On this Memorial Day I would like to honor the memory of two people who were not buried at Arlington. They were not soldiers. They were not even victims of religious fanatical terrorists. They were victims of economic freedom -- freedom of Big Business to export the manufacturing base of America. To export the "arsenal of democracy" that provided victory in two world wars and one cold war and which would be badly needed by this country throughout the 21st century.
In February 25ths New York Times, three middle-aged men suffered heart attacks, two of them fatal, on the closing of a steel mill in New York State.
These men became a part of the American army of close to 30 million of fully or partially unemployed. Serves them right -- the poor saps never tumbled to getting tenure. Neither did they know that, in Capitalism and Freedom, Milton Friedman said that the "... [E]mployee is protected from coercion by employer because of other employers for whom he can work." These men did not know that alluring feature of economic freedom, or that their unemployment may be a part of a "natural rate."
They also did not know, or did not properly appreciate, the new economic paradigm of maximizing short-term corporate profits, enthusiastically supported by several thousand of the "mainstream" Anglo-American academic economists for the past 30 years.
Here is one description of the new paradigm: "... [T]he younger workers around the globe will use their increased savings to buy the assets of American seniors as they grow older, thus offering liquidity to our retirees, sustaining U.S. asset prices, and expanding U.S. opportunities."
That was said by Michael Milken, the father of junk bonds; quoted admiringly by George Gilder. In a Wall Street Journal article. A New Year present, too -- on January 2, 2007.
But what about the younger American workers, who will be replaced by these youngsters around the globe? And what opportunities? Before the crisis, perhaps most opportunities have been on Wall Street, but now this route of expansion seems to be closed, too. Milken does not care or explain. Of course, not everybody goes so far in myopic wishful thinking. Nevertheless, the paradigm still is here.
Please note -- the mentioned above closing of the steel mill happened in 2010, in the second year of the Obama administration. I think with horror what would have happened if McCain won the 2008 election, with Senator Gramm as his chief economic advisor. But isn't it time to start protecting American workers, perhaps one of the most defenseless in the world of Western-style economies?
In their obsession with getting government out of economic life, wishing to maximize profits, or to help -- perhaps -- people in developing countries, mainstream economists are ready to sacrifice a lot. Very noble and Nobel. A lot of other people, of course.
Moreover, as shown in my earlier blogs, all this is done on the basis of a utopian theory of international trade -- invalid, inapplicable, and irrelevant in the real world. It is irresponsible and cruel.
As mentioned in my first blog (about "creative destruction"), economics can never be construed on an axiomatic basis. Only one axiom is, and always will be, undoubtedly valid: Any fundamentalism -- religious, political, legal, or economic -- is dangerous. (Just look, for instance, at the recent supreme legal idiocy.) Too often, fundamentalists go as far as (they think) they can get away with. Any orthodoxy, any absolute dogma is a bad bedfellow for a society or an economy, be it sleeping on the left or the right side of the bed. The Soviet Union (on the left) and the free market or free trade (on the right) are good examples. When they do not fire at you, they fire you.
To avoid any misunderstanding, let me be completely clear. I am all for capitalism, free market, free trade, and globalization. But we need to save them from their currently employed, running amok, extremist and unbridled variations. No society or economy can prosper with extremism. We need to restore the "golden mean." Even anything good -- and especially anything "free", such as "free fall", "free love", "free lunch", "free speech", "free medicine," "free education," "free trade", or "free market" -- should still be used in moderation. Anything "free" is only as good as its set of constraints.
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I have a simple proposal how to make economics a respectable science and economists - respected scientists. To achieve that, it is sufficient to speak honest truth.
Just let us insert "abstract" prior to everything that has word "economics" in it and is not closely connected with the real world. Let us have "abstract economics," "abstract macroeconomics," "Departments of Abstract Economics" in universities, "the Nobel Committee of Abstract Economics," and "Nobel Prizes in Abstract Economics."
True, it might negatively impact the number of students studying the discipline, so one has to choose. No pain - no gain, as they say in the Wall Street
Plus, I am using a nice, positively sounding "Abstract," rather than "Utopian."