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    the imbalance Why World War II was accompanied by full employment and why such full employment represented a major economic loss for the great majority of American workers 4 The Productivity Theory of Wages A critique of the exploitation theory why both workers needs and employers greed are irrelevant to the wages workers actually have to accept Money wages are determined mainly by the relationship between the quantity of money and the supply of labor Real wages are determined mainly by the productivity of labor 5 The Role of Businessmen and Capitalists in Raising Real Wages Real wages as the product of the productivity of labor and of wage payments relative to consumption spending How the saving and productive expenditure of businessmen and capitalists increase the economic system s concentration on the production of capital goods which in turn raises the productivity of labor How their competitive quest for profits achieves the same result How their saving and productive expenditure raises wages relative to consumption spending How the activities of businessmen and capitalists in turn depend on the existence of a free and rational society 6 Application of the Productivity Theory of Wages to the Interpretation of Modern Economic History The low standard of living of the early years of capitalism was the result of a low productivity of labor inherited from centuries of stagnation under feudalism The rise in the standard of living increasingly evident as the nineteenth century wore on was the result of a rising productivity of labor achieved by the activities of businessmen and capitalists The higher real wages brought about in this way were responsible for the elimination of child labor the shortening of the working day and the improvement in working conditions Government intervention far from being the cause of the average person s economic gains as is usually believed necessarily operated to hold down the rise in real wages and the benefits resulting from it Price 49 95 Return to top of page Return to Reisman s Program A Theory of Productive Activity Profit and Saving This series makes an excellent accompaniment to Chapters 11 and 16 of CAPITALISM It was delivered at the Jefferson School s 1987 summer conference at the University of California San Diego Each of the six lectures is approximately 90 minutes long including question and answer period A 16 page outline summary accompanies the lectures as a supplement Price 49 95 1 Basic Concepts Definitions of such fundamental concepts as productive expenditure and consumption expenditure capital goods and consumers goods Adam Smith s positive contribution to the concept of productive activity and his contradictory development of the conceptual framework of the Marxian exploitation theory 2 The Marxian Exploitation Theory Marx s version of the labor theory of value and the iron law of wages How profits are made to appear as essentially the same as the gains of slave owners The exploitation theory as the theoretical basis of the economic policies of the contemporary liberals 3 Böhm Bawerk s Critique of the Exploitation Theory Exposition of the leading critique of Marx as developed by a father of the Austrian school of economics The time preference theory of profit interest Böhm Bawerk s fundamental concessions to the exploitation theory 4 Reisman s Theory of Profit Interest vs the Framework of the Exploitation Theory How business in the aggregate generates sales revenues greater than costs Profits not wages as the original and primary form of income Businessmen do not deduct profits from wages but are responsible for the creation of wages which along with other costs are a deduction from sales revenues all of which were originally profit Businessmen and capitalists as the primary workers in the economic system 5 Specific Productive Functions in the Light of the Division of Labor The division of labor as the explanatory principle of the specific productive functions of businessmen and capitalists the financial markets and financial institutions retailing wholesaling and advertising 6 Further Development of Reisman s Theory of Profit Interest Say s Law II not only does production create purchasing power but also the productive process itself is what generates monetary profitability Radical implications for the role of saving and technological progress in the process of capital accumulation Return to top of page Return to Reisman s Program Capital the Productive Process and the Rate of Profit This six lecture series delivered at the Jefferson School s 1989 summer conference at the University of California San Diego makes an excellent accompaniment to Chapters 15 17 of CAPITALISM It represents a step by step exposition and development of Dr Reisman s own original theory of profit and capital accumulation together with many of its leading applications It is accompanied by a 6 000 word excerpt from the draft of his book Capitalism A Treatise on Economics and by a 34 page lecture supplement that contains the numerous diagrams and tables carefully worked through in the lectures as well as a detailed outline of the material presented The series thus represents a combination of tapes and virtual mini textbook Each of the lectures is approximately 90 minutes long including question and answer period Price 49 95 1 Methodological Epistemological Introduction Elements of sound economic theorizing the proper treatment of money the Aristotelian view of entities held by the British classical economists versus the Platonic Heraclitean view of entities held by contemporary economists Implications for the conception of aggregate production aggregate spending and the role of saving and productive expenditure versus consumption expenditure Overthrow of the foundations of Keynesian economics 2 Capital Accumulation and Its Causes Saving and the relative demand for and production of capital goods Technological progress and general economic efficiency as causes of capital accumulation The fundamental role of economic freedom Demonstration that in the absence of increases in the quantity of money national income and capital accumulation are inversely related Overthrow of the Keynesian doctrines of the balanced budget multiplier and the conservatives dilemma 3 The Average Rate of Profit and

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    of the growing problems experienced by the United States today to its government s growing violations of the country s own magnificent founding principle of individual freedom 3 25 Read an excerpt Capitalism The Cure for Racism A seventeen thousand word pamphlet that explains how capitalism and the unhampered profit motive achieve equal pay for equal work and operate against all aspects of racial prejudice in the marketplace and how the unjust treatment of blacks in contemporary American society is the result of the mixed economy not capitalism 4 95 Read an excerpt The Toxicity of Environmentalism This 24 page pamphlet written on the foundation of Objectivist philosophy and procapitalist economic theory is the most powerful and convincing critique of environmentalism available From intrinsic value to global warming it exposes the rampant errors and contradictions of the movement and shows its profound hatred of human values It demonstrates why the real problem of the industrialized world is not environmental pollution but philosophical corruption of which environmentalism with its hatred of science and technology is the leading contemporary manifestation The pamphlet concludes with a call for a cleanup of the environment the philosophical intellectual environment based on the introduction of the writings of Ayn Rand and Ludwig von Mises into college and university curricula 4 25 Read an excerpt Education and the Racist Road to Barbarism A 13 page pamphlet that explains the nature and universal value of Western civilization and why the efforts to replace its teaching with Afro centric and Latino centric studies are based on racism and imply the destruction of education This pamphlet is a well deserved intellectual slap in the face of today s fascists who seek to impose political correctness on America s schools and universities 3 25 Read an excerpt Classical Economics Versus the Exploitation Theory A 19 page pamphlet demolishing all aspects of the Marxian exploitation theory on the basis of theoretical foundations supplied by Classical economics and thus pointing the way to the reintroduction of Classical economics as a major and vital element in the defense of capitalism 3 75 Read an excerpt Platonic Competition A 15 page pamphlet that demolishes the philosophical and theoretical foundations of antitrust policy In opposition to prevailing doctrines the pamphlet explains why price competition is an omnipresent phenomenon under capitalism Reprinted from Ayn Rand s The Objectivist it is an excellent antidote to much of the error in contemporary microeconomics courses 3 25 Read an excerpt Production Versus Consumption An 11 page pamphlet showing why the production of wealth not the artificial creation of the need and desire to consume is the fundamental problem of economic life The pamphlet develops the implications of these opposing basic economic premises for understanding the economic effects of machinery war government spending population growth advertising technological progress and inflation The subject of a full Newsweek column by Henry Hazlitt when it originally appeared in The Freeman this pamphlet is an antidote to much of the error in contemporary macroeconomics courses

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  • Audiotapes and Pamphlets by Edith Packer
