A New Crisis-Proof Economic Science

The science of Economics was established as a consequence of Mercantilism.

The Mongols had connected Europe with China, allowing merchants like Marco Polo to establish trade and become very wealthy. The fall of Constantinople to the Muslims in 1453, however, ended the silk road connection and allowed the Arabs to dominate the trade between Europe and Asia.

The Europeans found a solution by sailing around Africa and South America to reach China and Indonesia. This slowly reduced Arab power and wealth, and along with it Islam. But it also created a rise in greed and materialism both in the people and in the ruling classes of Europe.

The Political Economy

This prompted 17th and 18th century writers to create the science of Political Economy as regulation against opportunistic merchants on one hand (nowadays called businessmen), and oppressive monarchs (governments) on the other.

This led to rules such as competition (as opposed to guilds), contracts (as opposed to oaths), employment (as opposed to slavery), excise taxes (as opposed to poll taxes), government investment in public infrastructure (as opposed to palaces and castles), and so on. These transferred more power to the people, allowing them to make economic decisions for themselves. This let them generate more wealth in their own way within a society or state, increasing wealth overall.

Neoclassical Economics: Crisis-Prone

The French Revolution of 1789, however, further reduced the regulatory powers of governments, allowing greed to grow in the private sector. This is best shown in the profit maximizing doctrine of the Marginal Revolution which led to Neoclassical Economics and the overthrow of the Classical or Political Economy.

The feudal lords and colonizers switched to banking and trade, focusing on the money produced by the land, as cash crops, instead of the food that fed the people.

In Britain, this led to the Irish famine, prompting debates between Ricardo and Malthus. In India, this caused the Bengal Famine. This pattern of maximizing profitable cash crops and minimizing unprofitable food crops continues to modern times in the famine in Hanoi, Vietnam in the 1940s and the Negros famine in the Philippines in the 1980s. Both were caused by planting sugar cash-crops instead of rice.

Not content with cash crops, traders entered oil in the early 1970’s as a result of the Nixon shock, leading to instability in the Middle East and the phenomenon of stagflation.

Later, traders globalized food, putting rice on the same footing as a cash crop subject to market forces. This led to the 2008 Food Crisis along with the Financial Crisis. As nothing was done to regulate commodity futures trading, the crisis returned in 2022. Since grains are the basis for other commodities, this has led to chronic inflation:

Neoclassical Economics merely transferred the oppressive power from governments to the markets themselves, which really represents monied-people, as humans with surplus money to invest. While the Mongols used bows, with arrows as ammunition and horses as delivery mechanism, the market uses finance, with money as its main weapon delivered by financial and trading institutions. The Mongols’ edge was their mastery of horses just as the edge of monied-people is their mastery of such institutions.

Nowadays, corporations can rise or fall by the mere whim of the markets by putting their money in, or by taking their money out. This is most evident in cryptocurrencies which can be pumped and dumped, making them totally unreliable as a basis for any economic system.

The Classical or Political Economy, in contrast, did not enshrine cash as the measure of value. China invented printing and paper money in the Song Dynasty, but realized its inflationary effects and so abandoned it in the Ming Dynasty, reverting to rice and silver coins as payment for wages.

While the Trump administration embraces Mercantilism and Marginalism by creating trade wars and establishing cryptocurrencies, the rest of the world should take the opposite path and return to the forgotten principles of the Political or Classical Economy that sought to balance the economic power of different vested interests and classes.

We call its revival, made holistic and upgraded with modern data and tools, as Supereconomics. It is derived from the ideas of Adam Smith, David Hume, and Socrates and is based on Superphysics which is our proposed alternative to Physics and pre-science ideas. Superphysics, in turn, is based on the principles of Descartes, Socrates, and Asian Philosophy. As Socrates is common to both, we call this a Socratic paradigm that merges science with philosophy, and physics with metaphysics, to solve persistent, real problems.