News & Analysis
TIME Spreads the Government-Wealth Meme
Anatole Kaletsky: How to Fix the Global Economy ... Kaletsky argues that capitalism has gone through three major eras punctuated by two near-death crises – the Great Depression of the 1930s and the stagflation of the 1970s – which forced the system to adapt in order to survive. In the aftermath of the Great Recession, he says, capitalism is morphing into a new, fourth era. Kaletsky spoke to TIME about what went wrong with the global economic system – and how to fix it. ... TIME: What will be the defining feature of capitalism 4.0? Kaletsky: In the fourth era we are going to recognize that both governments and markets can, at times, make serious – sometimes catastrophic – mistakes. There was a view after the Depression that markets were dangerous and needed to be tamed by an all-knowing, benign government. In the third phase [before the Great Recession] there was a reversal: the idea was that markets are perfect and governments need to be tamed. Now we know that both government and markets make mistakes, and we won't trust either of them. – TIME Magazine
Dominant Social Theme: Government is very helpful in the wealth building process and without an enlightened regulatory bureaucracy the Invisible Hand would be fumble-fingered indeed.
Free-Market Analysis: The Daily Bell analyzes the dominant social themes of the elite. In TIME, the Wall Street Journal and other major mainstream media, a new dominant social theme is being constructed in our opinion. It is one justifying the Western economic system and the massive government interference that has taken place. We have pointed this out in several articles recently, most recently in Libertarians Seek Rahn's Ideal State where we wrote the following ...
Two brand new dominant social themes in a very short space of time, or at least that is the way we see it. The state has come under tremendous attack in the 21st century and we believe the powers-that-be are pushing back. (Why wouldn't they?) In aggregate, the themes make a powerful argument that some level (perhaps a high degree) of state involvement in the economy is at least tolerable if not an unmitigated good.
We explored the first meme just the other day. It was, we believed, a sophisticated socioeconomic perspective promulgated by a brilliant young political observer, one Ian Bremmer – who had the perspicacity to focus on the idea that most of the major powers of the world today are practicing something called state capitalism ... Bremmer, we decided (whether he knows it or not) is essentially creating a new dominant social theme that justifies Western capitalism not just in previous free-market incarnations but as it is today. The argument he presents, we came to believe, is one that if taken to its logical conclusion implies that instead of criticizing Western capitalism, Westerners ought to devote their energies to combating state capitalism abroad. ...
Now the NEW meme (new to us anyway) buttresses what Bremmer is proposing. This suggestion is brought to us from the mainstream libertarian wing of the US sociopolitical dialogue. ... [Called the Rahn curve], it postulates that data shows governments are most effective at supporting economic growth and free-markets when they comprise no more than 15 to 25 percent of total GDP. Because today governments in the West are consuming so much more of GDP to provide "services," the "Rahn Curve" claims that government is basically out of control.
We can see in both of the above that there is an effort to incorporate the government as a natural part of the larger conversation. This interview with Anatole Kaletsky in TIME magazine parallels what we have already observed. Who is Anatole Kaletsky? Wikipedia tells us that he is "a journalist and economist based in the United Kingdom. He is Editor-at-Large and Principal Economic Commentator of The Times, where he writes a thrice-fortnightly column on economics, politics and financial markets."
And Wikipedia adds, "He was named Newspaper Commentator of the Year in the BBC's What the Papers Say awards for 1996. He has twice received the British Press Award for Specialist Writer of the Year, has won the Wincott Award for economic journalism administered by the Institute of Economic Affairs, and the First Cernobbio-Europe prize. Beginning in 1990 he was Economics Editor of The Times, responsible for all economic news and analysis, and resigning in 1996 to create his consultancy practice. He remains the paper's principal commentator on economic and financial affairs, and is now Editor-at-Large writing for The Times Comment pages on Thursdays and for the Times Business section on alternate Mondays."
This sounds most impressive, and yet we have this from Wikipedia as well:
Many of his economic predictions have been proven wrong by subsequent events, and this tendency was noted by the satirical magazine Private Eye. For example, Kaletsky wrote, "... I am one of the few economic commentators who has consistently made light of the anxieties about a "day of reckoning" for British homeowners and consumers ..." Predictions include that "the credit crunch seems to be ending" (June 2008) and that "there will be no US recession" (January 2008). His latest prediction is that in the United Kingdom general election, 2010, the Liberal Democrats may displace the Labour party as the "dominant party of the Left".
