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Capitalism’s new bad revelation

Sep 03,2018 - Last updated at Sep 03,2018

Is capitalism on the attack or is it on the defence? In 1994, English economist Paul Ormerod published his book “The Death of Economics” suggesting that current economic models and modalities fail to explain, or even find solutions, for unemployment. The book which was directed at British readers caught fire and was translated into ten languages.

Right now, we look at the “Trumponomics”, if I may use the term, and we see a reminder of the ideological split which had eventually led to American Civil War (1861-1865). While the British adopted Adam Smith’s principles of “laissez faire, laissez passer” to be more appropriate to embrace in order to export their industrial products, especially to the US, farmers in the UK suffered as a result of these Adam Smith’s proposals because after the abolition of tariffs in 1846, the cheap agricultural products of the US dominated UK markets.

On the other hand, the mid-west states, where steel and coal were abundant, did not want that state of affairs to continue. When Abraham Lincoln won the presidency on November 1860, he succeeded in passing the Confiscation Acts and Emancipation Proclamation, which led to freeing enslaved African Americans in the south, causing disruption and higher agricultural production costs.

Of course, such acts had humanitarian motives, but it is naïve to ignore that the Krupp steel industries in the Rohr Valley in Germany did not echo the same sentiments of the mid-western US states, which had a similar cause to fend off Smith’s capitalist liberalism and instead adopt the protectionist capitalism of the famous German economist Friedrich List, who by the way held dual American citizenship. 

US President Donald Trump is turning to protectionist and hegemonous practices in order to solve the problem of unemployment and to set the record straight after a long period during which the United States was “ripped-off” by the world at large, according to him.

The Arab Gulf states ripped off the Americans by not paying for the protection which the US had offered them against their enemies, Iran in particular. China steals American patents and manipulates its currency to prevent the American economy from decreasing the trade deficit with China. The same line applies to the US’ neighbour in North America and the European countries as well as Russia, Japan, India and very soon countries of the Association of Southeast Asian Nations.

As a result of using all of his economic cards, President Trump succeeded in increasing job opportunities, lifting the rate of economic growth in GDP and in selling more arms. The resonant effects of this Civil War era practices in our world are currency wars, trade wars, proxy wars, beggar-thy-neighbour syndrome and very soon a world moving to the brink of an all-out war. The world could be poised for a period of monetary chaos which would lead, as Austrian-American economist Joseph Schumpeter predicted, to a very deep depression cycle where the only exit is another world war.

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