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Source link: http://archive.mises.org/9504/economic-recovery-requires-capital-accumulation-not-government-stimulus-packages/

Economic Recovery Requires Capital Accumulation, Not Government “Stimulus Packages”

February 25, 2009 by

An economic system entering into a major recession or depression is in a situation very similar to a sleep-deprived individual. A stimulus further depletes his body’s already diminished energy reserves and takes him down the path of utter exhaustion.The main difference between such economic “stimulants” and pharmaceutical stimulants is that the economic stimulants will not succeed even in temporarily restoring the economic system to anything approaching its normal level of activity. FULL ARTICLE

{ 59 comments }

mnoaz1 February 27, 2009 at 4:30 pm

Excellent exchanges here, thanks for the posts.

pbergn: hopefully you find some good solid work to do, and soon.

I would like to add there was an article a short while back about kids picking over trash for items of value to sell, paid the equivalent of $0.50 US/day for the efforts. I can’t remember where it was that I saw it, some google searching would bring it about easily I’m sure. The point was, that these children wanted that work; they wanted to be doing what they were doing and it was the best choice for them out of an array of admittedly rough choices. But, it was the choice that offered the most reward for their effort and it was better work than some of the other choices they had. I agree with Andras that this is the key; if we can get society to enforce property rights, and stop stealing by government intervention and coercion from producers, and give those that are able a chance to pull whatever weight they are willing to sign up to try to pull, we have a great bright future to look towards. I am realistic, however, in that it is going to take some serious pain before that change comes.

Paul Marks February 28, 2009 at 5:37 pm

Land can not be made less scarce by Henry George style tax games – see Murry Rothbard’s “Man, Economy and State” for this in detail.

Henry George correctly noted that as people came into a previously unihabited (or lightly inhabited) land the price of the land tended to go up and it became harder for poor people to buy people.

Sadly Mr George then decided he could alter this situation for the better with tax policy.

As for “shortage of capital” the whole point of what Dr Reisman is saying is that this must come from REAL SAVINGS.

Not the magic wand of credit/money expansion or some other silly trick.

On wages:

As capital is invested wages tend to go up up – when an economist says “a worker is more productive” he does not mean “he works harder”.

As for American wages – contrary to the ravings of Pat B., taxes on imports were not the reason why American wages became the highest in the world.

As can be seen by Britain where there were no such restrictions on imports and no new land (and where, contrary to propaganda, the Empire was a net economic loss) and wages were some of the highest in the world in manufacturing industry.

Want a return to strong manufacturuing?

Then radically reduce government spending and regulations – and establish a real monetary and banking system.

On the article.

Very good.

Walt D. February 28, 2009 at 10:43 pm

Part of the problem is that the members of congress are stupid – check here- Nancy Pelossi has the same IQ as Mohamed Ali (and she is not the greatest!)
http://www.kids-iq-tests.com/famous-people.html

If Brittney Spears has an IQ of 105, she has a higher IQ than the average member of Congress.

Kitty Antonik Wakfer March 1, 2009 at 8:32 pm

I have found the comment exchanges of some here to be very interesting. (And I will admit that I skipped to them before completing Reisman’s meaty article.)

However, several comments have demonstrated what I consider a serious problem for real improvement in human interaction.

The failure to use the same definitions of words – especially ones that have high emotional content, such as “coerce” or “force” – contributes greatly to people talking past each other. A person having a choice, at a particular time, between a job cleaning toilets (at a pay less than that of, for example, serving meals to others) or remaining a beggar on the street is considered by some individuals to be a situation of “coercion”. Others would not use that word “coercion” unless, for instance, the toilet cleaner’s family was being held physical hostage. I would ask in the first case, who is doing the “coercing”? In the second case it is clear that the hostage-holder is the “coercer” of the toilet cleaner.

