The Failure Of Laissez Faire Capitalism And Economic Dissolution Of The West by Dr. Paul Craig Roberts - formerly Assistant Secretary of the US Treasury for Economic Policy under President Reagan - addresses dramatic changes taking place in the global community. In the process, it demolishes the credibility of the economic thought that has led to the dissolution of the West and the relentless devastation of environmental and human well-being.
Despite impeccable qualifications as an economist, Dr Roberts is a heretic. The West's mainstream authorities do not welcome his insights. Translators and publishers had to be found in Germany and China before this book could be made available in English, on Kindle. Some initial words by his German translator leave no doubt about the book's challenge to the illusions of certainty and comfort cultivated by many in positions of privilege in the West:
We are witnesses to a historical turning point. A new world order is emerging. Economic power is shifting to the BRIC states and to other emerging countries at an enormous pace. New alliances such as the Shanghai Cooperation Organisation (SCO) with China and Russia as driving forces have been preparing the new economic world order well in advance. It is very likely that they will dominate it.
However, the forces that have been leading the global economy throughout the past decades – the U.S., UK, Euroland, and Japan – are struggling to survive. Their economies are in a process of disintegration. Especially in the U.S. and in EU countries more and more people are living in poverty. Further significant losses in welfare are looming ahead. Major parts of these populations do not see any future for themselves in the global economy.
Dr Roberts' conclusion presents his complex thesis succinctly:
This book demonstrates that empty-world economic theory has failed on its own terms and that its application by policymakers has resulted in the failure of capitalism itself. Pursuing absolute advantage in cheap labor abroad, First World corporations have wrecked the prospects for First World labor, especially in the US, while concentrating income and wealth in a few hands. Financial deregulation has resulted in lost private pensions and homelessness.
The cost to the US Treasury of gratuitous wars and bank bailouts threaten the social safety net, Social Security and Medicare. Western democracy and civil liberties are endangered by authoritarian responses to protests against the austerity that is being imposed on citizens in order to fund wars and financial bailouts. Third World countries have had their economic development blocked by Western economic theories that do not reflect reality.
All of this is bad enough. But when we leave empty-world economics and enter the economics of a full-world, where nature's capital (natural resources) and ability to absorb wastes are being exhausted, we find ourselves in a worse situation. Even if countries are able to produce empty-world economic growth, economists cannot tell if the value of the increase in GDP is greater than its cost, because the cost of nature's capital is not included in the computation. What does it mean to say that world GDP has increased four percent when the cost of nature's resources are not in the calculation?
Economist Herman Daly put it well when he wrote that the elites who make the decisions "have figured out how to keep the benefits for themselves while 'sharing' the costs with the poor, the future, and other species" (Ecological Economics, vol . 72, p.8). Empty-world economics with its emphasis on spurring economic growth by the accumulation of man-made capital has run its course. Full- world economics is steady-state economics, and it is past time for economists to get to work on a new economics for a full world.
Dr Roberts' first chapter (of three) covers a comprehensive field of theory - Microeconomics, Macroeconomics, Free Trade Error, Offshoring Exports Jobs Instead Of Products, The Problem of External Costs, Nature's Capital, Planning For A Full World, Failures Of Economic Theory Are Pervasive, The Failure Of Laissez Faire Capitalism
When the West's economic thought, which pervades and dictates almost all human activity, can be portrayed in such a state of disarray and crisis, it is but a small step to talk of the crisis in Western thought.
The same crisis in Western thought is evident from other perspectives. The opportunity to examine and evaluate Western behaviour and thought from an Asian perspective can be one of the most enlightening.
Since the ancient Greek philosopher Plato's transcendent forms, through the Medieval Roman Church's neo-platonic doctrines and dogmas, the European Enlightenment's universal values and the contemporary rational economist's abstract theories, the West has used philosophers, priests and economists to construct "truths" with some claim to transcendent authority as a basic tool in ordering society.
In contrast, the Chinese classics, like the Analects, Daodejing and Book of Changes, retain their original authority to this day and nurture habits of thought that are much more fluid, intuitive, holistic and practical. Since the mastery of these classics is traditionally undertaken by rigorous rote learning from a very early age, many educated Asians do not find it difficult to master the West's comparatively simplistic abstract rational thought.
It is not difficult then for Asians to manage to advantage all sorts of interactions, including international trade. In one sense, since 1945, soft Asian strategies can be seen to account for the peaceful rise of Asia and the steady decline of the West, with its hard rational thought. Assisting this process has been the West's inane and culturally myopic insistence on using abstract stereotypes like capitalism and communism to label Asian economic policy.
The possibility that the world is approaching an "historical turning point" and that "a new world order is emerging" is little addressed by the Australian political. academic and media classes. There is, however, an increasing body of action and speculation that gives credence to the suggestion by Roberts' German translator.