For your edification, I present a few remarks by famed
economic historian Niall Ferguson. Interviewed for an audio documentary on the
health of capitalism, Ferguson addressed a number of important issues in political economy. The link will take you to the video itself. For our
purposes, I quote the transcript. I take full responsibility for the questions: they may be slightly different from the interviewer's, but they provide some narrative connective tissue.
Question 1: Was the Trump election a rejection of
capitalism?
Ferguson:
In
recent elections we didn’t see a rejection of capitalism. The victory of Donald
Trump, in particular, was the election of a capitalist to the highest office in
US politics. Trump’s critique wasn’t of capitalism but of globalisation and its
various manifestations – notably free trade as it has been constituted and
immigration, and out-sourcing. The backlash we have seen from within certain
advanced democracies has largely been against a globalisation that occurred too
quickly, and without adequate checks and balances – rather than a reaction
against the economic system that overcame socialism in the 1980s.
Capitalism is one thing. Free trade and globalization are
others. It’s one thing to be against free trade and quite another to be against
the way certain trade deals were negotiated.
Question 2: Why has unionization declined?
Ferguson:
The
decline of unionisation doesn’t explain falling wages at bottom end – it’s
simply a reflection of declining demand for unskilled labour, especially in
developed countries. Most deserving of blame are the education systems in
developed countries – the US & UK in particular – where, despite more and
more taxpayers’ money being spent, rates of literacy and numeracy are actually
going backwards for large numbers of children. National governments are simply
failing to prepare their citizens for the new economy and research by Raj Chetty, a
colleague at Stanford, shows the significant contribution of bad schools
and bad teachers to widening inequality in US.
Our educational systems have failed to produce workers who
are capable of doing the more technical jobs that are now being offered. America has a
bad schools and bad teacher problem. We are not, he suggests, going to fix it
by increasing the power of unions. Certainly, not by empowering the teachers' unions.
Question 3: What’s wrong with western economies?
Ferguson:
As I
argued in The
Great Degeneration, the current weakness of much of the western
world isn’t rooted in capitalism but in fundamental weaknesses of the State –
including its structural fiscal deficits, complex and burdensome regulation,
and world-trailing public services, where even some gains in public health
are being reversed. State failure is not capitalism’s fault – but the fault of
inadequate politicians, ineffective public administrators and and public sector
unions that are too powerful.
Then again, if you work for the government or if you believe
that we need government to control greedy predatory capitalists you will never find fault with government. Ferguson retorts that the problem lies with
the state and with the public sector unions that control the bureaucracy.
Question 4: What lessons did we learn from the market crash
in 2008?
Ferguson:
We’re
learning precisely the wrong lessons from the crash by embracing the “silly”
but easily understood argument that we need more regulation. The crash of ten
years ago began in the part of the financial sector – the banks – where
regulations existed “in profusion”. The crash didn’t come from the
largely-unregulated hedge funs, who worried regulators before the events of
2007 and 2008. Because the regulations were so complex the banks gamed
them.
And also:
The
real explanation for the crash lies in the cosy relationship with the State
that the complex regulations brought about. Banks were able to behave as
recklessly as they did because they calculated (correctly in all cases but
Lehmans) that they were too big for the State to let them fail. Although
friends of capitalism have this more accurate explanation for the crash – of
excessive closeness between regulators, politicians and the banks on Wall
Street and in the City of London, the “fairy story” put about by the likes of
Paul Krugman, that it was all about deregulated markets has gained credibility
because it’s simple. The result is, since the crash, we’ve learnt precisely the
wrong lesson and enacted enormous amounts of extra regulation – which is, at
best, “besides the point” and, at worst, damaging and encouraging of moral
hazard.
We understand that politicians like Elizabeth Warren and
Bernie Sanders are making a very good living by promoting more regulation of
banks and markets. Ferguson makes the salient point, namely that the crash and great recession arose in the hyper-regulated banks, not in the far less regulated hedge fund
industry. He adds that the multitude of regulations caused
the banks to game the system. Twas always thus. As Confucius said, over-regulation dulls the moral sense.
Question 5: Is capitalism in crisis?
Ferguson:
The big
problem is not that capitalism is in crisis (because it’s not). The big problem
is that socialism is making a comeback. Fed by the post-crash narrative,
younger voters, who have no memory of the economic troubles of 1970s and the
turnaround of the 1980s, are ready to embrace Jeremy Corbyn and his promises of
jam tomorrow, jam the day after and regulations to stop anything and everything
they don’t like. You only need to spend a day studying economic history, or the
current economic breakdown in Venezuela to realise the danger he represents
One recalls the old song: When will they ever learn? When
will Western progressives get over their love affair with socialism? Communism failed
and failed miserably. Cuba has failed. Venezuela is in a death spiral. Yet,
Jeremy Corbyn and Bernie Sanders want to give us more socialism.