    of Dr Packer s other eight lectures Total running time for the nine lectures is over 18 hours Total price 99 95 Pamphlet version 23 pages no Q A 4 25 Read an excerpt Happiness Skills A discussion of the conscious and subconscious conclusions attitudes and skills required for successful living and the achievement of a positive emotional state in everyday life Application is made to the four crucial areas of work romantic relationships friendships and leisure Dr Packer explains the importance of such attitudes and skills as focusing on positive goals thinking long range holding perspective not exaggerating the significance of failure not fearing negative emotions and commitment to action Extensive Q A Total running time of approximately 2 hours and 20 minutes Price was 26 95 Now available exclusively in mp3 format along with all of Dr Packer s other eight lectures Total running time for the nine lectures is over 18 hours Total price 99 95 Pamphlet version 22 pages no Q A 4 25 Read an excerpt Understanding the Subconscious Shows how the automatic functioning of the subconscious rests on core evaluations which are fundamental universalized evaluations based on concrete experiences Explains how core evaluations underlie our everyday integration of aspects of reality and our emotional responses No Q A Running time of 60 minutes Price was 12 95 Now available exclusively in mp3 format along with all of Dr Packer s other eight lectures Total running time for the nine lectures is over 18 hours Total price 99 95 Pamphlet version 16 pages no Q A 3 25 Read an excerpt Toward a Lasting Romantic Relationship Part I A comprehensive guide to creating and sustaining a romantic relationship Offers valuable advice on how to recognize both true compatibility and inappropriate methods of choosing a mate and explains the psychological basis of physical attraction between people who barely know one another Shows the importance of sex connected with love the necessity of each partner being the most important person in the other s life and the need for emotional communication between the partners and how to promote this A two tape set containing Q A Total running time of approximately 2 hours and 20 minutes Price was 26 95 Now available exclusively in mp3 format along with all of Dr Packer s other eight lectures Total running time for the nine lectures is over 18 hours Total price 99 95 Pamphlet version 22 pages no Q A 4 25 Read an excerpt Toward a Lasting Romantic Relationship Part II Shows how psychological problems create barriers to successful romantic relationships Covers factors that undercut one s sense of sexual identity and examines the impediments caused by defense values and defense mechanisms especially repression Also deals with parental influences both psychological and existential that can harm a couple s relationship and explains what can be done about them With Q A running time 90 minutes Price was 18 95 Now available exclusively in mp3 format along with all

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  • Ludwig von Mises, the Greatest Advocate of Capitalism in the History of Economic Thought
    and its philosophical foundations A thorough knowledge of this magnificent work is absolutely essential to the advocacy of capitalism at the highest intellectual level which ultimately is the only level that counts 907 pp Please remember to complete your purchases from TJS before going to Amazon com Socialism Von Mises s classic critique of all aspects of Marxism and the other variants of socialist doctrine The book demonstrates why a socialist system is a planless chaos and thus cannot exist without the aid of outside capitalist countries It is one of the most profound sources of enlightenment available capable of transforming the reader s view of the world concerning matters relating to economic activity and society 572 xxiv pp Please remember to complete your purchases from TJS before going to Amazon com The Theory of Money and Credit This is a comprehensive in depth treatment of all important aspects of the theory of money including the trade cycle Its analyses of inflation and deflation and defense of the gold standard are unsurpassed It also includes von Mises s detailed plan for how the gold standard can be reestablished 493 pp Please remember to complete your purchases from TJS before going to Amazon com Planning For Freedom An immensely valuable collection of essays written for the general public on leading issues of economic theory and economic policy such as profits Say s Law unemployment labor unions inflation price controls saving and capital accumulation and socialism and Nazism 280 xii pp P Please remember to complete your purchases from TJS before going to Amazon com Omnipotent Government The Rise of the Total State and Total War A brilliant account of the statist intellectual influences that led to the rise of Nazism and a demonstration of how government intervention in the domestic economy

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  • Ayn Rand, the Foremost Defender of Reason in Modern Times
    Rand upholding the ethics of rational self interest and its application to politics The opening essay sets forth her own original theory of ethics Contains the best exposition of the nature of individual rights and government to be found anywhere 151 pp P Please remember to complete your purchases from TJS before going to Amazon com Capitalism The Unknown Ideal Another brilliant collection of essays mainly by Miss Rand this time ranging from the basic moral nature of capitalism and the refutation of major fallacies concerning it to such specific issues as patents and copyrights and the property status of airwaves Also contains dazzling philosophical analyses of major contemporary political and cultural phenomena such as the student rebellion the art of smearing and conservatism 349 pp P Please remember to complete your purchases from TJS before going to Amazon com The New Left The Anti Industrial Revolution A collection of essays all by Miss Rand that constitute a thorough expose and demolition of the philosophical foundations of the new left and environmentalism Includes devastating analyses of contemporary education 239 pp P Please remember to complete your purchases from TJS before going to Amazon com Philosophy Who Needs It A posthumously assembled collection of essays all by Miss Rand that demonstrates the power of philosophy in moving the world Among the most outstanding of the essays are The Metaphysical Versus the Man Made Faith and Force The Destroyers of the Modern World and Fairness Doctrine for Education 274 pp P Please remember to complete your purchases from TJS before going to Amazon com The Voice of Reason A second posthumously assembled collection of essays that contains such outstanding pieces as The Intellectual Bankruptcy of Our Age Our Cultural Value Deprivation Representation Without Authorization and The Question of Scholarships 353 pp P Please remember to complete your purchases from TJS before going to Amazon com The Romantic Manifesto A collection of Ayn Rand s essay s that presents her philosophy of art and literature Titles include among others such great pieces as Art and Sense of Life What Is Romanticism Art and Moral Treason and The Goal of My Writing 199 pp P Please remember to complete your purchases from TJS before going to Amazon com Introduction to Objectivist Epistemology Expanded Second Edition Presents some of Ayn Rand s most original and important contributions to philosophy among them her solution to the centuries old problem of universals The main subjects covered are cognition and measurement concept formation abstraction from abstractions concepts of consciousness definitions axiomatic concepts the cognitive role of concepts and consciousness and identity A lengthy appendix consisting of excerpts from Miss Rand s epistemology workshops is also included 314 pp P Please remember to complete your purchases from TJS before going to Amazon com Anthem Set in a thoroughly collectivist world of the future this short novel is about one man s rediscovery of what it means to say I 105 pp Please remember to complete your purchases from TJS

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  • Shopping Cart
    or description above to bring up the complete text in pdf Literature and Lectures by Edith Packer George Reisman and Others Online Guide to Reisman s Program viewing only Capitalism Short Answer Q A Supplement viewing only Introduction to Reisman s Theory of Profit Interest A slide show with oral commentary accompanying each slide Noble Vision a novel by Genevieve LaGreca Now available in paperback Ludwig von Mises s Human Action in pdf courtesy of Bettina Bien Greaves and Laissez Faire Books The full on line text of other major works by von Mises and other defenders of capitalism I nteractive bibliography from Reisman s Capitalism click on a title and the book comes up at Amazon com An Important Message concerning ordering Links to Other Websites Our Shopping Cart Accepts These Credit Cards Dear Visitor TJS accepts payment by Visa Mastercard the American Express Card and the Discover card In addition of course you can use our shopping cart program to generate an order form for anything you wish to purchase on our web site and then make payment by check or money order rather than by credit card The procedure is identical until you reach the choice of

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  • The Real Right to Medical Care Versus Socialized Medicine
    finance it help to explain the very high prices of many patented prescription drugs The prices of goods enjoying patent or copyright protection or which are produced under a unique secret technology that is the prices of goods whose sellers need not fear direct competition are set with regard to what economists call the elasticity of demand This is a measure of the extent to which charging a higher price results in a reduction in the quantity of the good that people are prepared to buy Sellers of such goods do not want to set the price so high that the reduction in sales volume outweighs the rise in price They set a price or prices that are low enough to enable them to retain the bulk of their volume This often entails price discrimination that is charging different prices for the same or substantially the same good to buyers in different parts of the market a higher price or higher priced version in the high income end of the market and one or more lower prices or lower priced versions in the lower income segments of the market It follows that to the extent that the market comes to be made up of buyers for whom price is no object because they are covered by today s private medical insurance companies or by government programs the price that it is profitable to charge is correspondingly increased This is because to that extent the higher price does not operate to reduce the quantity of the drug demanded Thus the incentive is created to charge a higher price At the same time various prohibitions against price discrimination serve to prevent the offering of lower prices or lower priced versions to those who lack insurance and are outside of the government programs Today if a drug company offered a lower price or lower priced version to anyone the government and many or most of the private insurance companies would almost certainly demand that they too obtain the benefit of the lower price or lower priced version Thus the offering of a lower price or lower priced version to any segment of the market does not pay and the result is that everyone is confronted with artificially higher drug prices These observations made with respect to the domestic market of the United States are confirmed by the recent furor caused by newspaper reports of the availability of lower drug prices in Mexico The fact that I have stressed the role of the alleged need based right to medical care in raising drug prices should not be understood as minimizing the role played by arbitrary FDA regulations that delay and inhibit the introduction of new drugs These are responsible for the average new drug that is introduced having a development cost and thus price far in excess of what market conditions require 6 Hospitals wasting money in the purchase of unneeded costly equipment The perverted notion of the need based right to medical care and the collectivization of medical costs to finance it are also responsible for the phenomenon of hospitals being able to waste