Basically what we're doing now is the exact opposite of what attended broad-based economic prosperity during America's heyday...
The reason perfect capitalism doesn't exist is because we don't live in a perfect world. Therefore, instead of trying to "get back" to something that can't exist, we should focus on getting back to something that actually works. Of all economic bloggers, in my opinion, David Stockman is the smartest. I always learn something from him, even when I disagree with him. Like now:
ZH: Stockman - Swan Song For Central Bankers
While I agree with most of what he says in this article. What I dispute is this abiding fantasy of "perfect capitalism". We just have to keep trying. Centuries of sweatshop labour are not enough to disprove the existence of something that has never existed. It all comes down to who is doing the sweating. And those who advance these arguments are never the ones doing the heavy lifting:
First off, while he puts Monetary Policy at the center of economic disaster, I see Monetary Policy as handmaiden to economic disintegration. The underlying cause however was this abiding fantasy of *free* trade. Forty years of U.S. free trade has been handsomely paid for in terms of factories, jobs, industries, human degradation, family dissolution, mass shootings, and colossal debts. Trade deficits axiomatically require debt accumulation. Moreover, the world will always have poor countries eager to entice investment, so "competitive" debasement of labour and industrial standards is a first order fool's errand.
It's easy to point out the flaws in today's economy, compared to the advantages of "perfect capitalism". Why? Because perfect capitalism exists nowhere in the world today. Nor has it ever existed, in the U.S. nor anywhere else for that matter. It's easy to refute one set of ideas while offering a strawman in return. More to the point, China has done more to adopt the environmental and labour degradation required to compete on global labour markets than any other country. Their payback, is wages that are still 1/10th of those in the U.S. In other words, they do all of the things we used to do, but for pennies on the dollar. And why is that? It's because all of the value that U.S. labour used to provide was extracted to corporate profit, when the factories were forklifted to Asia, that's why. But of course, the joke is on the global corporate oligarchs who've recycled their unsustainable profits into unsecured ponzi bonds.
Getting back to perfect capitalism, it exists nowhere in the world today, so surely it has existed in U.S. history. And of course the answer is no. The middle class was a post World War II conception. Prior to that time, life on earth was nasty, brutish, and short. The life expectancy of white males doubled between 1850 and 1980. Meanwhile, the average male worker's wage peaked in 1973 book-ending America's 1950-1973 "Golden Age". For some reason, perfect capitalism had somehow not conspired to generate perfect prosperity in any period prior to the 1950s. And that's where it gets interesting, because during America's golden age, perfect capitalism didn't exist then either. That period was noted for high tax rates, fiscal prudence, balanced trade, counter-cyclical Keynesian policy, and sound money. In other words the exact opposite of what we have today. Today in Trumptopia we have low taxes, fiscal profligacy, massive trade deficits, pro-cyclical Keynesian policy, and Monetary engineering on a scale never possibly imagined.
The moral of the story is that there will ALWAYS be poor nations on this planet. Therefore any nation that acquires some modicum of prosperity, would be wise not to allow multinational corporations arbitrage it away, under the guise of *free* trade.
And with respect to sound money, at present no country in the world is on the gold standard. Moreover, I highly doubt any country ever will be again. To unilaterally adopt the gold standard would likely prove financially impossible, as the price of gold would Bitcoin to infinity as speculators front-run the Treasury. The U.S. acquired its gold hoard slowly and steadily over decades of accumulated trade surpluses. Meaning that going off of a gold standard is easy, getting back on it, has never been attempted. In any case, sound money requires sound laws more than anything. Because any country that allows a president to unilaterally go off of its gold standard, doesn't have a safe currency in the first place.
The goal should be to get back to something we know worked, not continually strive for something that can't exist.