Wow. Here is a fellow who has won some of the most prestigious awards in his profession and yet on every significant economic event of the 2000s he was wrong. He didn't believe there would be a real-estate crash, a credit crunch or a recession – and said so in no uncertain terms. Yet not only has he kept his job, he is being held up buy TIME magazine as an economic "guru" whose words we ought to trust.
Should we? It is Kaletsky theory (as we can see from the article excerpt that began this analysis) that there have been three major eras in terms of the West's perception of capitalism. During the Great Depression, he argues that "markets were dangerous and needed to be tamed by an all-knowing, benign government." The second era was during the 1970s, an era of stagflation when capitalism had to readapt to survive. After that came a third era during which the idea took hold that "markets are perfect and governments need to be tamed." What has been the result of all this? A fourth era as follows: "Now we know that both government and markets make mistakes, and we won't trust either of them."
This fits right into the meme we have already discerned – arguments that go out of their way to incorporate government involvement in the marketplace. We would argue this is a pro-active theme, a fear-based promotion that is gradually building in power and persuasiveness via the mainstream media. Like many such themes it is being pursued at a number of levels and in a number of guises. The idea is always to suggest a number of possibilities and then see which is the best received. That is the one then to receive the most promotion.
We have an alternative point of view that we will suggest however. It is one that goes back to the Greeks and has as its basis the idea that government ought to be rigorously disciplined and pruned. This idea of severely limiting government found resonance in Britain with the Magna Carta and was soon married to the idea that the free-market itself was the driving force behind prosperity. Adam Smith suggested this with his concept of the Invisible Hand. Not much later with the founding of the Austrian School, the idea that the market was the fount of prosperity began to accumulate theoretical backing.
We now have some 200 years of neo-classical theorizing, beginning with the boundary between classical and neo-classical economics – the theory of marginal utility that shows comprehensively that wealth is created and accumulated via free-markets (the freer the better) not via the guidance of government. Ludwig von Mises presented this clearly in his great work Human Action, which postulated that it is the individual, operating freely and within the ambit of the larger marketplace, who makes the decisions that drive prosperity, not the government bureaucracy.
And then we have this – what we have pointed out ourselves – that the great Western nation-states seem to come from inchoate and small entities competing side by side and sharing the same language and culture. In such instances, governments are likely to be quite cautious because citizens can move from one region to the next and thus avoid draconian laws, regulations and taxes. We have pointed out this pattern as regards the Greek city states, the Seven Hills of Rome, the city states of the Italian Renaissance and of course the 13 US colonies.
These are all historically valid points in our view and their frame of reference is millennia. Why is it then that Kaletsky writes a book that attempts a historical analysis of capitalism in less than a century? If you read the interview, you will see for yourself, dear reader. Over and over Kaletsky returns to the idea that government is a necessary part of any economy. If one examines the economic and political history of thousands of years, one sees that this is not necessarily so. But Kaletsky, an astonishingly bright man, is determined for some reason to look at only about 100 years. We would argue this foreshortened frame of reference is partially responsible for what we consider to be flawed conclusions.
But we think unfortunately that it goes deeper than that. The usual mainstream suspects in Britain and America have launched yet another promotional campaign using various intellectual justifications to ensure that people are reminded that government is a necessary part of any economic adventure and that wealth cannot be gained without the presence of government. What does Kaletsky tell us? "The crisis has made it fairly clear that the deregulated, noninterventionist model of capitalism can't cope with extreme fluctuations. America will pragmatically conclude there is a need to invent a new system, crucially one in which government is necessary."
Kaletsky's solution is an aggressive one indeed and features another element of the West's current command-and-control economy – central banks. Here is what he proposes: "There is another alternative: monetary policy. Central banks could do more. We already have short-term interest rates near enough to zero all over the world. But there is still a view that this is a temporary emergency situation that isn't going to last very long. What central banks can do — and I think will do — in the next several months is offer clear assurances that interest rates are going to be at or near zero for many years to come, perhaps the rest of the decade. ... That's really the most plausible formula for a return to decent economic growth all over the world."
We disagree with this. We think central banks fix the price of money and always do so wrongly causing terrible booms and busts. We think central banks are a big part of the problem. Why doesn't Kaletsky? We have no idea. We are not even prepared to say that he is a knowing part of what we discern as a new elite dominant social theme for the 21st century. In fact, we have no idea how these promotions work at the upper levels. We are fairly sure that individuals such as Kaletsky are not given direct orders to pursue this or that intellectual endeavor. Kaletsky and the others may be therefore entirely sincere in their premises and conclusions. But nonetheless, these fear-based promotions evidently and obviously take place.