vast sums of money in the purchase of costly equipment from which they derive relatively little use In any other industry if companies buy expensive equipment that they use insufficiently they lose money or at least make less money than they could have made Buyers of their products are not willing to reimburse them for their wasteful expenditures As a result they try to avoid the practice and quickly stop if they make such a mistake But when the buyer is a nonprofit collective with unlimited access to the resources of the taxpayers namely the United States government and pays according to the sellers costs in this case the hospitals costs whatever those costs may be then there is no reason for the sellers to limit their expenditures The same result exists if private for profit buyers are legally obliged to pay rates that cover the sellers costs whatever those costs may be which is the position that the private medical insurance companies have been in in relation to hospitals The government s response in such circumstances is to take control of the expenditures the sellers are allowed to make This is why hospitals in many states are now required to have a so called certificate of need from the government before being allowed to make any significant sized equipment purchase The situation is analogous to what prevails in the case of farm subsidies There the government has obligated itself to buy farmers crops at an artificially high price In order to limit its expenses it controls the amount of acreage the farmers are allowed to plant or requires that they possess a license to grow the crop In practice certificates of need have thus far only been imposed by state governments which are mandated by federal law to pay for substantial and rapidly growing costs under the Medicaid program and which are responsible for finding the funds with which to do so on their own It should be realized that the government can also be motivated to impose restrictions on hospitals purchases of equipment even in conditions in which the purchases are entirely necessary and appropriate To the extent that the hospitals patients are served for free at the government s expense the restrictions on the purchases appear from the government s perspective simply as a saving of cost that is as a saving of cost unaccompanied by any reduction in revenue The patients are worse off but from the government s perspective all that happens is that its cost is less 7 Below market Medicaid rates and cost shifting The perverted notion of the need based right to medical care and the collectivization of medical costs to finance it are also responsible in the last analysis for the rise in medical costs that takes place as the result of the practice adopted by many state governments of keeping their schedule of allowable Medicaid charges substantially below the prevailing market level This is a practice which like that of requiring certificates of need has been adopted for the purpose of controlling federally mandated state government expenditures under the Medicaid program It is a practice which has led to many physicians refusing to accept Medicaid patients because of inadequate compensation In the case of hospitals which cannot refuse to accept Medicaid patients when they appear in the emergency room the result has been a correspondingly greater rise in the costs charged both to private medical insurance companies and to the federal government under the Medicare program The process is known as cost shifting That is to the extent that the hospitals costs are not reimbursed by the Medicaid program they are shifted in the form of higher charges to patients covered by private insurance companies or the Medicare program Private patients who are not insured are also confronted with higher charges on account of this shifting of costs The same kind of cost shifting occurs insofar as hospitals are legally compelled to accept other patients with no means of paying Since the mid 1980s when the Medicare program adopted the policy of payment according to diagnostic related groups DRGs cost shifting has intensified Now Medicare payments also frequently turn out to be inadequate to cover the costs of treatment This inadequacy is added to the insufficiency of Medicaid payments The inadequacy is further compounded to the extent that private insurance companies have adopted the DRG standards of payment The total combined shortfall is then passed along to the remaining patients above all the uninsured 8 Bureaucratic interference with medicine and the rise in administrative costs As we have seen repeatedly the effect of the alleged need based right to medical care and the collectivization of costs to finance it is to make the cost of medical care rise beyond all bounds But as the last two points of discussion indicate sooner or later the continuous rise in medical costs encounters resistance not from the great majority of individual citizens to whom everything still appears to be free but from the officials of the collectives that must meet the ever rising charges Thus in an effort to limit the rise in costs more and more bureaucratic controls are introduced by all the various collectives that must pay the costs Under the controls the insurance companies and the government agencies administering the Medicare and Medicaid programs must be kept advised of every step of the treatment of each of the patients insured or covered by them A mountain of paperwork develops The filing of all the various bureaucratic forms is inevitably accompanied by frequent haggling back and forth on a case by case basis between physicians and hospitals on the one side and the insurance companies and federal and state governments on the other The inevitable further result is another major source of higher medical costs namely a sharp rise in administrative costs While the rise in administrative costs is less than the altogether boundless rise in costs that would otherwise take place it is nonetheless very substantial in its own right and represents a further loss to the general public that must be charged to the perverted notion of the need based right to medical care A rather seamy related aspect of the collectives attempt to control costs is the apparent practice of some private insurance companies of losing many of the insurance claims submitted to them or of suddenly finding the need for additional often irrelevant information These are ruses designed to postpone payment and thus reduce the pressure of cost increases outstripping rate increases This of course adds further to administrative costs by making the physicians hospitals and clinics who are claimants go to the trouble of repeatedly refiling or amending their claims In addition to everything that can be traced specifically to the perversion of the right to medical care there is the impact on the cost of medical care of government regulation in general Alleged safety regulations environmental regulations labor regulations and so on all add more or less substantially to the cost of medical care just as to the cost of everything else Probably they have added more to the cost of medical care than to the cost of most other things because of the lack of buyer resistance that the perverted notion of the need based right to medical care engenders in the field For example the resistance to the employment of unnecessary workers in connection with union featherbedding practices is certain to be less in hospitals to the extent that the hospitals know they can pass the extra cost on to the insurance companies or to the government Thus in all of these ways the perverted notion of the need based right to medical care that is an alleged right to medical care with or without the consent of those who are to pay for it or provide it that is an alleged right to medical care as entailing a right to steal and enslave has progressively raised the cost of medical care It and it alone is responsible for the crisis of the ever rising cost of medical care At the same time as the corollary of its destructiveness this perverted notion of the right to medical care has systematically undermined the actual rational right to medical care This cannot be stressed too strongly In each and every instance in which it has raised the cost of medical care as explained under the eight points I have listed it has represented a case in which individuals who could have afforded to buy medical care from willing providers have been prevented from doing so by the initiation of physical force In other words therefore it is the government s violation of the actual rational right to medical care that is equally responsible for the crisis in medical care In view of all this it is difficult to decide which is the more astonishing the utter ignorance of all of the above facts Mrs Clinton revealed in her declaration that On psychological as well as economic grounds some form of discipline i e price controls in a marketplace that frankly has had none seems to us a feature that needs to be there as a backup or the fact that Mrs Clinton has somehow managed to acquire the reputation of being an expert on the subject she has been spending so much time speaking about lately It should be obvious to anyone who can understand even the barest essentials of economic theory that the cause of the crisis in medical costs is precisely the philosophy of collectivism and government interference Mrs Clinton advocates and now wants to extend further Mrs Clinton s statement appeared in the Orange County Register Oct 10 1993 p 2 3 The Clinton Plan The Clinton plan seeks to solve the problems created by government interference with medicine up to now by adding further even more destructive government interference with medicine While the effect of the government s violation and or perversion of the individual s actual rational right to medical care namely his right to buy it from willing providers has thus far been more and more to restrict that right and to undermine its value by making it more and more expensive to exercise the Clinton plan would destroy the rational right to medical care altogether It would substitute for the present very bad situation characterized by a semi private room in a hospital costing 1 000 to 1 500 a day the much worse situation in which the medical care one seeks and is willing and able to pay for cannot be obtained at all because the government refuses to allow those who would provide it to do so The Clinton plan seeks nothing less than to deprive the citizen of his essential right to use the offer of money as the means of obtaining the medical care he wants and instead to make him dependent on the medical care the government is willing to allow him to have Inasmuch as we have had essential features of socialized medicine for many years the Clinton plan should not be thought of as representing the inauguration of socialized medicine in the United States It should however be thought of as representing a more extreme fuller bodied and uglier form of socialized medicine than we have had thus far It should be thought of in effect as socialized medicine