First published by CanSpeccy on Wordpress, June 20, 2013
In his latest book, pot boiler, extended magazine article in hard covers for 28 bucks, whatever, Niall Ferguson sets out to explain why the nations of the West, so long dominant in scientific and technical skills, wealth and power, are now stagnating economically as China and much of the rest of the Third World rise in power and prosperity at an unprecedented rate.
The trouble, thinks Feguson, is the problem that Adam Smith identified as the cause of China’s economic stagnation in the 18th century: it is, he argues, our institutions. Our institutions of democracy, capitalism, the rule of law, and civil society, he says, have degenerated, resulting in the the concentration of wealth, the emergence of monopolies, a decline in educational standards and other ills that have resulted in a loss of Western competitiveness.
In form, Ferguson’s book is reminiscent of those vaguely interesting and generally incoherent lectures to which so many have been exposed during undergraduate education: a few interesting facts and ideas with many loose ends, leaving unlimited scope for further debate and literary output.
But as an account of the stagnation and relative decline of the West, Ferguson’s effort is almost entirely futile other than as an exercise in misdirection, distraction and cover-up.
If the institutions of democracy in the West are degenerating, those of the extraordinarily dynamic China are essentially non-existent. If the rule of law in America is increasingly the “rule of lawyers,” in China it is a concept barely even understood. If free and fair competition in Western economies has diminished as capital has been concentrated in fewer hands, China’ state capitalism is the complete antithesis of the free and fair market that underlay Adam Smith’s invisible hand. As for the the institutions of civil society, the West is still incomparably free compared with China where even association for the purpose of religious worship is prohibited.
So while Western institutions are in decline, China’s are absolute crap. Yet still China’s economy booms as the West stagnates. Clearly, then, there’s more to Western economic decline than the inadequacy of some vaguely defined sets of institutions.
To discover what has stultified the West, it is necessary to consider what drives economic expansion, and the answer to that is quite simple: increased investment and production. But you cannot have increased investment and production unless there are markets for the increased output, and there will only be markets for the increased output if the new production is competitively priced. But how can new output in the West be competitively priced when the legally mandated minimum wage in America and Europe is between ten and twenty or more times the rate paid factory workers in the Third World?
This is the simple, obvious brute fact that explains Western economic stagnation, to which Niall Ferguson, like any other tenured professor at a top US or UK university, must carefully avoid drawing attention.
The consequences of the fact of Western wage uncompetitiveness with the Third World are as obvious as this one basic fact itself.
Once the Uraguay Round of the Gatt (which led to the creation of the World Trade Organization) was signed by the Western states in 1994, the Western economies were on the skids.
It took a while, naturally, to export Western capital and technology, accumulated through the sweat of generations, to the Third World.
But the system’s in place now and the jobs have been bleeding away rapidly during the last ten years, the loss masked in part by housing bubbles that stimulated the construction industry, which is among the few that cannot be off-shored wholesale.
But now the real estate bubbles have burst or are bursting and the shrinking Western economies are plagued by deflation, falling incomes, rapidly rising welfare costs and unemployment, and ominous rumblings of social discontent. Add to the mix mass immigration of culturally disparate elements, which displaces from the workforce the least competent members of the indigenous population, and you have a recipe for both economic decline and revolution.
Hyperventilating about the degeneration of our social, legal and political institutions or getting everyone to join the Lions Club won’t solve the problem created by the treason of our elites, who have sold out the working people of America and Europe for the benefit of the money power, which has gained enormous profits through the success of globalized corporations such as IBM, Apple, Microsoft, and many others.
The only remaining question of real interest is whether the money power will get away with the genocide of the Western nations in its bid for a system of global financial feudalism. And an answer to that question, we can be sure, will not be made available by Niall Ferguson or any other member of the academic elite until such time as the question has become entirely academic.