The Daily Devil’s Dictionary: For a “Healthy” Economy

Economics, economy, economics news, The Economist, healthy economy, economic health, The Economist, America, US news, world news

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The health care crisis doesn’t only affect humans. It affects the economy.

As the game of real-world empires evolves, with Pax Americana showing signs of waning and Chinese power rising, The Economist points to a serious failure of the Trump administration. President Donald Trump appears to be short on strategy and long on tactics, missing the essential point that tactics should serve strategy rather than the other way around.

The article highlights China’s emerging technological prowess and comments, “China’s technological rise requires a strategic answer, not a knee-jerk one.” Reviewing recent history, the author recalls the post-war period when the US economic success of “public investment and private enterprise” worked together “in pursuit of a national project.” This produced the golden age of information technology as this common vision “ultimately gave rise to Silicon Valley, where it was infused by a spirit of free inquiry, vigorous competition and a healthy capitalist incentive to make money.”

Thanks to the pursuit of variations on neoliberal ideology — from Ronald Reagan’s global militarism to Donald Trump’s neo-isolationism — public investment has to a large extent dried up. On the other hand, the “healthy capitalist incentive to make money” has never been stronger or more productive for its immediate beneficiaries. The question the article evades is this one: How healthy is that vaunted incentive? Or more to the point, what do they mean by healthy?

Here is today’s 3D definition:


Contributing to the well-being of those who can already pay for everything that is required to maintain good health, while showing little concern for anything or anyone else

Contextual note

The future of the capitalist system as it exists today depends on the uncritical acceptance of the assumption mentioned in the article — that the “incentive to make money” is by definition “healthy.” The question then becomes: healthy for whom?

We know that drug dealers and arms traffickers, money launderers, pimps, pornographers and poachers are driven by that identical incentive to make money. Just as shady real estate barons are (even after being elected president). And what about fast food, an effective and legal way to make money? Does the incentive suddenly stop being healthy because of the nature of the activity? And if that is true, where do we draw the line?

The economic system behind what the author so admiringly describes as “America’s success in the 1950s and 1960s” is precisely what President Dwight Eisenhower called the “military-industrial complex.” Eisenhower took the trouble to characterize it as an amoral, if not immoral force whose power and influence could pollute democracy. In Ike’s words, “The potential for the disastrous rise of misplaced power exists and will persist.” Some consider him a prophet.

The author’s notion of “health” appears to focus exclusively on the notion of profitability and durability, though it could be argued that in the 50s and 60s the profit that drove the military-industrial complex was at least indirectly shared with the people through the creation of both jobs and new consumer goods in an expanding economy. In contrast, today’s evolved model sees profit essentially from the point of view of investors, shareholders and senior managers in an increasingly financialized economy.

Historical note

Research published by the Levy Economics Institute of Bard College analyzes the history of the financialization of the economy. It began in the early 20th century and has gone through four phases — the final phase of acceleration and intensification starting around 1970.

Significantly they describe the third phase — from 1945 to 1970, which includes the Eisenhower years — as one of definancialization, when income inequality was at its lowest and progressive taxation of personal and corporate income at his height. They note that “the dominance of the productive sector and the strengthening of unions are also key features of the third period of definancialization.”

That period saw the rise of the military-industrial complex, which now in which Silicon Valley plays a major role. It led to an unprecedented concentration of power based on new principles of economic and political organization, overturning definancialization. It thrives on the simplistic idea that the capitalist incentive of making money is always healthy. Replacing the old Ricardian principle of generating profit through comparative advantage in the offer of goods and services, economic decision-makers relished the idea of making money from money itself (the value of assets). Once the aggregate power of money (increasingly virtual) becomes the easiest route to profit, the economy becomes financialized.

And so it transpires that the notion of a “healthy profit incentive” becomes an omnipresent and obligatory romantic myth hearkening back to an idealized past and denying current reality.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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