discarding the ballerina shoes it has been parading around in up to now and replacing them with a pair of hobnailed boots as taking off the velvet glove and revealing a mailed fist Up to now under the perverted notion of the need based right to medical care and the collectivization of costs to pay for it the government has essentially allowed individuals to obtain as much medical care as they and their physicians have deemed necessary or appropriate Under the Clinton plan the government through a National Health Board will henceforth decide what medical care is to be provided and by what methods Through a set of quasi public bodies known as regional alliances the government will determine what it pays for medical care These alliances are to negotiate with insurance companies which henceforth are to be the providers of medical care in the manner of present day health maintenance organizations such as Kaiser Permanente or Cigna Every American citizen is to be compelled to join a government approved insurance plan All the plans will offer a uniform set of medical benefits and operate under the guidance of the National Health Board Funding for the plans is to come mainly from the present day employer financed health insurance premiums The so called regional alliances are in effect to tax away these premium payments and use them themselves to pay the insurance companies Large corporations those with more than five thousand employees may constitute themselves as corporate alliances and deal with the insurance companies directly as they do now The essential purpose of the Clinton plan is to reduce spending for medical care in the United States at the same time that it brings 37 million presently uninsured individuals under the umbrella of the alleged need based right to medical care Thus 37 million additional individuals are to be placed in a position in which medical care will appear to be free I must digress to point out that a significant number of these individuals will also become unemployed as their employers who until now have not paid health insurance premiums are compelled to pay a major new and additional employment cost in the form of a medical payroll tax that the regional alliances will collect on these individuals alleged behalf The results must be the same as those produced by a rise in the minimum wage or in union scales namely a reduction in the quantity of labor demanded and thus unemployment The quantity of medical care demanded will rise correspondingly with this enlargement of the number of those eligible to receive it as an alleged need based right At the same time financing to meet the demand for medical care is to be reduced Indeed the Clinton plan aims to reduce spending for medical care on behalf of those presently covered by employer financed health insurance plans to such an extent that when the savings from the medical insurance premiums are paid over to the employees as additional wages the federal government s tax collections on the wage earners will go up by 51 billion New York Times Sept 21 1993 p A13 If you realize that the extra federal taxes the workers will pay are on the order of 25 percent of their additional incomes the implication is that the Clinton plan contemplates slashing something on the order of 200 billion or more from medical spending on behalf of today s insured wage earners It should be obvious that under such conditions no other outcome is possible but shortages and rationing for there will be a vast increase in the quantity of medical care demanded and at the same time a major decrease in the financial resources made available to meet the demand Doctors offices will fill up Long waiting lists will develop for practically every type of medical procedure As in Canada today more people will die on the waiting list for heart surgery than on the operating table See Imprimis November 1993 p 3 The more expensive kinds of procedures will be performed much less frequently if at all and their place will be taken by lower cost less reliable or less effective alternatives as every provider of medical care is placed on a limited budget and obliged to treat the collectivity of his patients within the limits of that budget In this connection no one should be fooled by the fact that the Clinton plan promises the continued existence of traditional fee for service medical practitioners and free choice among them They too will be placed on strict budgets and their methods of treatment closely monitored and controlled by the government in its efforts to limit expenditures for medical care No one should imagine that the additional 1 140 per year or less that this variant of medical insurance is to be allowed to cost under the Clinton plan will enable anyone to obtain significantly more medical care than the member of the typical HMO type scheme that is envisaged The proposed cost to the individual for the fee for service type plan is a maximum of 1 500 per year versus 360 per year for the HMO type plan The HMO type plan also requires a 10 copayment for each visit to a doctor s office And even the allegedly continued legal right to choose one s physician will be lost once the demand for his services comes to exceed his ability to render them and he is prevented from restoring balance between demand and supply because he is prohibited from raising his rates or raising them sufficiently to do so In following the less expensive medical procedures the physician will be legally safe irrespective of the effect on the individual patient so long as his treatment is within the parameters of appropriate treatment to be set forth in detail in various Practice Guidelines that are currently in preparation by the government These Practice Guidelines will be the bureaucratic rule books that when strictly followed will be the physician s protection against the charge that he failed to do as much as he might have done for the health of his patients At the same time it will be against the law for patients to offer physicians or other medical care providers additional fees in order either to get to the head of a waiting list or to secure the more effective but costlier methods of treatment they may require by enabling the providers to go beyond their fixed budgets Indeed the Clinton administration s Health Security Preliminary Plan Summary published by the U S Government Printing Office notes ominously that among the plan s provisions are New criminal penalties for health care and for the payment of bribes or gratuities to influence the delivery of health services and coverage p 4 Thus physicians are to be reduced to the level of postal clerks deterred by the threat of criminal penalties from providing the medical care an individual patient needs and is willing to pay for and at the same time by the very same set of facts the individual patient is to be rendered impotent to secure the medical care he needs and is willing to pay for This interposition of brute government force between physician and patient this utter destruction of the real rational right to medical care is what the Clinton plan has in store for the American people As I have already said what is present here is an attempt to deprive the citizen of his essential right to use the offer of money as the means of obtaining the medical care he wants and instead to make him dependent on the medical care the government is willing to allow him to have Such a situation represents a government gun aimed at the heads of the citizens preventing them from securing their health and their lives by the exercise of their own free judgment and that of their freely chosen physicians Despite these facts President Clinton claims that his plan will preserve individual choice and provide medical care that is as good or better than that now provided but will do so for everyone in the United States and will do so for less money than is now spent for medical care Whenever anyone hears these claims he should remember the claim this same gentleman repeatedly made before his election that he would enact a tax cut for the middle class These latest claims of his have even less to do with reality Among the areas of medical care likely to suffer the most under the Clinton plan are those which represent the leading edge of medical technology Of necessity these almost always begin with a relatively high cost In addition their full importance and range of application is often not seen for some time A system dominated by bureaucratic routinists is not conducive to their encouragement even apart from the fact that their introduction under the perverted notion of the need based right to medical care operates as we have seen sharply to increase spending for medical care which is the very thing the government wants to avoid Thus it is not accidental that in it its efforts to control medical expenditures the Clinton plan makes virtually no provision for the introduction of major new medical technologies The plan s contemplated restrictions on the profitability of new drugs will also strongly operate against progress in medical technology Another leading candidate for cutbacks in medical care are the aged The cost of treating them is high and their remaining years as taxpayers are few if any It is not accidental that in Great Britain for example it is extremely difficult if not impossible for people over the age of fifty five to obtain coronary artery bypass operations and that elderly people with a broken hip are likely to die before they reach the top of the waiting list for such operations Even the Clinton plan s much vaunted goal of reducing administrative costs will not result in any genuine saving The administrative costs under the present system are not accidental They are necessitated by the need to deal with the mountains of claims made on the system by patients and practitioners proceeding under the perverted notion of the need based right to medical care and who are attempting to collect their due under that alleged right Any administrative cost savings that will be achieved will be of the character of the post office or motor vehicle department not having enough clerks to serve the lines of waiting customers or of the practice of various government agencies of not answering their telephones Moreover any such cost savings will almost certainly be dwarfed by the enormous additional costs of having to deal with the claims of the 37 million presently uninsured individuals who are to be brought into the system by the Clinton plan As to the claim that the Clinton plan fosters competition which will operate to reduce the cost of medical care one need only bear in mind that what the Clinton plan envisages as competition is managed competition an oxymoron if ever there was one The meaning of managed competition i e competition controlled by the government is precisely that there is no freedom of competition What is admitted into the market is only what the government wishes to allow The actual description of such a situation is monopoly that is presence in the market is made a matter of the grant of government privilege the market is reserved