No Return to Normal

Posted by | March 20, 2009 | business | No Comments

James Galbraith (the son of J.K.) argues for a wartime scale peaceful mobilization to deal with the economic crisis through government initiatives.

“It was the war, and only the war, that restored (or, more accurately, created for the first time) the financial wealth of the American middle class. “

The problem with this is that where natural forces prevail, the most efficient means of creating wartime scale initiatives happen through – war. In other words, no government is ever going to persuade people to spend as much within the system (i.e. domestic economy) on things like infrastructure, global warming and energy initiatives without the galvanizing force of directed hostile energy, outside of the system that happens naturally in a conflict. If Galbraith is right in his pessimistic but non-hysterical analysis then the equilibrium state of the global economy creates a very high risk for a large war in 5 to 10 years.

But there is a silver lining. Galbraith himself notes that:

The deepest belief of the modern economist is that the economy is a self-stabilizing system.

Anyone that has studied physics knows that this is provably wrong. The economy is an open system: money flows in, work is done and goods come out. All open systems are held far from equilibrium and are prone to periods of unavoidable, and provably unpredictable instability.

In other words, the principal tenet of current economic theory is a provable fallacy. Which is a good thing, else there will certainly be a large war.

James Galbraith: no return to normal.