Monthly Topic: Economic Consolidation

[sophia-sadek.livejournal.com]

The Austrian school of economics makes the case that central banking leads to "malinvestment." There is a chicken-and-egg issue here because central banks were developed as a method to rein in the excessive speculation associated with malinvestment. One may ask, "How does the solution to a problem perpetuate the problem?" We need look no farther than the problems caused by prohibition to see that excessive controls tend toward chaos.

Where the Austrian school falls down is in the romanticization of capitalism. They see the mangy chicken that eventually grew from the pristine egg and deny the fact that the egg was the product of another mangy chicken. A completely laissez-faire investment environment leads to economic consolidation, speculation, and misappropriation of capital. These are the ills that the Austrians associate with central banking. In order for some investors to succeed, others must either be brought under control of the same boat or sunk to the bottom. The central bank is the fulfillment of capital accumulation, not its antithesis.

Alexander Hamilton founded the predecessor to the federal reserve system. His detractors accused him of corruption because his friends made handsome profits by buying up revolutionary war debt at pennies on the dollar. Some of these "stock jobbers" were associated with loyalist and collaborationist elements in New York. Hamilton was himself a proponent of a royalist federation. The anti-Federalists saw the national bank as a counter-revolutionary ploy to allow British investors to continue taxing the American populace, albeit indirectly.

What is the ultimate conclusion of economic consolidation? Is it a world like that portrayed in the science fiction film Rollerball where the Earth is owned and managed by one monstrous monopoly? Some Marxists go so far as to promote that path as the fulfillment of Karl's prophesy. It would be the mangiest of chickens to hatch from the biggest of Austrian eggs.

Comments

[dwer.livejournal.com]

Them's good eating, if you can avoid the bits with mange.

[sophia-sadek.livejournal.com]

I usually avoid the skin anyway.

[rimpala.livejournal.com]

Is this like, big business taking over small businesses? Because I've always been weary of monopolies. Living in Central Florida, I always understood economic consolidation in the form of Walt Disney World. The company's relationship to Orlando is not unlike a feudal lord's sometimes. We're always making plans for Disney...

Another example like the Rollerball monopoly would be Shin Ra from Final Fantasy 7 or The Umbrella Corp. from the Resident Evil series. Once you've taken over the police and military I'd pretty much say you've reached the peak of monopoly heh.

[sophia-sadek.livejournal.com]

In a traditional consolidation scenario, the big business either buys out the small business, or forces it out of business. Feudalism is an apt analogy. Orlando is a "company town" in more ways than one.

There is really no need to take over the military once the civilians in charge of the military are in the pocket of business owners.

[jerseycajun.livejournal.com]

I was feeling the need to make a comment on the OP, but was discouraged by the number of higher priorities on my list of things to do (see the lengths needed to explain things).

In short, you have thankfully eliminated the need that was felt :)

[kylinrouge.livejournal.com]

I have fundamental disagreements with Austrian conclusions (especially since they are a priori) but I suppose it's better to actually know what they are instead of distorting it. If I were a blind ideologue I would just agree with sophia.

[michael barnett (from livejournal.com)]

Well Economics is not a science. It is a social science. Therefore, trying to mold it into a math-based empirical system like, say, physics, leads not to scientific results, but to scientism. It must be stressed that in economics, there can be no real control groups and no real experiment groups. Experiments cannot be duplicated repeatedly in a lab to test hypotheses. That shit is just, simply, impossible for a social science. Therefore, an empirical approach is a bad idea.

[gunslnger.livejournal.com]

I agree with jerseycajun. :)

[michael barnett (from livejournal.com)]

>>The Austrian school of economics makes the case that central banking leads to "malinvestment."<<

No it doesn't. It makes the case that massive credit injections by central banks, or central bank imposed non-natural instant rates create clusters of errors by sending the wrong signals to individuals and businesses about how they should be acting (borrowing, saving, expanding production, etc.) and that these clusters of errors manifest as malinvestments in a false boom which inevitable turns into a bust when it becomes apparent that the actions were indeed not justified by marketplace fundamentals but rather by manipulated signaling devices.

The rest of your diatribe also resides on both a faulty notion of Austrian School economics and a misunderstanding of the market process, but it would take quite a while to debunk it all.