to the exclusive possession of those the government wishes to allow to be in the market while all others are excluded by means of the government s threat to fine or imprison them that is by its threat to initiate the use of physical force against them Under the Clinton plan the decision of which insurance companies will be allowed in any given market will be made by the quasi governmental regional alliances Thus the competition the Clinton plan envisages is competition among providers operating within its guidelines of medical treatment and to the satisfaction of its regional alliances The medical insurance companies are to compete in delivering medical care at the lowest cost within these parameters Individual citizens are then to choose among the medical insurance companies allowed to compete by the regional alliances In the framework of this kind of competition that is monopoly the operation of the profit motive is likely to turn out to mean the realization of some of the worst nightmares collectivists and socialists have about the effects of the profit motive for the Clinton plan makes the source of profit nothing other than the withholding of medical care from the sick An insurance company will be the more profitable the more consistently its treatment methods conform to the minimum standards allowed by the government s Practice Guidelines In fact the arrangement is nothing less than a formula for near murder This is because so long as an insurance company both complies with the practice guidelines and turns in an overall performance record that is judged to be statistically satisfactory it has absolutely no reason to make the substantial additional expenditures that may be necessary in individual cases to save a human life At the same time of course the individual whose life is at stake is prohibited from offering the insurance company or its practitioners additional money of his own to obtain the medical care he requires This monstrous system operates to draw even the individual physician into its deadly game by paying him a flat fee per patient a so called capitation fee It thereby creates an economic incentive for the physician to do as little as possible for the patient indeed to have as many patients as possible with as few illnesses as possible Those are the ways a physician can earn the highest income under the Clinton plan because in such ways he receives the same revenue and has the lowest costs In fact the kind of medical care that can be expected if the Clinton plan is enacted is less and less actual medical care and more and more efforts to avoid sickness by promoting so called wellness such as through attempts to change patients lifestyles The logic of the arrangement implies that what can be expected instead of medical care is hectoring on behalf of the latest health fads concerning diet exercise and stress Indeed it is difficult to imagine a worse arrangement than one in which one s well being and very life are made to depend on the largesse of necessarily indifferent government officials who will pay a given amount on one s behalf to some other set of strangers for one s total medical care and who then pretend that the problem of one s care is provided for while the individual himself is prevented from going out and offering money for his care more money for more care and thereby enlisting the self interest of others in his care President Clinton describes his proposed little red white and blue card that every American will have to carry as the National Health Security Card He has said With this card if you lose your job or you switch jobs you re covered If you leave your job to start a small business you re covered If you re an early retiree you re covered The card according to Mr Clinton represents the security of insurance you can never lose New York Times September 23 1993 p 1 The truth is as the present discussion confirms that the individual has no security of medical care when he is deprived of his essential right to buy medical care and his medical care is placed in the hands of the government Under such conditions his medical care is as secure as that of a convict Individual cases and the lives of individuals do not matter to the authors of the Clinton plan The Clinton plan is founded upon and spurred on by an unchallenged mentality of collectivism and statism which regards the United States and its people as the property of the government It is from this perspective that its intellectual supporters and alleged experts complain about the growing percentage of the gross national product that is devoted to medical care and about the deprivation of other allegedly more important uses for the additional share of funds devoted to medical care such as education They look upon the income and wealth produced by tens of millions of separate individuals in the United States and properly belonging to those individuals separately and individually as though it resided in one giant pot whose disposition was not to be decided by the individuals to whom it belongs but by the government By the same token they regard the people of the United States not as separate free and independent individuals with the right to make their own free and independent choices on behalf of their own individual well being but in effect as human livestock whose work and wealth indeed whose very lives are to be devoted to the fulfillment of the government s plans Unfailingly each of the alleged intellectuals and experts always assumes that the government will act according to his particular plan and not according to any plan he may not like In effect he projects himself upon the lives and destinies of his fellow citizens as though he were the government or what is the same thing the trusted adviser whose advice the government will automatically always follow In regarding his fellow citizens and their property as the government s property he implicitly regards them as his property It is on the basis of their mentality of collectivism and statism that the authors of the Clinton plan seek to impose a system of medical care on the American people that will be determined not by individuals acting for their own self interest with the help of the best their money can buy but from on high by considerations of the nation s medical spending in relation to its gross national product These considerations as interpreted and applied by the proposed National Health Board will extend their tentacles from the nation s capital out into the examining office of every doctor and into every hospital and operating room by means of governmentally imposed fixed budgets and Practice Guidelines They will determine the course of treatment that is deemed appropriate in the individual case that stands before the physician or that is to lie before him on the operating table Thus the life of the individual patient and the thinking and planning of the physician in the service of the individual patient s life are no longer to be what medicine is about Instead it is to be about national priorities and considerations of nationwide medical spending in relation to the gross national product This is an utter perversion of the art of medicine It is an utter perversion of what the United States of America and its Constitution and Bill of Rights are about The Founding Fathers of the United States did not create this country so that someday a generation of descendants would so debase themselves as to welcome the prospect of living as serfs on a vast transcontinental feudal estate presided over by President and Mrs Clinton With their constant pandering to people s fears of insecurity and their pretended offer of an escape through the abandonment of the remnants of individual freedom in the area of medicine the Clintons and their propaganda retinue seek to exploit human weakness They are attempting to lead masses of fearful and ignorant people into a situation of the profoundest danger to their very lives with the siren song that whoever finds facing the world on his own to be too difficult has only to give up the struggle and let the government the jailer take care of him Put yourself in the hands of the government they say and then you don t have to worry you don t have to think about how to provide for your medical needs The government will do it for you Never mind that it is precisely the government s taking care of things that has made life in this area so difficult Just close your eyes and look forward to the security you will have with the little red white and blue card Yes I say learn to close your eyes a little further and you can look forward with pleasurable expectation to all the security you might have if the little red white and blue card guaranteed you food clothing and shelter along with medical care What the Clinton plan is offering is exactly the same kind of illusory security as offered under communism the security of rightless serfs which means not security but miserable poverty and insecurity Poverty and insecurity are the results in any and every area of life in which the individual loses the right to pursue his own self interest by means of meeting his needs through buying from willing sellers who are motivated by serving their self interests Poverty and insecurity will be the results in medicine if the Clinton plan is enacted All of the essential criticisms made of the Clinton plan apply to the

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  • Globalization
