FICTITIOUS CAPITAL, DEBT DEFLATION AND GLOBAL CRISIS
Keywords:
Fictitious capital, debt deflation, regulation, wages, profitsAbstract
Market structures and broad economic patterns that classical political economists positioned at the center of their analysis are regarded as “exogenous” by today’s established scholars. Monetarist teachings exclude the study of how nations have created banking practice to finance growth. Free trade doctrine and a profinancial ideology of deregulation are al ays related: “free markets” for predatory behavior and unearned income. Today’s mainstream Consensus correspondingly supports free trade and minimal public regulation or taxation. These policies are restricted by privatization and a “flat tax” on employment, hile untaxing real estate, property and high income brackets. The older practice — by hich today’s successful lead nations caught up ith others and then achieved dominance — pursued active protectionist industrial and agricultural policy and state intervention.
This practice supports government subsidy of investment in infrastructure, education, research and development, progressive taxation of income and of reinter returns (land rent, financial returns and monopoly gains), and a financial system that stimulates tangible capital formation. Critics of free trade and financial deregulation have determine the proper aim of national policy to be active regulation and tax policy to define markets so as to maximize capital formation, in such a way that raise productivity and living standards. This is achieved by public investment in basic infrastructure, tariffs and subsidies to encourage capital formation, education, research and development, capped by directing the banking system towards productive credit creation to finance industrial capital formation. By denying the classical distinction bet een productive and unproductive labor and credit, today’s national income accounts classify reinter gains as “earnings” on a par ith ages and profits, adding to national product rather than simply being transfer payments. This perspective treats all wealth as being earned as part of the production process, not extracted from the economy in the form of a free lunch (“economic rent”) by renters. . . The euphemism “free market” means central planning by the banks and high finance. Their plan involves untaxing reinter income and wealth, led by land-price gains (the “unearned increment”) and financial deregulation. This shifts the allocation of capital and policy planning out of the hands of government into those of the banking sector. This financialization of the economy is more centralized than public planning by elected officials. And while government planning tends to be long-term, financial planning under neoliberal zed conditions is hit-and-run. Whereas government planning is supposed to encourage capital formation and full employment, today’s financial planning makes returns by stripping assets, inflating asset-prices (the Bubble Economy) and minimizing the return to labor relative to reinter returns.
In the view of the fact that interest is a cost of production and enters into the cost of living, financial zed economies become more high-cost and for this reason uncompetitive. Nevertheless the dynamic of globalization in today’s world is predominantly financial.
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