Abandoned by the politicians and economists of the 20th century, the political economy necessary will reappear in the 21st century, because of a simple reason: man can hide the true, do not recognize it, but this not change the true; and the true is that the political economy is the most important of the social sciences because it synthesize the two most important activities that determine the live of the human beings. The politics alone is not sufficient; the economy alone neither. The combination of both is the base of the power and government an all the societies.
The political economy was abandoned at the begin of the 20th century because she could not respond to the main economical challenges of that moment, among them the economic cycle, the inflation, the devaluation of the currencies, the poverty and the growing unemployment.
Alfred Marshall (1842-1924) separated the economy of the politics and tried of creating an autonomous discipline; he did it and since then emerged the economics as an independent study. The new economics focused their attention in the microeconomics and the econometrics among other issues.
Marshall had interest in the human side of the economy and in contrast with the previous classical economists he asserted that was possible better conditions of live for the working classes. Marshall had a strong social sense and assured that the principal task of the economics should be to eliminate the poverty.
But the new economy promoted by Alfred Marshall and his pupils could neither resolve the accumulated problems. It was John Maynard Keynes, a traditional economist, former pupil of Marshall, which developed the politics and economic new system that gave to the world a partial solution for the economics problems of that historic stage. That new system was the macroeconomics, an integral political proposal that considered the increase of salaries and the private and public expenditure as the key factor for attacking the jobless and the economic recession. The thesis of Keynes was contrary to the ideas sustained by the Classical Economy, which thought that the reduction of salaries was the way for reactivating the employment and the economic growth.
The conception of Keynes let the recovery of the hit economies of the post war. For that reason the thirty years of growth between 1945 and 1975 was named the Age of Keynes. That period was very favorable for the developed nations of America and Western Europe but not for the rest of the world; in those years and the followings (80 and 90) the gap between the rich and the poor nations registered a great difference. The Capitalism generated an important progress but limited only to a small number of countries.
The Communist regimes of the past and of the present, like the Former Soviet Union and the nations of the Eastern of Europe, China, North Korea and Vietnam neither reached an economic welfare; on the contrary, they were and they are impoverished countries.
The first conclusion in this sense is that none of the economics systems has been able of to improve the quality of live of the majority of the world population so far.
Origin of the wealth and the poverty
The first form of property was the community property. The primitive man did not know the private property. It was the appropriation of the first lands by the stronger men the cause of the original richness; this was too the first economic sin. The consequence of this process was the born of two classes: the owners and the exploited, this means the rich and the poor.
A reflection on the evolution
The concept of evolution deserves an especial consideration. Man of the 21st century has the same predatory attitude of the primitive man. He commits murders, abductions, cheatings and stealing, terrorist acts against innocent people, maintain the slavery and do the war.
In parallel also exists the contrary: goodness, kindness, justice, love, religiosity and peace; the great problem is that in the majority of the societies this is not the common. This lead to an unavoidable question: until what the human being has evolved?
Man has achieved a great level of development since the scientist and technological point of view but not in his social and economic behavior.
In the 21st century exist the same social and economics conflicts of the Prehistory, it means:
a) The struggle by the property of the land: a minority is the owner of the majority of the urban and agricultural lands in the entire world.
b) The majority of the workers worldwide receives an insignificant salary that do not let them neither to buy the essential food.
c) The unemployment and sub employment affects the most of the workers worldwide.
d) The economics and social conditions of the work in the most part of the underdeveloped countries are in the practice conditions of slavery.
e) The struggle by the wealth distribution benefits to the privileged rich classes.
A new conflict has emerged
But a new conflict ---unknown in the past--- has arisen in the beginning of the 21st century: the global shortages of basic natural resources ---as water and petroleum--- that change the economic paradigm. The shortage of natural resources is a consequence of the overexploitation of the resources and of the pollution. The outcome is the scarcity of manufactured goods and more inflation.
A look to the past
The evolution of the humanity is divided in two great stages: the Prehistory and the History; the first is the period previous to the invention of the writing and the second begin since that moment until the present.
In the Prehistory man built the basic elements of the progress: constructed the first instruments of stone, learned how to transform the matter through the fire and discovered the agriculture, the ceramic, the metals, the road, the tools, the architecture, the textile, among other great advances.
At the beginning of the history in successive stages developed the writing and after created the print, an instrument that changed completely the history.
The other great historic jump occurs in the 18th century: the creation of the machine of vapor and of a new scale of production developed during the First Industrial Revolution in Europe.
In the 19th century appears in the scene the Second Industrial Revolution; this was the revolution of the energy and emerged two inputs ---the petroleum and the steel--- that joined to the electricity modified completely the live of millions of people.
In the 20th century the progress of the chemical and the medicine and the creation of the mass media represented the other great changes of the history. In this century happened, moreover, two extraordinary facts: the discovery of the nuclear energy and the conquer of the space.
All the mentioned advances suppose a great dominium of the exact sciences, the mathematics, physics, chemical, biology, medicine and the astronomy.
Man do not dominate the social sciences
But the human being has not been able of to reach the same level of development in the social sciences, especially in the economics and in the politics.
Man has not been able of:
a) Diminishing the poverty and for that reason more of two thirds of the world population lives in the extreme poverty with an income of less of two dollars per day.
b) To guarantee a decent salary to the most of the workers neither to create enough employments in the world.
c) To avoid the war and to live in peace, employing the politics and the diplomacy.
d) Preserving the forests, the nature, neither of does not contaminate the planet.
What does it reveal?