    billion people integrated into the division of labor and able to support a thousand medical schools there can be 4 000 such specialists And finally with 6 billion people constituting the whole population of the globe integrated into the division of labor and able to support 1 500 medical schools there can be 6 000 such specialists 14 Now the larger the number of such specialists the larger is the number of intellectually gifted ambitious people dedicated to working on the special problems of their field and thus the greater is the likelihood of success in discovering new and improved methods of diagnosis and treatment Six thousand such specialists each on the lookout for advances and globally interacting with one another through medical journals conferences and now the more rapid methods made possible by computers and the internet are almost certain to succeed in discovering more such advances than are 4 000 such specialists let alone only 400 such specialists This principle that a larger absolute number of intellectually gifted individuals dedicating themselves full time to solving the problems of a field is more likely to achieve success than is a smaller number of such individuals applies to far more than just medical specializations It applies to every branch and sub branch of science engineering invention and business innovation It is the most important of all economies of scale Looking at the same facts from a different perspective it should be clear that one of the greatest of all gains that results from the division of labor is the ability of geniuses to devote their full time to activities representing the discovery and application of new knowledge Such is the general nature of their specializations Instead of devoting their labor to growing their own food they specialize to a high degree precisely in such fields as science engineering invention and business innovation The result is that instead of a particular pile of potatoes or rice being produced here and there by such people which is almost all they can achieve in a non division of labor society new principles of science and mathematics are discovered and new products and new methods of production are developed and brought to market The rest of the population is taught to produce products it could never have imagined by methods it could never have conceived but which it quickly comes to value and is enabled to enjoy thanks to the efforts of the ingenious innovators The proportion of geniuses or at least of potential geniuses to population is almost certainly pretty much the same throughout the world There should certainly be no doubt that there is potentially the same proportion of Chinese and Indian geniuses as European and American geniuses But everywhere the proportion follows the pattern of the normal curve The most important economy of scale the number of intellectually gifted individuals dedicating themselves full time to solving the problems of a field The fact that thus far only about one sixth of the world s population has been fully integrated into the division of labor implies that at the present time the economic system of the world is operating far far below its intellectual potential Across the interior of China and India and the rest of Asia across the interior of Africa and South America there are billions of human beings still living in a state of substantial economic self sufficiency devoting most of their time simply to growing their own food Among these billions are many thousands with the potential of making significant to major contributions to the productivity of labor throughout the world but who will never be able to do so so long as the time that they might have devoted to making advances in science and to improving products and methods of production must instead be devoted to growing their own food With globalization remarkable developments will originate in what is today the middle of nowhere from the point of view of the rest of the world and then spread throughout the world Equivalents of Bentonville Arkansas and Redmond Washington will arise in what are now merely very obscure locales in India and China and other countries even less familiar They will arise because major business talent will be able to appear and develop in such places All over the world far more refined and differentiated wants and tastes will be able to be supplied Goods and services that only one person in a million may want become more likely to be worthwhile producing when there are 6 000 such millions The tremendous surge in scientific and technological progress and increase in the effective supply of business talent that globalization will bring will be a major foundation of the accelerated economic progress that I have argued will be its result Of course globalization will also mean that in every branch of production it will be possible to achieve the maximum of all kinds of other economies of scale as well consistent with the size of the world s population By its very nature globalization will mean that every factory every productive establishment of any description located anywhere in the world will be able to regard the entire population of the world as its potential market and to produce on a scale corresponding to the market it achieves Larger scale operations will mean that it will more often pay to use machinery and more specialized machinery because their cost will be spread over more units of output thereby reducing the cost per unit of product Globalization implies the achievement of further economies of scale in the production of machines themselves as the result of the greater frequency in which their use will pay and thus the increase in the quantity in which they will be produced Globalization and Capital Accumulation Raising the productivity of labor almost always requires the use of more and better capital goods that is such things as more and better factories tools machines and previously produced materials components and supplies dedicated to producing for the market In the countries of today s First World generations have had to go by in order to achieve their present day supply of capital goods The fact that only about 1 6 of the world s population has been fully integrated into the division of labor implies that at the present time the economic system of the world is operating far far below its intellectual potential Generations ago through a process largely of scrimping and saving an economy employing oxcarts and wagons and primitive iron forges became able to construct the first primitive railroads and steel mills Then with the aid of those primitive railroads and steel mills it was possible to go on to produce more bigger and better railroads and steel mills which in turn were used in the production of still more still bigger and still better railroads and steel mills and numerous other capital goods as well whose design was made possible by technological progress Step by step generation by generation more and better capital goods were employed to produce still more and still better capital goods The advances in capital goods in each generation were the foundation for the production of the still larger supply of capital goods embodying the still further technological advances of the next generation This is a process that can be repeated indefinitely so long as scientific and technological progress and business innovation continue and an adequate degree of saving and provision for the future is maintained 15 Today the most backward economies of the world are able to skip over all of the generations that have had to go by to accumulate the capital goods of the advanced countries They can start off with them ready made thanks to foreign investment 16 As soon as they get modern capital goods the productivity of their labor begins dramatically to increase To the extent that they save and reinvest out of their resulting larger output their increased output is itself the source of still more modern capital goods for them Thus for example foreign investment supplies a backward country with a modern steel mill a substantial part of whose great output serves in the construction of more such steel mills in that country Or foreign investment provides the means of producing a substantially increased volume either of capital goods or consumers goods that are exported and a substantial portion of the resulting sales proceeds is used to import additional modern capital goods of various types In this way with high rates of saving and investment on the pattern of Japan South Korea and Taiwan a country that was previously miserably poor can be transformed within as little as two generations into a modern industrial economy with a standard of living comparable to that of the United States High rates of saving and investment provide the ability to take great and rapid advantage of the accumulated advances of generations in the capital goods supply of the First World countries and are what makes possible the very high rates of economic progress in previously backward countries The same pattern now appears to be taking place in important parts of China and in other places in Asia 17 Ricardo on Capital Accumulation An Answer to the Fears of Capital Transfer Recognition of the dynamic inertial nature as it were of capital accumulation belongs do David Ricardo By this description I mean the fact that in raising the productivity of labor an increase in the supply of capital goods makes possible a further increase in the supply of capital goods coming in effect out of the enlarged product itself Capital Ricardo wrote is that part of the wealth of a country which is employed with a view to future production and may be increased in the same manner as wealth An additional capital will be equally efficacious in the production of future wealth whether it be obtained from improvements in skill and machinery or from using more revenue reproductively 18 With globalization remarkable developments will originate in what is today the middle of nowhere from the point of view of the rest of the world The key point here is the recognition that more capital goods results from such things as improvements in machinery which is to say from a preceding increase in the supply of capital goods And it itself in turn is capable of bringing about a still further increase in the supply of capital goods potentially without any fixed stopping point This principle is extremely important in considering the process of globalization For it implies that so far is the process from stripping advanced countries of their accumulated capital that its actual effect is ultimately to increase the accumulated capital of the advanced countries Fear of the loss of capital from advanced countries to the rest of the world has been expressed by Dr Paul Craig Roberts 19 Dr Roberts fears the outflow of capital from the United States to impoverished low wage countries He states The collapse of world socialism has made vast pools of cheap and willing labor in Asia and Mexico available to US capital and technology The mobility of capital and technology means an Asian can work with the same capital and technology as the American However the Asian does not have to be paid the same wage The large excess supply of labor in Asian markets means that the market wage is far lower Our approach to the world is based on the assumption that we are experiencing free trade If instead we are experiencing the flow of factors of production to absolute advantage our entire trade policy will need to be revised 20 There is a measure of truth in what Dr Roberts states and we can illustrate it by means of the following example Thus assume that an American firm is contemplating the investment of 10 million of capital to build a factory Construction materials and the use of construction equipment along with the machinery to be installed in the factory will cost 5 million of those 10 million The remaining 5 million will have to be paid to cover the wages and benefits of 100 American construction workers for a year at the rate of 50 000 per man In an impoverished country in Asia however the cost of equally capable construction workers is only 1 000 per man In other words a total labor cost of 100 thousand instead of 5 million The construction materials construction equipment and the machinery for the factory can all be shipped there If the costs of transportation and any other costs associated with construction and set up abroad amounted to 900 thousand the total cost of constructing the plant in Asia would still be just 6 million instead of 10 million This of course is a powerful incentive for building the plant in Asia And then once the plant is built whatever the number of workers it needs for its operation can