Conclusion: We believe the three examples cited in this article begin to show once again how these memes are promulgated and how sophisticated they can be. They do exist in our view and the solutions they offer are always, at least, quasi-authoritarian. The idea is ever to advance centralized governance and inevitably a global form of it. They worked better in the 20th century than today.
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Posted by Lee on 09/07/10 10:19 PM
I concur with Gabe and again just want to thank you guys for this site. I second the proposition that this site WILL explode as the cause of what is occuring before our eyes continues to play out. The Marxists and Neo-Marxists that run the U.S. and Europe are running our collective homes into the ditch. It remains my hope however that once these crooks have run their course sites like this one could point the way back to some sanity.
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Posted by John Danforth on 09/07/10 09:35 PM
"This person also needs to have power over the economy..."
I say, NO THANKS.
Right on, Bill, as always.
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Posted by Bill Ross on 09/07/10 05:58 PM
Kaletsky: "Now we know that both government and markets make mistakes, and we won't trust either of them."
Huh? Within the total set of humanity there is government and not government. We know that the "market" has government (coercion) and non government players.
Who is this "we" that can stand outside of both government (those who tax/coerce, "obey or else") and the total market, Adam Smiths "unseen hand", our cumulative choices in pursuit of self-interest?
It seems to me, that "we", thinking they stand outside of humanity, must believe they are "god", to judge ALL of us "we won't trust either of them".
An unfortunate slip of phrase on Kaletsky's part. Seems he is speaking for elites, which may explain his limited, parochial POV WRT to economic history, as noted by DB.
No matter, until the free market is restored with absolute property rights and scrupulous enforcement suppressing force / fraud (all trades that are not mutually consensual), the grim reaper of "Mathematics of Rule" will collectively smite us, until we "do get it":
Click to view link
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Posted by Spencer on 09/07/10 05:39 PM
Hey Victor, Have you been talking to the Father?
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Posted by John Ray Savage on 09/07/10 03:59 PM
"1]governments are necessary,
[2] governments[and their banking systems] work to benefit society "as a whole". "
We have to remember that the current fluid and non rigid nation-state system gave away much national sovereignty after Bretton Woods. The UN and other such super-national entities also helped. But even before this the Personal Rule of monarchs was subjected to massive criticism by the incumbent Power Elite, who were encouraged by a inner group of financier Freemasons.
Thus Personal Rule was removed and replaced by Parliaments and politicians who were the firewall protecting and benefiting the Money Power behind the firewall.
Free Markets for the money power and plenty of regulations for the rest of us. The Propaganda we are fed from the cradle to the grave is that things used to be bad under monarchs, people were primitive and then along came the moderns with their philosophies, parliaments and central banks and we all became free and rich.
We do need governments, but not Structuralist governments, we need Personal Rule, where one person is actually responsible to his people to rule them with justice and fairness. This person also needs to have power over the economy and must not allow 'freedom' to a small group to gain total power over society.
As a result of the new era, we have the worst and lowest characters in positions of power, these people are easily seduced by Titles conferred on them, they actually are incompetent and no good at government but because they are part of this structure they are able to get away with it.
How long can we go on with this terrible state of affairs? We do not need another revolution, just a gradual non violent change, and removal of these despicable people.
Reply from The Daily Bell
Very good. Thanks.
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Posted by Victor Barney on 09/07/10 03:37 PM
Dominant Social Theme: "Government is very helpful in the wealth building process and without an enlightened regulatory bureaucracy the Invisible Hand would be fumble-fingered indeed".
If you believe that the government is very helpful in the wealth building process, it can only relate to the spiritual deity of this world, or "Lucifer," who has but short time left! Watch!
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Posted by Jones on 09/07/10 02:25 PM
GS, regarding the HuffPost article:
Click to view link
I learned the hard way, a long time ago, to take delivery when you purchase PMs. If you can't touch it " it is not yours.
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Posted by Lila Rajiva on 09/07/10 02:12 PM
@Dennis Murphy
It has nothing to do with what the CTFC said or didn't say. There IS gold and silver manipulation. But arguing for that because of the lack of delivery on futures is quite odd, since future contracts generally don't entail delivery. NSS in the stock market is a different thing. iTulip had an extensive post on this.