Similar to the savage’s animals
This reveals that man can dominate the external things but he is not able of dominating his primitive’s impulses and his conduct. It means that in his essence man is a predatory animal similar to the savage beasts. A simple example is sufficient for validating this concept: observe the behavior of man against the other men in the war scenarios. Currently, in plenty 21st century there are unbelievable examples in this sense in the Middle East, in Africa, in Asia; you know which those scenarios are and it is not necessary to do explicit mention of them.
Has evolved the human being?
What is evolution?
What do you think?
Conclusion
The political economy may contribute to build a better world.
The first step is recognizing the failure of the economics systems so far.
The Communism has been a complete failure in the nations where has been applied.
The Classical Economy could not anticipate the depression nor the unemployment. It had a non realist and theorist vision of the economy. The classic economic model of pure competition and equilibrium supported in the laws of the supply and demand has never existed. For that reason the Classical economists could not believe that a crisis might occur as a consequence of a fail in the demand.
The Marginalist thesis of Stanley Jevons (1835-1882) and Leon Walras (1840-1910) had also a capital sin: they considered the economy as an automatic mechanism that work in independent form of the rest of the society.
By other hand, the partial vision of the microeconomics imposed by Alfred Marshall at the beginning of the 20th century neither represented a solution for the practice economics problems of that epoch.
The Keynesian model ---that combined the participation of the investments and the regulatory action n of the State with the productive action of the private sector--- has been the most successful economic model until now.
But in the eighty years of the 20th century came back again the formulas of the Classical Economy, especially the Quantity Theory of Money, from the hand of Milton Friedman and his pupils of the Chicago School. The new monetarism caused a severe damage to the world economy because it stressed the difference between the rich and the poor nations and increased the poverty in the entire world, through a mechanism known as globalization.
Which would be a solution?
A synthesis of the best of the capitalism and the best of the socialism might be the possible solution.
The recurrent economic crisis in the capitalists nations put in evidence that the free market policies without none class of restrictions generates graves consequences. The most recent economic debacle of the years 2008 and 2009 is a good example of the assured.
On January 3, 2010 during the American Economic Association meeting in Atlanta, the chief of the Federal Reserve, Ben Bernanke, pointed out that:
“Stronger regulation is the best way to prevent financial speculation from getting out of hand and throwing the economy in a new crisis…” (a) By Jeannine Aversa, AP Economics Writer, On Sunday January 3, 2010, 1:41 pm EST.
Other leaders have expressed opinions in the same direction but the resistance to any change is enormous. This happens not only in the United States but in the rest of the capitalist’s nations of the Western World.
Two concrete measures
The politicians and the economists have lost the time in non important affairs. For example, they have not been able of paying effective attention to the three most important problems that affects the humanity: the poverty, the unemployment and the destruction of the nature and the environment.
A concrete Policy of Global Wellbeing should begin with two activities:
a) A Global Program of Employments. The ecological employments ---through the reforestation--- would be an effective way in that sense.
b) A Global Program of study and improvement of the salaries for the working classes.
These two programs might create the conditions for the construction of a better world.
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lunes, 8 de febrero de 2010
lunes, 14 de diciembre de 2009
What the true wealth is? The monetary illusion
Most people think that money is the true wealth. The reason is very simple: because so far you can buy the majority of goods with money.
Too few things you can not acquire with money: the live, health neither true love. The problem is that those are the most important values of the life. You can not avoid the death. The billionaires die the same than the poor’s. There are illnesses that can not be treated with success. The true love is the other vital situation that the money can not buy.
Until now, in the developed nations, you can buy water, food, energy and other material elements if you have money. In the underdeveloped countries is different. There are regions where you can have money but that is not enough for getting the basic goods for live.
The first warning about the natural resources vulnerability was given by the Arab nations in the year 1974, when they decided to impose a petroleum seizure against the United States and Europe, because of the support of those countries to Israel during the Six Days War.
With the exception of that period of time, the developed nations, United States, Japan and the Western nations of Europe has enjoyed of the most natural resources in abundance. Some underdeveloped nations has not had the same luck. The African continent, some regions of Asia, Latin America and Oceania has been affected by the lack of resources, and this provoked the hunger of millions of people in those areas.
An important change in the economics concepts
The traditional economy has assured that oxygen and water are abundant goods; for that reason the first has not had a specific price and the price of the second has been reduced. But that trend started to change and already the oxygen is being appreciated in other dimension and the water price has reached an important increase in many countries.
In the 21st century the perception of the natural resources abundance is changing. Today are scarce the abundant goods of the recent past. Scarce goods are now oxygen, water, food and petroleum; all they are forms of energy. Without those goods the live is not possible. We can say that the modern evolution has affected the quantity and the quality of the energy sources.
The pattern of production and consumption followed until now and the pollution has become abundant resources in scarce resources. Vital goods are running out and this represents a deep change in the economic paradigm.
Wealth and happiness
There is a difference between wealth and happiness. Wealth is material abundance. In change, happiness is knowledge, health, love, employment and material satisfaction. You can be rich but unhappy.
A people or a country may be rich because possesses a great amount of material resources, but unhappy and underdeveloped, because do not have the most important things of the life: knowledge, health nor true love. The development is a combination of these values.
The knowledge is not only privilege of the scientists, the techniques nor the humanists. The modest people have a great knowledge. The farmers, the fishermen, the highlanders have a deep knowledge; they are in touch with nature and that contact give to them a special sensibility and vision of the life. It is the wisdom of the simple things. They know when the time of to sow, to sever and to harvest is. They know the essence of the trees, the behavior of the tides, the weather changes.
The first causes
The most advanced stage of the knowledge is tied to the comprehension of the first causes. Man only discovers the reality of nature. For example, the atomic energy has existed ever; but man discovered and employed it in the 20th century; not before. It is sure that other knowledge’s exists in nature that man still has not discovered but it is very likely that realize it in the future. The comprehension of a part of the true reality of the space and the time, the domain of the illnesses, for example, might be possible in the coming years.