They are addressing themselves to an economically illiterate
millennial generation, a generation that knows nothing of history but that believes itself entitled to a living without working too much or too hard.
Good luck with that.
Paullie "The Beard" Krugman: Wrong when he's right, and right when he's wrong, because he writes contradictory stories out of phase.
ReplyDeleteFree trade is a boon for multinational corporations looking for low-cost labor. The same thing is not good for working class people in developed countries. It's all about labor arbitrage. Follow the money... what the political class calls "free trade" is a scam.
ReplyDeleteComrade Chesterton, do you really want to pay more rubles for your beet vodka? Suggest strongly you either get a job or let the market sort things out.
ReplyDeleteMr. Fisher. Sarcasm is not reasoned argumentation. If you wish to promote your point of view, state it clearly.
ReplyDeleteFerguson is correct. Read John Grey's "False Dawn". -- Rich Lara
WRT item 2, More and more money and it still seems to work fine in grades K-8, after that either the decline is due to demographics or the parents decide to take their bright high achieving 9-12 graders and send them to the very fine local private high schools. 6 years ago the local high school was an 8 on the system used by zillo. It's now down to a six and falling.
ReplyDeleteI'm hardly a communist, Mr. Fisher. Ask anyone here.
ReplyDeleteI just have a sense that an American citizen should have opportunity, and be justly compensated for their imaginination/ingenuity and, just as importantly, their labor.
Our elites have abandoned that idea for a money-changing economy over the last 40 years (largely favored by GOPe), and the results have been disastrous. Meanwhile, the vast expansion of the administrative state has enabled elites (largely Democrats) to feel good about how they're protecting "the little guy." Hardly. Both forces have conspired to make things much worse for economic opportunity in America. The Demoblican and Republicrat Uniparty is destroying American economic opportunity, all driven by a centralized control from (and for the benefit of) the District of Columbia.
Simplistic? Perhaps. But this is a comment on a blog, and I am enjoying my Sunday off from the outstanding job that I do, in fact, have.
I hope we can agree that coordinated political meddling can distort a market and create massive inefficiencies. A phony macroeconomic command-and-control economy operated for the the benefit of Washington, D.C. is the sort of market distortion I speak of. And it would seem that our political class is sorting things out to their own distinct advantage. I do not approve of this.
If you'd like to go down the road toward the laissez-faire theoretical universe, have at it. The "market" is an ass. We are the market, and we as citizens can choose how we want the market rules to benefit our fellow citizens. What Republicans and Democrats today call a "free market" is distorted by (a) a grotesque, labyrinthine regulatory and tax system that benefits (b) insider professional groups, bureaucrats and the political class, while simultaneously pushing (c) a trade regime with carve-outs and set-asides paid for with campaign and lobbying dollars, through transactions processed by (d) corporatist politico-macroeconomic banking interests. How else do our legislators become millionaires in short order? This is no free market... it is a circular economy benefiting white collar sycophants.
A multinational corporation like Ford Motor Company building a plant a few miles into Mexico is not "free trade." It's graft legitimized by horrible free trade agreements. Shipping manufacturing capacity over to China solely for cheap labor is not "free trade." It's labor arbitrage. Moving a plant to Thailand to avoid environmental regulations is not "free trade." It is moral subterfuge. All these mechanisms impact American citizens in middle class jobs, and close opportunities to enter the labor economy for those seeking/holding lower class jobs.
One might retort that they should work harder and/or get an education. You can't just work harder against Indonesian labor rates. And you can't get a good education in middle class or lower class areas because oururban and rural public schools are a disaster. And then, to add insult to injury, you have the laissez-fairies at the Wall Street Journal, U.S. Chamber of Commerce and Democrat Party plugging for open borders, even while our government entitlement benefits are tied to the nation-state, (under-)funded by our representatives through deficit spending now totaling $20T.
I invite you to at least consider what the corruption of your precious "market" is doing to other people's jobs, and how that impacts people who have been abandoned by our corporatist political system, accelerated under that great man of the people -- President Obama.
Is capitalism dying? Wellllll, not yet, but there are a lot of Brutuses out there with the intent to kill Julius Capitalus.
ReplyDelete