Saturday, 4 September 2010

Forget Keynes.

Government "stimulation" basically slows change. This takes funds from more productive sectors and redirects it into less productive ones. It maintains the status quo at the expense of slowed growth and future debt.

The last 100 years has been a period of rapid change. ALL decades experienced innovative development and creative destruction. The Government response has been to promote the existing corporations that once where great and no longer have the innovative culture that caused them to exist in the first place.

This of course is politics responding over economics. Politicians like large government. They can pork barrel existing (and politically supportive) firms over newer ones which are likely to change existing economic and cultural dynamics. The problem is that this always fails in the long term, but with the result that we have lower net wealth and productivity in the short term.

Keynes did decry the long term, for in politics, everything is the short term economically.

1 comment:

Andrew said...

I believe the quote is:
"Long run is a misleading guide to current affairs. In the long run we are all dead."

He also said:
"There is nothing so disastrous as a rational investment policy in an irrational world"

As well as:
"The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens."