EVOLUTION OF CLASSICAL POLITICAL ECONOMY IN THE FIRST HALF OF THE 19TH CENTURY THE COMPLETION OF THE CLASSIC TRADITION
4.4. Economic theory in USA. C. C. Carey
Henry Charles Carey (1793-1879) - the first American economic theorist. Carey was born in Philadelphia to an Irish political exile. He graduated from a regular school and at 24 became a businessman, quickly secured a financially independent future for himself, and at 42 went into science. During his travels to Europe, he met many prominent people of that era, and among them J.S. Mill, who interested him as an outstanding scientist.
Kerry outlined his economic views in the works "Essays on the rate of wages" (1833), "Principles political economy"(1840), "Harmony of Interests" (1850) "Principles of Social Science" (1859), etc.
The conquest of independence from England, the availability of free fertile lands and other natural resources, the immigration of capital and technical progress from Europe, the absence of feudal brakes led to the rapid development of the US economy market type. Features of the evolution of the US economy were reflected in the economic theories of the first famous American economist Carey.
In contrast to the class theory of distribution of D. Ricardo, G. C. Kerry put forward his own theory of the harmony of class interests, which formed the basis of his concept of value. According to Carey's theory, the value of a product is determined by the amount of labor required not for production, but for its reproduction. According to Carey, with the growth of labor productivity, the costs of the reproduction of goods decrease, which accordingly leads to a decrease in the share of means of production in the value of the product, and, consequently, the share of capital and interest on it as a reward to the capitalist for invested capital. Accordingly, the value of labor and its share in the product increases.
On this basis, Carrey concluded that with the acceleration of the technical progress of capitalist production, the proportion of workers ( wage) grows both absolutely and relatively, while the share of capitalists (profit) grows absolutely and decreases relatively. Hence arises the harmony of their interests in production, since with the development of capitalism the condition of the workers improves faster than the incomes of the capitalists grow.
In his concept of rent, Carey ignored the contradictions between landowners and capitalist tenants, which D. Ricardo and his followers wrote about. Under land rent, the American economist understood the interest on capital invested in land, that is, he considered such rent to be one of the forms of profit. In Fundamentals of Social Science, Carrey sharply criticized the free trade theory of the classical school and economic policy free trade in England, which was based on the classical theoretical principles. Carey believed that free trade only benefited individual nations that produced cheap products and hindered the development of others. Carey substantiated this unexpected and paradoxical conclusion with facts from the history of the development of the lands of North America by the first colonists. The fertile land in its natural state abounded in thickets of shrubs and grasses, dense forests, so it was very difficult to clear it for cultivation. It was even more difficult to develop wetlands, win them back from the water element, creating protective dams. Therefore, the pioneers first mastered the slopes and hills, areas that were easy to work, then gradually, over the course of several generations, they cleared fertile valleys and introduced them into agricultural circulation.
Of course, the situation in agriculture Europe, which had long been mastered, was completely different, which led to a different approach to the analysis of value and rent.
Speaking March 8 at the US National Association of Business and Economics, IMF Deputy Managing Director David Lipton warned that the risk of a global economic catastrophe continues to increase. This is true, but it is not the whole truth. David Lipton hardly imagines the real extent of the problem.
The fact is that the IMF itself is one of the main culprits of the current crisis.
It works simply: upon discovering that the government of a country is unable to repay its loans, the IMF offers to pay off creditors from its own funds and thus save its credit rating. In exchange, the government undertakes to pay the IMF money saved by reducing social benefits and public services, as well as through the sale of state assets to foreign owners. The role of the latter is often played by the clients of the very banks that strangled the “rescued” government with their loans.
There are countless examples.
Today it is Greece and Portugal. Before that, this was the case in Ireland and Latvia.
However, the main reason for the decline in the global economy is the stagnation of consumption in the so-called developed or industrial countries.
Take, for example, largest economy in the world - the United States. Now the economic policy of the neo-liberals is actually destroying the US consumer market, literally undermining the demand for goods and services - both domestic and imported.
There are two destructive strategies. The first is the outwardization of production, and hence jobs, in industry and professional services, such as software production.
These jobs are being replaced by others, but they tend to be low-paid and unstable. For example, the place of a waitress, bartender or sales assistant.
When jobs are moved abroad, the country's incomes and purchasing power of the population are reduced, and with them the tax base.
To generate revenue, the government begins to privatize public infrastructure (such as roads) and sources of income (such as parking machines) at a loss. And now private investors are beginning to collect revenues that were previously intended for the state treasury. For example, in 2008, the City of Chicago leased 36,000 parking machines for 75 years. Under this contract, a consortium of private investors paid only $1.2 billion to the city budget.
Another no less destructive neoliberal strategy is to increase the debt burden of the population. For example, before the dimensions mortgage loans were limited to the amount, the maintenance of which took up to 25% monthly income families. The remaining 75% people could use at their discretion or save. Today for service mortgage loan a family can spend up to 50% of their income. Thus, the possibility of consumer spending was reduced by 25%.
