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Wednesday, 28 August 2013

Khrushchev and his stupid stupid ideas about capitalism and America!

Bob! Cc: others

I take these economic policy things too seriously to let that one slide by, so here goes my humble opinion and wickedly cryptic thought process!

America in reality saved the Russians from certain financial disaster. Barack Obama is the best friend the Russians could have at the present time, not because he is a socialist, but because he is a liberal thinker, just like me and all my real friends. Russia never had it so good and its not because of Putin or Khrushchev. Vladimir Putin is a disaster for Russia and is like George Bush, a man with little real positive power for good, a weakling as a statesman and one who, in my humble opinion, belongs on the rubbish heap of history. Russia could be a great power, but not under its present Putin leadership which is totally crappy, in my view!

The ignorant Russian Khrushchev had no idea about socialism or economics and should never have been given access to such a powerful position appearing before the UN and threatening the world with nuclear holocaust. He was a stupid tired and cranky old alcoholic. Shows how adrift the Russian system took their people. He may even have been responsible for President Kennedy's death?

The use of the terms capitalism, socialism, and communism really date one. These are no longer concepts that have much analytical merit and belong in the detritus of past mistakes at understanding the basic organisation of economies and societies.

The authority on the decline of capitalism and the rise of socialism is the highly respected business cycle economist Joseph Schumpeter a former economic history professor at Harvard and in my view a genius ranking along with Veblen, Marx, Hayek, Lord Kahn, Lord Keynes (Cambridge), Lord Kaldor and Milton Friedman (Chicago).

As an economic thinker and analyst, Joseph Schumpeter introduced technology and innovation into capitalist business cycle theory. His understanding of economic growth processes was remarkable. Few modern historians and economists can match his breadth of research and analytical skills. He was, however, weak in his overall understanding of banking seeing it mainly from the viewpoint of technology and innovation. In other words, he was a poor balance sheet manager and accountant. He even caused a bank to collapse?

On the other hand, :) Lord Keynes saw the general economic employment system as a zero sum short term game, in the 1930's trumping Schumpeter in academic popularity who had a clearer idea of the long term, but John Keynes failed to understand industry dynamics and how much employment would be driven by the international distribution of human and material resources with banks, firms and governments breaking all the rules in a relentless drive towards unambiguous control.

My political science Professor Gad Horowitz at McGill told me that economists trying to understand socialism was a lost cause and then proceeded to point me in the direction of the Marxist theorist Herbert Marcuse who accurately said technology ruled the roost. However, I don't think Gad was right in his thinking about Schumpeterian economics, which has mostly stood the test of time. Schumpeter was 'the' expert on the decline of capitalism and the rise of socialism, and he wrote the book 'Capitalism, Socialism and Democracy'.

I have immense respect for the Schumpeterian approach to understand the rise and fall of firm-based industries, markets and products within the capitalist system. In time, the capitalist system with government support has succeeded. It would have failed without government support in subsidizing basic research and science. It fails, for example, now to grasp the weakness of economic growth emerging from cell phone technology that despite obscene profits cannot begin to undertake the social health research necessary and that after a major crisis in the future will inevitably be subsidised by governments.

What Schumpeter foresaw that Marx missed was the critical role of product differentiation and new product innovation. Socialist ideas fail when they do not include technology innovation. Our ideas about capitalism also fail for a similar reason that they do not take into account the critical role of government in science. Without governments footing the bill, capitalism and socialism would both be completely on the scrap heap of historical concepts.

My own dissertation showed the application of concepts of Schumpeterian competitive destruction dynamics to high technology industrial cycles in Britain over forty years.

Lord Kaldor, a Hungarian, was my faculty adviser at Cambridge, a gifted orator, and the inventor of the details of the consumption tax. The historian Professor Grant was my tutor along with Michael Posner a member of Harold Wilson's cabinet (who incidentally sang for several years in the Balliol choir section in Oxford University alongside my father, and regularly played pool with him in the evenings at Mansfield College). My father was an out and out socialist who worked in the Montreal docks and labour relations boards to see that sailors, dock workers and seamen were treated fairly. Dad saw capitalism for what it is, a system of exploitation of working people. That concept has stood the test of time.

Lord Kaldor was a genius in the economics of growth and particularly the relationship between population growth and market productivity.

You must realise that socialism was defined by Marx / Engels and the anti-capitalists is a situation of interest rates approaching zero. Many uneducated American economists don't understand the slightest concept of socialism or economic development, which is why they appear so funny to those that do. Some would say that because interest rates are close to zero, we must have socialism?

American law is currently in the process of deflating the US economy by handsomely fining those banks that caused the problems of bad loans / assets. When those banks have paid up the huge amounts that they owe the American people, then money supply and government debt can gradually return to a more normal level. This shrinkage will lead to higher interest rates and the American government debt will again become very manageable. The problem is the leakage of US dollars overseas, which will lead to further deflations and devaluations in countries such as Brazil and India as banks waste futures.

What has caused the American debt to balloon has been spending on the US military and that has shrunk the non military capitalist economy relative to what it should have been. The Reagan years of military build up were only a more recent expression of why American capitalism has been unable to achieve its domestic productivity potential and used China as an escape hatch to keep profits high.

Obama has produced a capitalist economy par excellence when defined in terms of the real interest rate used by all Marxist economics, namely the rate of profit. Obama is the antithesis of socialism and the greatest expression / exponent of American liberalism and small scale capitalism. American bankers, however, are the creators of socialist forces seeing that they require huge government subsidies to survive, when in reality they should be allowed to fail. It will be interesting to see whether high interest rates lead to wholescale banking collapses which is what one would expect from banks that don't have the slightest idea about effective balance sheet management.

Khrushchev would not understand why capitalism has succeeded so magnificently under the management of a black man. Obama has saved the US economy from ruin in many ways! The lawyers will do the rest. President Bush his predecessor was in my opinion really a very stupid man.

Yes! President Barak Obama is the greatest capitalist president ever, for many many reasons! He saved the American automobile industry from almost certain collapse.

Sorry to disappoint the bastard Khrushchev!

Arthur

Wednesday, 28 August 2013

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