be found locally at a comparably small fraction of the cost of employing American workers Exactly such considerations explain why a very substantial amount of American manufacturing has moved offshore It s just so much cheaper Now Dr Roberts sees this movement of capital offshore But what he does not see is that the process is much more than just a movement of a given amount of capital from one place to another That much or better that little is true in terms of monetary value but in terms of actual physical wealth and in this case physical capital there is a substantial increase Being able to obtain for 6 million what one would otherwise need to spend 10 million for makes it possible for that same 10 million to obtain much more It leaves 4 million of capital funds over for purchasing other capital facilities perhaps another two thirds of a second such factory in Asia An American firm that invested in this way would be in a position to supply its customers with approximately two thirds more output for the same money because it conducted its manufacturing operations in Asia rather than in the United States Even if it were the case as is so often claimed that displaced American factory workers must end up as mere hamburger flippers the American economic system would have this additional output plus all the extra hamburgers the displaced factory workers would allegedly produce Some critics of globalization do not understand how it promotes capital accumulation and instead believe that it deprives the advanced countries of capital To describe the situation when the factory or factories have been completed and are up and running the lower labor costs and resulting lower prices to American buyers simply mean that American buyers get a unit of a good for less money and have that much more money available to spend on other things Imagine that the factory turns out television sets American made television sets would have to sell for 200 to cover the high cost of American labor But these television sets made in Asia can be sold profitably for only 100 Every American who buys one of these sets now has 100 left over to spend on other things Workers no longer needed to produce American television sets can now produce these other things or replace other workers who now produce these other things 21 Of course that still leaves 100 of sales revenues and earnings that have not been made up We should expect those 100 to be earned in producing American exports to pay for the 100 of imports Immediately however people will probably point out that for many years the American economic system has been badly deficient in exports Exports have fallen far short of imports Our balance of trade and our balance of payments have been chronically unfavorable chronically negative 22 Indeed the American economic system has had a chronic excess of imports over exports And this would actually be utterly amazing if the fears of Dr Roberts and others who are concerned about the loss of capital from the United States were valid Any capital that the United States or other advanced countries might lose to the low wage impoverished part of the world would be in the form of exports Just as in the example of a moment ago concerning a factory that costs 10 million to construct in the United States but only 6 million in Asia there would need to be the export of construction materials construction equipment machinery and also consumers goods to supply the Asian workers engaged in the construction But the truth is for many years rather than exporting capital to the rest of the world the United States has on net balance been importing substantial sums of capital from the rest of the world This is clearly shown in Table 2 immediately below 23 Table 2 Net Foreign Investment in the United States in millions of US dollars Year 2001 2002 2003 2004 2005 partial US Investment Abroad 382616 294027 328397 855509 491729 Foreign Investment in United States 782859 794343 889043 1440105 1292695 Net Foreign Investment in United States 400243 500316 560646 584596 800966 China in particular has been a substantial source of capital funds coming into the United States This is true not only of the direct investments Chinese firms have made such as Lenovo s purchase of IBM s ThinkPad line of laptop computers It is also true of China s holdings of over 500 billion of US Treasury securities Even though these particular funds are not invested in US business firms they make it possible for these firms along with the US home mortgage market and other users of credit to have over 500 billion of capital that the US Treasury would otherwise have drained away from them in financing its deficits in competition with them for loanable funds Capital funds coming into the United States from abroad with China prominent in the list of the countries supplying those funds have made it possible for the United States largely to avoid the destructive effects on capital accumulation of its government s policy of deficit financing They have also made it possible for Americans to import more than they export As I ve explained an efflux of capital from the United States to the rest of the world would be manifested in the opposite condition namely an excess of American exports over imports with the excess constituting America s contribution to capital formation abroad The truth is that at least as far as China and much of the rest of East Asia are concerned the base has already been laid for rapid capital accumulation mainly on the foundation of what are now means of production existing within the borders of that region 24 East Asia is no longer a drain on Western capital but if anything as we have just seen a source of capital to the West This has been the case with respect to Japan for many years There is nothing unusual or novel in this relationship In the nineteenth century Europe was the source of much of the capital used to develop the United States But it was not very long before the resulting great expansion of production in the United States made the US a major supplier not only of consumers goods but also of capital goods to Europe Capital accumulation in Europe was increased as the result of Europe s investment of capital in the United States And in exactly the same way the investment of capital in the western United States made possible by savings made in the eastern United States soon so increased production in the western part of the country that it became a source of capital accumulation in the eastern United States 25 Today in addition to the fact that China is a major source of financing the US Treasury s deficits one can see its contribution and that of other East Asian countries to the supply of capital goods in the United States in such forms as computer chips and motherboards steel and automotive products and electronic components of all kinds The high quality and low cost of these capital goods have become essential to the competitive success of numerous American manufacturing firms Dr Roberts it thus turns out is probably at least a decade out of date in his worries that the United States is being drained of capital to build up the economy of China China is now capable of accumulating capital on a massive scale internally and of supplying capital to others on a large scale Dr Roberts it thus turns out is probably at least a decade out of date in his worries that the United States is being drained of capital to build up the economy of China This is probably not yet true of India but to the extent that India will need substantial capital from the outside world China will be present to help supply it along with the countries of the First World And then within a generation or so if India pursues economic policies promoting capital accumulation to an extent comparable to those pursued by China India too will become a source of capital accumulation for the rest of the world as well as for itself It should be realized that the economies of scale achieved by globalization by movement in the direction of globalization are themselves a major source of capital accumulation This is true above all of the economies of scale associated with the increase in the amount of human talent devoted to scientific and technological progress and business innovation These advances serve to maintain or even increase the output that results from the use of additional capital goods They thus offset and possibly more than offset the operation of the law of diminishing returns in connection with capital accumulation As Ricardo pointed out since capital goods are themselves part of the output of the economic system anything which increases that output promotes capital accumulation 26 Indeed the contribution that we can expect globalization to make to human prosperity will very largely be precisely by way of its contribution to capital accumulation 27 Capital accumulation of course is promoted by all of the economies of scale that result from a widening of the market i e from movement in the direction of globalization For they too serve to increase output a major portion of which is capital goods The Anti Globalization Arguments of Gomory and Baumol While Dr Roberts s fears are mistaken his argument has the virtue at least of being cogent Unfortunately the same cannot be said of the critique of globalization and free international trade made by Gomory and Baumol in their book Global Trade and Conflicting National Interests 28 In contrast to Roberts who worries about competition from low wage backward countries that are becoming equipped with modern tools and machines provided by First World countries Gomory and Baumol welcome such developments and instead worry mostly about competition from countries that have reached a comparable level of economic development They write When we sic does development abroad help and when does it harm Put somewhat loosely our central conclusion is that a developed country such as the United States can benefit in its global trade by assisting the substantially less developed to improve their productive capability However the developed country s interests also require it to compete as vigorously as it can against other nations that are in anything like a comparable stage of development to avoid being hurt by their progress Thus US interests are served by progress in trading partners such as India or Indonesia but the United States is better off staying as far ahead as possible in terms of productivity of trading partners like France Germany or Japan 29 In view of the apparently very different positions of Roberts on the one hand and of Gomory and Baumol on the other with respect to where the threat from foreign trade allegedly lies it may seem somewhat remarkable that they are typically grouped together as having presented some kind of unified and successful challenge to the doctrine of free trade Apparently just any old critique will do if the purpose is to discredit free trade While Dr Roberts s fears are mistaken his argument has the virtue at least of being cogent Unfortunately the same cannot be said of Gomory and Baumol The reason that Gomory