Friday, December 05, 2008
The end of free market fundamentalism not of the mixed economy (revised)
My earlier lengthy post under this title has been published in terser form over at Online Opinion.
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Market failures arise with certain public goods best provided by natural monopolies... i.e. airlines, trains, urban transport, water, electricity, telecommunications, prisons, hospitals, schools, and at least two banks in a country the size of Australia, one of which should be a specialist rural bank.
With regard to the "four events" contributing to the current financial brothel, the high savings in China are a consequence of a drive to ever greater short-term revenue by US (and our) companies, without looking at any long-term consequences . Thus the export of labour to where it appeared to be the cheapest and compliant, leading to a conspiracy entered into with the connivance of an authoritarian system that could control manpower absolutely and at the same time deliberately massively undervalue its own currency. (The average monthly wage in PRC is 800 Yuan and equivalent to about $100 AUD. No US or Australian enterprise could compete with that scale.)
Ipso facto, the so-called overvaluation of the US dollar goes hand in hand with deliberate and perfidious undervaluation of the Chinese yuan. Hence it's not "savings" in some Calvinistic, moralistic sense of a thrift virtue by the Chinese people, but state-run currency and labour "markets" arbitrage designed to kill off manufacturing industry in the US and Australia.
With regard to massive accumulation of capital in the Middle East oil-producing countries, this is not saving either, as such, but the inability to spend the tsunami of petrodollars coming in. After all, even the richest people have only one mouth and one arsehole, so there is a limit to consumption, solid gold dunny chains notwithstanding.
The US could have started moving itself away from importing oil after 1973 oil shokku as the writing was on the wall then that a dependency on the Middle East satraps was strategically untenable. But again, short-term profit was too much of a temptation. The US's ability to delay gratification is akin to that of a desperate, end-of-the-food-chain junkie. We are not far behind.
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