By Andy Chi
Published: December 31, 2008
From the economic tsunami to international inflation, till the global recession, this is not only the policy side problem but also the controversial between the Right and Left.
First of all, in the side of economic policy, we have no choice but to notice the representative work “The General Theory of Employment, Interest, and Money”. His theory is not general but special one because the demanding economy is deriving form the economic crisis.
70 years ago, the Great Depression is similar as the economic crisis today, both facing the overproduction, disparity between the rich and the poor, insufficient of demand and liquidity trap (when the nominal interest rate reach to a low standard, no matter how much currency the central bank release can’t stop the propensity of the people who would rather hold the money than spend.), even though the interest rate descend to zero, it can’t stimulating the consumptions. This is more obviously in the developed nations. Since in the aging population society, the livelihood of the aging populations partially count on the interest of their pension. If cut down the interest rate, they will be more conservative in shopping.
Although the industries have the incentive about the cost cutting (the cost of the capital is interest) to invest more. Owing to the accumulation of inventory and the declining of marginal propensity of consumption made the industries holding a pessimistic attitude. Of cause it blocked the further investment. And in the vicious circle of the declining of consumption and investment, the rising of unemployment rate was necessarily happening. That’s making the gross national product decline.
So the fiscal policy has his inevitability. It can make the social economy getting rid of the depression by means of the multiplied effect of the government. (Especially in the premise of liquidity trap, the government spending would not make the interest rate arising.). Nevertheless, the fiscal policy has its limitations. This is a kind of extremity and the debt must be paying. The tremendous bond interest is more often than not making a country mired in a debt crisis. Those countries owning the hard currency shouldn’t worry about the capability of payment, but those minority countries relying on the foreign exchange reserves to maintaining their stability must make both ends meet.
Moreover, the ideology evaluation, this financial tsunami flooded the New Right which prevailing our society over 20 years aroused the revival of the Social Democracy. The young people living in a society which pursuit the maximizing of interest, celebrating of the capitalism and cherishing the possessive individualism have to face the shack of transition in the economic thought.
Ideology is just a kind of means, not an objective. What we call the universal moral principle is merely an instrument for vested interests to make their money in some way. The victory of Neoliberialism is establish in the collapse of Soviet Unions, Japan’s bubble economy, China’s economy reform, the Latin American Debt Crisis and American Hegemony. So to speak, Neoliberialism is a kind of blend of religious conservatism and market fundamentalism. Personal liberty has submitted to the authority of ideology of government. This is much more appropriate for calling to the freedom of TNCs and global economy.
The Social Welfare and efficiency, the Proletariat and Bourgeoisie, the equality and liberty seems never come to a compromise. From the perspective of the history, the twenty years after the great depression in 1930s is the golden time for Social Democracy and Keynesian. Marginalizing by the stagflation in 1970s, the rising of Reganism or Thatchersim and the toppling of Soviet Unions made the Social Democracy passing away in its policy “from cradle to grave”. Economic theory always lagged the development of economic society, and every big crisis generated the new generation theory. This time will be the world of Social Democracy? I don’t think so.
What time we can walk on the way what Anthony Giddens speaking “The Third Way”, it will not only take times but need the inclusion. The investment of education, capital regulation, social equality have supported fully by Michael Porter and Ohmae Kenichi were also what the social camps insisted. Since we have the consensus that the global economy should have a structural adjustment, then we can take this crisis to a lesson before the great tsunami submerges the humanity by the greedy ideology.
A version of this article appeared in print on December 31, 2008
Published: December 31, 2008
From the economic tsunami to international inflation, till the global recession, this is not only the policy side problem but also the controversial between the Right and Left.
First of all, in the side of economic policy, we have no choice but to notice the representative work “The General Theory of Employment, Interest, and Money”. His theory is not general but special one because the demanding economy is deriving form the economic crisis.
70 years ago, the Great Depression is similar as the economic crisis today, both facing the overproduction, disparity between the rich and the poor, insufficient of demand and liquidity trap (when the nominal interest rate reach to a low standard, no matter how much currency the central bank release can’t stop the propensity of the people who would rather hold the money than spend.), even though the interest rate descend to zero, it can’t stimulating the consumptions. This is more obviously in the developed nations. Since in the aging population society, the livelihood of the aging populations partially count on the interest of their pension. If cut down the interest rate, they will be more conservative in shopping.
Although the industries have the incentive about the cost cutting (the cost of the capital is interest) to invest more. Owing to the accumulation of inventory and the declining of marginal propensity of consumption made the industries holding a pessimistic attitude. Of cause it blocked the further investment. And in the vicious circle of the declining of consumption and investment, the rising of unemployment rate was necessarily happening. That’s making the gross national product decline.
So the fiscal policy has his inevitability. It can make the social economy getting rid of the depression by means of the multiplied effect of the government. (Especially in the premise of liquidity trap, the government spending would not make the interest rate arising.). Nevertheless, the fiscal policy has its limitations. This is a kind of extremity and the debt must be paying. The tremendous bond interest is more often than not making a country mired in a debt crisis. Those countries owning the hard currency shouldn’t worry about the capability of payment, but those minority countries relying on the foreign exchange reserves to maintaining their stability must make both ends meet.
Moreover, the ideology evaluation, this financial tsunami flooded the New Right which prevailing our society over 20 years aroused the revival of the Social Democracy. The young people living in a society which pursuit the maximizing of interest, celebrating of the capitalism and cherishing the possessive individualism have to face the shack of transition in the economic thought.
Ideology is just a kind of means, not an objective. What we call the universal moral principle is merely an instrument for vested interests to make their money in some way. The victory of Neoliberialism is establish in the collapse of Soviet Unions, Japan’s bubble economy, China’s economy reform, the Latin American Debt Crisis and American Hegemony. So to speak, Neoliberialism is a kind of blend of religious conservatism and market fundamentalism. Personal liberty has submitted to the authority of ideology of government. This is much more appropriate for calling to the freedom of TNCs and global economy.
The Social Welfare and efficiency, the Proletariat and Bourgeoisie, the equality and liberty seems never come to a compromise. From the perspective of the history, the twenty years after the great depression in 1930s is the golden time for Social Democracy and Keynesian. Marginalizing by the stagflation in 1970s, the rising of Reganism or Thatchersim and the toppling of Soviet Unions made the Social Democracy passing away in its policy “from cradle to grave”. Economic theory always lagged the development of economic society, and every big crisis generated the new generation theory. This time will be the world of Social Democracy? I don’t think so.
What time we can walk on the way what Anthony Giddens speaking “The Third Way”, it will not only take times but need the inclusion. The investment of education, capital regulation, social equality have supported fully by Michael Porter and Ohmae Kenichi were also what the social camps insisted. Since we have the consensus that the global economy should have a structural adjustment, then we can take this crisis to a lesson before the great tsunami submerges the humanity by the greedy ideology.
A version of this article appeared in print on December 31, 2008
