Let me start out with the
unavoidable fact that I am an engineer. Essentially, I am a scientist that
cares about how I can use new discoveries, how I can make the new technology
(i.e. chemicals, electronics, paper) on a large (read industrial) scale, and
how much this whole project is going to cost (Net Present Value, IRR, Cash Flow
Diagram). However, my economic understanding is pretty limited to gut feeling
which comes from my life experience and observations.
As I started out reading Economix, I was led into a complicated
world of wonder where every page or two, someone (whether an individual,
nation, or global society) was stealing from the poor to give to the rich.
Goodwin was explaining why this was happening from an economic perspective. The
Invisible Hand (Chapter 1) really began to explain in simplified terms how the
cycle of economics works (and why we have ended up where we are from a
historical perspective). I would find myself nodding along with the text,
completely convinced. Full Steam Ahead (Chapter 2) continued along much of the
same lines. Then we get to The Money Power (Chapter 3), where the demonization
of industry begins.
From what I can infer based
on the reading, Goodwin has no trust in industry and essentially thinks that
the larger the business, the worse the business is for society. This opinion
plays out all through Chapter 3 and continues throughout the book by mentioning
looming sky scrapers that have a menacing expression. I just cannot put stock
into this opinion.
The larger the corporation,
the more revenue it can generate and the more people it can employ. All of
these factors contribute to a successful economy. I agree with Goodwin that
monopolies must be restricted because industrial competition is what drives
innovation, fair prices, and better business practices (i.e. if company x and
company y perform the same function but company x offers better benefits,
company x will end up with more productive employees and that will show up in
the stock market value).
Although regulation is
necessary to restrict monopolies and encourage start-ups and diversification,
the actual practicality of all regulations should be considered. For example,
Goodwin mentions that tomato size for green tomatoes was regulated to prevent
Mexican tomatoes from being imported. Regulation like this is useless because
it actually limits industrial competition. When regulation is limited (except
where absolutely necessary for human or environmental health), innovation and
market competition are rewarded.
Even though I couldn’t buy
into all of Goodwin’s opinions, this was an excellent and worth-while read. However,
I am a friend to industry and think that it is beneficial to society. (Without big industry, there I would definitely be out of a job!) I think that
I more than doubled my understanding of historical economic events and how the
economy should (theoretically) work.
Hey Devon,
ReplyDeleteFor the most part, I think you're spot on with your points about the necessity of corporations, and some of the problems with regulation. I found one interesting thing in your critique of Goodwin however, when you said that he "has no trust in industry". My question is, why is that a bad thing? I think its possible not to trust big business and still readily concede that they are necessary, proper, and beneficial to society. I think banks are absolutely vital to the functioning of credit markets, and really hope that they keep reliably accepting my paychecks so that I can buy expensive coffee and concert tickets, but that doesn't mean that I trust banks any further than I can throw an ATM. I think Goodwin would say that free market principles demand that we be ever skeptical of power, regardless of its the power of corporations, or of government. I think its fine to like industry, and appreciate all of the value it generation, but I certainly never want to take their goodwill on faith because of that value. Anyway, food for thought!
Engineers like you, economic / political beliefs aside, can live on my street and borrow my lawnmower any time they want. But I've got to ask if it's INDUSTRY, or the way it's conducted, financed, regulated, marketed, etc. (as Mike sets it up) that he thinks is the problem. I don't think he's a romantic Luddite.
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