From April 17, 2020--Alexander Hamilton and the American System, Part 2
Part 2—Alexander Hamilton
Revive the American System
Revive the American System
To the Reader,
If you haven’t read through the Intro article I posted last week, I highly recommend it, since it provides necessary background for the discussion in front of us.
In Part 1, I reviewed the failings of US Economic policy over the last 50 years which left us vulnerable to both the COVID-19 Pandemic, and the current threat of a 1930’s style Financial collapse and Great Depression. As stated, Coronavirus was not the cause of our current crisis. Our Financial System was already Bankrupt, our physical Economy dilapidated, and a major crisis of any sort, such as an Oil shock following an Middle East Crisis, or an irrational action by Trump vis a vis Russia, or China, could have served as a trigger for a Global Meltdown of Tens of Trillions of Dollars in fictitious values. We were, in effect, already riding “The Bubble”. Hence, the need for a thorough overhaul of US Economic and Financial policy, and a revival of Alexander Hamilton’s “American System” of Economics.
In Part 1, I reviewed the failings of US Economic policy over the last 50 years which left us vulnerable to both the COVID-19 Pandemic, and the current threat of a 1930’s style Financial collapse and Great Depression. As stated, Coronavirus was not the cause of our current crisis. Our Financial System was already Bankrupt, our physical Economy dilapidated, and a major crisis of any sort, such as an Oil shock following an Middle East Crisis, or an irrational action by Trump vis a vis Russia, or China, could have served as a trigger for a Global Meltdown of Tens of Trillions of Dollars in fictitious values. We were, in effect, already riding “The Bubble”. Hence, the need for a thorough overhaul of US Economic and Financial policy, and a revival of Alexander Hamilton’s “American System” of Economics.
First, I want to address a few “Elephants in the Room”, and I’m not referring to the Republican variety. Many people in the business or academic world have some background in Economics, and History. Others have studied it in school, or on the fly as they have read the News, looked at background to the News, or through their careers. Many have avoided thinking about Economic Policy unless it had immediate relevance to their personal situations, such as Tax Policy, costs of Health Care, Insurance Rates, fluctuations in interest rates, or wages.
Unfortunately, when it comes to “the big picture” most people take the view that its too big, they don’t understand it, and “I’m only going to worry about things that I can control”, so why bother thinking or reading about it?
I often use the anecdote that when people travel by Air, they are encouraged to read the flight safety instructions and listen to the Flight attendant’s presentation on Emergency Procedures. Most people don’t listen, the Ear Buds are already in, and they don’t read the laminated handout in the seatback, UNTIL the flight drops a thousand feet due to some event, and the Oxygen masks come down. Then they grab the card, and read. We are in an analogous situation right now, and there is a sudden interest in Economics as people are feeling the effects of the crisis in a way they haven’t previously.
Unfortunately, when it comes to “the big picture” most people take the view that its too big, they don’t understand it, and “I’m only going to worry about things that I can control”, so why bother thinking or reading about it?
I often use the anecdote that when people travel by Air, they are encouraged to read the flight safety instructions and listen to the Flight attendant’s presentation on Emergency Procedures. Most people don’t listen, the Ear Buds are already in, and they don’t read the laminated handout in the seatback, UNTIL the flight drops a thousand feet due to some event, and the Oxygen masks come down. Then they grab the card, and read. We are in an analogous situation right now, and there is a sudden interest in Economics as people are feeling the effects of the crisis in a way they haven’t previously.
Also, among those who have studied Economics, there has been a decades long process of ideological distortion and miseducation, false axioms and premises for operating that have short circuited our thinking on these matters, and opened the door to bad policies. Ask yourself, what do you think about when you hear the word, “Economics”? Well, that’s a softball question.
