Recently the WSJ editorial page had a letter to the editor from a devoted reader in La Jolla, California. He asked a pointed question, you know the type, the dangerous inquiry that excoriates the philosophical foundation of Keynesian thought.
The celebrated question was simple. If macroeconomics is so great, why don’t we prosper?
The answer has to do with capital flows, tax rates, the impact of technology and the third rail of politics; the social mandates that are corrupting State/Federal fiscal balance sheets which Congress is unwilling to reform.
Capital flows to Mexico, Central America, Africa and Asia are well known. What isn’t is the impact of tax rates on multinationals, or torts, or how about the impact regulations have on start-ups. I didn’t even get to our reluctant education system or the implicit redistributionist psychology that animates the monetary, fiscal convictions of contemporary progressives. How else to say it: the whole damn thing’s a mess.
Concerning China’s artificially high capital inflows artificially maintaining our standard of living until the world’s reserve currency ‘status’ is no longer. Readers of this blog know that the American political economy has been in negative territory for decades.
Our private-sector debt is currently 348% of GDP. THIS DOSEN’T ACCOUNT FOR OUR UNFUNDED LIABILITIES OF MEDICARE, SOCIAL SECURITY, PRESCRIPTION DRUG BENEFITS ETC. . .
We don’t pursue pro-growth policies that actually increase productivity.
Instead we’ve become militants of past revolutionary regimes (all failed) that seek to redress issues fit for theologians. Instead of permitting our citizens the liberty to acquire capital/equity formation, we’ve got politically allocated forms of subsidized credit flowing out from ‘fat-boy govmint‘. Our monetary expansions and over-leveraged credit manias only happen in ‘bubbles’ of subsidized credit not wage growth or productivity.
We ignore our perennial account deficits that would cripple any Civilization.
And why do we do this to ourselves.
Hayek’s philosophical pronouncement of a dangerous hubris, a ‘fatal conceit’ lies at the heart of western civilization. Its always been there, its contemporary character still resonates an egalitarian, nearly totalitarian posture.
For capitalist mercantile political economies, this ‘fatal conceit’ is discovered by examining the contours of our desperate need for radical militant autonomy. For the self-correcting and self-immunizating benefits of market cycles have been stilted by a humanist temptation/compulsion to control free markets (and by extension, liberty itself) and with it economic growth.
So much for calling philosophy ephemeral.