The problem of language usage is enormous and I do not think that it is limited to English, though maybe it is worse because of so many words with ambiguous, if not outright opposing, definitions. The need for and consistent use of technical terms in regards to specific areas of human interaction is clear to me. Otherwise many words are used with a variety of meanings by some speakers/writers (typically elsewhere, but here too), often for the purpose of manipulating the target audience rather than uncovering the truth of reality. But even when a person is trying his/her (hir) best to be unambiguous, it can be difficult, and sometimes impossible, to truly communicate with another unless both have agreed to the meaning of terms. This is the reason why husband Paul Wakfer’s foundational writings include some words that are specifically defined rather than leaving it to a reader to decide which vernacular meaning is appropriate. “Social Meta-Needs: A New Basis for Optimal Interaction” – http://selfsip.org/fundamentals/socialmetaneeds.html

Kitty Antonik Wakfer March 1, 2009 at 8:41 pm

Thank you, A. Viirlaid, for mentioning your response to my comment in the http://blog.mises.org/archives/009403.asp blog – I had not checked back (extremely busy) and was therefore unaware of its existence. You made some pertinent points there and I’m mixed as to whether to respond there or here since so many people lose track of their comments like I did. (Having an option feature of response notification would be great…)

You agreed with my point of, in your words, “arguing past each other”, which I have made use of in regards to the lack of precise word definition agreement in discussions (previous comment). In that earlier context, I was referring in part to the view of so many that “they” are all wrong, with the “they/them” any one not a part of their own particular group – groupism.

You wrote also (at that other blog entry): “Such written exchanges could all potentially be exchanges of gifts — we should always strive for that.”
I would rephrase it to replace the word “gifts” with “value” – a gift is something someone gives without any expectation of return, even though I doubt that this is actually the case in the vast majority of situations. Far better in my view for individuals to exchange value in the non-monetary aspects of their lives just as they regularly do for products and services. It is an actual waste of one’s precious resource of time, for example, to spend blocks of it repeatedly trying to communicate with someone for whom one has little if any respect or if that someone has made it clear s/he holds the attempted communicator in low esteem. Of course some few initial messages are sent out “on spec” – an investment in time with the hopes of productive return, that return being a reply conveying value in content to the recipient. So for this reason, I (and husband Paul Wakfer) operate on the Value for Value principle in our lives, and encourage others to do likewise as a first step, towards a far better society.

In regards to your pessimism expressed 2/26/09 11:53am, I think Andras Ludanyi is closer to the probable outcome: “We are not doomed… we are on a crossroad, the truth is that our society can’t go further on the foundations of Keynesianism-Marxism-Mercantilism, the MARKET simply would not allow that, if production fall (and it will and it is) the parasites can extract only less and not more, so yes we will have a major setback, but we are not doomed.” I will add, however, that without major initial and/or reevaluation (depending on the evaluator) of the actual social needs of human beings based on their nature as human beings, the same type problems will occur in the future.
From the online article for the CNN program Andras refers to as an optimistic example: “Many of the immigrants who immigrated to North Dakota generations ago from Norway, Finland, and Sweden came here with a sense of financial practicality and conservatism.” http://ac360.blogs.cnn.com/2009/02/25/what-recession/
I think it quite reasonable to interpret this description of the people in Fargo as meaning that the vast majority of them are self-responsible – an important attribute currently lacking in large numbers of people elsewhere in the US and around the world, and greatly in need of return. However, I think that self-responsibility will only predominate when large numbers of people – hopefully including those who also are supposedly greatly leaned – understand that the nature of human beings does not automatically lead to the conclusion that individuals must be ruled by others in order that there be orderly interactions between them. Society, just like any other natural system can be self-regulating by means of interactions between its members, if only humans are allowed to develop the methods by which such self-regulation can be effective, rather than the social system constantly being held in an unnatural (and very unoptimal) state of balance by the operations of its rulers and other influencers.

BTW, in reply to your mention of being Canadian, Paul is also. We are a “mixed marriage” – I visit him at his legal residence in Harcourt Park Ontario from late April to late October and he visits me at my legal residence NE of Casa Grande Arizona from late October to late April. Under the current schemes of society, this is the best arrangement for us.

Andras Ludanyi March 2, 2009 at 3:30 am

TO: Kitty Antonik Wakfer

I must agree 100% with you, especially on the use of language. I also made this mistake, although it wasn’t intentional and English is not my native language, I understand clearly that coercion involves force from another person and that natural limitations of choice because of a lack of capability is not coercion. Thank you for spotlighting this for me. Still I think that the main part of my response the “choice/best offer” part is true regardless of the fact that I unnecessarily used the wrong word in the case of natural limitations and obstacles.

