“Wrong path”. Modern Monetary Theory and affirmative action lead America on the path of decline
Ernesto Galli Della Loggia in his book "The sunset of a nation" describes well the secular problems of Italy and the causes of a tendential decline.
When I analyze the events and policies in America, the last cornerstone of Western civilization, I do not see the same negative elements well described by the Italian historian that are characteristic of Italian society. In America we see various signs of decline, which began decades ago, around the 1960s, and which are slowly creating little visible ballasts that weigh on American society and on the country's economic productivity.
From my point of view, Europe is no longer a noteworthy power. Economic and social policies have turned the continent into a strange animal. It matters nothing from a geopolitical and military point of view. From an economic point of view, it is a very protectionist territory and unfortunately at the mercy of China (German and also Italian exports), Russia (energy) and Turkey (immigration).
South America, even if still conservative and strongly Christian, unfortunately lives of political cycles, of "Odi et Amo" with the communist parties. And here comes Castillo, a friend of various Sendero Luminoso militants, as president of Peru. Lula, after years in prison, the main candidate in the 2022 elections in Brazil. And Boric in Chile, who, even though he dropped a lot in the polls, will scare South American Switzerland until the end of December, when there will be the second round of the presidential elections.
But I don't want to go too far into politics. Returning to America, I was surprised by an article by the most recognized American investor in the world, Ray Dalio, in which he attacks the latest policies claiming that the United States is on the wrong path, "wrong path" . Surprised, because Dalio has long recognized the problems of inequality in American society and for a time supported Keynesian policies.
But it seems that the new American school of thought, the MMT, Modern Monetary Theory (which has very little of "modern" , solutions of this type have been adopted in the past) does not suit him.
I often disagree with Dalio, but on this point I can't blame him. The problem I've always argued is the lack of future productivity. Less future productivity means lower growth and wealth. As Dalio says well, wealth is not represented by money in the current account. These can be many but if they can buy less and less then the wealth is just fictitious.
Take for example the very extreme case of Venezuela. In March of this year they issued tickets of 200, 500 thousand and one million Bolivares ! Obviously Venezuela is a separate case but the basic concept is that you cannot give money to people. But this is precisely what the left wing of the American Democrats wants to achieve. He wants to inject billions into the system by giving people services and money without asking for anything in return.
Currently, the progressive and moderate Democrats are in an internal struggle in which the former try to convince the latter to spend 2 trillion on health care and to combat "climate change", in addition to the trillion in infrastructure (the latter project already approved partly by the Republicans).
The law that has already passed the House and awaits the final approval of the Senate. But we are a long way from Roosevelt's policies for getting out of the Great Depression. FDR initiated state policies that were intended to create jobs, while current policies do not create jobs, but temporary benefits without creating an economic structure that in the future is capable of maintaining the aid created without resorting to excessive debt.
Furthermore, these gifts from the government will make the country increasingly a prisoner of its policies and many of the benefits introduced will become untouchable in the future, aggravating the US deficit and debt, as I explained in my previous article , "The tyranny of the status quo".
It is not only the large expenses sustained philosophically by MMT that endanger the American system, but also the social policies that for years have been slowly eroding the meritocratic model on which it is based.
One of these policies that has been in vogue for decades is the so-called “positive discrimination”, affirmative action and public and private institutions are involved. The affirmative action provides that to increase the condition of diversity in universities and in the workplace, many positions are obtained only on the basis of ethnicity or gender even if the results of the entrance tests or interviews show the opposite.
But what will happen when, in a few decades, American productivity will be much lower than it is today and the economy will lose in the comparison of competitiveness with other countries, such as China, Korea, India, Vietnam?
Civilizations don't disappear after a few years. It takes centuries to make civilizations rise and as many centuries to make them go down. Just look at the Roman Empire. In full decadence it has had flashes of strong economic growth and expansion of borders (which today can correspond to commercial and technological victories).
The greatest danger for any civilization or society is in my opinion represented by wealth. A society that feels rich and comfortable loses the propensity to sacrifice. And without sacrifice there is no future productivity and wealth.
This theory was also developed by Alexis de Toqueville, who had highlighted how individualism and concern for material problems risk corrupting the aspirational character of the human being.
I would have liked to conclude on a positive note but I fear that, like Galli Della Loggia, the decline is inevitable even if it will be very slow. This does not mean that I do not positively evaluate the global economy and the future developments that technology can give us, but I believe that the importance of Western civilization will decrease more and more and that Asian civilizations, especially Indian and Chinese civilizations, will be the point. reference for future generations.
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This is a machine translation from Italian language of a post published on Atlantico Quotidiano at the URL http://www.atlanticoquotidiano.it/quotidiano/wrong-path-modern-monetary-theory-e-affirmative-action-portano-lamerica-sulla-strada-del-declino/ on Fri, 26 Nov 2021 03:49:00 +0000.