Its Money. You know, that magic word. The biggest and most destructive axiomatic flaw in our thinking about Economics, is that Money equals or measures Wealth. It does neither. Money, in and of itself, is a political fiction. It is simply a contrivance, a tool for facilitating the production, exchange and distribution of useful and productive goods and services. It has NO intrinsic value, whatsoever. Actual Wealth, are the discoveries, inventions, defined resources and ideas that are the creations of the Human Mind. Therefore, a system of Economics or a policy which is premised on the study of the management of Money alone, (Monetarism) is inherently methodologically flawed. A system which takes as primary the creative powers of the Human mind, and improving the Productivity of Labor, (through increased Intellectual, Technological Scientific and Educational standards, rising living standards through higher wages, NOT cheaper Labor) is a system that will foster growth and increase real Wealth, as opposed to the increased value of financial Paper.
This is the most central concept we will be addressing, and the one which Hamilton and his collaborators focused on primarily as they created our Economic System, and addressed the crises which they faced which would have killed the US in the cradle had they not taken this approach.
Its Money. You know, that magic word. The biggest and most destructive axiomatic flaw in our thinking about Economics, is that Money equals or measures Wealth. It does neither. Money, in and of itself, is a political fiction. It is simply a contrivance, a tool for facilitating the production, exchange and distribution of useful and productive goods and services. It has NO intrinsic value, whatsoever. Actual Wealth, are the discoveries, inventions, defined resources and ideas that are the creations of the Human Mind. Therefore, a system of Economics or a policy which is premised on the study of the management of Money alone, (Monetarism) is inherently methodologically flawed. A system which takes as primary the creative powers of the Human mind, and improving the Productivity of Labor, (through increased Intellectual, Technological Scientific and Educational standards, rising living standards through higher wages, NOT cheaper Labor) is a system that will foster growth and increase real Wealth, as opposed to the increased value of financial Paper.
This is the most central concept we will be addressing, and the one which Hamilton and his collaborators focused on primarily as they created our Economic System, and addressed the crises which they faced which would have killed the US in the cradle had they not taken this approach.
So, that said, we are in a crisis now which forces us all to reconsider what we think we know, and to learn about those things we have avoided thinking about for much of our adult lives that we previously considered “irrelevant”, or over our heads. Simply put, we are in the process or watching our government choose between bailing out a bankrupt financial system, or letting people die in large numbers, or some attempt to straddle the line, going back and forth between both.
I say there is a better way. And that’s what we will be talking about in this series. We are not discussing so much a recipe, or a “how to manual”, but an approach, a method. Clearly, it is not 1787. Circumstances, conditions, culture, demographics, technology, are all different today. But certain ideas and concepts are Universal, and are not “situational”. Human problems can be solved by Human creativity. Not by “the Magic of the Marketplace” or the “Invisible Hand” of Adam Smith’s “Wealth of Nations”. Divine Intervention is not going to fix our situation. If your Toilet backs up, you don’t get on your knees and pray for God in Heaven to come down and fix it for you. You get up and get a plunger.
The tools for fixing our Economy, in the spirit of the “General Welfare” clause in the Preamble of our Constitution are available to us. We simply have to pick them up. Hold on to that thought, and we will be back with Part 3, “Who Was Hamilton, the Origin of a Young Genius”
I say there is a better way. And that’s what we will be talking about in this series. We are not discussing so much a recipe, or a “how to manual”, but an approach, a method. Clearly, it is not 1787. Circumstances, conditions, culture, demographics, technology, are all different today. But certain ideas and concepts are Universal, and are not “situational”. Human problems can be solved by Human creativity. Not by “the Magic of the Marketplace” or the “Invisible Hand” of Adam Smith’s “Wealth of Nations”. Divine Intervention is not going to fix our situation. If your Toilet backs up, you don’t get on your knees and pray for God in Heaven to come down and fix it for you. You get up and get a plunger.
The tools for fixing our Economy, in the spirit of the “General Welfare” clause in the Preamble of our Constitution are available to us. We simply have to pick them up. Hold on to that thought, and we will be back with Part 3, “Who Was Hamilton, the Origin of a Young Genius”
