We may agree or disagree with the jobs plan of President Obama but one thing is certain this high unemployment rate that has engulfed the major developed economies across the world is not just serious but bewildering. After all wasn’t capitalism supposed to allocate the resources efficiently then why is that we have 16% unemployment in US (U6), over 30% youth unemployment in Spain, Greece, Italy. I mean the problem of this world is fall in output (growth) that is critical to get rid of this debt trap and so isn’t it ironic that with so much unemployment (ideal resources) around and we are unable to provide employment and solve this problem. A barrage of sensless reasons is given on television by many analysts and CEO’s primary being a lot of policy uncertainty which is leading to this bemusing irony. Well this may be playing a very small part in the scheme of things as I find it hard to believe that policy makers a few decades back were far idealistic, efficient and superior to what they are now. The real reason for this catharsis is that the world we are living in is no longer free markets and the economic order is no longer capitalist in nature but rather “crony capitalist”.
Recessions, fall in stock prices and asset prices in general and failure of big and mighty are features of capitalism wherein it reorganizes resources and efficiently allocates it to new sectors, people and industries which then take it forward thus creating jobs and continuing the boom. Just to take a very simple example assume an economy wherein for someone to start his own business and thus provide jobs he/she would require 1 kg of gold as capital, however all the gold in that economy is captured by one single man, how can that economy grow? Unfortunately something similar is happening to this world now as even a 10-15% stock market fall is followed up by printing of money by the Fed, companies like GE and GM are saved under the garb of avoiding huge job losses and of course the banks and the financial institutions (the less said of those the better) these institutions that add very little value to this society but for continuing the ponzi currency scheme. What’s worse is that with every time they are saved under the farce too big to fail these banks end up raking in too much of the economic resources.
What’s required is not another failed government induced spending plan but instead the government getting out of the way of this economic reset, let the markets crash if they have to and the companies and banks go bankrupt… There will be brief period of chaos followed by a new reinvigorated order as new capable people take over those deflated resources and as the capital froth from those assets move to new places thus creating opportunities for our young entrepreneurs and providing jobs to millions. Socialism and today’s crony capitalism suffer from the same problem “mis allocation of resources” the only difference is that while socialism gives less to the competent, crony capitalism gives almost everything to the incompetent but not letting them fail.
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