POLITICS UNHELPFUL IN REFORMS OF ECONOMICS

Rene E. Ofreneo posts (11 October) on Business Monitor HERE 

“The trouble is that the welfare state system has been eroding.  Economic globalization and the shift in economic thinking favoring free-wheeling neo-liberal economics are the culprits. The welfare state system is even on the brink of collapse in some European countries due to the global financial crisis, with the Austerians managing to control the levers of policy-making. This, in brief, is the reason the debates on the future of the capitalist system have been intensifying, not easing.

One of those engaged in the global debates is Prof. Robert Reich, US labor secretary under President Bill Clinton. In Saving Capitalism (2016), Reich argued for the need to reform America’s corporate system in order to save capitalism “for the many, not the few”. He demolished the old argument of “free traders” seeking less government role in business and in shaping the economic directions of society, stating that no “free market” is possible without government.  Further, he pointed out that the “invisible hand” in the market is not really that invisible; it “is connected to a wealthy and muscular arm” of the corporations.  Those who argue for free market are the ones trying to influence the market for themselves. Reich went on to outline how the American big corporations and their CEOs are able to manipulate the market and the politicians, monopolize products ranging from agriculture seeds to ICT data, hollow out manufacturing by outsourcing everything, organize business to maximize returns to shareholders, and minimize taxes for the rich.  An ex-Cabinet man, Reich concluded that the so-called free market system is really an alliance between Wall Street and Washington.

So what is Reich’s proposed alternative?  A return to Keynesian model of development where the government leads in designing, organizing and enforcing the market to meet the needs of the many, not the few.  He also argues for a fairer sharing of present and future wealth, not through a simple higher taxation for the rich but through an assurance that every citizen shall have a basic decent income.

Is this vision of economic governance possible in America?  In Europe? In the Philippines?  The answer lies in the collective hands of the millennials and the next generation.”

COMMENT

Professor Paul Reich is a product of his the economics that his generation absorbed from Paul Samuelson’s economics, which in turn were misappropriated from a misreading of Adam Smith’s singular use of the two metaphoric words, ‘invisible hand’, in his Wealth of Nations.  Rene E. Ofreneo, the author of the above piece adds to the speculative confusion, with his politics that says nothing about the solutions to the identified problem. 

I think it is time to anticipate a theme in my Authentic Account about what Adam Smith actually meant in his use of the ‘invisible hand” metaphor. So later today I shall publish a brief extract from my explanation on Lost Legacy.

It won’t solve the problems of the world’s economies, but it will remove one area of muddled modern thinking about its causes.