much faster than humans. Human evolution is too slow. Sometime in the future working class will become extinct. Normally this extinction process would be carried out through savings and investing of workers and then capital will be transfered to their children. But it's not smooth process. Some people make mistakes when investing and some people(i believe they are majority) do not even realize that they should save and invest. if this happens they either starve to death, rob other people and go to jail, or charity helps them. Problems begin when too many people loose their jobs and don't have savings. That happened during Great Depression. Yes, federal reserve created bubble that popped in 1929. But what Murray Rothbard wrote about Hoover interventionism is wrong. Two examples of government intervention that austrians usually use are fixed wages and trade war. Fixed wages argument refuted here by dsglop http://www.youtube.com/watch?v=tBqjdbLFfGQ
Also Murphy says in that video that wages were fixed because Hoover called to businessmen and asked for it. However in this video http://www.youtube.com/watch?v=zPbaA3V41sc at 15:08 historian David Kennedy says that Hoover called to businesmen in 1921 and it is ended Depression of 1921 while austrians believe that lack of government intervention and free market help US economy get out of this depression. So either Hoover had magic powers and could stop depression of 1921 AND prevent businessmen from lowering wages or free market fixed itself in 1921 AND it fixed itself in first years of Great Depression except that according pure abstract economics those 25% of workers that were unemployed were unnecessary and should have been removed from economy.
2nd argument refuted here http://www.exponentialimprovement.com/cms/smoot.shtml
and here http://www.economics-charts.com/gdp/gdp-1929-2004.html
exports were only 5% of GDP, trade war couldn't impact US economy.
Government didn't cause Great Depression. Neither did free-maket. Humans caused Great Depression. Specifically working class. Market worked very well. Economy was completely restructured by 1933. But there was 25% unemployment. Real free-market solution would be to kill those workers(or let them starve to death). Because they can't adapt fast enough. Humans are obsolete. They can't keep up with progress. Even without minimum wage there was no place for them in economy. Free market economy ensures fastest economic growth. But humans are unnecessary for economy. Machines can completely replace human labor. therefore free market doesn't guarantee that there will always be demand for human workers. And because free market doesn't care about humans only about efficiency and gross output human capitalists will be eventually replaced too by uncontrollable AI(like in matrix, terminator, etc.) Economy simply doesn't need any humans.
Austrians believe that Roosevelt was evil, however he was forced to try to save those unnecessary 25% of workers otherwise they would probably destroy system. But Great Depression happened worldwide, many people couldn't find jobs, and capitalists didn't do enough to save them. I believe that's one of major reasons of WWII, technological advancements and capital accumulation lead to millions of workers that economy didn't need and those millions killed each other plus enough capital was destroyed so demand for previously unemployed workers was created again. Great Depression is very similar to what is happening these days. So i think it is possible that there will be WW3 in next 5-10 years if nothing will be done to deal with excessive human supply.
I also believe that markets are inherently unstable, usually they can fix themselves, but bubbles can also occur without government intervention. Problem with Soros's reflexivity theory is that while there were numerous market bubbles without government intervention there were very few(if any) that actually caused major damage to economy(2-way feedback mechanism - bubbles affect real economy). There was at least one such example in geopolitics - WWII. Germans and Japanese created bubble of national supremacy that badly damaged Allies and after it popped it caused even bigger damage to Axis. Even if Pearl Harbor was inside job it was necessary because otherwise Germany would get access to nuclear weapons and possibly destroy the world. Soros blames dotcom and housing bubbles on free market but he clearly lies because he said in several interviews that Greenspan is biggest market manipulator. Even Paul McCulley from PIMCO who is also believer in free market's tendency towards bubbles said in 2001 that Greenspan was responsible for both dotcom and future housing bubble. I think that Soros does it probably because he can't explain it to public in simple terms.
Possible solutions to these free market problems
1 NWO. There should be one world government that controls WMDs, ecology and things like that. Strongest countries should take responsibility of policing the world. If some governments refuse to comply they must be destroyed.
2 Not only FED should have responsible monetary policy but government should have instruments for suppressing bubbles.
3 People that can't find work and depend on government should have handouts/living wage as low as possible(just enough for food, cheap apartments, very basic medicine, tv, internet, prostitutes, i.e. "bread and circuses")
4 Strict population growth control(sterilization, vasectomy, etc.) is required for sustainability of economy, rich people can have as many children as they can support
5 no additional care for poor older people
6 legalization of euthanasia, smoking, alcholol, heavy drugs, abortion for people that depend on government
7 there probably should be some voting restrictions because people who depend on government will vote for greater share of income(which is normally reinvested to grow economy) and will slow progress while rich people would vote for less government and taxes which threatens stability and existence of humanity. However it's unclear how such system could be implemented since watchdogs are humans too, they are biased and fallible...
It's hard to accept but we libertarians indeed are cult members :) Rothbard, Schiff, Ron Paul, Jim Rogers are all wrong. However nobody can deny fact that free market capitalism ensures fastest economic growth. So government intervention is needed but only to prevent system from collapse, everything else should be left to free market.
PS Sorry for broken english, it's not my first language.
Zbigniew Brzezinski has similar concept Tittytainment
20 percent of the working age population will be enough in the coming century to keep the world economy going. "More workers will not be needed", said magnate Washington SyCip. A fifth of all jobseekers will be enough to produce all the goods and perform all the top-flight services that the world society can afford....
from deleted wikipedia article
The word “tittytainment” was coined for the first time in 1995 by the neo-liberal ideologue Zbigniew Brzezinski, member of the Trilateral Commission and ex-national security adviser of United States President Jimmy Carter, during the conclusion of the first “State of the World Forum”, which was hosted at the Fairmont Hotel in the city of San Francisco. The objective of this meeting was to determine the state of the world, suggest desirable objectives and principal activities to achieve them, and to establish global politics to match them. The attendees to this meeting (Mikhail Gorbachev, George Bush, Margaret Thatcher, Václav Havel, Bill Gates, Ted Turner, etc.) arrived at the conclusion that a 20:80 society is inevitable. This means that the work provided by 20% of the world population would be sufficient to sustain the world economy, while the other 80% would be without work or opportunities, nourishing a growing frustration.