The energy sources use
The Industrial Revolution may be considered as the Revolution of the Energy. Since the beginning of the civilization until the First Industrial Revolution (1769) ---when James Watt created the machine of vapor--- the world used the wood as the principal source of energy. But with the creation of the machine of vapor ---fed by coal--- the situation changed and a new scale of production was developed; this helped to the transformation of the handcraft scale into industrial production, one of the most important advances of the humankind.
The discovery of petroleum in the year 1869 and their later use as new source of energy for the most activities generated a modern scientist and technological development.
Man has overexploited the sources of energy; first he razed the forests for obtaining wood; the whales for getting oil; after it overexploited the coal and the petroleum and in the last decades of the 20th and 21st centuries began again to raze de forests that still survive in the planet.
But the most danger for humanity is the growing employment of atomic energy. In the last decades some nations has appealed to this form of energy because of the restrictions in the availability of other sources as the petroleum and the hydroelectricity. The construction of new atomics plants represents a peril for mankind. The effects of Chernobyl are still present and it constitutes a clear example of the things that human beings must avoid.
Still the science has not been able of creating a massive substitute for the fossil energy; this is one of the major challenges in the world future.
The issue is that none other element has the energetic intensity of the petroleum; for example, the energetic power of a liter of gasoline can not be compared with none other source.
The coal is the other form used in many countries. China has important reserves. The great problem is that coal is the most contaminant element.
Meanwhile, the climatic change, the global warming, is everyday more intense. The glaciers lose the snow worldwide, the oceans level grow and the forests disappear in many regions, specially in the Amazonia, the last natural reserve that still survive in the planet.
That is the reality, a fact linked to a basic conception: that the true wealth is money and other things do not matter. For that reason the countries has not made a real effort for preserving the environment.
The production is oriented to producing money and not to the satisfaction of the human beings necessities. The financial economy is in the first place and the real economy after.
In the year 2008 the bailout was for the financial economy and only a little part for the industry and the citizens that would loose its homes.
If the world does not change this manner of to see the life, the collapse will be unavoidable. In too few time the financial system will fall again; that is a cyclical process derivate of the system nature. The system receives money and spend money for to increase everyday the richness of their owners; very simple.
Monetary illusion
The monetary economy born as consequence of a necessity; the bartering was not able of responding to the increase of the volume of commercial transactions. For that reason, essentially, appeared the monetary economy.
In the money man found a manner of representing the value of the things, in the same form that in the writing he found a way for expressing its thoughts.
But money created a distortion: man think that the accumulation of money constitutes the real wealth of people and nations; and that is a mistake, a great lie.
In the current reality money is only paper and coins without a true value. In the past, when money was developed of gold and silver, the situation was different because the money had a proper value: the value of the gold and silver.
But now money is a simple instrument that let to change that paper or coin by goods or, sometimes, by other currencies more accepted in the market.
The unique base or support of money is the credibility that people have in the money as instrument of change.
So far, the currency for international commerce has been the dollar of the United Sates of America. The majority of the international transactions are realized in this currency. With the born of the Euro a part of those transactions began to be made in the new currency.
Some countries have begun to criticize the use of dollar as instrument of international exchange. In that sense, the news agencies has informed that Iran, Russia and China has considered the use of their national currencies for the petroleum transactions.
This reveals that nothing is definitive. The change is permanent. What will happen in the future? What do you think?
The new economic paradigm
The traditional economy has been supported in the idea of the abundance of natural resources and the scarcity of the resources of capital. But now, in the 21st century the situation is different. Now the scarce factor of production is the natural resources. The signs of water and petroleum shortage already are evident. The impact of these facts on the global production, consumption and the inflation will be more intense.
The value of money will be each day minor as consequence of inflation and the reduction of the natural resources availability. This process will put in evidence that money is really an illusion and that the most important is the knowledge, the environment, the natural resources and the material production.
God bless the world.
Too few things you can not acquire with money: the live, health neither true love. The problem is that those are the most important values of the life. You can not avoid the death. The billionaires die the same than the poor’s. There are illnesses that can not be treated with success. The true love is the other vital situation that the money can not buy.
Until now, in the developed nations, you can buy water, food, energy and other material elements if you have money. In the underdeveloped countries is different. There are regions where you can have money but that is not enough for getting the basic goods for live.
The first warning about the natural resources vulnerability was given by the Arab nations in the year 1974, when they decided to impose a petroleum seizure against the United States and Europe, because of the support of those countries to Israel during the Six Days War.
With the exception of that period of time, the developed nations, United States, Japan and the Western nations of Europe has enjoyed of the most natural resources in abundance. Some underdeveloped nations has not had the same luck. The African continent, some regions of Asia, Latin America and Oceania has been affected by the lack of resources, and this provoked the hunger of millions of people in those areas.
An important change in the economics concepts
The traditional economy has assured that oxygen and water are abundant goods; for that reason the first has not had a specific price and the price of the second has been reduced. But that trend started to change and already the oxygen is being appreciated in other dimension and the water price has reached an important increase in many countries.
In the 21st century the perception of the natural resources abundance is changing. Today are scarce the abundant goods of the recent past. Scarce goods are now oxygen, water, food and petroleum; all they are forms of energy. Without those goods the live is not possible. We can say that the modern evolution has affected the quantity and the quality of the energy sources.
The pattern of production and consumption followed until now and the pollution has become abundant resources in scarce resources. Vital goods are running out and this represents a deep change in the economic paradigm.
