This is the concluding part of an article which appears in the February 8, 2002 and the February 22, 2002 issues of Executive Intelligence Review.
Economics:
At The End of a Delusion
by Lyndon H. LaRouche, Jr.
[PDF version of Chapters 1 and 2]
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Back to Chapter 1
2. The Present National Emergency
Do you wish that the world's present, awful night would soon end? Most of you are now huddled fearfully around whatever fantasy you wish to believe would be a safe place. Meanwhile, the weather worsens more than you ever believed could happen. Many are clinging desperately to false dreams, hoping that this terribly stormy moment might just go away. Soon, there will come a death-like moment of false dawn. That will make some things in our landscape clearer to those who have the courage to open their eyes. The great battle for the continued existence of civilization, is about to descend upon us all.
For some, it will be as it was for cowards of the past. Some will say, "I always hated war; therefore, I don't see why I should be expected to fight it," or, "Don't bother me now; call me when I have returned from my vacation." Others will be like those in the Nazi concentration-camps, who, for a time, sought "to go along, to get along" with their captors. For the rest of us, if civilization is to survive what is now coming down upon us all, we must be prepared to support certain radical changes, away from the opinions and actions which have come to dominate popular opinion in Europe and the Americas, as elsewhere, since about thirty-five to forty years, and, in some cases longer. We must seek to bring to their senses, those self-doomed souls who are clinging to the defense of their presently habituated personal opinions, like a drowning man who had lashed himself desperately to the anchor of the sinking ship.
I now summarize the view of the present world situation, as developed, in successive stages, in earlier parts of this report. There are three leading causes for the disaster now descending upon all mankind.
The first big disaster, has been the post-McKinley, Twentieth-Century hegemony of an Anglo-American alliance of financier interests, which has sought to secure the permanent supremacy of the British system of political-economy. By "British economy" is meant, a system with the included axiomatics of such empiricists as Sir Francis Bacon, Thomas Hobbes, John Locke, Adam Smith, Jeremy Bentham, H.G. Wells, Bertrand Russell, and Winston Churchill. That is also the British system as worshipped by American Tories.[53] The latter include the beknighted British agent of influence (Sir) Henry A. Kissinger, and many other representatives of that Twentieth-Century Anglo-American bloc which was established by the U.S. Presidencies of Presidents Theodore Roosevelt and Woodrow Wilson. This Twentieth-Century fusion of British and American Tory traditions, constitutes the basis for the decadent and tottering Anglo-American System of today.
On the opposite side, since about three centuries ago, the chief threat to that British System and its Anglo-American successor, historically, has been, and remains my American System, that of Benjamin Franklin, Alexander Hamilton, Abraham Lincoln, and Franklin Roosevelt.
The second, post-Franklin Roosevelt phase of degeneration of the British System and its American Tory component, has been the cause of that presently threatened long-term doom of world civilization, which is implicit in the post-1971 form of the world's present "floating-exchange-rate" monetary-financial system.
The third phase, of moral and economic degeneration of the American Tories' own economic system, has been the post-1989 campaign to abolish the nation-state, in favor of a new, universal fascist form of Roman Empire, called today by such names as "globalization" and "world rule of (neo-Roman) law." This form of fascism is typified in its most morally degenerate expression by the utopian dogmas associated with the present-day heirs of the Nashville Agrarians' Professor William Yandell Elliott.
The overlap of these three, combined afflictions of our planetary civilization, defines that long-range cycle which has brought the planet as a whole into the present, terminal phase of a global, systemic, and existential crisis. During the coming decades, unless we now overturn the axiomatic assumptions implicit in those three, interacting, pathetic aspects of the past hundred years history, no continuation of this present organization of civilization will be possible on any part of this planet.
Therefore, one among the greatest dangers to human life on this planet today, is the tendency of pragmatists, to say: "Yes, we must reform the present system; but what you propose goes too far!" They are determined, not merely stubbornly, but suicidally, not to accept any reform which implicitly overturns any among the truly essential assumptions underlying the combination of those three pestilences: The Anglo-American system, the post-1971 floating-exchange-rate monetary system, and the presently self-doomed, post-1989 attempt at consolidating a utopian, post-nation-state form of new Roman empire.
Therefore, we have come to a time when the corrupt and the timid each seek a comfortable berth within a sinking ship, even a perch on that ship's anchor, making no suggestions which might upset their already hysterical fellow-passengers. However, if you are rational, and care about the survival of civilization, it is my proposals which you will prefer, and support, even if they are sometimes contrary to what you have been previously conditioned to believe.
A. The Structural Reform of Employment
Today, as, increasingly, during the recent forty years, the influence of a mentality specifically rooted in recent decades' ordinary ideas of management, will be a great source of self-inflicted danger to the continuation of any enterprise; either a corporation, private enterprise, or national economy. As merely typified by the bellwether case of Enron, those who have become conditioned to recent decades' financial buccaneering, will impose policies which ultimately ruin, or even destroy the enterprise, all in the name of "good, practical business management."