The same policy is being pursued by creditor banks in the automotive market. If earlier a loan for the purchase of a car was granted for three years, now it is up to seven years. If earlier the loan amount was up to 80% of the cost of the car, now it is 100%. The terms and amounts of payments are increasing, the possibility of consumer spending is reduced.
Due to the marginal debt burden that has fallen on the shoulders of the population, it is simply impossible to increase consumer demand, as advised by the IMF. These processes are observed not only in the USA, but also in most other countries of the world.
Multilateral trade initiatives such as the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership, which are supported by the IMF, will not help stimulate trade either. The main and true purpose of these agreements is to remove global corporations from the laws of the countries in which they will operate. The so-called partnership will give corporations the ability to challenge national legislation. For example, if France decides to join the Transatlantic Partnership, the US corporation Monsanto will be able to hold the French government accountable on the grounds that French legislation restricting the use of GM products "creates barriers to the development of free trade."
A heavy burden falls on world economy and western banking system. The provision of bank loans is reduced almost entirely to the financing of transactions for the purchase of real estate, companies, commodities and consumer goods. American banks do not lend to the construction of new production facilities, but create new ones. debt instruments. And this, in turn, reduces the possibility of investment and consumer spending.
However, the state keeps the big private banks “too big to fail” afloat at the expense of taxpayers or with “zero” or negative interest rates that deprive bank customers of their savings.
The main risk of the world economy is that the neo-liberal economy, the principles of which the IMF and international institutions continue to follow, is a mistake that could turn into a disaster.
On California's main freeway, the entire southwestern United States has been hit hard, once again indicating that the world's largest economy is falling apart.
The ideological reluctance to invest in the public sector, coupled with the endemic short-term thinking of those who write budgets, has saved spending on roads, airports, railways, telecommunications networks, and power generation at a level well below what is required. Yet the problem can no longer be ignored. If the US does not act quickly to secure its fragile economic recovery with a solid foundation of modern infrastructure, it may find itself slowly sinking back into stagnation.
It seems to be taken for granted that developed economy requires adequate, ongoing investment in public goods. But the state of infrastructure in the US shows that many decision makers do not share this view. A 2013 report from the American Society of Civil Engineers gave US infrastructure a miserable D+ rating. The report cites numerous specific government shortcomings, including "88 highly dangerous dams and 1,298 structurally deficient bridges" in Michigan and "$44.5 billion needed to upgrade drinking water systems" in California. The report concludes that $3.6 trillion in investment will be needed by 2020 (about one-fifth of the annual country's GDP) to improve the quality of U.S. infrastructure by eliminating "a significant backlog of overdue maintenance [and] an urgent need for modernization." Otherwise, the collapsing infrastructure of the country will pull down the economic growth coming years.
America's desperate need for modern infrastructure has come, in a sense, at an opportune moment. At a time when the economic recovery remains fragile, a government-funded infrastructure development program could significantly change the outlook for American workers by providing new employment opportunities for low and unskilled workers.
Meanwhile, an increase in infrastructure spending could provide an often overlooked opportunity for long-term institutional investors. pension funds, Insurance companies, shares investment funds in the United States manage total assets for total amount about $30 trillion and they are struggling to find investments that match their long-term obligations. Steady low interest rates have been particularly difficult for pension funds, which are facing growing liabilities (calculated on a concessional basis).A massive program to reset America's collapsing infrastructure will have to go a long way towards solving this asset-liability gap by providing pension funds investments with long-term prospects (and thus guaranteeing income for future retirees), while using private capital For public good. In fact, US pension funds are already investing in infrastructure, but they are doing so in Canada, Australia, the UK and the Netherlands.
Unfortunately, ideological objections and partisan politics are likely to stand in the way of any effort to modernize America's infrastructure and create such opportunities at home. Investments public sector invariably ignite a very long-standing struggle between those who insist that the government should stay out of the job creation effort and those who believe it is part of the government's role to apply underused human resources to the job.
One way to avoid this bottleneck for US President Barack Obama would be to create a bipartisan Infrastructure Commission tasked with finding a solution to the problem. It would work just like bipartisan National Commission By Tax Responsibility and Reform, created in 2010 to address America's fiscal problems, or the military base closure and reorganization commission of the 1980s and 1990s. By sharing responsibility between the country's two major parties, the commission would free its members from the pressures of day-to-day politics and allow them to focus on the health of the economy. Congress would then vote up or down on the commission's recommendations.
Infrastructure has long been recognized as fundamental to economic prospects countries. By neglecting necessary investment, the US is setting itself on a difficult path that could lead to stagnation and decline that would be difficult to reverse.
There is little reason for American politicians to accept this fate. Low interest rates, the dollar's continued role as the world's main reserve currency, and the public sector's ability to increase spending provide reasons for more convincing infrastructure spending. In the twentieth century, the US government spent billions of dollars to rebuild the European economy. Their project for the first half of this century would be to do the same at home.