[Fwd: Asia Times Online]

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Dear Editor,

I would appreciate if you would consider this as an Op-Ed piece.

The social sciences, of which economics is one, profess a function of
truth seeking. Politics, as distinguished from political science, is the
interaction of ideological positions in a game of power which manifests
itself in struggles for the minds of citizens. Ideological positions are
independent of truth. They are beliefs that express themselves as
transcendental commitments that lift life from mundane existence.
Political economy can be viewed as a science in which the outcomes of
previous struggles are accepted as basic parameters on which future
outcomes are predicted. The truths of this kind of "science" have two
faults: 1) they are based on data that are themselves artificial, the
"truth" of which is primarily derived from the fact that it happened in
the past; and 2) they are based on interpretations of such data by some
"authorities" in the form of theories that are
accepted by similar "authorities", thus creating a self-perpetuating
circular logic that may be unrelated to reality.

Facts are that data in the social sciences are merely incidents of past
life and theories are rationalization of prejudices motivated by
interests. Take the issue of unemployment. It is equally rational to
define a healthy economic system as one without unemployment as its is
to insist on a "natural" rate of unemployment to manage inflation. Full
employment may even "scientifically" come with a price of a natural rate
of inflation. Monetary policy decisionmakers in the past have tended to
be fixated on preventing inflation as a sacred goal. Some questions come
to mind over this fact. Is inflation the worst of all economic evils?
Or, to put it another way, is there any empirical evidence that
inflation can be controlled by the central bank at a cost less than that

exacted by inflation itself? Would the establishment of price stability
as the Fed's sole objective hinder long-run growth prospects for the
U.S. and the global economy? The answers to these questions are critical

for the assessment of monetary policy. In 1976, the long-run
relationship between inflation and unemployment was still under debate
in mainstream economics. During the 1960s, mainstream economics leaned
toward the belief that a lower average unemployment rate could be
sustained at the cost of a permanently higher (but stable) rate of
inflation.

Friedman used his Nobel lecture to make two arguments about this
inflation-unemployment tradeoff. First, he advanced the logic why
short-run tradeoff would dissolve in the long run. Friedman's second
argument was that the Phillip's Curve slope might actually be positive -
higher inflation would be associated with higher average unemployment.
He argued that only low inflation would lead to a natural rate of
unemployment. This for policymakers was the equivalent of "when
unemployment is unavoidable, relax and enjoy it." Yet if short-run
tradeoff would dissolve in the long run, what is the harm of the
trade-off for full employment? Would it not be common sense to maintain
full employment repeatedly in the short run and let a natural rate of
inflation happen?

The concept of the economic man is fundamental to economic science. Yet
an involuntarily unemployed person is functionally exiled from the
modern economy. Unemployment cannot possibly be an economic truth, any
more than an involuntary disabling of one of a person's ten fingers can
be beneficial to his/her well-being. Thus full employment can be
rationally accepted as an economic truth rising from which an economic
science should seek the lowest possible cost for its maintenance.  As
Professor Paul Davidson insightfully puts it:  Both Say's Law and
comparative advantage in global trade are special cases in which the
unemployment problem can not exist. Without full employment at the
national level free trade promotes an international race to the bottom
for  real wages. Unemployment (and underemployment which is a technical
form of unemployment), is the black death of prosperity.  Any economic
system that requires unemployment to preserve the value of money
(combating inflation) is merely keeping the plague epidemic alive in
hope of keeping the population healthy.  The right of all to productive
and fulfilling work is sacrosanct.  Full employment must be a
prerequisite for any social contract that mandates any particular
economic system. Full employment must be an uncompromised goal.  Any
economic system that institutionalizes unemployment as a policy tool
does not deserve support.

Thus for some fundamental social issues, there is no need for obscure
search for scientific truth. There is only need to acknowledge self
evident moral truth from which scientific rationalization will follow
but should never dictate. The moral truths for the global economy are:
full employment, fair distribution of wealth, promotion of fair
exchanges and regulations against unfair exploitation. To implement
these  truths, it is necessary to promote a new monetary structure and
financial architecture, because much of the falsehood of neo-lieralism
is imbedded in the world's historical monetary system from which
neo-liberalism drives its "scientific" logic.


Henry C.K. Liu
Chairman
Liu Investment Group
157 East 62nd Street
New York, N.Y. 10021
USA
212-754-6351

--- Begin Message ---

• To: hliu@xxxxxxxxxxxxxx
• Subject: Asia Times Online
• From: Anthony Allison <atachai@xxxxxxxxxxxxxx>
• Date: Mon, 18 Mar 2002 01:55:39 -0800 (PST)

Dear Henry,

Thank you for sending your interesting article "Full
employment as a moral imperative", which we would like
to publish.

Best regards

Tony  Alison
Senior Editor
Asia Times Online



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