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The
dangerous
Return of Utopian Socialism.
Not "unbridled
Capitalism"
but the ill conceived Monetary
System caused the crisis |
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We do not need to
replace the Capitalist System with a Swedish style social model as UN
economist Jeffrey Sachs argues. We only need a just monetary system.
Such system can only be equitable and contribute to an efficient
allocation of resources when money growth is zero or at the most
limited to the growth of the real economy. A return to the gold
standard may be the best guarantee thereto
Jeffrey Sachs' bombastic climate alarmism in the run up to the
Copenhagen Climate Conference next month is an
ultimate attempt to convince conference goers to step into the global
emissions bureaucracy. Politics turned CO2 Emission rights into a
totally fictitious but legally indispensable commodity for most
production processes. Politicians will arbitrarily decide both its
degree of scarcity and the regional allocation. This political
interference does not only boost production costs, but also disconnect
costs from market reality, causing massive distortions in the global
trade. The UN emissions scheme is nothing less than disguised
protectionism causing developing nations more damage than good.
Insider
knowledge is likely to turn the Emissions Trading System into one
big swindle...
|
 Jeffrey
Sachs is senior economist at the UN and author
of the bestseller
"Common
Wealth" and
the controversial Time essay "The
Case for Bigger
Government".
In a recent interview for the Belgian
Journal ‘De Tijd” Jeffrey Sachs blames “unbridled American market
capitalism”
for the financial crisis and pleads in favor of the Swedish social
model as an
alternative. His ideological argument is revealing for the dominant
utopian-socialist mind at the top of the UN.
The
Swedish social model which Sachs promotes so enthousiastically, has
not the only the
largest Size of Government of Western World, but also
the
weakest economic performance of the OECD. In 1970, Sweden
still was the fourth
wealthiest nation in the world. Thirty years later, Sweden
had fallen to rank 17 with
catastrophic social consequences. In the meantime the U.S.
consistently managed to remain the second or third for more than half a
century. So there is not much socio-economic wisdom to be learned from
the Swedish
Social Model.
Sachs
also argues that "unbridled capitalism" is the cause of the current
crisis. The reality is that during the last twenty years central
planning progressively
intruded Western economies who now bear the burden of governments
spending 40%
to 55% of GDP. Entrepreneurs face ever more crippling restrictions,
licensing schemes,
quotas and price and quality controls. Businessmen endure tens of
thousands of
pages of new rules and regulations each year, all written in a lawyers
slangy
that totally undermines the legal certainty of the free market and
which transformed
business into a gamble on the next political caprice and on judicial
interpretations of the legal jargon. Size of government, computerized
control
and dirigisme has now reached a level plan economists of the Soviet
Union could only dream of. Not the
capitalistic system failed, but
excessive dirigisme is to blame for the crisis.
Monetary Policy
 Sachs
also fails to mention the role of monetary policy in the financial
crisis.
Still it was interest manipulation and "money printing" that undermined
our purchasing power, and
heavily
forged our means of exchange and saving, with massive distortions as a
result.
The
reason why interest rate manipulation causes so much distortion is that
the
interest rates are the key factor in all spending and investment
decisions. Not
only in the choice between saving and consumption, but also in the
investment
calculus between capital intensive and labor-intensive production
processes.
Years of low interest rates lead to overinvestment in futuristic
automation and
nonsensical expulsion of low-skilled labor from production processes.
The colossal
waste of their unemployed capacities tumbles overall
productivity resulting in
lasting
stagflation and heavily suboptimal living standards.
It
was way
too easy access to cheap credit that provided the incentives for the
banks' under-capitalisation
and their extreme leverage ratios. Easy money
provided big business with an excessive competitive advantage
over labor-intensive SMEs. System threatening concentration
and monopolies are the result. Industrial
overproduction and chronic shortages of service
providers are
just a couple of the actual symptoms. Massive inefficiencies
are the result.
New Monetary
system
Technological
and commercial progress result in average productivity gains of 2 to 3%
each year.
Prices
should therefore fall by 2 to 3% and not rise as we now witness for as
long as we can remember. The positive inflation
targets
adopted by Central Banks
worldwide
seize the benefits of progress in favor of
the bankers, and
systematically confiscate
4 to 6% of Joe Sixpack’s and Sally Housewife’s added value.
 This inflation
leads to severe distortions and is
fundamentally unjust. The collective
achievement of progress belongs to the whole of society, and in the
first place
to those who most contribute to it. Worse still is that
inflation
devalues worker’s savings so much that the real purchasing power is
often only
one third when they reach retirement.
We
do not need a Swedish social model as Jeffrey Sachs argues, but a just
monetary system.
Such system can only be equitable and
achieve
efficient allocation of resources when monetary growth is zero or at
the most
limited to the growth of the real economy. A return to the gold
standard may be
the best guarantee thereto.
Kyoto and
Emission rights
Jeffrey
Sachs also belongs to
the side of
the
"climate fixers" who take the controversy
over the global warming trend for a
"global consensus". They continue to claim that human action caused
the trend and that humans can even reverse it. Sachs
professes that Southern Europe will soon dry out resulting in massive
flows of
refugees to
the north. This bombastic climate alarmism in the run up to the
Copenhagen
Climate Conference next
month must be understood as an ultimate attempt
to convince conference goers to
step into the global emissions bureaucracy.
