Paul Craig Roberts: The Collapsing US Economy and the "End of the World"

[Jan Klimkowski]

Economists have almost universally confused jobs offshoring with free trade. Economists have even managed to produce "studies" purporting to show that a domestic economy is benefitted by being turned into the GDP of some other country. Economists have managed to make this statement even while its absurdity is obvious to what remains of the US manufacturing, industrial, and professional skilled (software engineers, for example) workforce and to the cities and states whose tax bases have been devastated by the movement offshore of US jobs.

The few economists who have the intelligence to recognize that jobs offshoring is the antithesis of free trade are dismissed as "protectionists." Economists are so dogmatic about free trade that they have even constructed a folk myth that the rise of the US economy was based on free trade. As Michael Hudson, an economist able to think outside the box has proven, there is not a scrap of evidence in behalf of this folk myth (see America's Protectionist Takeoff 1815-1914).

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As Lenin and others predicted, industrial capitalism has turned into finance capitalism. Finance capitalism does not finance or create new real investments such as manufacturing facilities. Instead, finance capitalism functions as a rentier. It leverages debt and extracts interest payments (and today taxpayer bailouts for its over-leveraged gambles). Finance capitalism flourishes by converting more and more of society's resources into payments to itself.

One result is that markets cease to expand and economies cease to grow as austerity is imposed to service the build-up in debt. Austerity pushes economies down as consumption and investment are cut back in order to service debt. Hudson concludes that the result is that bankers now receive the rents (a form of unearned income) that once flowed to the landed aristocracy. Unlike the aristocracy, who were dispossessed of their rents, the bankers have not been.

Hudson knows the history of economic thought and economic history. Reading The Bubble and Beyond lets readers see how economic ideas developed in ways that leave economists unable to perceive the real character of the problems that are challenging them. Trapped in the matrix that they have constructed for themselves, economists are unable to devise solutions.

Hudson writes that western economies are at a turning point. GDP growth consists increasingly of the build-up of financial overhead. The wealth gains are paper gains, not gains from real plant and equipment, and are increasingly concentrated in the hands of the one percent. Financial earnings are extracted from the earnings of tangible capital and labor. Matt Taibbi captured the point with his imagery of Goldman Sachs as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

The free market and free trade are the Big Lies of C21st finance capitalism.

The Lies that will cause the destruction of the Empire.