War: Economically, the major cause of national debt and inflation, and often of postwar deflations. Politically, war serves as an excuse to centralize control of government in the hands of the few, and in the Executive Branch of government.
Underdevelopment: The term coined by Andre Gunder Frank to describe the policies which former European colonies and more contemporary third-world countries have been turned into indebted raw-materials exporters rather than balanced economies capable of feeding themselves. (See World System.)
S-curve: The typical shape of growth in nature, such as human beings whose height tapers off as they reach maturity. They also typify most business cycles, which taper off after an upswing as employment, raw-materials and resource limits are approached and wages and commodity prices rise, slowing profits. The demand for specific products likewise tapers off as markets become saturated. Meanwhile, the fact that financial claims and debts tend to grow at compound interest means that financial dynamics tend to outrun the S-curve of production and consumption, creating business crises which end the upswing. Continue reading →
Race to the bottom: A term for dog-eat-dog competition by which countries compete by cutting wage levels so as to produce in the cheapest market, not by raising wages and labor productivity. The effect is to shrink the circular flow between producers and employee-consumers, leading to declining living standards. Under these circumstances productivity is increased only by working the existing labor force more intensively and cutting back medical insurance, old-age pensions and other social welfare expenditures. (See Free Market.)
Panic: The abrupt culminating stage of the business cycle, in which inflated asset prices collapse in price as financial securities and properties are sold to pay off debts.
Parallel Universe: The objective of modern economic methodology. A hypothetical exercise in science fiction depicting a world that conceivably could exist, given a sufficient number of internally consistent assumptions. (See Neoclassical Economics.) Continue reading →
Neoclassical economics: The school that arose in the last quarter of the 19th century, stripping away the classical concept of economic rent as unearned income. By the late 20th century the term “neoclassical” had come to connote a deductive body of free-trade theory using circular reasoning by tautology, excluding discussion of property, debt and the financial sector’s role in general, taking the existing institutional environment for granted. (See Marginalism and Parallel Universe, and contrast with Structural Problem and Systems Analysis.)
Malthus, Thomas Robert (1766-1834): British economist and spokesman for its landlord class. His Principles of Political Economy (1820) countered Ricardo’s critique of groundrent by pointing out that landlords spent part of it on hiring coachmen and other servants and buying luxury products (coaches, fine clothes and so forth), thus providing a source of demand for British industry, and part capital improvements to raise farm productivity. Continue reading →
Labor: The labor theory of value resolves the value of products and capital goods into labor costs, while Say’s Law focuses on how employees spend their wages. Hence, labor often is euphemized as “consumers” rather than focusing on the terms of their employment by capital.
Jubilee Year: In Judaic Law (Leviticus 25) a Clean Slate to be proclaimed every 50 years annulling personal and agrarian debts, liberating bond-servants to rejoin their families, and returning lands that had been alienated under economic duress. Long thought to have been merely a literary religious ideal, the policy has now been traced back to royal proclamations issued as a matter of course in Sumer and Babylonia in the third and second millennia BC. (See Bronze Age.)
Ideology: A set of assumptions so appealing that one looks at their abstract logic rather than at how the world actually works. (See Insanity.)
Ignorance: Socrates said that ignorance was the source of evil, because nobody knowingly commits evil. But by pursuing their own narrow interests, the financial and property sector destroy the social unit, which is the essence of evil as viewed from an evolutionary vantage point. Thomas Hobbes wrote in Leviathan (1651) that “Ignorance of remote causes disposeth men to attribute all events to the causes immediate and instrumental: for these are all the causes they perceive.”
Half-life: In physics, the time it takes for half the mass of a radioactive element to decay into the next-lower isotope or element, typically ending in a stable and inert element such as lead. By extension, the time it takes for an economic theory or ideology to lose half its influence, e.g. as Marxist value theory, Henry George’s Single Tax, Keynesian income theory, Chicago School monetarism, or most recently, neoliberalism. In international relations, the time it takes for an industrial creditor nation to dissipate half of its economic advantage and free lunch. Continue reading →
Gains from Trade: A euphemism for trade dependency resulting from the specialization of production between food-surplus nations and food-deficit countries, and the parallel polarization between high-technology and low-wage producers. Originally coined by free-trade advocates, the term is now used primarily by the agriculturally protectionist economies of North America and Western Europe. Under Ricardian trade theory, the gains from trade are measured by the amount of labor and related costs to importers of producing similar products at home. Continue reading →
Factoid: A hypothesis, rumor or story so consonant with peoples’ preconceptions that it is accepted as a fact or working assumption, even though it often is made up a priori. Among the most notorious examples are the ideas of diminishing returns, equilibrium, that privatized ownership is inherently more efficient than public management, and that trickle-down economics works. (See Junk Science.)
Earned income: Wages or profits earned by labor or capital for their role in producing goods and services. As such, earned income excludes economic rent and interest, which are property and financial returns that must be paid out of profits and wages.