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The failure of the NEW new economics

by | May 27, 2022 | Philosophy | 2 comments

Decades ago (almost literally, by now), when Yer Very ‘Eavy, Very ‘Umble Servant were a wee lad busily frittering away his misspent yoot in university in Central Big Shitty, I was studying mathematics and economics at a Very Prestigious University. In my personal opinion, there is no such thing as “too much” time spent studying mathematics – it is a language of unsurpassed beauty and power, as well as the foundation of literally everything important. Though I disdain the way economics is taught these days, I still also believe that it is fundamentally the study of human behaviour, and as such should be regarded as a critically important field of study in and of itself. Unfortunately, for the past 70 years, the entire field has been thoroughly corrupted by an insistence on reducing everything down to mathematical operations and notation.

In the process, we have thoroughly lost track of everything that made economics such a powerful and important field of study. Not for nothing did Kenneth Boulding (supposedly) write that “mathematics brought rigour to economics. Unfortunately, it also brought mortis.”

My studies in economics focused very heavily on the mathematical aspects, because I went to a Very Prestigious University that, along with Cambridge University, really pioneered the use of mathematical theory and ideas after John Maynard Keynes explicated his General Theory of Employment, Interest, and Money.

This was a particularly misguided attempt to improve something through mathematics, which actually made the situation vastly worse.

What Keynes Intended

Keynes was trying to do for economics what Einstein had done for physics. Just as Einstein came up with, essentially, a generalised theory of gravity and therefore energy and matter, encompassing the scale of the entire Universe, Keynes intended to come up with a general theory that essentially explained the entire economy. And he inserted himself into the conversation at a highly opportune time, because this was right around the moment that the entire world could see that supposedly non-interventionist laissez-faire economics had totally failed.

This magnum opus hit the shelves in 1936, years into the global Great Depression. It proposed that economic recessions and depressions were caused by falls in consumption and therefore “aggregate demand”, and that governments could intervene in this process to restore confidence through fiscal and monetary means. (I am grossly oversimplifying here, naturally.)

Keynes explained how governments can do this by separating the economy into “aggregate demand” and “aggregate supply”, and using all sorts of the most outrageous mathematical mummery and handwavium to come up with seemingly elegant solutions that summarised the entire economy.

The late, great Henry Hazlitt took this entire approach to pieces in the most cold-blooded and analytical fashion possible in his superb dissection and entombing of Keynes, The Failure of the New Economics. Sadly, however, by that point, the damage had already been done.

What Actually Happened

Governments around the world embraced Keynes’s theory, because he proposed giving them MORE power to solve the very problems that they inevitably created. So, naturally, Keynes became the absolute darling of meddling government planners, because he told them exactly what they wanted to hear. His prestige and influence in the world of economics was absolutely unparalleled by the time he wrote his giant treatise – this was the same man who had written the genuine masterpiece, The Economic Consequences of the Peace, and had presciently predicted so much of the economic unrest and pain that was to come with the Great Depression.

Let’s give Keynes his due, as well – he WAS a genius. His understanding of the likely consequences of the Treaty of Versailles was unmatched. And, even though he got most things badly wrong in his General Theory, he deserves great credit for his writing about tariffs and the need for, and right of, governments to regulate trade, and his shattering of the Ricardian dogma of “free trade”.

But ultimately, Keynesian economics resulted in a very muddled and broken understanding of the subject. And it led to an incredibly foolish and extremely misguided blind belief in the wisdom and power of technocratic elites to manage economies into “soft landings” from recessions.

The Nonsense Machine

Let me give you an example of just how stupid things got because of Keynes. Somewhere deep in the bowels of the London Science Museum lies a weird gizmo called the MONIAC (Monetary National Income Analog Computer), which was first demonstrated at the London School of Economics in 1949. The idea behind it was to use changing water levels to show how national income and output would change based on different levels of stimuli.

Does anyone take this idea seriously nowadays? No. Not even hardcore Keynesians – of which an unreconstructed few remain, even to this day – believe that you can explain the workings of an entire economy through such a simplistic, mathematically regulated mechanism. The simple reason why is that humans are not automatons that can be reprogrammed at will – they do, however, respond to incentives in rational, though not mechanistic, ways.

However, the power of this nonsense machine remains to this day. It has changed through time, into something that we know of today as “knowledge economics”.

The idea behind “knowledge economics” is that the world is moving toward a service-oriented economy, in which the countries that win are the ones which invest the most heavily in education, technology, and innovation. As with all half-truths, there is in fact much validity to the idea – it is, after all half-true, by definition. You cannot run an economy without brains or skills, and you cannot have an economy absent rules and regulations – otherwise, you end up with, well, Africa.

At the same time, however, you cannot run an economy purely on brainpower alone. The “weightless economy”, in which knowledge would flow across borders and boundaries seamlessly, and in which nation-states no longer really matter, is pure vapourware.

For years, though, this paradigm of a “knowledge economy” was in the ascendant. You have probably seen any a number of books on the subject:

This is still going on, to this very day. But, as with any other paradigm, we must ask:

Is it TRUE?

Does this view of the world as essentially a knowledge marketplace, without borders, without need for physical moorings, actually make sense?

Smashing the Glass House

The answer to this question is very clear by now:

Absolutely NOT.