Wealth and happiness
There is a difference between wealth and happiness. Wealth is material abundance. In change, happiness is knowledge, health, love, employment and material satisfaction. You can be rich but unhappy.
A people or a country may be rich because possesses a great amount of material resources, but unhappy and underdeveloped, because do not have the most important things of the life: knowledge, health nor true love. The development is a combination of these values.
The knowledge is not only privilege of the scientists, the techniques nor the humanists. The modest people have a great knowledge. The farmers, the fishermen, the highlanders have a deep knowledge; they are in touch with nature and that contact give to them a special sensibility and vision of the life. It is the wisdom of the simple things. They know when the time of to sow, to sever and to harvest is. They know the essence of the trees, the behavior of the tides, the weather changes.
The first causes
The most advanced stage of the knowledge is tied to the comprehension of the first causes. Man only discovers the reality of nature. For example, the atomic energy has existed ever; but man discovered and employed it in the 20th century; not before. It is sure that other knowledge’s exists in nature that man still has not discovered but it is very likely that realize it in the future. The comprehension of a part of the true reality of the space and the time, the domain of the illnesses, for example, might be possible in the coming years.
The energy sources use
The Industrial Revolution may be considered as the Revolution of the Energy. Since the beginning of the civilization until the First Industrial Revolution (1769) ---when James Watt created the machine of vapor--- the world used the wood as the principal source of energy. But with the creation of the machine of vapor ---fed by coal--- the situation changed and a new scale of production was developed; this helped to the transformation of the handcraft scale into industrial production, one of the most important advances of the humankind.
The discovery of petroleum in the year 1869 and their later use as new source of energy for the most activities generated a modern scientist and technological development.
Man has overexploited the sources of energy; first he razed the forests for obtaining wood; the whales for getting oil; after it overexploited the coal and the petroleum and in the last decades of the 20th and 21st centuries began again to raze de forests that still survive in the planet.
But the most danger for humanity is the growing employment of atomic energy. In the last decades some nations has appealed to this form of energy because of the restrictions in the availability of other sources as the petroleum and the hydroelectricity. The construction of new atomics plants represents a peril for mankind. The effects of Chernobyl are still present and it constitutes a clear example of the things that human beings must avoid.
Still the science has not been able of creating a massive substitute for the fossil energy; this is one of the major challenges in the world future.
The issue is that none other element has the energetic intensity of the petroleum; for example, the energetic power of a liter of gasoline can not be compared with none other source.
The coal is the other form used in many countries. China has important reserves. The great problem is that coal is the most contaminant element.
Meanwhile, the climatic change, the global warming, is everyday more intense. The glaciers lose the snow worldwide, the oceans level grow and the forests disappear in many regions, specially in the Amazonia, the last natural reserve that still survive in the planet.
That is the reality, a fact linked to a basic conception: that the true wealth is money and other things do not matter. For that reason the countries has not made a real effort for preserving the environment.
The production is oriented to producing money and not to the satisfaction of the human beings necessities. The financial economy is in the first place and the real economy after.
In the year 2008 the bailout was for the financial economy and only a little part for the industry and the citizens that would loose its homes.
If the world does not change this manner of to see the life, the collapse will be unavoidable. In too few time the financial system will fall again; that is a cyclical process derivate of the system nature. The system receives money and spend money for to increase everyday the richness of their owners; very simple.
Monetary illusion
The monetary economy born as consequence of a necessity; the bartering was not able of responding to the increase of the volume of commercial transactions. For that reason, essentially, appeared the monetary economy.
In the money man found a manner of representing the value of the things, in the same form that in the writing he found a way for expressing its thoughts.
But money created a distortion: man think that the accumulation of money constitutes the real wealth of people and nations; and that is a mistake, a great lie.
In the current reality money is only paper and coins without a true value. In the past, when money was developed of gold and silver, the situation was different because the money had a proper value: the value of the gold and silver.
But now money is a simple instrument that let to change that paper or coin by goods or, sometimes, by other currencies more accepted in the market.
The unique base or support of money is the credibility that people have in the money as instrument of change.
So far, the currency for international commerce has been the dollar of the United Sates of America. The majority of the international transactions are realized in this currency. With the born of the Euro a part of those transactions began to be made in the new currency.
Some countries have begun to criticize the use of dollar as instrument of international exchange. In that sense, the news agencies has informed that Iran, Russia and China has considered the use of their national currencies for the petroleum transactions.
This reveals that nothing is definitive. The change is permanent. What will happen in the future? What do you think?
The new economic paradigm
The traditional economy has been supported in the idea of the abundance of natural resources and the scarcity of the resources of capital. But now, in the 21st century the situation is different. Now the scarce factor of production is the natural resources. The signs of water and petroleum shortage already are evident. The impact of these facts on the global production, consumption and the inflation will be more intense.
The value of money will be each day minor as consequence of inflation and the reduction of the natural resources availability. This process will put in evidence that money is really an illusion and that the most important is the knowledge, the environment, the natural resources and the material production.
God bless the world.
martes, 17 de noviembre de 2009
The Political Economy in the 21st century, Theory of the Political Supremacy
To get the human beings happiness must be the purpose of the economics.
Objective of the essay
The goal of this essay is to demonstrate the necessity of building a new approach of political economy that helps to create a best world.
Historic vision
The development of the economic thought practically began in the 16th century. Previously, some philosophers, Thucydides (455-4009), Xenophon (430-355), Plato (384-322) and Aristotle (384-322) made some contributions to the economics. In fact, the term economy comes from the Ancient Greek and was Aristotle who made a first approach to the Theory of Value. In his book Politics, he distinguished between the value of use and the value of change and realized also some considerations regarding the Quantity Theory of Money.
