We all should understand that conventional economists – Greenspan, Bernanke and the like in America and Europe – led us straight into today’s economic crisis, denying every step of the way that such a crisis was to be expected. They, along with the conventional politicians who rely on them for advice, have evidenced no ability to lead us out of the crisis. They don’t even have a coherent reason for why it occurred, and keeps occurring. They do have a mass of contradictory ideas, amounting to shifting the blame away from themselves even when they were the people in charge at the time.

The conventional wisdom of economists is looking more and more like a con job. Perhaps the economists are conning themselves. We should not let them continue to con us.

Herman Daily has published an excellent introduction to fundamental reasons for the failure of economists and political leaders. Essentially, the world has changed, while their ideas about it have not.

In http://www.energybulletin.net/stories/2012-05-07/what-limiting-factor, Daly begins:

“In yesteryear’s empty world capital was the limiting factor in economic growth. But we now live in a full world.

Consider: What limits the annual fish catch — fishing boats (capital) or remaining fish in the sea (natural resources)? Clearly the latter. What limits barrels of crude oil extracted — drilling rigs and pumps (capital), or remaining accessible deposits of petroleum — or capacity of the atmosphere to absorb the CO2 from burning petroleum (both natural resources)? What limits production of cut timber — number of chain saws and lumber mills, or standing forests and their rate of growth? What limits irrigated agriculture — pumps and sprinklers, or aquifer recharge rates and river flow volumes? That should be enough to at least suggest that we live in a natural resource-constrained world, not a capital-constrained world.”

[end excerpt from ‘What is the limiting factor?’]

Now, it may be that Daly’s model of a “steady-state economy” is no more realistic than the conventional economists’ model of a perfect “free-market economy.” The economy of the real world is both dynamic and imperfect, neither steady nor free. It is subject to history, politics and the inadequate knowledge of managers.

None the less, Daly’s identification of the basic flaws in how conventional economists think the world should work is clear and accurate. It is the sort of thing we all should know, in order to innoculate ourselves against catching these seriously mistaken ideas, especially during the campaign season.

Daly’s article is worth reading seriously, and the subject is one we all should discuss and study. Our political and economic leadership, Democratic and Republican, has been leading us from one failure to another. We need to replace them with people who have a better comprehension of the world and a better ability to provide for the general welfare in order to get a different result.

It’s time to make democracy work from the bottom up. In part, we do that by creating local economies to compensate the increasing failures of the global economy. In part, we recognize that corporate control is for the benefit of corporations, and only sometimes and accidentally for our benefit.

Art Myatt