Michael Hudson on Junk Economics

More below from Michael Hudson‘s J is for Junk Economics, the major part of which is a dictionary of ideas from economics, political economy and beyond which aims to be ‘a guide to reality in an age of deception’. Hudson draws on an eclectic mix of sources to argue his case; among them, the classical political economy of Smith and Ricardo, the institutionalism of Veblen, post-Keynesianism and the little-known American School of Political Economy. He remains an independent, iconoclastic and provocative thinker and his work deserves a wide audience.

Junk Economics: A public relations exercise promoted by vested interests to depict their behaviour in a positive light instead of as exploitative zero-sum rent-seeking. Junk economics is a kind of “as if” science fiction with assumptions appropriate to a utopian parallel universe in which rentiers are the heroes. Much as a good novel or play must have characters that act consistently, the criterion of this economic pseudo-science is merely the internal consistency of its assumptions, not worldly realism. Many of the most applauded economists reason logically by a priori axioms about a world that might hypothetically exist.

The trickle-down strategy of financial populism is to convince the public that the economy’s bottom 99 percent are best served by pursuing policies that favour the top one percent. This requires erasing the classical concept of rent distinguishing between productive and predatory activity.

Free-market economics such as the Chicago School‘s “rational market” theory, Laffer Curve and marginalism ignore the long run to focus on the short run, and ignore the large economic picture to focus on the individual. Debt is treated as a contract by impatient consumers to pay for being able to consume now rather than later, or by businessmen seeking to make a profit by borrowing for a long-term capital investment. This frame of reference has no room to analyze the rising overall volume of debt passed on from one business upswing or generation to the next as banks create new credit/debt.

Public infrastructure spending also plays no role, so government borrowing appears simply as a tax without an economic return – a deadweight overhead. Government spending is assumed only to increase consumer prices, not increase employment or lower the cost of infrastructure services to businesses and families. “Sound money” is supposed to be only created by banks, not governments. The aim of such assumptions is to capture monetary policy and mainstream economic thought, weaponizing it for class warfare purposes.

When persistent error achieves broad success, one always finds a special interest behind it. On the broadest level, Karl Marx observed: “Scientific bourgeois economics…was no longer a question of whether this or that theorem was true, but whether it was useful to capital or harmful, expedient or inexpedient…In place of the disinterested inquirers there stepped hired prize fighters; in place of genuine scientific research, the bad conscience and evil intent of the apologetic.””

Michael Hudson (2017), J is for Junk Economics, p.132-3

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