In the Roman Empire we find the contribution of the Emperor Diocletian; he established the first control of prices in the economy and appears too the work of Varron (116-27) on agricultural economics.
After, in the Middle Age (centuries V to XV), highlight the Summa Theological of Saint Thomas of Aquino (1225-1274), who exposed the value of the just price, the just salary and condemned the usury.
Some years after appear the work of Nicholas Oresme (1340-1382), who criticized the reduction of the value of the money made by kings. The work of Oresme was the inspiration of Thomas Gresham (1519-1579) who demonstrated ---some years after--- how the less valued currencies displace the most valued currencies.
The Mercantilism
Gresham inaugurated the Mercantilist thought in the 16th century. The Mercantilism defended the thesis of the state intervention in the economy. The mercantilists sustained that the wealth of nations was represented by their stocks of gold and silver and by a positive balance of payments; this means, by the promotion of the exports and the restrictions to the imports.
Among the principal mercantilists authors must be mentioned the names of Juan Botero (1540-1617) and his book Reason of State; Antoine Montchretien ( 1575-1621), who employed for first time the term political economy; Jean Baptiste Colbert (1619-1683); William Petty (1623-1687), with his book Political Arithmetic, considered, moreover, founder of the economics and Richard Cantillion (1680-1734) considered too founder of the economics.
The Physiocrats
Between the years 1760 and 1770 emerge in France a new economic vision. It was the thought of the Physiocrats, who’s sustained a different idea regarding the causes of the wealth of nations.
The Physiocrats thought that the agriculture was the base of the wealth and not the bullion (gold and silver), neither the advantages in the foreign commerce as had assured the Mercantilist theory until that moment. They believed in a natural order and were opposed to the state intervention in the economy. This represents the opposite thesis to the Mercantilism.
The principal exponent of the Physiocracy was Francoise Quesnay (1694-1774), who created the Tableu Economique in 1758, a model of economic analysis where he demonstrated the flows of the economy. This work was the base of the modern econometrics years after.
Classic Economy
In the year 1776 occur a fact that would change the economic history. It was the publication of the book An Inquiry into the Nature and Causes of the Wealth of Nations, of the philosopher Adam Smith (1723-1790). This book is considered the main economic work of all the times.
Smith contradicted the appreciations of his predecessors and argued that the industrial production is the most important cause of the wealth of nations increase and made a severe opposition to the intervention of the state in the economy.
Smith inaugurated the period of the Classic Economy, which other principal figures were Thomas Robert Malthus (1766-1834); Jean Baptiste Say (1767-1832); David Ricardo (1772-1823); John Stuart Mill (1806-1873) and the main critic of the Classical Economy, Karl Marx (1818-1883).
This broad period of time, since the 16th century until the 18th century was characterized by a fact: the consideration of the economic phenomenon as a whole discipline: the political economy.
I think that the political economy was a method of analysis that took in account not only the economic conditions but the society as a whole. This method was used the same by the Mercantilists, Physiocrats and the Classic Economy.
The modern economics
In 1890 with the publication of his book Principles of Economics, Alfred Marshall founded the modern economics.
In the three previous centuries 16th, 17th and 18th, the economics was considered a subject of the Moral Sciences, a branch of the politics, and for that cause and methodological reasons it was called political economy. The founders of the economics were aware of the paper of the state in the economic behavior of the society.
Marshall developed the microeconomics. John Maynard Keynes called him “the founder of the diagrammatic economics…”
In 1903, thirteen years after the publication of his Principles, Marshall gets to create the Cambridge School of Economics and to separate the economics studies of the Moral Sciences and the politics. Since that moment the economics and the economists began a new road. They leaved the political economy and centered its efforts in concrete problems, in the microeconomics and in the new mathematical economics.
In the 46 years between 1890 ---with the publication of the Principles of Marshall--- and 1936 when appear the thesis of John Maynard Keynes, General Theory of Employment, Interest and Money, the Marginalist and mathematic trend dominated the scenario.
In that historic period emerged important figures that would tackle specific economic affairs. Francis Edgeworth (1845-1926) with is Mathematical Physics and his Theory of Distribution; Wilfredo Pareto (1848-1923) and his Manuale di Economia Politica; John B. Clark (1847-1938) Distribution and Wealth; Eugene Böhm-Bawerk (1851-1914) Positive Theory of Capital; Frank Taussing (1859-1940) Tariff History of the United States; Werner Sombart (1864-1920) DES Moderne Kapitalismus; Gustav Casel (1866-1945) the Nature and Necessity of Interest; Arthur C. Pigou (1877-1959) Wealth and Welfare and Ludwig von Mises (1881-1973) the Theory of Money and Credit, among other economists.
In the already 46 years mentioned ---between 1890 and 1936--- the economic crisis acquired a new and intense dimension. The Communism obtained the power in Russia in 1917 and the radicalism found a fertile field in the impoverished European population. The inflation and the unemployment reached unbelievable figures in those years. This let the promotion of men as Benito Mussolini and Adolf Hitler and was the main cause of the First and Second World War. In the United States the Great Depression of 1929 threatened the real bases and the intellectual support of the North American capitalism.
The economic crisis discredited the economics and the economists: the old political economy and the new modern economics of Marshall and his pupils.
The paper of Keynes
John Maynard Keynes rescued the prestige of the economics. With his General Theory, he demonstrated that the control of the inflation and the unemployment were possible. He evidenced that the holistic method of the political economy was indispensable for resolving the economics problems. He tackled the crisis with an integral vision and proved that the control of the state and their investments are essentials for the economic progress.
The Keynes’s theory was a practice success and was applied in the United States, in Europe an in the rest of the world since the decade of the forty years.
