Great Nations at Peril (The European Heritage in Economics and the Social Sciences Book 17)

This book was prompted by the current, lingering financial crisis, which has its basis in the disorderly financial practices of the United States. These practices have resulted in an accumulated debt which now requires the United States to run financial policies at artificially low interest rates. In principle, these low interest rates should flood the markets with ready money. Since the spread for banks is very thin, however, and they must carefully discriminate between available risks and finance only those propositions with no risk, credit is not abundantly available. With staggering foreign debt and a myriad of other perils looming, this great nation is at peril for sure. In the tradition of the Heilbronn Symposium, the authors look at historical cases as a means of understanding the current situation and informing possible solutions to a problem that continues to affect the global economy. The volume analyzes cases such as Prussia, Greece, Italy, Estonia, and the European Union. This book will be of interest to scholars and students of economic history as well as policy makers who may benefit from an historical understanding of the economic challenges their countries currently face. Contents 6 Contributors 7 Chapter-1 8 Troubling Thoughts in Troubled Times 8 References 11 Chapter-2 12 Troubles on Statistical Lies 12 Introduction 12 Statistical Background of Political Decisions 13 Duties and Responsibilities of Governmental Policy 13 Statistical Data 16 Mysterious Language of Statistics 16 Peculiarities of Statistics 16 Census 17 Income Statistics 18 Graphs 19 The Average 22 Arithmetic Mean 22 Mode 22 Median 22 Statistical Inquiry 23 Endogenous or Exogenous Variable? 23 Result: Statistical Data Based on a Statistical Model 24 Résumé 25 Bibliography 25 Chapter-3 27 Great Nations in Peril—Rise and Fall of Prussia 27 Introduction 27 Begin and Rise 28 Times of Radical Changes 32 Fragments of the End 38 Summary and Conclusions 38 References 40 Chapter-4 42 Friedrich List’s “Great Nations”: Mobilising Capital for Quality Labour 42 What the USA and the EU Can Learn from Friedrich List’s Solution to America’s Debt Crisis 42 The West Has Forgotten and Needs to Relearn 42 “Rise and Fall of Great Nations” 44 Credit as a Tool of Power 44 Why Are Great Nations Creditworthy? 45 Renewed Interest in Friedrich List’s Insights 46 Building a Competitive National Economy 47 Lacking Productive Force 50 An Agricultural America in Crisis 51 Agricultural Nations Suffer More Often from Disrupting Crises 51 Stability—Protection of Home Markets 52 Global Trade Imbalances and National Performance 53 Balance of Trade and Quality Labour 54 Trade Imbalances—the Mercantilists, Smith and List 55 Balance of Trade—American and Russian Experiences 57 Deficits—Creating Dependency 58 Imperial Strategy—and Revival 60 Hot Money Caused Debt and Bondage 63 English Dumping and Export of Commercial Crisis 64 The Merchant Interest 65 A Magnificent Servant and Deceitful Mistress—Capital Flight 66 Productive Considerations Must Dominate Finance—Not the Way Around 67 The Need for Regulation of Finance 67 Protection Furthers Incentives 69 “Exploiting Imperialism” 70 Innovative International Finance—And Then? 72 A Two-Currency System? 74 References 77 Chapter-5 81 Austerity Versus Productive Investment: Two Traditions in Capital Formation and Growth 81 Friedrich List’s Criticism of Adam Smith’s Materialism and Barter-Based View of Capital 81 Introduction 81 Poor Old Solutions 82 Delayed Understanding 83 Materialism Ignores Mental Powers 84 Material Capital—Less Important 86 Physiocratic Materialism: No-Money, Barter Economics 88 Counterproductive Saving 90 Productive State Credit 91 Money Creation—Gold or Paper? 94 Money Creation—Private and Public? 97 The Not-So-Innovative Keynes 101 Mobilising Capital into Nurturing Quality Labour 105 An Opportunity to Restructure the Economy 105 The Inadvisability of Supporting Manufactures 106 Intervention—Public Goods 110 Intervention—Transaction Costs of Interrelated Branches 112 Targeted Investment 113 Infrastructure, Energy, and Machine Tools 115 How Does List Apply to the USA and to Greece? 117 The Listian Principle—Elevate Labour 118 References 118 Chapter-6 123 Why Greece Should be Bailed Out 123 I. The Dire Straits 123 II 124 III. The Check 126 References 126 Chapter-7 127 Agricultural Subsidies in the USA—History, Implications, and Critiques 127 Introduction 127 History of Agricultural Subsidies and Context in the USA 127 Subsidies’ Effects on Agricultural Production and Food Prices 128 Problems and Critiques of Agricultural Subsidies in the USA 130 Agricultural Subsidies and Public Health 132 Further Research Possibilities and Concluding Remarks 133 References 135 Chapter-8 136 Jacob Bielfeld’s “On the Decline of States” (1760) and Its Relevance for Today 136 German Economics: Jacob Bielfeld and His Contemporaries 138 Jacob Bielfeld: A Brief Account of Life and Work 140 The Chapter “On the Decline of States” 142 E−1. Migration 143 E−2. War 144 E−3. Excessive Demands from Neighbouring States 144 E−4. Imperial Over-Extension 145 E−5. Dependency 145 E−6. Grandiosity of Independence 146 E−7. Division of Empire (or “Balkanisation”) 146 E−8. Single Sovereign (or Sovereignty is Indivisible) 147 I−1. Unwise Constitutions Leading to Inequity 147 I−2. Insane Sovereign 148 I−3. Requirements of State (Public Administration) 148 I−4. Relaxation of Morals (Importance of Morals and Rule of Law) 148 I−5. Excessive Religion 149 I−6. Oppression/Limits on Liberty (or Despotism) 149 I−7. Excess of Liberty 149 I−8. Decline of Production. Neglect of Agriculture, Commerce, Sciences, Useful Arts, and Passion for Liberal Arts and Frivolity 150 I−9. Arrogance, Pride, and Idleness 150 I−10. Senseless Laws 150 I−11. Excessively Large Colonies 151 I−12. Epidemics and Occupational Health 151 I−13. Abuse of Spirits and Strong Liquors 151 I−14. Relaxation of Military Discipline 152 I−15. Debt 152 I−16. Constant Internal Wrangling 152 I−16. Interfering with Fundamental Laws of Government 153 I−17. Regicide or Assassination of the Sovereign 153 Bielfeld, Institutions Politiques, vol. 2, Chap. 15. On the Decline of States 154 References 174 Front Matter....Pages i-vii Troubling Thoughts in Troubled Times....Pages 1-4 Troubles on Statistical Lies....Pages 5-19 Great Nations in Peril—Rise and Fall of Prussia....Pages 21-35 Friedrich List’s “Great Nations”: Mobilising Capital for Quality Labour....Pages 37-75 Austerity Versus Productive Investment: Two Traditions in Capital Formation and Growth....Pages 77-118 Why Greece Should be Bailed Out....Pages 119-122 Agricultural Subsidies in the USA—History, Implications, and Critiques....Pages 123-131 Jacob Bielfeld’s “On the Decline of States” (1760) and Its Relevance for Today....Pages 133-172