What Happens When You Believe in Ayn Rand and Modern Economic Theory

[applegrove]

What Happens When You Believe in Ayn Rand and Modern Economic Theory

By Denise Cummins at Evonomics

http://evonomics.com/what-happens-when-you-believe-in-ayn-rand-and-modern-economic-theory/

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Modern economic theory is based on exactly these principles. A rational agent is defined as an individual who is self-interested. A market is a collection of such rational agents, each of whom is also self-interested. Fairness does not enter into it. In a recent Planet Money episode, David Blanchflower, a Dartmouth professor of economics and former member of the Central Bank of England, laughed out loud when one of the hosts asked, “Is that fair?”

“Economics is not about fairness,” he said. “I’m not going there.”

Economists alternately find alarming and amusing a large body of results from experimental studies showing that people don’t behave according to the tenets of rational choice theory. We are far more cooperative and willing to trust than is predicted by the theory, and we retaliate vehemently when others behave selfishly. In fact, we are willing to pay a penalty for an opportunity to punish people who appear to be breaking implicit rules of fairness in economic transactions.



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[Gregorian]

1. That website is putting out some thoughtful articles.

Thanks.

[applegrove]

2. Yeah. I get their emails every day. I just hope there is no limit.

[forest444]

3. You get Argentina.

Most readers in the U.S. aren't aware of this; but Argentina - which was almost a developed country by the 1970s - collapsed in the early 1980s after its dictatorship deregulated finance, embraced "free trade" (which devastated local industries), and attacked labor rights (many of the 30,000 disappeared were in fact trade unionists or their relatives).

Before the collapse though, much of the middle and upper class supported these policies out of sheer snob appeal: Deregulated banks? The rich know best! Free trade? Foreign investors will love us. Labor rights? They should get back to work. Social programs? Lazy blacks. Police state tactics? Gotta defend the homeland against terrorists (and to be fair, some on the far left were).

The result? $50 billion foreign debt (most of it bad debts from speculators), 200,000 bankrupt businesses, and a 10-year depression that led to 50% lower real incomes for most people, and a concentration of wealth for the top 1%.

And the most vocal apologist of dictatorship-era economic policies? None other than Milton Friedman, Nobel Prize in Economics and renowned fan boy of Ayn "Ann O'Connor the Social Security cheat" Rand.

[applegrove]

4. Most people don't know that Argentina had an economy like Canada's at the start of the 20th century.

They chose not to do trade. They chose not to focus on that. Canada did. Argentina went down the tubes which led to instability and yes, exploitation by right wingers. A non stable economy is the culprit. Seems you need a certain amount of wealth to be stable. And to afford things like honest police and the like. All those good things like human rights come from stability and a stable economy. Good regulations cost money.

[forest444]

5. Not really.

People who bring up these comparisons often point to data that reflected paper income more than anything else - a lot like when thw Arabian peninsula countries suddenly became "richer than Canada or Europe" in the late '70s and early '80s owing to the disproportionately high relative prices of oil and gas.

While the bonanza was undeniably helping, they weren't really, were they. (or now, for that matter).

The claim about Argentina's "choosing not to trade" is also inaccurate, since it was the British Empire that insisted they buy largely useless British manufactures in exchange for access to the British market and its colonies - even going as far as to keep Argentina's most of central bank surpluses in the Bank of England in escrow to make sure they did not (and even so, Argentina imported all the U.S. manufactures they could).

Once World War II ended, it was, again, foreign insistence - not Argentina's - that kept its trade volumes lower than they could have been. To placate the powerful farm lobby, Truman forced all Marshall Plan beneficiaries to cut out any Argentine imports - despite the fact that FDR himself called Argentine agricultural products "cheaper and better" (for all of Truman's efforts, btw, the farm lobby remained rabid Republicans!). This naturally limited Argentina's import capacity as well.

Nor did Argentina reject foreign investment. Attracted by what by regional standards was a high purchasing power in Argentina, quite a bit of productive foreign investment arrived in the 50s, 60s, and 70s; but unlike Mexico (the "model" to many free-traders) Argentina's well-paid, highly unionized labor force made the country unattractive to large-scale maquiladora investment (semi-slave labor producing for export).

There was also the issue of excessive profit remittances, which limited investment despite these multi-nationals' highly profitable operations; this business model, though unsustainable, was never seriously interfered with in Argentina in the way it was in Chile under Allende, for example.

