Myths About The Economy

Dr. Michael LaitmanOpinion (Sergei Cherkasov):Economists claim to be scientists. But if the economy were a science, it should have predictive power. How distant the economists’ forecasts of life are is well known … .

“If we look at the abundance of large schools and small sects who can not reconcile their points of view, then it seems that the economy – is not a science, but faith, each sect with their own myths. …

“Particularly active in the market of neoliberal economic ideas, Russia is no exception. Since the time of Adam Smith, the Liberals believe in the “invisible hand of the market,” which will handle everything itself. …

The first myth. ‘The economy must be economical!’ …

“It starts usually with the mantra that it is time to tighten their belts. We need to cut costs. What are we going to cut? That’s right: social programs and budgetary spheres: medicine, education, science and others.

“Where does it lead?

“Obviously the same: to the impoverishment of the population, to reduce its purchasing power and economic activity.

The second myth. Because liberalism is the ideology of the rich, the liberal economists are very nervous to increase the tax burden on the wealthy layers. They believe that the rich tax deter investors and affect economic performance. However, it is known that in the most prosperous countries: Sweden, Norway and Denmark, are the most rigid fiscal policy. …

The third myth. … it is a myth that the private ownership makes a more efficient state. …

“World experience shows that privatization has rarely resulted in an increase in production efficiency. …

“Noam Chomsky says in this regard:

The state-owned enterprises have a lot of side benefits. They may even operate at a loss specifically for these spin-offs. For example, if the state steel company operates at a loss, the other sectors get cheaper steel. In sum, the benefits obtained. In times of crisis and recession all private companies are cutting staff and increase unemployment. Public companies can save jobs in this situation until the crisis will not pass.

“Why, then, do liberals insist on privatization? With the company in the hands of the state, it is difficult to take profits … .

Fourth myth. According to liberals, any attempt to implement financial market regulation and to restrict the volume of speculative transactions will destroy commercial banking sector.

“However, it does not. Sadly famous financial speculator George Soros suggests:

In the 19th century, when the state did not interfere in the banking sector, financial crises were going after each other.

“In the 50-60’s of the twentieth century, the level of state control over the banking sector was large enough. This led to a general increase in wealth and the absence of financial crises.When under the influence of the liberal ideas, the state decreased intervention in this sector, this led to the financial crisis of 2008. And no wonder! Speculative transactions of banks in the financial markets reached 40% of total volumes.

“As a result, they themselves had suffered, losing all this fabulous and easy profit. And we saved them, among other things, due to the general funds of the national budget.”

My Comment: Private initiative is beneficial in the initial stages of developing production and trade relations. But later it does not create development, but invents tricks of how to enrich themselves through banking games and monopolies.

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Mikhail Delyagin On The Crisis

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