and Baumol fear the progress of comparably advanced countries or of countries drawing within range of becoming comparably advanced is nothing more than that they fear the loss of significant relative national income to those countries Their analysis is permeated and fundamentally flawed by the significance they attach to the relative size of a country s national income 30 National income of course is a concept very similar and closely related to GDP In fact for practical purposes it is simply GDP minus capital consumption allowances Thus all that I have shown concerning the fundamental insignificance of a decline in a country s relative or even absolute monetary GDP resulting from other countries increases in production applies equally to any decline in its relative or absolute monetary national income that results from other countries increases in production Gomory and Baumol proceed as if they have not the faintest inkling of the distinction between value and riches and its significance Essentially they are stuck at the most superficial level of analysis in recognizing that gains in relative productivity by any given country serve to reduce the monetary income or at least the relative monetary income of other countries It is on this basis that they conclude that there is a conflict of interests among countries in international trade 31 Not realizing the confession of economic ignorance that they are making they blatantly declare that it is share of world income that matters primarily in our model 32 And they assert We have shown that if a nation loses its share of world industries because its productivity lags or for any other reason national income and the nation s wage earners are apt to be the ultimate victims 33 Almost the entire substance of their allegations of conflict in international trade rests on their confusion of economic competition and its resulting gain or loss of monetary income with conflict They might as well with equal lack of justification allege that conflict characterizes practically all other economic activity as well This is because within each country the various industries and business firms and more fundamentally all individuals who seek to earn money are in competition with one another for sales revenues and incomes that are always necessarily limited by the existing quantity of money and the desire of people to hold it The competition between countries for monetarily limited sales revenues and incomes is fundamentally no different Competition between countries and competition within countries is essentially the same In both cases conflict is a matter of superficial appearance only The actual substance of economic competition is one of a profound harmony of interests 34 In a free market the way that the competitors seek to obtain additional sales revenues and income is by increasing their production in terms of quantity and quality Competition intensifies their efforts to do this Because of competition each is given motive to strive to increase his production as much as possible To the extent that in this process some competitors succeed in increasing their production relative to that of other competitors they increase their sales revenues and incomes at the expense of the other competitors This is not a net or long run loss to the losing competitors because as I demonstrated earlier the same process the same increase in production that reduces the sales revenues and incomes of the losers ultimately much more than equivalently reduces prices We have already had abundant illustration of this principle in our example of today s First World countries increasing their production fifty fold over the next 100 years while the countries of the rest of the world increase theirs by one thousand fold in that time The loss of monetary income in the First World countries was so far exceeded by the fall in prices that they ended up with fifty times their original buying power as much additional buying power as the increase in their production 35 And of course when one allows for the increase in the quantity of money that under a gold standard would take place as part of the process of a general increase in production the money incomes of the losers end up substantially higher as well as their real incomes 36 Apparently just any old critique will do if the purpose is to discredit free trade Competition increases the real wealth and income of all participants in the economic system not only by intensifying their motivation to increase and improve their production but also by providing them with the material means of doing so This last comes about as the result of the availability of the larger better and less expensive supply of means of production i e capital goods resulting from the competition of the producers of the means of production It is certainly true that other things being equal earning a higher income is preferable to earning a lower income and that this principle can be applied to countries as well as to individuals But the principle applies only in the context of free competition in which the higher income is earned on the foundation of superior productive performance not when it is obtained on the basis of physical force and injury to others In the one case there is a net increase in wealth in the other a net decrease The greater the pursuit of higher income by means of superior productive performance the greater the improvement in human well being the greater the pursuit of higher income by means of physical force including of course government interference the less the improvement in human well being and the greater the degree of impoverishment that results The higher income of a holdup man is unlikely to be of much benefit to him because the harm he does to others leads them to take action against him of a kind that is likely ultimately to cause him a loss greater than his previous gains Similarly the higher income one might earn by means of sabotaging competitors or otherwise being installed in a position that someone more capable should have had loses its value to the extent that others get away with the same policy Thus whatever I and my family might gain if somehow I could be installed as the head of a major corporation despite my lack of qualification for such a job would be more than lost back by my having to deal in my capacity as a consumer with suppliers as deficient in competence as I was My loss would be driven home to me when I or a loved one died as the result of incompetence on the part of a hospital or airline or any one of many other suppliers whose incompetence turned out to be a matter of life or death There is a net loss in every instance of the violation of free competition This is because of the restriction of production that it entails The party favored by the violation has more money income while the party harmed by the violation has equivalently less money income and in addition less is produced than otherwise would have been produced That restriction on production is the net overall loss that results from interference with the freedom of competition The greater and more frequent the violations of free competition the greater is the general loss It is truly to the self interest of everyone that the ruling principle in economic life be that of free competition in which all jobs can be filled by those best qualified to fill them and all industries can be in the hands of those best qualified to run them This is the arrangement that can provide great and progressively growing gains to all Its success depends on men and countries of lesser productive ability not being in a position to forcibly usurp the position of men and countries of greater productive ability lest the whole economic system be greatly undermined in terms not only of what it is currently able to produce but more importantly in terms of its ability progressively to increase production over time This last is the consequence insofar as interference with free competition undermines the production of capital goods and thus attacks the foundation on which future production rests Gomory and Baumol apparently do not realize that the parties concerned with competition are by no means exclusively those who win or lose a given competition The whole rest of the society national or international is concerned as well Thus when the automobile outcompeted the horse and buggy it was not merely a matter with which auto producers and horse breeders were concerned Much more was involved than a gain to the one and a loss to the other There was a gain to the general consuming public from the success of the automobile over the horse and buggy a gain that ultimately even the ex horse breeders were able to share once they found new ways to earn their living Similarly to the extent that more recently the Japanese automobile industry has come to offer better less expensive automobiles than the American automobile industry this is a gain to buyers of automobiles in the United States and throughout the world and one which ex American automobile workers too can share once they find new ways to earn their living Gomory and Baumol apparently do not realize that the parties concerned with competition are by no means exclusively those who win or lose a given competition Every time one industry or one country displaces another in free competition there is a gain to the general economic system because now the supply of goods produced is larger and better Whatever the workers in a given industry or a given country may lose in a given competition they make up over and over again as the result of all the competition going on in the production of the goods and services to which they are related only in their capacity as consumers and in addition given the time required to find new ways to earn their living they gain even from the competition that initially displaced them just as ex horse breeders and blacksmiths ultimately gained from the automobile Thus if it is now Japan or China displacing the United States in some cases or Italy displacing France in some cases or Slovakia and Hungary displacing Germany in some cases in each instance there is a gain to consumers the world over insofar as the goods involved are exported And to the extent that the countries involved have economic freedom their workers are soon as fully employed as ever and in a position to take advantage of the improved supply of consumers goods that initially may have caused their loss of employment Perhaps without being aware of it the essential policy prescription of Gomory and Baumol is the application of physical force in the form of government coercion for the purpose of stacking the international competitive deck in favor of the industries of one s own country For the most part they appear as though they would be satisfied with protective tariffs for infant industries 37 However direct government subsidies to infant industries are not to be excluded as well 38 And they positively favor government spending in support of basic research 39 In the case of the United

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