Finally, we have the aforementioned 1976 dictatorship - which used the very argument you just did, practically verbatim, to justify financial deregulation (which led to a mountain of bad speculative debts) and the scrapping of import tariffs and other limits. The results, as I mentioned, were disastrous, and not unlike what we ourselves saw at the end of the Bush years.

The only real difference is that we have a fed that can print $40 trillion out of thin air to bail the system out of its mess, and most other countries do not.

[applegrove]

6. How is Argentina doing today? They trade. They are doing much better. Same with lots

of places in South America. When you get the oligarchs stopping controlling trade and allow the people to participate, you strike gold. Kenya now grows fresh cut flowers for all of Europe. That benefits the people greatly. And they can afford things that are missing in other places in africa, like public police instead of private police who just helped the rich or expats.Why don't you like trade? I agree there should be standards and regulation. But be there for the public to benefit from.

[forest444]

7. I hear you. My initial post only referred to times when Argentina adopted Ayn Rand's laissez faire

And all the harm that came about as a result - something which, as you pointed out, they've managed to largely recover from since 2003 or so.

Trade is good; fair trade, better. But "free" trade, as sociopaths like Ayn Rand and Milton Friedman understood it (the race to the bottom for corporate Benedict Arnolds, and then using policy to make your own country vulnerable to slave-wage goods and dumping), not good. Not good at all.

[applegrove]

8. Okay. We pretty much agree.

[Bucky]

9. very enlightening discussion. Thanks to both of you

[forest444]

11. My pleasure.

If you don't already do so, check out the Latin America group from time to time.

These are interesting - and difficult - times for the region, which is suffering from the effects of the recent commodity price collapse and, concurrently, is seeing a big media-generated resurgence of the far right (Argentina's Macri being the most prominent recent example).

Judi Lynn, the senior member and unofficial host of the Latin America group, is definitely a good person to consult to get the lay of the land in this often ignored (but always interesting) DU group.

All the Best, Bucky.

[applegrove]

10. They have a right wing government so the oligarchs are back in 2015.

http://dissidentvoice.org/2016/02/argentina-the-end-of-post-neoliberalism-and-the-rise-of-the-hard-right/

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3. A negotiated transition to electoral politics (1983)a hyper inflationary crises and the deepening of neo-liberalism (1989-2000).

4. Crises and collapse of neoliberalism and insurrectionary class struggle from below 2001-2003.

5.Center-left Kirchner-Fernandez regimes (2003-2015): a labor-capital-regime social pact.

6.Authoritarian neo-liberal Macri regime(2015) and intense class struggle from above. Macri’s strategic perspective is to consolidate a new power bloc of local agro-mineral,and banking oligarchs, foreign bankers and investors and the police-military apparatus to massively increase profits by cheapening labor.

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[forest444]

12. Thank you for that, applegrove.

Argentina is arguably one of the world's most complicated countries, which is part of what makes it so interesting.

Kudos to you. I think you captured, in a nutshell, what usually takes me a whole page to describe.

As they say in Argentina: Matecitos!

[applegrove]

13. There was a Ted Talk that explained how a country

needs a basic economy before it can afford to promote human rights. And all sorts of regulations and such. To stop the bad things in culture like graft that makes people poor and reinforces inequality. Obviously you keep the great things in culture and have the money to do that.I wish I could remember the name of the speaker.

[forest444]

14. Well, their fundamentals are there. They just can't paper their problems over like our Fed can.

What happened here during the Bush years is actually quite similar - proportionately - to what happened in Argentina during the laissez faire dictatorship in the early '80s.

But whereas we (thankfully) have a hard currency that can be marshaled by the Fed to bail the system out of its bad debts to the tune of with $40 trillion, they do not. Most countries, as you know, depend on the limitations of foreign transactions (exports, tourist receipts, bond issuances, etc.) to pay their bills.

As far as fundamentals, Argentines have the requisite large middle and unionized working classes, a diversified urban economy that gives most people some vested stake (less than in developed countries; but without the large peasant underclass that characterizes most Latin American countries north of the Tropic of Capricorn), and an extremely active media that arguably makes it much harder for officials to get away with graft than it is here.

This, for instance - http://www.thenation.com/article/mitch-mcconnells-freighted-ties-shadowy-shipping-company/ - would be an 18-column headline scandal in Argentina for months if not years. Here, as you know, the media pretty much rolled over (although we on DU certainly didn't!).