The Banderastan War has shown us, beyond any shadow of a doubt, that it is the control over physical assets that determines economic power. This has always been true, but in our folly, we have forgotten it and ignored that basic truth.

The truth is that powers which control the acquisition, extraction, refinement, manufacturing, transportation, delivery, and utilisation of natural resources, are the ones with true strength. Russia has proven this with absolute clarity. Note that Russia is the world’s largest exporter of natural gas and one of its largest exporters of crude oil – in fact, Russia’s crude oil exports are of a type that is not well-suited for refining petrol, but is exceptionally well-suited for refining diesel and other heavier fuels. Russia is the world’s largest wheat exporter, and one of the world’s most important manufacturers of food in general.

THIS IS REAL POWER, in its most raw and absolute form.

The current, lunatic, regime of sanctions has resulted in soaring prices of basic goods and services around the world, and has raised the horrible spectre of global famine for the first time in living memory. We have never been in this situation before as a species, where literally the entire world’s food security has been threatened.

Now, before anyone gets carried away, let us be very clear about something:

The world is still producing enough food, just about, to feed everyone. The problem is not food production in general. The problem is transporting specific types of key foods to various places. With sanctions placed on Russia, thereby preventing its exports of wheat, fertiliser, and other critical exports to countries that need those things for other purposes, the entire food supply chain is under threat. This shock has created a number of aftershocks that have sent world markets reeling.

You can see the results now, in the real economy, not in the virtual one that the globalists and whorenalists and academics have constructed in their foolish minds. FinTech companies and banks are laying off people left and right. Technology companies are flashing warning signs as they are unable to manufacture and ship their goods to people around the world. Information flows globally are being disrupted quite severely, preventing people from getting the data that they need in order to stay informed and updated.

And ALL of this is happening because ONE country, the true commodities superpower of the world, has barely begun to respond to the sanctions placed against it by very stupid, power-drunk, completely mad Western governments. In fact, if you look carefully at the Russian responses, they have been measured, sober, and really rather light. All that they have done is to demand that people pay for their goods and services in their own national currency, the ruble.

And that, combined with their undisputed ownership of the means of production and transportation, has sent the entire Western world into crisis and near-collapse in a number of instances.

Conclusion – Physical Strength is True Power

It is well past time for us to recognise and understand that this nonsense of the “weightless economy” and the “knowledge economy” is precisely that – nonsense. We need to get back to the true measure of national power – manufacturing, production, the art and science of making things, digging things out of the ground, transforming them into other things, sending those things on to others in exchange for money.

That is not to say that there is no place for knowledge in such an economy. Of course there is. Much value lies in ensuring that people adhere to contracts, or transfer money seamlessly, or create unbreakable systems to store and interpret and analyse the necessary data. But we must never, ever allow ourselves to forget that true economic power lies in making and selling things, NOT in pushing numbers around on a bloody spreadsheet to make money from more money.

This is why, incidentally, the West is doomed to fail and fall. While the Western world still contains tremendous manufacturing power, it has allowed that power to fall away. The United States, in particular, is largely a financialised economy where real production has been shunted aside by the technocratic elites, in favour of Wall Street, which makes its money from pyramids of funny money stacked on top of each other.

It will not take much to cause such an artificial construct to collapse. Russia does not have this problem, because it has studiously avoided going into deep debt to finance its industrial economy. China is exposed to it, but has a far more powerful manufacturing economy than most people realise – just as people vastly underestimated Russia’s economy’s resilience and strength, and believed it to be nothing more than “a gas station masquerading as a country”, as Sen. John McCain (may he burn in Hell) once said, I believe that people are going to discover in a very big hurry that China is rather more than just a giant factory for cheap Gucci and Apple rip-offs.

When the collapse comes – and, make no mistake, IT IS COMING – the Western world, with 12% of the world’s population and quite a lot of its manufacturing capability lost and hollowed out, is going to discover that it no longer matters nearly as much as those countries which produce the essential things. Those things are food and energy. Without food, without energy, all of the AI-powered algorithms and cryptocurrency mining rigs and Wall Street robo-trading platforms, SIMPLY DO NOT RUN.

Looking to the future, we would all be well advised to make preparations for the day when food and energy become scarce in the Western world. We can all stand to learn a few more physical skills, and spend a bit less time in front of a screen. We can all benefit from reconnecting with the physical world, and ignoring the virtual one, a bit more. And we can assuredly do far worse than simply ignoring the technocrats and academics who landed us all in this mess in the first place.

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  1. Jim S

    It is quite amazing, as I type this comment, watching the real-time collapse of the USSA and the West. Your 2025 prediction may be late, as is Vox’s 2033 prediction. My prediction of somewhere between 2025 and 2033 is also late.

    Looking at the USSA’s inflation rate of “8.3%”, I laugh. It is probably in the neighborhood of 20%, if it was still measured the way it was in 1970’s and earlier (the change happened in 1979, to try and make Carter look better). The Fed (which should be burned to the ground, bombed, burned again and then salted) is so far behind the curve after kicking the can down the road for about 14 years. A recession will occur and is occurring right now. Oh and Keynes sucked. Had his excrement shoved down my throat in college, glad I discovered Hazlitt years ago.

    Russia is the best positioned economy to date. PERIOD. Very little debt, resource rich (in many ways), and a currency that is backed by something other than air. People in the west do not understand this at all. Simply amazing.


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