Posted tagged ‘John Meynard Keynes’


March 23, 2010

Erle Frayne D. Argonza

The debates by presidential candidates have been reverberating the media audiences in the country for couples of weeks now. The issues have ranged from those that are social policy-oriented (subsidies to poor, health, education, housing, jobs) to macro-economic policies (sustaining growth, accelerating development) and moral policies (corruption, reproductive health). Some articulations of foreign policy were also heard from the competing gentlemen.

Seemingly confusing in their broadness, somehow the various forums for the debates (not actual debates but simply presentation of each one’s opinion about policy questions) did give a semblance of information-based campaigns by enthused candidates. This is already quite a departure from previous polls when debates were sparse and superficial, and should be lauded by observers.

What this analyst, who is a public policy expert, wishes to see clearly in the debates is the economic issue of whether to highlight the physical economy policies versus the virtual economy in the management of jobs and wealth creation by the next government. I raised this same question in the last presidential poll in the USA that pitted Senators Obama and McCain in a neck-to-neck fight. I shared my own assessment then that Sen. Obama resonated nearest to a physical economy inclination and should be supported by USA’s voters.

To reminisce a bit, the national economies saw the radical ascent of Reaganomic policies of privatization, deregulation, liberalization, and reinforcing policies beginning in 1980. Such policies led to the rapid integration of nations into a global economy, liberalized the cross-border flow of financial and monetary assets, and eventually led to the predominance of the ‘virtual economy’ based on predatory finance.

In the mid-90s, the Philippines saw its investments structure alarmingly imbalanced, with 86% or 6/7 of total comprising of portfolio capital, and only 1/7 or barely 16% in real or physical economy investments inclusive of FDIs (direct foreign investments). As early as 1989, I already raised the alarm bells that excessive radical liberalization of the economy could jeopardize the financial sector in the short run and lead to an economic collapse that could be far worst than the 1984-86 Depression of the Marcos era.

When a situation comes that the virtual economy dominates over the physical economy (agriculture, industry, S & T, transport) and subordinates the latter, a bubble is created. A bubble economy is one that grows on the basis of speculations in stocks and predatory operations of financial derivatives (secondary debt papers traded in the global market), and is bound to collapse when a burst comes since it isn’t based on tangible goods.

Surely enough, when the bubble burst in Thailand in June 1996, the ‘butterfly effect’ of a mini-flapping of wings created a storm across a vast region. We then dubbed that crisis as the ‘Asian financial meltdown’. The economies and financial institutions that had the greatest exposure to portfolio finance suffered the most.

The worst was yet to come though, as the USA had to wait for 2007 before it would experience its own crash, a catastrophic crash that spread to Europe and Japan (twas barely out of a decade-long recession). The same bubble economy and its predictable burst led to the crash, a recession that hasn’t fully retreated yet. Europe is still in flames today (watch the financial flames in Greece, Spain, Finland), while Japan remains as flat as it was during its 10-year crisis (1994-2004).

The fact of the matter is that, in a virtual economy, the predatory financiers (bankers included) gain the most, while the people pay the price for the collapse. And the payment comes in the form of ‘stimulus package’ that are derived from tax revenues. So the equation is that financiers run away with the massive loot, and the people pay for the cost of the looting crime. The culprits then run away largely unpunished, while the people face the punitive flames of massive business closures, retrenchment, unemployment, and bad debts.

In my book Fair Trade & Food Security (Kaisampalad publication, 2005/07), I emphatically stressed that we have to reverse the free market and free trade policies to be able to regain economic wellness. Reversal means we have to go back to the principles of regulated economy (production, trade, distribution, consumption), and replace free trade with fair trade in our international trade.

Strong regulatory frameworks, coupled with strong institutions and good governance, will redound to bringing back the physical economy into place. With the economy based on the physical or real economy, this country and any country for that matter will weather any economic storm both local and global. There is ample funds to pay national debts, balance the budget, fund social programs, create jobs, and increase wages.

Among all presidential candidates, only that of Senator Manny Villar so far resonates the strongest in terms of echoing the physical economy. This resonance could be explained by the fact that the noblesse legislator immersed himself in housing & infrastructures for the longest time of his life as an entrepreneur, and only fractionally engaged in speculative engagements. Besides, he was witness to the maelstrom on the realty sector caused by the bubble burst of ’97, a burst that wasn’t of his own making as it was the maneuverings of George Soros & pals via currency attacks (monetary markets) that led to the meltdown.

I hope you would agree with me that the slogan for this year’s polls would be: “It’s the physical economy, stupid!”

[Philippines, 19 March 2010]


September 14, 2008

Erle Frayne Argonza

To all fellow men and women out there who may have deep fondness for the liberal capitalist model of economic adaptation, I hope that you can make some adjustments in your cognitive banks. Capitalism is not a permanent facet of human life, but merely one among various epochs that will come to pass. Only impermanence is sacrosanct in the cosmos, so please refrain from singing hallelujah to a world system that is on its death knell as I articulated in a previous article.

