A large part of China’s economic miracle is linked to the fact that financial resources are not allocated where they bring the greatest profit, but rather where they lead to greater creation of physical capital (lots of factories and lots of roads are built) and to an increase in the standard of living, writes American economist Robert Hudson — and it seems like an accurate observation.
But wait! We all learned in school that financial profit is an indicator showing what is most useful — including what contributes most to the creation of useful physical capital and to raising the standard of living. Isn’t that so? It isn’t! Profit is an indicator that shows the amount of profit. Nothing more, nothing less. From time to time, profit moves in line with usefulness, but that is by no means the rule.
Which brings us to another unpleasant realization: namely, that the discipline known as neoclassical economics may contain a few scientific elements and a few good insights, but overall it is an ideology deliberately written to lead us into poverty and to keep us there. Yes — the same economics that is taught at the Faculty of Economics of the University of Economics in Prague and at other faculties.
That the SPD (Czech Radical Populist) party so eagerly embraces this ideology I consider very unfortunate. Equally unfortunate is the near absence of an economics that would “merely” describe reality in a neutral way and help us understand its laws.