In better, former times, now as far into the past as a quarter-century ago, what had once been a notably successful private enterprise, was often ruined for the simple reason that, upon the death or retirement of the creative figure who had built up the firm, the enterprise fell under changes in management thinking brought in by the profit-minded heirs of the founder. In study of successfully launched, durable forms of business enterprises, there is often, in business as in political life, a personal factor of leadership, which many observers may have wrongly regarded as an almost accidental, mere idiosyncrasy of a leading figure of a successful organization. Yet, usually, it was often that personal leadership whose persistence had brought an enterprise to its relative success, where comparable other enterprises had failed, even absolutely.
It has been the virtual uprooting of the cultural traits associated with exemplary, technologically progressive, closely held entrepreneurship, which is today a characteristic, fatal expression of systemic economic decadence within the present Anglo-American-dominated world system.
Woe came to such a firm, had it fallen into the hands of heirs who ignored that factor of personal leadership, and who had substituted what were considered by them "modern, business-like methods of management coordination." So-called "systems analysis" has been among the worst such trends toward the now pervasive decadence in the management of enterprises.
Thus, in some cases in which technological innovation had been the relevant predominant factor in the success of a closely held entrepreneurship, it was the loss of what seemed, to some, to be a mere idiosyncracy of the entrepreneur which brought on the decadent phase. Such alleged idiosyncrasies of the figure sometimes slyly labelled a "tycoon," might have been his creative engineering impulses, for example, which had been the easily recognized type of crucial factor in the enterprise's success. However, the factor of individual creativity is also expressed in ways other than what is recognized as a factor of technological innovation as such.[54]
The principle which usually distinguishes the remarkably successful entrepreneurship, is the organization of productive enterprises around the sovereign cognitive powers of either a single leading individual, or, a close intellectual collaboration among a few such individuals. Stockholders may take a share of a firm's profit, but it is the cognitive quality of the operating management of the enterprise, which actually generates the growth from which honest profit of private enterprise flows. The problem has been, that personalities which have developed their cognitive powers of economic leadership to this effect, have been, so far, relatively rare, not only in the population in general, but within the professional retinues of management generally. The notion that one could produce a qualified entrepreneur at Harvard Business School, or Wharton, for example, has been chiefly an insolent, failed delusion of the post-World War II "white collar class."
Worse, among the retinues of management, there is usually a combined awe and deep resentment of the personality of the effective leader. The capable entrepreneur is resented among most of that retinue, increasingly so during the 1950s rise of the so-called "organization man." The retinues of management have tended, increasingly over the past half-century, always to resist what they sometimes deprecate maliciously as the "authoritarian personality" of the entrepreneur, and would, if they could, drag the policies of the enterprise down to a level of mediocrity, called, euphemistically, "management," with which they believe they will be "more comfortable."
Thus, when the alleged "tycoon" moves on, or is moved on, the retinue inherits the reign. Usually, as we have seen among many of the once-celebrated names of corporate America, the ensuing course of events, is in the direction of corrosive decadence. It may be fortunate for society, if only temporarily, that such firms may continue existence, in their increasingly decadent state, in the short to medium term; in the longer term, the influence of such persisting decadence is like an infectious disease, which poisons the behavior of both enterprises and government in general.
It should be emphasized, at this point, that the entirety of the rise of modern civilization out of the swamps of ancient empires and feudal tyrannies, was premised on two, interdependent principles. First, the principle of the general welfare; second, the obligation to promote that general welfare through providing protection to the contributing role of the related cases of the individual scientist or creative Classical artist, and the individual entrepreneur. This is, in effect, the same thing as saying, that the superiority of the American System of political-economy, lies in a recognition of the nation-state to provide both the basic economic infrastructure, and the protection of the expression of the sovereign cognitive powers of the individual, upon which a satisfactory form of society depends. The business leader who combines a passion for promotion of the general welfare, with a cognitively inspired drive to make things better through the work of the enterprise, is the type we ought to desire and foster in our nation's economic policy. U.S. Treasury Secretary Alexander Hamilton would agree.
In a related expression of the referenced class of causes for failures of formerly successful enterprises, the shareholder interest tends to bring about its own ruin. It does this through the role of mediocrity incarnate in the sentiment of small-mindedness which most among today's customary retinues of management often share with the typical shareholder. Thus, we had, decades past, the myth of the alleged "tycoon:" the founder went to glory, and his heritage went to Hell.[55]
Take a third case, that of the effect of the untimely death of President Franklin Roosevelt, or the death of Abraham Lincoln before him, or the comparable effect of the assassination of a unique quality of leader, the Reverend Martin Luther King, Jr., on the Civil Rights movement. Any leadership which is putatively assumed to carry on after the sudden loss of a certain quality of leader, has usually failed with that leader's absence from the scene. Usually, the heirs, even the relatively talented and well-meaning ones, simply can not fill the role of the person who led them jointly to success.
