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Reason vs. mainstream economics

Reagan and his cronies
Reagan and his cronies

Classical and neoclassical economics are silly. Maybe at times they stumble into a good idea or two, but the foundation is unreal. Let’s just use our common sense for a minute. If a country wants economic development, there has to be high aggregate demand for goods. Without demand, producers will have no reason to supply goods. What’s the surest way to create demand? Let government use its enormous tax revenues and its power to borrow to directly demand products and services (infrastructure development, etc.), to partly redistribute income to those who will use it to buy the most stuff, and to fund and direct public institutions that will contribute to development. For these reasons alone, government has to be the foundation of modern economic progress, as it has been. But it is also needed in the sphere of foreign trade, to establish import tariffs and quotas. After all, development is based on continual improvements in labor productivity. (With more productive labor, output can be greater and relatively cheaper, which brings in more revenue that makes it possible to hire more workers and/or pay them more—if, that is, they organize and force that to happen—which both raises aggregate demand and gives business incentives to raise productivity more, etc. It’s a virtuous circle.) Government therefore should use its unequalled revenues (and power) to direct investment—or encourage it to be directed—where there is the greatest potential for improvements in labor productivity. This might well necessitate tariffs and quotas, to give domestic business a chance to catch up with international competitors who have had a head start. In fact, as it turns out, every country that has ever successfully industrialized has done so through protectionism, heavy government involvement in the economy, and substantial reliance on extra-market mechanisms.[1] This circumstance in itself refutes the dominant conceptions of the dominant modern schools of economic thought.

By the way, computers, plastics, containerization, numerical control of machines, the internet, satellite technology, and biotechnology were all hatched in the "inefficient" state sector. Look it up. We live in a brainwashed, ideologically upside-down society.

[1] See, e.g., Paul Bairoch’s Economics and World History: Myths and Paradoxes (1995), or Richard Du Boff’s Accumulation and Power: An Economic History of the United States (1989). Even Britain, the pioneer, industrialized only by establishing tariffs against Indian cotton while simultaneously colonizing the country and, eventually, forcing it to be a net importer of British cotton goods. And of course cotton-plantation slavery, essential to the early industrial revolution, was a rather egregious violation of market principles. (More accurately, in one sense it was their apotheosis, since it put a price even on human beings; but its reliance on brute force had little in common with the idealized free market.)


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