The Global Economy Is a Giant Ponzi Scheme

[eridani]

http://readersupportednews.org/opinion2/277-75/35966-the-global-economy-is-a-giant-ponzi-scheme

HUDSON: The essence of classical economics was to reform industrial capitalism, to streamline it, and to free the European economies from the legacy of feudalism. The legacy of feudalism was landlords extracting land-rent, and living as a class that took income without producing anything. Also, banks that were not funding industry. The leading industrialists from James Watt, with his steam engine, to the railroads …

HEDGES: From your book you make the point that banks almost never funded industry.

HUDSON: That’s the point: They never have. By the time you got to Marx later in the 19th century, you had a discussion, largely in Germany, over how to make banks do something they did not do under feudalism. Right now we’re having the economic surplus being drained not by the landlords but also by banks and bondholders.

Adam Smith was very much against colonialism because that lead to wars, and wars led to public debt. He said the solution to prevent this financial class of bondholders burdening the economy by imposing more and more taxes on consumer goods every time they went to war was to finance wars on a pay-as-you-go basis. Instead of borrowing, you’d tax the people. Then, he thought, if everybody felt the burden of war in the form of paying taxes, they’d be against it. Well, it took all of the 19th century to fight for democracy and to extend the vote so that instead of landlords controlling Parliament and its law-making and tax system through the House of Lords, you’d extend the vote to labor, to women and everybody. The theory was that society as a whole would vote in its self-interest. It would vote for the 99 Percent, not for the One Percent.

By the time Marx wrote in the 1870s, he could see what was happening in Germany. German banks were trying to make money in conjunction with the government, by lending to heavy industry, largely to the military-industrial complex.

HEDGES: This was Bismarck’s kind of social – I don’t know what we’d call it. It was a form of capitalist socialism…

HUDSON: They called it State Capitalism. There was a long discussion by Engels, saying, wait a minute. We’re for Socialism. State Capitalism isn’t what we mean by socialism. There are two kinds of state-oriented–.

HEDGES: I’m going to interject that there was a kind of brilliance behind Bismarck’s policy because he created state pensions, he provided health benefits, and he directed banking toward industry, toward the industrialization of Germany which, as you point out, was very different in Britain and the United States.

[Gregorian]

1. Fantastic article

I thought this was outstanding-



The parasite can’t simply come in and take something. First of all, it needs to numb the host. It has an enzyme so that the host doesn’t realize the parasite’s there. And then the parasites have another enzyme that takes over the host’s brain. It makes the host imagine that the parasite is part of its own body, actually part of itself and hence to be protected.

That’s basically what Wall Street has done. It depicts itself as part of the economy. Not as a wrapping around it, not as external to it, but actually the part that’s helping the body grow, and that actually is responsible for most of the growth. But in fact it’s the parasite that is taking over the growth.

The result is an inversion of classical economics. It turns Adam Smith upside down. It says what the classical economists said was unproductive – parasitism – actually is the real economy. And that the parasites are labor and industry that get in the way of what the parasite wants – which is to reproduce itself, not help the host, that is, labor and capital.

[Hugin]

2. That really hits home the scheme of things.

Wow.

[Ghost Dog]

3. Succinct, accurate, must read.

... HUDSON: Here’s what happened. Marx traumatized classical economics by taking the concepts of Adam Smith and John Stuart Mill and others, and pushing them to their logical conclusion.

Progressive capitalist advocates – Ricardian socialists such as John Stuart Mill – wanted to tax away the land or nationalize it. Marx wanted governments to take over heavy industry and build infrastructure to provide low-cost and ultimately free basic services. This was traumatizing the landlord class and the One Percent. And they fought back. They wanted to make everything part of “the market,” which functioned on credit supplied by them and paid rent to them.

None of the classical economists imagined how the feudal interests – these great vested interests that had all the land and money – actually would fight back and succeed. They thought that the future was going to belong to capital and labor. But by the late 19th century, certainly in America, people like John Bates Clark came out with a completely different theory, rejecting the classical economics of Adam Smith, the Physiocrats and John Stuart Mill.

HEDGES: Physiocrats are, you’ve tried to explain, the enlightened French economists.

HUDSON: The common denominator among all these classical economists was the distinction between earned income and unearned income. Unearned income was rent and interest. Earned incomes were wages and profits. But John Bates Clark came and said that there’s no such thing as unearned income. He said that the landlord actually earns his rent by taking the effort to provide a house and land to renters, while banks provide credit to earn their interest. Every kind of income is thus “earned,” and everybody earns their income. So everybody who accumulates wealth, by definition, according to his formulas, get rich by adding to what is now called Gross Domestic Product (GDP).

HEDGES: One of the points you make in Killing the Host which I liked was that in almost all cases, those who had the capacity to make money parasitically off interest and rent had either – if you go back to the origins – looted and seized the land by force, or inherited it.

HUDSON: That’s correct. In other words, their income is unearned. The result of this anti-classical revolution you had just before World War I was that today, almost all the economic growth in the last decade has gone to the One Percent...

[Hydra]

4. This is a great read, and why things will collapse at some point (soon) n/t