A Crisis of Political Economy

Via Samizadata comes this excellent deep-dive essay regarding the links between the ongoing economic and political system dysfunctions.

From the essay's opener, but please do read the whole thing (including the embedded links):

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Oy, what a mess.

The "mess" of which I speak is, of course, U.S. Political Economy. And make no mistake about it: We are talking about political economy.

One of the things that I have long admired about Austrian-school theorists, such as Ludwig von Mises, F. A. Hayek, and Murray Rothbard, is their understanding of political economy, a concept that conveys, by its very coupling, the inextricable tie between the political and the economic.

When Austrian-school theorists have examined the dynamics of market exchange, they have stressed the importance not only of the larger political context within which such exchanges take place, but also the ways in which politics influences and molds the shape and character of those exchanges. Indeed, with regard to financial institutions in particular, they have placed the state at the center of their economic theories on money and credit.

Throughout the modern history of the system that most people call "capitalism," banking institutions have had such a profoundly intimate relationship to the state that one can only refer to it as a "state-banking nexus." As I point out in my book, Total Freedom: Toward a Dialectical Libertarianism:

A nexus is, by definition, a dialectical unity of mutual implication. Aristotle (On Generation and Corruption 2.11.338a11-15) stresses that "the nexus must be reciprocal ... the necessary occurrence of this involves the necessary occurrence of something prior; and conversely ... given the prior, it is also necessary for the posterior to come-to-be." For Aristotle, this constitutes a symbiotic "circular movement." As such, the benefits that are absorbed by the state-banking nexus are mutually reinforcing. Each institution becomes both a precondition and effect of the other.

The current state and the current banking sector require one another; neither can exist without the other. They are so reciprocally intertwined that each is an extension of the other.

Remember this point the next time somebody tells you that "free market madmen" caused the current financial crisis that is threatening to undermine the economy. There is no free market. There is no "laissez-faire capitalism." The government has been deeply involved in setting the parameters for market relations for eons; in fact, genuine "laissez-faire capitalism" has never existed. Yes, trade may have been less regulated in the nineteenth century, but not even the so-called "Gilded Age" featured "unfettered" markets.

One of the reasons I have come to dislike using the term "capitalism" is that it has never, historically, manifested fully its so-called "unknown ideals." Real, actual, historically specific "capitalism" has always entailed the intervention of the state. And that intervention has always had a class character; that is, the actions of the state have always, and must always, benefit some groups differentially at the expense of others...

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Hence the eternal question:

Quis custodiet ipsos custodes?