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Letter to the Editor: A Clarification of My Argument at the Economics Debate

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By Nevio Cristante

This report is written to clarify the argument that, for uncontrollable reasons, was not stated explicitly in the debate I had with Prof. Brain MacLean, the Chair of the Economics Department at Laurentian University.  The debate was entitled “Should the American government have bailed out Wall Street?” and dealt with the decision made by the American federal reserve to bail out the financial sector after the market collapse in 2008.

Within the debate, I remember stating that Prof. MacLean and I were not in harsh opposition to one another.  The recognition that the activities of Wall Street were wrong was not in dispute, but the act of bailing out the debt by the Federal Reserve in order to correct the failures of the private banks in the U.S. should have included a punishment on the banks’ CEOs, instead of a convenient relief.  A revelation should have been stated to the open public of the real nature of these disparaging events.  They are not only examples of the increasing continuity of failures in the free-market system, but, beyond a construction by an “invisible hand” not knowable to the general public, a formulation of the dominance of economics to such an extent that we are under the control of “invisible” imperial factors of economic dictatorial rule. This revelation displays that the so-called “free-market” system from its beginnings has little contact with the major principles incorporated under the typical democratic order. That event should have generated the argument that a new monetary system should be created.

For various reasons the debate was not formulated in that manner. All I could do was be repetitive of my general view which I would not like to have it acclaimed as “theoretical,” but a general description of the real. The description of reality is a difficult task, owing to the fact that the description of our economic system and its related democratic neo-liberal order hides many important factors, which are made invisible. If anything, this is the true nature of the “invisible hand,” not the simplistic, ironically individualist democratic claim of Adam Smith, the forefather of the free-market system. Much of that simplistic, black- and-white logic misrepresents the more real condition of an increasingly complex and perplexing global framework.

I am certainly not blaming the previous reporter for not identifying these intricacies previously, since they would require a long explanation that obviously cannot be done in a news report. I am not exactly sure if I actually stated the following claims below in the debate. Yet, I can say that some of them were stated, and others are additions for the sake of clarity.

I did give a brief explanation of market failures: I believe I displayed the lack of consideration of externalities, and also mentioned Keynes and Galbraith, economic theorists, whose critical claims are not regarded by every-day practice. The neo-liberal market system, for Keynes, would not come close to the supply for the level of aggregate demand, and this inadequacy could lead to ever-prolonging periods of high unemployment.  John Kenneth Galbraith, a Canadian-born economic theorist, rejected the technical and mathematical models of neo-classical economics as being divorced from reality. Under this spectrum, he could see the rise in oligopolies, and I believe we can add plutocracies. He stated distinctly that the consumer sovereignty was firmly alienated by market power, and that the public sector becomes increasingly negated. For him, it seems that any viable reformer must be averse to the free-market.

Even amongst economic theorists, the free-market system was not efficient due to its simplistic, reductive view, and I desired a further explanation, even in economic parlance, on addressing these contentions.  I remember mentioning the speculative emptiness in the selection of gas prices: asking, who are these speculators, and how are they chosen to predict honestly the future economic conditions, or a reason for the price of gas? It was not answered. I belief I stated that most money was truly vacuous in regards of supply and demand, and that many of the people’s wants – which is a key requisite within neo-liberal economic theory – are ignored by corrupt and immoral corporations, and also our current government, which is more closely tied to these corporations, which are also more closely tied to the banks. Therefore, the once-upon-a-time Canadian pride in ‘social’ democracy –  which even Arendt stated is the only good thing in the neo-liberal democracy, where there are public bodies that could be formed to protect against the private, profit-making dictatorship of the free-market or the state capitalist market – is continuously diminishing. It may be argued that the Bank of Canada protects against the unruly activities of private banks, but that distinction is actually not so clear anymore, since not only the private banks in Canada but the Bank of Canada is under scrutiny.

The main problem that generated the economic crisis was the overvaluation of mortgage rates based on the false notion, from a lack of honest insight in the “invisible hand” idealization theory that housing prices would continue to escalate. Most of the money that engenders our activity is done through manipulated lending and investments of banks and stock markets, where speculation is used in order to take advantage through the increasing formalization of debt. This is how banks and the rich make money. This has little to do with the law of supply and demand, which should be based on actual products and services, not on the speculation of investments that is dependent on debt – not growth – in the economy.

These performances made by the irresponsible stock market and the private banks of America have global control, and we who are participants in this market system are included in this form of imperialism, a form of rule that democracy was supposed to eradicate.  Such participants are actually endorsing, whether they know it or not, the economic dictatorial determinism that is usually out of our control.  Yet, it is not really harming those who have extensive economic power, and who participate in maintaining it and establishing that illogical condition which is falsely described to us under seemingly concrete numerical terms and constricting, apparently logical, diagrams.

The main point is that the current all-powerful monetary system and its claims of security and protection do not make sense. Even the regulatory reforms to lessen the chance of economic-recessional recurrence do not come close to the requirements of the ‘non-value’ elements of environmental concern. The value monism of economics does not go beyond the price of the good itself.  It does not consider its “negative externalities,” making it absolutely ridiculous to claim itself as a perfect system. The entirety of effects on the public sector must be included in the economic value system. Yet, this limited “value monism,” instead of “value-pluralism,” continues by considering only profit as the main goal. There almost no true adherence to public, social, cultural, spiritual or aesthetic concerns, and yet these are increasingly recognized as essentials for the survival of a growing civilization. If they are not valued, the degradation of the quality of life will increase.

The answer of bailing out these American banks only relieves the problem temporally. It does not even recognize that this act adheres to another problem: that the current free-market system only functions through an immediate reaction, which exacerbates the condition.  Moreover this lack of good foresight – which comes from a severe lack of hindsight – does not consider the new important factors of sharing, or of employing a “gift economic culture,” which we can learn from our aboriginal peoples to relieve us from the global imbalances in trade, and to provide a sense of the worth of a long-standing economic sustainability, instead of the conflicting, inhumane practice of competition in the illusory ‘free’-market system. This is basically what I wanted to say.

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