And please refrain from swallowing hook-line-&-sinker the contentious propaganda of Francis Fukuyama about the ‘end of history’, that accordingly history had concluded with the galvanization of liberal capitalism, that history makes no more sense. Fukuyama’s theory is a slapstick narrative of hyper-valuation of the ‘mad economics’ of late capitalism and hypo-statization of reality that has no relation at all to the real in the world out there. Fukuyama had taken as ‘real’ what is actually ‘virtual’, and froze time much like unto a fairy tale of timelessness, of history-less Nietzschean moment that is fit more for infants than for adult humans.  

Fukuyama epitomizes the ‘mad economics’ of all those Pied Pipers of the global oligarchy for whom he works, and his discourse is akin to the ‘mad discourse’ so described by the late Michel Foucault. The ‘mad economics’ of Friedman, Hayek, Fukuyama, and all those technocrats who serve as processors and bagmen for the global oligarchy, is precisely symptomatic of that colossal ailment of a world system, and as we all know, madness can never salve ailments but rather hasten the system’s death. Caput! Blow your horns, prepare dirges to this Dead One!

Unless that you yourselves have become maddened by the seemingly infinite monies flowing unto your purses as you are among the beneficiaries of ‘late’ capital, unless that you are indeed now suffering from combined maladies of sociopathy and schizophrenia, unless that sanity had departed from thee forever, please heed the last plea of your own conscience where sanity had retreated: CAPITALISM IS DEAD! No amount of propagandizing, of contorted interpretations, can ever change the course of history at this juncture, as we are all headed for a TOTAL SYSTEM COLLAPSE in the months ahead. Read that please: MONTHS AHEAD, not years ahead.

What went wrong with capitalism? I’m sure all of you fellows knew what went wrong, do I even need to answer that? Your previous thinker mentors, among economists and sociologists, forewarned you all of the forthcoming demise of capitalism, but you paid nary an attention to those brilliant minds as you were so engrossed in your ‘conspicuous consumption’, behaving more like some infantile EATERS or as anthropoids rather than as thinking and spiritually evolving humans. You are all very much human, so please consistently behave like one, and begin by listening to the Inner Voice of your conscience, for that voice is your soul’s.

Let me summarize the diagnostics, forewarnings and/or prophecies of our thinker mentors from the West, and I’d stress WEST because there are some other thinker mentors from the EAST and SOUTH whose peregrinations are so recondite they are not so easily digestible. Let me just stress the WEST as this is what is common to us all. So let me re-echo the thinkers and their theories:

·        Karl Marx & Friedrich Engels: The internal contradictions between the private nature of capital (ownership of means of production) and the social nature of production. The ‘crisis of overproduction’ and the ‘law of the falling rate of profit’ are attendant patterns. Social revolution results, then the alternative society will be constructed.


·        Max Weber: Industrial capitalism’s granite product, the bureaucracy, led to dehumanization. He never forecast though whether this dehumanizing system can be sustained—but please read between the lines. (His contemporary Emile Durkheim had a similar observation about ‘anomie’ or normless state of urban/industrial society.)


·        Thorsten Veblen: The end-phase of industrial capitalism is markedly pathological. ‘Conspicuous consumption’ is the disease of this phase, the toxic behavior from the ruling class that later filtered down to the emerging middle class.


·        Joseph Schumpeter: The internal contradiction between the desire for profit and the revolutionary character of innovation. The demise of capitalism will see the possibility of the technical class taking over society and build that alternative system later.


·        Daniel Bell: The ‘post-industrial’ society had already been born right inside capitalism. A distinct modality in itself, post-industrialism will eventually prevail in a system that isn’t capitalist (or money economy) but rather knowledge-based. The ‘service worker’ had arrived on the social landscape, the prototype class of the future.


·        Theodore Adorno, Jurgen Habermas, Herbert Marcuse: ‘Late’ capital is characterized by the pervasiveness of ‘instrumental reason’, where reason is used to justify the non-rational (‘madness’ in Foucault’s argot), where state planning/intervention was infused into a system that scorned intervention.


·        Alvin Toffler: Both capitalism and socialism are based on hoarding, both are variants of the same industrial society of yesteryears, both are based on ‘2nd wave’ capital-intensive technologies and non-renewable energy sources. The ‘post-industrial’ society is altogether distinct, isn’t based on hoarding, production-consumption (‘prosumer’) is based on ‘3rd wave’ knowledge-intensive technologies and renewable energy sources, knowledge cannot be hoarded.   

I need not articulate further, do I? They all converged on one theme: capitalism is transitory, it bred social maladies (alienation, dehumanization, anomie, conspicuous consumption,…), is systemically flawed, and will be dismantled at sometime in the future.

No matter how delimited their theories maybe, as they all proceeded from certain perspectives (they were all ‘paradigm’-based in the jargon of Thomas Kuhn), they all proclaimed—in either tacit or explicit fashion—the coming demise of the system. They weren’t as silly as Fukuyama who popularized seemingly ‘satanic verses’ (distorted precepts) about a non-changing, permanent economic landscape called ‘liberal capitalism’, but were rather so adroit at social forecasting that they saw a vision of the future as they were articulating on their empirical observations of the present society.

So, fellows out there, prepare for the months and years ahead. We are headed towards those stormy months, years, maybe even decades. How the future society will come to shape is not easy to forecast. “Something blurs the Force, darkens our sight of the future,” declared a Jedi Master in the Star Wars cinema fame. Let me end right here.

[Writ 22 August 2008, Quezon City, MetroManila.]