The full title of this book by Paul Craig Roberts is
“The Failure of Laissez Faire Capitalism and Economic Dissolution of the West“.
In my review posted to Amazon.co.uk, I gave the book Four Stars. This means it is Good and Well Worth Reading.
Here is my book review.
We’re in the middle of a nightmare economic situation
This important book criticising the laissez faire capitalism of the last couple of decades is written by an assistant secretary of the Treasury under President Reagan and is one of the architects of Reaganomics.
I think that’s important because its criticism of capitalism is coming from the political right and not from someone with long-standing views.
Another reviewer is correct. There is a long introduction by someone else for the German version served up to us on amazon.co.uk. My advice is to skip it and start with the book written by the author because you won’t have any trouble understanding the stories based on America.
The book is a little repetitive and in need of an effective edit anyway but ignoring the introduction will help get to the core of the matter.
What we’ve seen is the creation of global corporations that are effectively outside the scope of political influence because there is no global government to stand up to them. In fact it’s worse than that, these corporations have the means to twist policies in their favour.
Our economic models, taught at universities and practised by central banks and governments, don’t properly incorporate the effects of these changes. This leads to a misleading narrative about what is good and bad in the media.
By pursuing strategies to move production and services offshore to low cost countries, these corporations have managed to enhance their profits by dumping enormous costs on society. The USA (and the UK and parts of Europe) has been hollowed out with middle income jobs transferred overseas. Unemployment increases and the traditional economic levers no longer work because the capacity for the jobs no longer exists. Increasing aggregate demand using traditional Keynesian policies pushes a share of the added value abroad so the benefits leak from the economy while the debts build up.
Jobs that are created in our newly modelled economies are often part time, lowly paid and support what the author calls non-tradeable services. Government employees, shop assistants, hairdressers, care workers can’t help the economy export and earn the money needed to pay for the imports.
This is important. The tradition support for free trade in classical economics comes from David Ricardo, an early 19th century economist who developed the theory of comparative advantage. He argued that because Britain was better at producing textiles than wine and because Portugal was better at producing wine that textiles, both economies would gain by specialising in what they did best and trading.
The logic was impeccable in a simple two product, two country example. It falls apart as things get much more complicated. It’s entirely broken when you look at offshoring of processes. That’s no longer trade but labour arbitrage.
This book helped to bring together a lot of uneasy thoughts I’ve had over the last 15 years or so. I’d accepted the idea that free trade was good and that whilst we lost jobs, we benefited from buying consumer products at prices that could never be achieved with UK production so that meant our incomes bought more.
What I hadn’t thought about was the remorseless process that is occurring as more higher paid jobs are offshored. The political talk about specialising in complex engineering and technology is nonsense when you think about it properly and look at education standards. Chinese and Indian software developers are still a fraction of the cost of those who live in the developed countries.
I recommend this book to help you understand the problems. It does get a little paranoid in places as it rages against a political executive that is remorselessly gaining powers and spying on the general public but these things are happening. It may be naive to believe that it will be used for general public good rather than just the good of the elite.
The book doesn’t point to solutions. Should globalisation be stopped and could anyone stop it anyway? Do we want a world government to stand up to global corporations and stop them avoiding taxes? is protectionism a valid solution anyway.
The answers need another book and may have to be written by another author. At least the book helps you to focus on the big underlying problems.
It is available to buy from Amazon.co.uk and Amazon.com.
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