Friday, August 05, 2011

The masters of deception

A few days back I wrote about how the BBC (and other media outlets) have a tendency to distort the past to suit their particular world view.

However, it's a practice which is not restricted to just media.

As was the case in the 1930s, when economic nationalism in the shape of protectionism brought the global economy to a shuddering halt, nations are starting to take measures to look after themselves at the expense of others.

This is a common view amongst economists - and totally incorrect.

Nationalism only started to become prominent AFTER the global economy came to a "shuddering halt" in the late 1920's and it was another 4 or 5 years of following the same failed economic policies that led up the crisis before protectionism started to be used as a standard instrument by just about all governments (including the US and our own).

It's also worth noting that those countries which had resisted the globalisation that took place after World War 1 and had remained staunch protectionist nationalists - such as France - were relatively unscathed by the global economy grinding to a "shuddering halt".

It was only when nationalism and protectionism became common place again that the economies of the world started to recover - from around 1933 onwards.

It's also worth noting that the conditions that brought about the Wall Street Crash and the Great Depression are almost exactly the same as now.

First of all you had a new technology that vastly improved global communication (the telephone back then - the Internet today) and made it possible to instantly conduct business over vast distances.

Secondly you had credit deregulation and expansion.

Thirdly you had a similar attempt at "free trade" and business without borders.

In other words, the period after the Great War up until the Great Depression was the first attempt at globalisation in the 20th century. It failed then just as it is failing now.

It will always fail because the basic principle behind it is fatally flawed - i.e. its principle driving force is short term gain for a few people rather than long term stability for the vast majority.

So why is this incorrect and damaging view that nationalism and protectionism is dangerous and globalisation good common amongst economists? Why do they ignore the facts of the Great Depression and put forward a totally distorted view of those times?

Just ask yourself this - who do they work for?

No comments: