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

[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.