“Keynes was the most important economic thinker of the 20th century. His influence was of such magnitude that the thirty years of the world economy success between the years 1945 and 1975 were called the Age of Keynes.
But as none remedy to the economics problems is permanent, the years of the Keynes success began to experiment problems and the crisis reappeared again. The increase of the oil prices since 1970 was one of the causes of the new global situation.
The monetary system established in Breton Woods in 1945 started to present problems at the end of the fifty years, when some European countries doubted of the dollar strength as instrument of international reserves, generating the prelude of a new world economic crisis.
In the seventy years appeared a new trend that hardly criticized the Keynesian model. It was the famous School of Chicago, which principal figure was the professor Milton Friedman, who revived the Quantitative Theory of Money. He asserted that the inflation is a monetary problem and that reducing the amount of money and adopting a policy of freedom to establish prices, wages and interests rates the inflation may be dominated…”
(1) Pablo Rafael González. Apreciación Crítica de la Política Monetaria, el bolívar oro. Monte Ávila Editores Latinoamericana, 2007. Pages 33 and 34.
Effects of the Neo liberalism
The intellectual position of the professor Friedman and the School of Chicago ---Neo liberalism--- was adopted by the government of Margaret Thatcher in England since 1979 and by the government of Ronald Regan in the United States. This policy was assumed by the International Monetary Fund and the World Bank in those years and imposed to the rest of the world through the globalization.
The outcome of the globalization has been the enhance of the poverty and the environmental damage, the privatization of many of the public institutions of the undeveloped countries, the increase of the public services tariffs, the inflation and the augment of problems of balance of payments of the developed and underdeveloped countries.
For the industrial nations, one of the principal effects of the Neo liberalism and the globalization has been the financial crisis of the year 2008. The model affected and weakened the mechanisms of controls of the governments on the financial institutions.
The other great error of the model has been giving preeminence to the financial capitalism and to put the real economy in second place. These facts caused the explosion of the current crisis.
Conclusion
I think that the political economy is a method of analysis that take in account, holistically, the paper of the economics in the society. The political economy is not a doctrine but a system of thought for the global comprehension of the economics, politics, environmental and social relations.
The sin of the modern economy has been their partial approach, the micro vision of the economics. The modern economics has worked deep in the trees but has loosed the perspective of the forest.
The mistakes of the politicians and economists explain why does more of the three fourth parts of the world population remain in the poverty and the half live with less of $2 per day.
New challenges have arisen, among them the natural resources crisis as consequence of the overexploitation of the resources and the pollution. These phenomenons have created a new paradigm for the economy.
In the 21st century it is necessary to recover the method of analysis of the political economy and to build a new political conception for attacking the poverty, managing the problem of the natural resources and preserving the environment. With willpower it is possible to reach both objectives; God save the next generations.
Objective of the essay
The goal of this essay is to demonstrate the necessity of building a new approach of political economy that helps to create a best world.
Historic vision
The development of the economic thought practically began in the 16th century. Previously, some philosophers, Thucydides (455-4009), Xenophon (430-355), Plato (384-322) and Aristotle (384-322) made some contributions to the economics. In fact, the term economy comes from the Ancient Greek and was Aristotle who made a first approach to the Theory of Value. In his book Politics, he distinguished between the value of use and the value of change and realized also some considerations regarding the Quantity Theory of Money.
In the Roman Empire we find the contribution of the Emperor Diocletian; he established the first control of prices in the economy and appears too the work of Varron (116-27) on agricultural economics.
After, in the Middle Age (centuries V to XV), highlight the Summa Theological of Saint Thomas of Aquino (1225-1274), who exposed the value of the just price, the just salary and condemned the usury.
Some years after appear the work of Nicholas Oresme (1340-1382), who criticized the reduction of the value of the money made by kings. The work of Oresme was the inspiration of Thomas Gresham (1519-1579) who demonstrated ---some years after--- how the less valued currencies displace the most valued currencies.
The Mercantilism
Gresham inaugurated the Mercantilist thought in the 16th century. The Mercantilism defended the thesis of the state intervention in the economy. The mercantilists sustained that the wealth of nations was represented by their stocks of gold and silver and by a positive balance of payments; this means, by the promotion of the exports and the restrictions to the imports.
Among the principal mercantilists authors must be mentioned the names of Juan Botero (1540-1617) and his book Reason of State; Antoine Montchretien ( 1575-1621), who employed for first time the term political economy; Jean Baptiste Colbert (1619-1683); William Petty (1623-1687), with his book Political Arithmetic, considered, moreover, founder of the economics and Richard Cantillion (1680-1734) considered too founder of the economics.
The Physiocrats
Between the years 1760 and 1770 emerge in France a new economic vision. It was the thought of the Physiocrats, who’s sustained a different idea regarding the causes of the wealth of nations.
The Physiocrats thought that the agriculture was the base of the wealth and not the bullion (gold and silver), neither the advantages in the foreign commerce as had assured the Mercantilist theory until that moment. They believed in a natural order and were opposed to the state intervention in the economy. This represents the opposite thesis to the Mercantilism.
The principal exponent of the Physiocracy was Francoise Quesnay (1694-1774), who created the Tableu Economique in 1758, a model of economic analysis where he demonstrated the flows of the economy. This work was the base of the modern econometrics years after.
Classic Economy
In the year 1776 occur a fact that would change the economic history. It was the publication of the book An Inquiry into the Nature and Causes of the Wealth of Nations, of the philosopher Adam Smith (1723-1790). This book is considered the main economic work of all the times.
Smith contradicted the appreciations of his predecessors and argued that the industrial production is the most important cause of the wealth of nations increase and made a severe opposition to the intervention of the state in the economy.
