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THE CONSERVATIVE REVIEW - January 11, 2011
Are We Committing Economic Suicide?
by: William Pfaff
Paris, January 5, 2011 ? Is it a case of murder, or has
the western economy deliberately, if unwittingly, attempt-
ed suicide, and nearly succeeded? John Maynard Keynes was
not just talking about defunct economists when he wrote
that the world is commonly ruled by dead ideas, its
leaders the slaves of the past. He said, "Indeed the
world is ruled by little else." If he were alive today he
could add management consultants and business gurus to
economists as among those responsible for the economic
crisis of the present day.
As 2011 begins, people still talk about the crisis of the
western economy as though we have been the victims of a
blight from nowhere, like Haitians in a hurricane, or
blackbirds in Arkansas. No individual is held guilty for
anything. Certainly not the leaders of finance or business
who insisted that markets know best, or the political
leaders who empowered them.
Thus my suicide argument. Once the Western nations profess-
ed belief in a stakeholder capitalism, which was supposed
to benefit nations as a whole, and whose principal actors
-- managers, employees, labor force, bankers, and customers
? were regarded as a community possessing common interests.
This was the "enlightened capitalism" of the post-second
world war years in the United States and Western Europe.
It was the product of progressive businessmen in the United
States, influenced by the two Roosevelt presidencies ?
Theodore Roosevelt and the Progressive movement early in
the 20th century, and FDR?s New Deal; by enlightened union-
ism in the United States, wartime Labour Party and Fabian
thinking in Britain, Social Democrats and Christian
Democrats on the Continent.
It bestowed upon Americans and West Europeans thirty post-
war years that today are looked back upon as a kind of
golden age of individual prosperity and enrichment,
universal education, and social achievement.
Mine obviously is the opinion of a sympathizer, but many
conservatives in Western countries might in retrospect
concede the economic and social accomplishments of the
West during those years. Certainly it was this democratic
social order that defeated Communism. The so-called
socialist system installed in Eastern Europe and the
Soviet Union at the same time could not withstand
comparison with the system achieved in the West, and
collapsed.
Many factors since then have contributed to the destruct-
ion of the Western version of capitalism, but the most
important for the U.S. was the theoreticians' rejection
of manufacturing -- in its fundamental meaning, the
making of things. In the 1960s it became common to argue
that manufacturing with its associated physical labor and
consumption of raw materials was inappropriate to a modern
society, whose distinctive and determining advantage was
its possession and use of knowledge and its capacity to
innovate.
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The new theory held that an advanced economy should supply
thought, innovation and largely intellectual services to
the world economy, leaving manufacturing to more backward
societies, which then would exploit the resources of
primitive economies. This also eliminated the onerous
demand to pay wages to American workers. Google and Face-
book do not produce mass employment, only mass profits.
Part of the transformation of this period was the acquired
conviction ? influenced by the example of despotism in
wartime societies ? that the state should divest itself
of direct economic intervention. Economies should be
privatized; the alternative would be the road to serfdom.
Prime Minister Margaret Thatcher of Britain ? a pioneer
of privatization ? is supposed to have said, at the time
when the channel tunnel between Britain and Continental
Europe was a controversial project ? that if business felt
the need for such a tunnel, business would build it.
This was a denial of state infrastructure responsibilities;
the influence of this idea is apparent in the present-day
display of infrastructure dilapidation and disintegration
in the United States as well as Britain. The unspoken
(because absurd) assumption has been that if business needs
bridges, highways, airports to meet expanding traffic,
enhanced national power systems, and so forth, business can
be relied upon to build them (even when, as would seem self-
evident, the amortization of national infrastructure invest-
ment vastly exceeds the time-frame in which business
corporations function).
This is one element in the national suicide attempt.
Another was the Virtual Corporation theory, which
encouraged the improvisation of essentially ephemeral
management entities to exploit specific business
opportunities singly or in alliance. Despite its
opportunistic advantages, this destructured the national
economy.
Today the United States, to take the obvious example,
suffers from weak consumer consumption. The lack of
consumption is due to the export of quality manufacturing
employment in the United States and Britain that in the
past drove consumption. Germany and France experimented
with this but drew back. They still are real heavy-
industrial economies making high-value goods sold world-
wide. The U.S. makes weapons, for its own use.
It continues to innovate, but the result is exploited by
foreign low-cost labor, which then buys consumer goods.
This should be no suprise, yet the reality of a virtual
economy, producing only low-employment (even if high
individual value-added) intellectual services seems not
to have been foreseen. One current result is national
and state government impoverishment.
Think of offshore investment funds and kindred innovations
in finance, that generate great wealth for a narrow elite,
and practically no employment for the population. Boeing
recently has nearly destroyed itself through outsourcing.
Practically no corporate taxes are paid to Washington,
since the profits of the new American economy are banked
abroad in tax havens, and used for investment or speculat-
ion abroad. Corporations now are demanding a tax holiday
rate cut to 5% in place of 35% if they repatriate profits.
For practical purposes it seems they don?t want to be
American. The nation and the general population are
impoverished.
(Tribune Media Services International)
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