Politics turned CO2 Emission
rights into a totally fictitious but
legally indispensable commodity for most production processes.
Politicians can
arbitrarily decide both its degree of scarcity and the regional
allocation. The
political interference does not only boost production costs, but also
disconnect costs from market reality and therefore cause massive
distortions in
the international trade. The UN emissions scheme is nothing less than disguised protectionism, which
does developing
nations more damage than good.
The Soviet debacle
learned to what systemic
waste
the falsification of competition and the elimination of market forces
lead.
High subsidies for extremely low productive windmills and solar panels
in the
Western World for example are causing
awfully
suboptimal use of scarce resources worldwide. Under free market
conditions much
more productive use would be found in developing countries. The
global ETS scheme is not only fraud
sensitive. Scarcity and
allocation
being the
result of political decisions, insider knowledge is likely to turn the ETS
scheme
into one big swindle with grave
counter-productive effects for global wealth.
Market oriented
Alternative
Before
attacking the hypothetical problem of global warming, let
us first
solve the real problems
that
threaten humanity. One single water pump at an equivalent cost of a
couple of
solar panels can indeed spare hundreds of Sahel women the daily journey
to the spring
and spare many infections and lives. At the fraction of the cost
of a windmill, a small investment in mosquito nets can save thausends
of lives due to malaria.
Fundamentally,
Kyoto
emission
rights are nothing less than a World Tax on existential human needs and
are
therefore highly incompatible with the human
right to development. The scheme
will
cost a small country like Belgium 3 to 5 billion Euro annually in the
first
phase, or
the equivalent waste of a "Long
Wapper" each
year. And such type of
taxes tend to increase over time.
If
indeed reduction of human CO2 emissions ever proved to be effective in
the “climate
management”, national governments can just as well raise
existing taxes on fossil fuels without the extravagance of the
distorting UN emissions
bureaucracy. As consumers will only substantially save energy when
energy
becomes expensive, it is the only effective and market-oriented way to
reduce
emissions without the distorting political interference. The
administrative
cost of such an increase is zero whereas a shift of the tax burden from
income to
consumption restores the incentives to productive labor and boost the
economy rather
than destroying it as
would be
the case with the UN emissions scheme.
The
emission rights scheme and the World Climate Organization which Sachs
calls for
are dangerous steps towards a "New World Order" that bring closer the
specter of World taxes, and wold Government under UN tyranny.
 Jeffrey Sachs calls it
frightening that the fate of the world depends on what (democratically
elected
national) senators think about global warming.
Even more frightening is
to
entrust our living standard and
our way of life to the
utopian
socialist ideals
of a few UN bureaucrats who escape all democratic
control. Even Karl Marx considered the bourgeois idealism of utopian
socialists the biggest threat of all to mankind.
Martin
De Vlieghere, philosopher
Paul
Vreymans, businessman
|
You can participate in
this debate at The Brussels Journal
| The Road to Serfdom. This masterpiece of
Nobel Prize laureate Friedrich Hayek
is an eye-opener,
strongly advocating the free market principles. In this all-time
classic Hayek persuasively warns against the authoritarian utopias of
central planning and the welfare state. Fascism, communism and
socialism share these utopias. For the implementation of their plans
these authoritarian ideologies require government power over the
individual, inevitably leading to a totalitarian state. Every step away
from the free market toward planning reduces people's freedom and is a
step toward tyranny. Planning also cannot assess consumer preferences
with sufficient accuracy to efficiently co-ordinate production.
However in a free market, "Price" is the all-inclusive source of
information, guiding entrepreneurs to produce whatever is wanted and
directing workers wherever they are most needed. Free markets also
provide the entrepreneurial climate for a thriving economy and for
releasing the creative energy of its citizens. Free individuals in
their native strive to develop their talents and to improve their fate
produce spontaneous progress.
All public interference in the economic process disturbs the market
equilibrium, distorts the optimal allocation of resources and
consequently reduces the level of wealth. Where planning replaces free
markets people do not only loose their freedom and individuality.
Resulting slow
growth also increases welfare demands causing dependence similar to
slavery. In the end people's self-reliance and self-respect is ruined,
and citizens are degraded to a means to serve the ends of the
collective mass. |
Free condensed pdf
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Abstract
Overview
Paperback
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Readers'
Digest
More Books of
Friedrich
Hayek here |
 The
Tragedy of the commons by Garrett
Hardin Free
access
and unrestricted demand for a finite resource ultimately
dooms the resource through over-exploitation. This occurs
because the benefits of exploitation accrue to individuals,
each of which is motivated to maximise his or her own use of
the resource, while the costs of exploitation are
distributed between all those to whom the resource is
available (which may be a wider class of individuals than
those who are exploiting it). The theory itself is as old as
Aristotle who said: "That which is common to the greatest
number has the least care bestowed upon
it. more
here
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