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Posted by Jacob on 09/07/10 12:09 PM
I notice another dominant social theme that perhaps warrants additional discussion.
This meme is that, because the social and economic environment we share is so vulnerable and so blindingly complicated, great skill and intervention is required for society to be able to properly function. Two questions emerge from this lie: 1) what interventions would produce the best results or best solve our problems, and 2) what person or persons would best orchestrate those interventions. This meme has been universally internalized and adopted as "natural truth," whose consequence has put people at each other's throats. Most would call this "politics" and deem it inevitable. I call it perpetual non-violent warfare orchestrated for hidden purpose.
Cultivation of group think and instigation of unending fighting, over what ideas would be best and who should implement them, somehow seems consciously designed to exhaust people spiritually, physically, emotionally and financially, leaving weak opposition to those behind such machinations to implement systems and measures advancing obscured objectives.
Engineered social warfare causes people to fight about things with which they either wouldn't be concerned or else wouldn't be combative, e.g. foreign adventures, military and otherwise; food, drug and product safety and prohibition; education of children; medical care; the list is endless.
I couldn't care less about what "government" wants or requires us to care about. I do care, however, about being inescapably confronted and prompted to get into this maddening socially divisive fray, and how much government has in this manner expropriated so much of our decision-making from our lives.
I am reminded of the WW I Christmas truce on the western front when enemy combatants, never understanding why they were fighting one another, suddenly desisted from combat for a few brief hours and shared their common humanity.
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Posted by Gabe on 09/07/10 11:55 AM
Daily Bell is quickly becoming my favorite website for analyzing current events, the media and the economy. You guys are doing an amazing job. I often ask similar questions to what I read here. There is a growing audience for this. I predict your readership will have explosive growth over the next year..
Reply from The Daily Bell
Thanks for the kind words and feedback.
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Posted by Johnny Dangereaux on 09/07/10 11:51 AM
Hey guys, I commented on the HuffPo story. Guess which comment is mine? Anyway the manipulation details link is in my comment.
Interesting headline piece on Click to view link today by an ex-soldier. He's not very optimistic I'm afraid.
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Posted by FLR on 09/07/10 10:58 AM
Kaletsky is part of a permabullish research firm (and apparently money manager if you are masochist) called Gavekal. John Mauldin gives the outfit a lot of exposure through his newsletter where he presents them as the extreme that sees no wrong with the economic system.
Here is an example of their bad analysis and predictions (published in Barrons) being taken apart by the venerable John Hussman:
Click to view link
p.s. The latest rubbish from Gavekal is that Scandinavia and Switzerland are going to save the Eurozone.
Reply from The Daily Bell
He is a "perma-bull ... "
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Posted by RMP on 09/07/10 10:41 AM
I think it would be better to examine the history of capitalism within its various stages than what has occurred recently with the likes of the Depression, Stagflation and Perfect Markets.
All three one could conclude had powerful manipulators within the last identified stage which is the pluralist economy stage. This stage came from the previous monopoly stage which came from financial capitalism stage, which came from..... mercantilist stage? if memory serves me.
You know, like manorial morphing into either merchantists, or.....sorry, I don't have it in front of me the lists of the various stages.
So, why not examine that aspect as to whether we are now breaking up and into another "new and improved" stage, perhaps consolidating within and from the pluralist stage into something else, or something now more sinister given how much power and influence the PE have verses the past and how stages came to be, one would assume the direct result of technology and other advancements.
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Posted by Dennis Murphy on 09/07/10 10:37 AM
@DB
My comment is about the item posted by Ms.Rajiva (Doubting the evidence of the Whistleblower to the(JP Morgan)Silver market manipulation. I wonder if Ms.Rajiva heard "More Convincing" information from CFTC cronies, that is contrary to "Market Manipulation" accusations leveled by Mr.Maguire...
I place more credibility on the Whistleblower's word than anything coming out of the CFTC. By the way belivers in the CFTC credibility are far OUT NUMBERED by those who know the truth.
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Posted by Ingo Bischoff on 09/07/10 10:37 AM
@ John Mahler
Powerful dominant men in a statist corporate elite no doubt sought to centralize government. Yet, it was the American people who clamored for, or who were propagandized into demanding the ratification of the 17th Ammendment which turned the American Republic into today's centralized "Democracy" government.
It also was the American people who elected BHO as their president in 2008, a man who had no rival for being the most leftist U.S. Senator.