About the “we are not doomed” part, I agree that major reevaluation is needed, but I am not very optimistic it will be achieved, I just think we going to have some minor reevaluation and a couple of decades of more responsible policies but the very moment we reach a point when another round of irresponsible parasitic wealth extraction become possible we will go on this path over again… just like many times in history the only difference is the magnitude, the amounts but the principle stay the same. Who got the gun [power] (the government), use the gun [power] to get something for nothing. I don’t believe any major reevaluation will ever change that (unfortunately).

Of course our current political systems (majority rule democracy) is as Mises told us very much suited to drive larger and larger parts of the population from the productive to the parasite groups, that’s why we don’t have responsible people, because most of us get something for nothing in this society and most of us like that, demands more of that and up to the point where the projected future production meets projected future consumption we can ride that bull but when it is become clear that the expected future consumption is too much for the expected future production (like now) the whole system is collapsing and after the collapse, there will be falling illusions and people will lover not just expectations for future consumptions but present consumption as well, and we all know (at least Austrians) that we prefer present to future. This will drive the system to a lover level, but won’t change it too much.

Kitty Antonik Wakfer March 2, 2009 at 2:32 pm

Yes, Andras, poor use of language can inhibit any well-intentioned discussion and can be a major factor in leading to outright dislike between individuals. But I think that the majority of people are well-intentioned, as I wrote in the blog comment to which A. Viirlaid was referring on 2/26/09 8:54pm. Part of what I wrote there: “I have long thought that the vast majority of people supporting the concept of government have the sincere conviction that rule by others is truly necessary, for without it they are convinced that there would be chaos – a loss of society as a whole.”

I understand your limitation with English, since it is not your native language, and I commend you for making the effort to be as clear in your statements as you are – something more the practice here at mises.blog than in many other online locations. However, there is another use of language that you have made (and is done by very many others) that I and Paul consider a serious error – one that can lead to distortions in thinking, and I suggest actually does for many people. You wrote: “Of course our current political systems (majority rule democracy) is as Mises told us very much suited to drive larger and larger parts of the population from the productive to the parasite groups, that’s why we don’t have responsible people, because most of us get something for nothing in this society and most of us like that, demands more of that and up to the point where the projected future production meets projected future consumption we can ride that bull…and we all know (at least Austrians) that we prefer present to future.”
The use of “we”, “us” and “our” is extremely problematic in writing and speech unless the group is clearly defined as to its member and the speaker/writer has the authority or is in a logical position to speak for all those in that same group. While you qualified your usage in some cases by the inclusion of “most” and therefore are aware of a problem with a simple “we/us/our”, I still suggest reading, “Collectivism in Language: Its Effects on Valid Reasoning” http://selfsip.org/fundamentals/we.html

You wrote, “I don’t believe any major reevaluation will ever change that (unfortunately).”
Perhaps, Andras, I did not make it sufficiently clear that re-evaluation (and for most it is probably an initial evaluation) of the nature of human beings is but the first step towards a better society, one in which there is no rule by others but, rather is self-regulating. The principles and general framework of this goal society is described in Paul’s essay, “Social Meta-Needs: A New Basis for Optimal Interaction” – http://selfsip.org/fundamentals/socialmetaneeds.html Before movement towards a goal can reasonably begin, one must know what is that goal – where s/he is going and why it is desirable. However, I do not think that it is necessary that all people go through this process of study/understanding/agreement first before a self-orderly society comes into being. I think that once just a significant number come to understand and agree with the principles and put them into practice, the others will come to learn by, what could be simply described as, example. (Exactly what percentage is “significant”, I do not know at this point.)

Lastly, in regard to your first statement directly above, I am pleased that you agree that “coercion involves force from another person and that natural limitations of choice because of a lack of capability is not coercion.” However there is the comment you made earlier (to pbergn 2/27 4:53am), and still related to the “choice/best offer” part, “Do I have a choice to move up and to increase my wealth by accumulating capital or not? In many countries this is denied from people or they ale very limited in this ability. Why? Almost exclusively because the political environment.” I suggest that you consider thinking of the situation as a reduction of available choices that occurs in a society of rule by others (including democracy), in addition to the reduction/elimination of liberty. Reading the above linked essay by Paul, I think will provide more understanding on this concept.

Thank you for responding, Andras, and for the reasoned discussion.

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Accumulation Program March 27, 2009 at 4:32 am

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