Frankenstein Economics is killing capitalism

Courtesy of Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — Requiem music soars, capitalism’s grand finale. Death by self-inflicted economicus extremis. Undead enemies, wounded zombies, ghouls, ghosts, vampires seek revenge, want blood.

For over two centuries capitalists have been dissecting and replacing body parts on Adam Smith’s theories, patching together a monster Frankenstein Economics. Once it worked for the whole economy. But now the monster is on a rampage, destroying itself, failing the nation that gave it life.

American capitalists are now self-destructing, killing American capitalism, our democracy, and next, the world economy. Cue music: “Thriller:”

Cue music. An ominous fog. The beat of Michael Jackson’s “Thriller” consumes the cemetery of economic horrors: “Darkness falls across the land. The midnight hour is close at hand. Creatures crawl in search of blood.” Crypts in the Adam Smith mausoleum are readied to hold the failing parts of a dying Frankenstein Economics, to hold the doomed parts for all eternity.

Yes American capitalists are now self-destructing, killing American capitalism, our democracy, and next, the world economy. Listen to the beat of “Thriller:”

“They’re out to get you … No one’s gonna save you … from the beast about to strike … The foulest stench’s in the air … The funk of forty thousand years … Grizzly ghouls from every tomb … are closing in to seal your doom … You fight to stay alive … Your body starts to shiver … No mere mortal can resist … the evil of the Thriller.”

For many Americans. Halloween is a holiday of great fun. My favorite. And probably why Michael Jackson’s “Thriller” was on my mind when reviewing the new Daron Acemoglu and James A. Robinson book, “Why Nations Fail.” They see a pattern repeating through history. Nations grow. Wealth concentrates at the top. The elite take steps to protect their wealth. And by closing the very doors that helped them get to the top, nations fail.

This Halloween the same pattern is accelerating with America’s election drama. This time, however, the door may close on super-rich capitalists. They may lose their battle to control our nation. Lose control. Here are seven other signs of this pattern:

1. Capitalists losing control of the Invisible Hand

Adam Smith’s capitalism believed the Invisible Hand would benefit everyone, the entire economy. But capitalists now control Smith’s Invisible Hand, using it to protect their personal wealth, gain more power. Traditional economists keep the pattern alive, like “True Blood” vampire squids surviving from ancient times, still haunting Wall Street.

A pattern reversal emerges in a new book, “Meme Wars: Creative Destruction of Neo-Classical Economics,” edited by Kalle Lasn, publisher of Adbusters. In one column Nobel Economist Joseph Stiglitz warns that economists in banks, government, universities and the Fed are trapped in capitalism’s Frankenstein Economics mythology. Trapped because myths like efficient market theory and supply-demand are easier to teach than complex environmental issues and long-term population growth. So most economists pretend that the myths work, inventing reasons why.

Moreover, lacking its own scientific basis, today’s Frankenstein Economics uses computer technology, math and physics, while ignoring the latest environmental and behavioral-economics research. As a result, economists are unable to analyze complex global issues, focusing instead on justifying the self-serving behavior of individual capitalists maximizing profits in a competitive marketplace.

2. Frankenstein Economics has a conservative political bias

Stiglitz warns that Frankenstein Economics has a political bias in conservative issues and the profits of corporation shareholders. Economics taught at Harvard University, for example, uses a textbook written by a former member of President George W. Bush’s Council of Economic Advisors that pushes “a particular ideological view that markets work perfectly.”

Capitalists also view environmental issues as liberal. Teaching any economics courses that are politically biased with a conservative or progressive agenda is dangerous to America’s future, as Acemoglu and Robinson suggest. Future leaders will just keep making decisions on broader public policies, relying on a conservative version of Adam Smith’s theories, failing America as a whole. Time to bury this corpse.

3. Frankenstein Economics relies on disasters, wars, famine, pandemics

Flash forward: The planet is incapable of feeding the 10 billion people projected on Earth by 2050, says Jeremy Grantham, whose firm manages $100 billion. But most economists working for capitalists today ignore the warnings, trapped in their denial bubble with men like the Fed’s Ben Bernanke. Time to reread “The Shock Doctrine: The Rise of Disaster Capitalism.”

Alternatively, it appears that only a disaster of epic proportions, like a global pandemic, will penetrate today’s capitalist mind-set and awaken their conscience.

4. Capitalists misleading us with the Perpetual Growth myth

Capitalism’s Frankenstein Economics is failing our nation with its core myth of Perpetual Growth, which assumes infinite resources with infinite opportunities for growth, profits, income, and wealth. Ad infinitum.

Though rich and brilliant, American capitalists have a childlike, irrational conviction that they can indefinitely mine, fish, dump, produce, grow and extract resources from the planet’s limited supply, without ever paying a steep price or planning for the day the planet’s resources are exhausted.

5. Frankenstein capitalists have short-term-thinking brains

Billionaires, corporate CEO, Wall Street bankers and other capitalists focus narrowly on closing stock prices, quarterly earnings, annual bonuses. Most are alpha-males, aggressive short-term thinkers, while America’s next generation of leaders must have “a historical perspective,” says Grantham. But unfortunately we get as leaders “an army of left-brained immediate doers” which “guarantees” they “will always miss” the next big one.

Stiglitz is right, America must teach an economics that is politically neutral and embraces new environmental and behavioral-economics research.

6. Frankenstein Economics reflects an extreme capitalist ideology

Today, the ideology of philosopher Ayn Rand, in works like “Atlas Shrugged,” is the core of Frankenstein Economics, has replaced Adam Smith’s original ideas as Rand’s extreme ideas have become the conservative political agenda: “When I say ‘capitalism,’ I mean a pure, uncontrolled, unregulated laissez-faire capitalism;” The only system that can make freedom, individuality, and the pursuit of values possible,” leaving “every man free.”

Today Rand’s ideology is not only locked into conservative politics and capitalist economics, it is now embedded in a conspiracy of a super-rich elite and our politicians, a dangerous repetition of the historical pattern Acemoglu and Robinson warn is closing the door to America’s future to protect wealth accumulated in the past.

7. Frankenstein Capitalism losing to China’s new State Capitalism

There is now a big elephant in the room: China’s is planning its future using a hybrid capitalism, while American capitalists are retreating to the past. China’s resources and people dwarf America’s: China will add 300 thousand in the next generation, topping 1.4 billion. America will grow to just 400 million. China’s economy will exceed America’s in a few years. And by 2040 China’s GDP will be 40% of the world versus America’s 14%.

All this gets even scarier when you realize China’s economy is growing faster than ours thanks to the Chinese communist party version, state-planned capitalism.

One final note: In the spirit of Halloween, let’s remember that China now has such a huge stockpile of dollar reserves, over one trillion, they could easily buy a “Thriller” mausoleum from our capitalists, and still have a lot remaining.