Smith inaugurated the period of the Classic Economy, which other principal figures were Thomas Robert Malthus (1766-1834); Jean Baptiste Say (1767-1832); David Ricardo (1772-1823); John Stuart Mill (1806-1873) and the main critic of the Classical Economy, Karl Marx (1818-1883).
This broad period of time, since the 16th century until the 18th century was characterized by a fact: the consideration of the economic phenomenon as a whole discipline: the political economy.
I think that the political economy was a method of analysis that took in account not only the economic conditions but the society as a whole. This method was used the same by the Mercantilists, Physiocrats and the Classic Economy.
The modern economics
In 1890 with the publication of his book Principles of Economics, Alfred Marshall founded the modern economics.
In the three previous centuries 16th, 17th and 18th, the economics was considered a subject of the Moral Sciences, a branch of the politics, and for that cause and methodological reasons it was called political economy. The founders of the economics were aware of the paper of the state in the economic behavior of the society.
Marshall developed the microeconomics. John Maynard Keynes called him “the founder of the diagrammatic economics…”
In 1903, thirteen years after the publication of his Principles, Marshall gets to create the Cambridge School of Economics and to separate the economics studies of the Moral Sciences and the politics. Since that moment the economics and the economists began a new road. They leaved the political economy and centered its efforts in concrete problems, in the microeconomics and in the new mathematical economics.
In the 46 years between 1890 ---with the publication of the Principles of Marshall--- and 1936 when appear the thesis of John Maynard Keynes, General Theory of Employment, Interest and Money, the Marginalist and mathematic trend dominated the scenario.
In that historic period emerged important figures that would tackle specific economic affairs. Francis Edgeworth (1845-1926) with is Mathematical Physics and his Theory of Distribution; Wilfredo Pareto (1848-1923) and his Manuale di Economia Politica; John B. Clark (1847-1938) Distribution and Wealth; Eugene Böhm-Bawerk (1851-1914) Positive Theory of Capital; Frank Taussing (1859-1940) Tariff History of the United States; Werner Sombart (1864-1920) DES Moderne Kapitalismus; Gustav Casel (1866-1945) the Nature and Necessity of Interest; Arthur C. Pigou (1877-1959) Wealth and Welfare and Ludwig von Mises (1881-1973) the Theory of Money and Credit, among other economists.
In the already 46 years mentioned ---between 1890 and 1936--- the economic crisis acquired a new and intense dimension. The Communism obtained the power in Russia in 1917 and the radicalism found a fertile field in the impoverished European population. The inflation and the unemployment reached unbelievable figures in those years. This let the promotion of men as Benito Mussolini and Adolf Hitler and was the main cause of the First and Second World War. In the United States the Great Depression of 1929 threatened the real bases and the intellectual support of the North American capitalism.
The economic crisis discredited the economics and the economists: the old political economy and the new modern economics of Marshall and his pupils.
The paper of Keynes
John Maynard Keynes rescued the prestige of the economics. With his General Theory, he demonstrated that the control of the inflation and the unemployment were possible. He evidenced that the holistic method of the political economy was indispensable for resolving the economics problems. He tackled the crisis with an integral vision and proved that the control of the state and their investments are essentials for the economic progress.
The Keynes’s theory was a practice success and was applied in the United States, in Europe an in the rest of the world since the decade of the forty years.
“Keynes was the most important economic thinker of the 20th century. His influence was of such magnitude that the thirty years of the world economy success between the years 1945 and 1975 were called the Age of Keynes.
But as none remedy to the economics problems is permanent, the years of the Keynes success began to experiment problems and the crisis reappeared again. The increase of the oil prices since 1970 was one of the causes of the new global situation.
The monetary system established in Breton Woods in 1945 started to present problems at the end of the fifty years, when some European countries doubted of the dollar strength as instrument of international reserves, generating the prelude of a new world economic crisis.
In the seventy years appeared a new trend that hardly criticized the Keynesian model. It was the famous School of Chicago, which principal figure was the professor Milton Friedman, who revived the Quantitative Theory of Money. He asserted that the inflation is a monetary problem and that reducing the amount of money and adopting a policy of freedom to establish prices, wages and interests rates the inflation may be dominated…”
(1) Pablo Rafael González. Apreciación Crítica de la Política Monetaria, el bolívar oro. Monte Ávila Editores Latinoamericana, 2007. Pages 33 and 34.
Effects of the Neo liberalism
The intellectual position of the professor Friedman and the School of Chicago ---Neo liberalism--- was adopted by the government of Margaret Thatcher in England since 1979 and by the government of Ronald Regan in the United States. This policy was assumed by the International Monetary Fund and the World Bank in those years and imposed to the rest of the world through the globalization.
The outcome of the globalization has been the enhance of the poverty and the environmental damage, the privatization of many of the public institutions of the undeveloped countries, the increase of the public services tariffs, the inflation and the augment of problems of balance of payments of the developed and underdeveloped countries.
For the industrial nations, one of the principal effects of the Neo liberalism and the globalization has been the financial crisis of the year 2008. The model affected and weakened the mechanisms of controls of the governments on the financial institutions.
The other great error of the model has been giving preeminence to the financial capitalism and to put the real economy in second place. These facts caused the explosion of the current crisis.
Conclusion
I think that the political economy is a method of analysis that take in account, holistically, the paper of the economics in the society. The political economy is not a doctrine but a system of thought for the global comprehension of the economics, politics, environmental and social relations.
The sin of the modern economy has been their partial approach, the micro vision of the economics. The modern economics has worked deep in the trees but has loosed the perspective of the forest.
The mistakes of the politicians and economists explain why does more of the three fourth parts of the world population remain in the poverty and the half live with less of $2 per day.