If there are any tears to be shed, they ought to be shed over the quality of information resting with the American electorate.
As Thomas Jefferson said, "To be ignorant and to be free, is something that never was and never will be."
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Posted by Bewer on 09/07/10 10:27 AM
Those people, (politicians, experts, etc.) chose a way to make their life interesting and probably financially secure by the method that works well for them. Lots of somebodies believe them and love to print BS and therefore make their living; the crowd reads it and suckers into the expertise that does not work better than non-expertise and probably worse; and here we are!!!!!
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Posted by Onebornfree on 09/07/10 10:25 AM
OBF CORRECTION TO PREVIOUS POST : I said:
"No matter how much they fail, a statist must/will always remain in denial of his/her core assumptions, and ALWAYS demand even more of the same to "cure" what the state, in actuality, caused."
What I _meant was:
No matter how much they fail, a statist must/will always remain true to his/her core assumptions, and in denial of reality, and ALWAYS demand even more of the same to "cure" what the state, in actuality, caused.
Regards,onebornfree
Click to view link
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Posted by Onebornfree on 09/07/10 10:19 AM
The Long and the Short
DB: "We think central banks fix the price of money and always do so wrongly causing terrible booms and busts. We think central banks are a big part of the problem. Why doesn't Kaletsky? We have no idea."
OBF: Its not really that hard to figure out.
The Long Answer:
The statist psychology depends on certain unquestioned assumptions [most likely learned at a young age [typically government funded schooling], and from those around then [family, newspapers, TV, movies etc. etc.]
For example, statists of all stripes routinely work from 2 core assumptions [i.e "truths"]:
[1]governments are necessary,
[2] governments[and their banking systems] work to benefit society "as a whole".
They are mostly incapable of ever seriously questioning those core assumptions[because they are "truths"], despite the bald fact that in the real world, governments have never "worked" [except in some nefarious, secret way that enriches those with the right connections].
The fact that all government "solutions" actually fail must therefor always be denied, [otherwise assumption [1] would need to be seriously examined!], therefor assumption [2] [i.e.that governments actually work] is also never seriously questioned, so that when a situation like the current "economic downturn" actually arises for nearly all to see, the only "solution" that can/ will be offered for "serious" consideration by the power centers will be one that actually demands more of the same, not less, or none.
The Short Answer:
There does not need to be any great conspiracy involved here [which is not to say there that there is not] simply because the short answer to your question is:
Mr Kaletsky is a statist, with a typical statist psychology [see assumptions 1&2 above], writing for a statist magazine with a statist readership. He gets paid to reinforce that belief system for his readers, not to question or demean it.
No matter how much they fail, a statist must/will always remain in denial of his/her core assumptions, and ALWAYS demand even more of the same to "cure" what the state, in actuality, caused.
Statists [at least, most of the ones over 40] are psychologically incapable of thinking in ways other than what they already do.
Expecting/ demanding that they think otherwise is illogical, plus a huge waste of time,energy and mental effort.
It does not mean that you or I have to believe any of their erroneous ideas now, does it?
We just need to look for ways to protect ourselves from those erroneous ideas, to the best of our abilities.
Regards, onebornfree
Click to view link
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Posted by Jones on 09/07/10 10:11 AM
Good article on spreading misinformation to a delusional public.
Click to view link "The World Hurts More Without The Truth"
More "shovel ready" manure to spread...
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Posted by John Mahler on 09/07/10 08:42 AM
It is incompatible with the least rational argument for central government and central banking to suggest the twisted logic of fiat legal tender has any relation to capitalism as an economic model.
No matter what history teaches, there is always a willing, well paid, lap dog media to skew those lessons to fit the agenda of present corruption in the body politic. Sadly, powerful dominant men in a statist corporate elite central government "Chicago Style" cabal have led the nation from a self rule constitutional republic to a nation of fifedoms and special agencies unaccountable to the electorate granted the power to legislate and control the American citizen from cradle to grave; blanching the faintest hope of meritocracy and American exceptionalism.
Tears well in my eyes because I mourn, with the gravest of grief, the passing of the American Republic.
Reply from The Daily Bell
"Sadly, powerful dominant men in a statist corporate elite central government "Chicago Style" cabal have led the nation from a self rule constitutional republic to a nation of fifedoms and special agencies unaccountable to the electorate granted the power to legislate and control the American citizen from cradle to grave; blanching the faintest hope of meritocracy and American exceptionalism."
You think this began with Obama?
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