Economics as propaganda

How is it that almost every mainstream economist is continually proved wrong in their predictions, that almost every prescribed course of action has led to a continual decline in the future economic prospects for the average American? The answer lies in the fact that economics has long since stopped being a field of scientific inquiry and rather exists as a system for misdirection.

Murray Rothbard observed in The Origins of the Federal Reserve (free pdf) that this transition began just over a hundred years ago:

“Throughout the land by the turn of the twentieth century, a legion of economists and other social scientists had arisen, many of them trained in graduate schools in Germany to learn of the virtues of the inductive method, the German Historical School, and a collectivist, organicist state. Eager for positions and power commensurate with their graduate training, these new social scientists, in the name of professionalism and technical expertise, prepared to abandon the old laissez-faire creed and take their places as apologists and planners in a new, centrally planned state.”

Today this is easily seen and verified in almost every mainstream article on economics. I encourage you to do this yourself. 

Step 1) Find an article promoting an obvious economic fallacy. 

I’ve done this enough to know that it’s very easy in the American press. For this post I thought I would go elsewhere, in this case the UK’s Guardian. After a couple of minutes scanning headlines in the business archives I spotted what appeared to be low hanging fruit: Japan’s pump primed recovery proves US deficit hawks wrong. 

It’s only the third paragraph in and we’ve already hit pay dirt. 

“Japan has been suffering from near-zero inflation, or even deflation, since the collapse of its stock and housing bubbles in 1990.”

The old central banking chestnut – inflation is good, deflation is bad. We are not allowed to be told that deflationary prices are the natural order of things in a society that is increasing its average standard of living. Goods and services become more affordable due to increases in efficiency and productivity. Both of which are the result of competition and proper investment of capital and not the result of currency debasement and government boondoggles and bailouts. 

Here’s another one.  

“While we are still in the early days of Abe’s program (He just took office at the end of 2012), the preliminary signs are positive. The economy grew at a 2.4% annual rate in the second quarter, after growing at a 3.6% rate in the first quarter.”

No mention here that GDP is a seriously flawed metric for evaluating economic conditions, as it is positively impacted by printing money and increasing the public debt. Consider the very localized GDP of two transactions occurring a year apart. A dairy farmer sells an individual a gallon of milk for $3. A year later the same two parties carry out the same transaction except this time the gallon of milk is exchanged for $6. And voila, just like that, 100% economic growth according to the economists. Yet both the farmer and his customer are having a considerably more difficult time surviving. 

Step 2) Consider the source.

At the top of the article we are shown a picture of the author, Dean Baker, and in place of his position, simply “theguardian.com“. So who is this poor Guardian reporter and how did he come to endorsing such obvious fallacies? Wikipedia reveals the very interesting answer. He’s not a reporter at all. He’s an economist and co-founder of the Washington DC think tank Center for Economic and Policy Research. 

So why do such easily debunked economic fallacies still exist in this day and age? Simple, they are necessary to convince the masses to go along with policies that are contrary to their own best interests. Or stated more obliquely on CEPR’s website:

“In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.”

Step 3) Follow the money.

And now to tie it all together. Who funds Dean Baker and the CEPR? Fortunately they have made it easy for us by listing some of their principal 2012 supporters:

– American Federation of Government Employees (AFGE)
– American Federation of State, County and Municipal Employees (AFSCME)
– Arca Foundation
– Atlantic Philanthropies
– Ford Foundation
– Moriah Foundation
– National Association of Letter Carriers
– National Bankers Foundation
– Public Welfare Foundation
– Rockefeller Brothers Fund
– Russell Sage Foundation
– Service Employees International Union (SEIU)
– Sloan Foundation
– Streisand Foundation
– The Advocacy Fund
– United Steelworkers

In just a single article, it’s easy to see how the game is played. It’s been over a hundred years now since economics had anything to do with an actual science. Economists have long since found it far more lucrative to act as propagandists for those who benefit from the destruction of sound money and a productive economy.