New challenges have arisen, among them the natural resources crisis as consequence of the overexploitation of the resources and the pollution. These phenomenons have created a new paradigm for the economy.
In the 21st century it is necessary to recover the method of analysis of the political economy and to build a new political conception for attacking the poverty, managing the problem of the natural resources and preserving the environment. With willpower it is possible to reach both objectives; God save the next generations.
lunes, 3 de agosto de 2009
A radical change in the economic theory
The concepts of the book Running Out: How Global Shortages Change the Economic Paradigm, (Algora Publishing, New York 2006 and 2008), represents a radical change for the economic theory. The main idea of the book is that the world is facing an unprecedented situation: the global scarcity of natural resources, especially water and petroleum.
The phenomenon already has begun to be visible in many regions of the planet. An oil producer as Indonesia, for example, has exhausted their reserves and had to retire from the OPEC recently.
The oil reserves of the North Sea are in critical situation; the same happen in Mexico and in the United States. The situation of the water reserves is not best. In many regions of the world the water scarcity is already a reality.
The book assures that capital will not be the main scarce factor of production as has been until now. In the near future the natural resources will be the scarce factor of production and this means a complete change for the traditional economics concepts.
The overexploitation of the resources and the contamination of the environment are the causes of the situation.
Only the development of new sources of energy less contaminants, the massive construction of green cars and a policy of reforestation and conservation of the forests that still survive might diminish the impact of the problem. But it is necessary a global effort.
www.pablorafaelgonzalez.com
The phenomenon already has begun to be visible in many regions of the planet. An oil producer as Indonesia, for example, has exhausted their reserves and had to retire from the OPEC recently.
The oil reserves of the North Sea are in critical situation; the same happen in Mexico and in the United States. The situation of the water reserves is not best. In many regions of the world the water scarcity is already a reality.
The book assures that capital will not be the main scarce factor of production as has been until now. In the near future the natural resources will be the scarce factor of production and this means a complete change for the traditional economics concepts.
The overexploitation of the resources and the contamination of the environment are the causes of the situation.
Only the development of new sources of energy less contaminants, the massive construction of green cars and a policy of reforestation and conservation of the forests that still survive might diminish the impact of the problem. But it is necessary a global effort.
www.pablorafaelgonzalez.com
miércoles, 13 de mayo de 2009
Oil price might surpass $ 500 for the year 2012
The oil price might surpass the barrier of $ 500 for the year 2012. For that year the United Kingdom reserves of the North Sea will be in it final stage.
This fact will cause a revolution in the world energy and will show the weakness of our natural resources.
The appreciation on the oil price has a base: the historical behavior of the prices. For example, for the year 1970 the oil price was of hardly more of $ 1 per barrel, but ten years after, in the year 1980, the oil price reached the figure of $ 40. This represented an augment of more of 3,000 per cent in a period of ten years. The prices experimented a sustained trend to the increase in those ten years, but an event, the Sha of Iran fall in the year 1979, accelerated the crisis and the oil price reached in 1980 it major level in the history until then.
If we consider the year 2002 ---after September 11 2002--- as the year of minor prices of the oil ---$ 16 per barrel in December of that year--- and we consider a growth of 3,000 percent for the year 2012, the estimation of a price of $500 has a real sense. Remember that a similar phenomenon already happened between the years 1970 and 1980 as was explained in the previous paragraph.
Nobody can predict the future with precision but the lessons of the history are a true source of knowledgment. The history teaches us that a great jump might occur in the oil price if a fact sufficiently important happens in the market. The figures of the world oil reserves demonstrate that is in the North Sea the place where the oil will finish first. The most important oil companies of the world are aware of this fact, some governments too but they do not recognize it in public form.
A jump in the oil prices of the magnitude considered would cause a real economic crisis with severe implications in the goods and services production worldwide.
The book A Statistical Yearbook 2008, Running Out: How Global Shortages Change the Economic Paradigm, (Algora Publishing, New York, 2008) presents a complete vision of the natural resources situation and especially of the petroleum.
pablorafael_gonzalez@yahoo.com
This fact will cause a revolution in the world energy and will show the weakness of our natural resources.
The appreciation on the oil price has a base: the historical behavior of the prices. For example, for the year 1970 the oil price was of hardly more of $ 1 per barrel, but ten years after, in the year 1980, the oil price reached the figure of $ 40. This represented an augment of more of 3,000 per cent in a period of ten years. The prices experimented a sustained trend to the increase in those ten years, but an event, the Sha of Iran fall in the year 1979, accelerated the crisis and the oil price reached in 1980 it major level in the history until then.
If we consider the year 2002 ---after September 11 2002--- as the year of minor prices of the oil ---$ 16 per barrel in December of that year--- and we consider a growth of 3,000 percent for the year 2012, the estimation of a price of $500 has a real sense. Remember that a similar phenomenon already happened between the years 1970 and 1980 as was explained in the previous paragraph.
Nobody can predict the future with precision but the lessons of the history are a true source of knowledgment. The history teaches us that a great jump might occur in the oil price if a fact sufficiently important happens in the market. The figures of the world oil reserves demonstrate that is in the North Sea the place where the oil will finish first. The most important oil companies of the world are aware of this fact, some governments too but they do not recognize it in public form.
A jump in the oil prices of the magnitude considered would cause a real economic crisis with severe implications in the goods and services production worldwide.
The book A Statistical Yearbook 2008, Running Out: How Global Shortages Change the Economic Paradigm, (Algora Publishing, New York, 2008) presents a complete vision of the natural resources situation and especially of the petroleum.
pablorafael_gonzalez@yahoo.com
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