December 2009 Archives

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We often read about the explicit ways in which those in power use the media to manipulate public opinion through censorship, 'spinning', and news management. However, each type of media (TV, the Internet, the Newspaper) affects political consciousness and ideology, even in the absence of any editorial control. 

'The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.'
Paul Samuelson died this week. Samuelson was the first American economists to win the Nobel Prize in 1970, and was one of the most influential proponents of Keynsian economics. His introduction to the field sold millions of copies and was used to train a generation of economists.

Samuelson was a big fan of government management of monetary affairs (printing money, setting interest rates), and so it is no surprise that the list of economists that saw him as their mentor includes contemporary "superstars" such as Ben Bernanke and Larry Summers. 
The above quote is taken from the 13th edition of Samuelson's introduction to economics, published in 1989. A few months later, the Soviet Union collapsed. 

Samuelson lived with the times and his error is excusable. The real question is why, twenty years later, contemporary economists still preach soviet-style policies. May Samuelson rest in peace. Communism, for now, is still alive and well. 
One of the most popular memes repeated by mainstream media since the collapse of Lehman Brothers last year is the idea that China will manage to avoid the consequences of the economic downturn by shifting from an export-based economy to one based on local consumption. 

Back in the middle of 2008, many publications, most prominently The Economist magazine, suggested that a downturn in developed countries might not have any significant effect on developing economies, since the latter have already "decoupled" and are no longer heavily dependent on demand from consumers in rich countries.

Within a few months, the "decoupling" theory proved to be false: The downturn in the developed world had a significant impact on China's economic well-being, causing a dramatic rise in unemployment and a sharp slowdown in economic growth. The Chinese government, just like the American one, responded with massive stimulus spending and expansion of cheap credit.
Note: The views and observations expressed on this web site are published for the sake of public discussion and do not represent my personal opinion or the opinion of my companies, clients, and/or employers. If you would like to get my opinion on anything, ask me.

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