Coming Trade War: Scarcity economics and overcapacity

July 27th, 2005 at 22:13 Björn Hallberg

Henry Liu publishes his fourth installment in The coming trade war. Scarcity economics and overcapacity

Neo-classical economics developed at a time when wealth was limited to what a relatively primitive industrial society could produce, and demand for goods was always greater than their supply. It is the economics of scarcity rooted in the medieval rule of parsimony, or principle of economy, frequently used by Franciscan monk William of Ockham (circa 1285-1349), which came to be known as Ockham’s Razor. Or to put it another way, scarcity, leading to the need for economy, is the determinant behind economics theory. The Franciscans, with their devotion to the poor and opposition to an opulent church, were the modern-day communists of the medieval Church.

Liu also constructs the inevitable link to Christianity.

Christianity is not known for its tolerance. It is a religion of “tough love”. Niccolo Machiavelli (1469-1527) recounted the pious cruelty of Christianity. David Hume (1711-76) exposed the intolerance of Christians in comparison with the Pagans. Friedrich Wilhelm Nietzsche (1844-1900) attacked Christian love as a fraudulent disguise for virulent hatred for all that was humanly vigorous, beautiful and noble. The history of Christianity is replete with militant religious intolerance.

The history of Christianity is closely linked to the evolution of capitalism, notwithstanding that Jesus overturned the tables of the money lenders and expelled them from the Temple because those responsible for maintaining the holiness of the holy were unable to separate service to God from service to Mammon, the demon of love of money

And about the dollar hegemony …

But such a policy to protect dollar hegemony in effect makes the fiat dollar less fungible. The latest report shows CNOOC being put in a box of no escape in its effort to outbid rival Chevron Corp in the competition to buy Unocal Corp. The Unocal board was reported on July 20 to be backing a sweetened offer from Chevron that will pay US$63 a share in cash and stock, up from a previous offer of $60.50 a share. CNOOC’s all-cash offer stood at $67 a share on July 20. CNOOC needs to raise its cash offer to $70 a share to win, but the higher offer would solicit more political opposition from the US government over the use of dollar loans from Chinese state-owned banks. The competition will then move further from one over money into the arena of geopolitics.

Apparently, the US dollar is less useful when held by the Chinese state. But when money is not useful to some, it is not useful to all. Money must stay fully fungible to preserve its full function and value. Money not accepted from anyone to buy anything anywhere cannot be acceptable universally. When the dollar is not universally accepted, it presents a greater threat to US national security than the sale of any one oil company.

Brilliantly written. I am very much looking forward to the next installment which promises to be Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Entry 179 filed under: Economy, North America. This entry was posted 3 years, 4 months ago. RSS feed for comments on this post.