That characteristic personal defect in the history of modern civilization, is a reflection of the fact, that relatively few persons have been able to rise to a governing sense of mission in their personal lives, a personal sense of an identity in "the simultaneity of eternity." Even persons of otherwise great talent, but who have lacked that special quality of moral commitment, fail, repeatedly, when left to their own inner resources. They fail because they are tragically inclined to betray their appropriate sense of mission, for the sake of such narrower concerns, as so-called "practical," family and related considerations.[56] The extraordinary importance of the individual leader with an appropriate sense of mission, is not a genetically determined quality; the want of more such leaders, lies essentially in the fact, that the majority among even the leading circles of government, business, and science, in nations, have not yet really "grown up" morally and intellectually. We are left to make the best of the relatively very few real ship's captains available.
The case of the best entrepreneurs of the past, and the exceptional political leader, are, like the truly great scientist, a reflection of the continuing rarity of competent leadership in our culture thus far.
The case of the work of Franklin Roosevelt and his circle of leading personal collaborators, in building the U.S. economy, is significantly illustrated by Richard Freeman's part in this report as a whole. Look briefly at an aspect of the role of President John F. Kennedy. Focus on one clear demonstration of what the United States might have accomplished, had that President not been assassinated by his enemies.
Kennedy's successful initiative, committing the United States to put man on the Moon during that decade, is the most notable of the initiatives he introduced as President. In these cases, he did not personally create the conception which he implemented, but his personal manner and quality of initiative, as President, brought about a great national achievement which were otherwise most unlikely to have occurred. He acted, in that respect, in the manner of a good entrepreneurial "tycoon," that, in fact, as his book, Profiles in Courage, implies.
Contrary to the Wagnerian rant of Federal Reserve Chairman Alan Greenspan's Ayn Rand, the outstanding leader in business or politics, is never the poor simp who has mortgaged his soul to popular opinion, but the most social of all creatures, the individual who resists the tyranny of popular opinion, because he is consumed by practical love for mankind's general welfare. It is the moral mediocrity, the intellectual mediocrity, who is truly the asocial individualist, the individual who would sell his soul for the pottage of "immediate personal, family, and community interest."
In all cases of the distinguishable quality of leadership which underlies those cases, the quality which recent decades' run-of-the-mill business executive could never seem to grasp, as long as he was thinking of himself merely as an accountant or business manager, is the role of the cognitive factor in enterprise, whether that is leadership in government, in a political party, or a business undertaking. This same cognitive factor has two principal expressions in the accounts of a national economy as a whole. As the case of President Franklin Roosevelt illustrates the point for his time, so now, there is no hope of U.S. recovery, in particular, from this awful, ongoing world-wide economic depression, unless that cognitive factor is the pivotal, dominant feature of U.S. policy. It is therefore urgent, that I identify, and also stress the place of that specific function within the economic policy-framework required for the U.S. government at this time.
There are many relatively obvious, practical measures dictated for the present situation of the U.S. economy. As you read and study this ongoing description of the kinds of leading features of economic reorganization required, never forget that the only possible source of physical-economic profitability and growth of a national economy (or a world economy), is the anti-entropic factor. That means, for example, that the economist were incompetent in his profession, unless he or she were fully conscious of the reasons certain costs must be added, and certain seemingly practical measures assigned a relatively lower priority, even curtailed, in order to channel the growth factor of cognitive creativity into the structure of employment and allotted categories of cost and investment.
Remember. From my studies of relevant cases, there was really no mystery as to why the so-called tycoon succeeded where his heirs failed. The difference lies in the same quality of cognitive factor, which I have contrasted to the relative cognitive mediocrity of the reductionist opponents of Leibniz in science. These were the opponents of the achievements of Carl Gauss and Bernhard Riemann. I can also attest to this from a position of relevant authority, from my own unique achievements as a long-range forecaster. The success or failure of any effort at the recovery of the present U.S. economy, will be determined by presence or absence of that seemingly egregious, cognitive factor of leadership and allocation, which has stood behind every great contribution to the general welfare of nation and society as a whole.
Cultures which successfully suppress such seemingly egregious natural products of agape, in favor of the oppressive accolades of rampant mediocrity, are cultures which have repudiated their own moral fitness to survive. That is what has happened to bring about the systemic ruin of the economies of the Americas and western Europe, during the recent decades. If such corrosive, recent decades' trends of rampant bureaucratic, moral and intellectual mediocrity through the political and business sectors, are not suddenly reversed, now, it is virtually certain that the U.S.A., for example, will not survive for much longer in its present constitutional form.
In response to what I have just written, the question will be posed: "Why should we accept the reversals you propose in our present policies and opinions?" The answer to that is: You will accept and implement these changes, if, but only if you wish this nation to survive. It is, obviously, up to you to decide, and, in any case, to, at last, accept personal responsibility for the consequences of your personal decision on this matter of policy.
That said to situate the following points, consider some crucial examples of the types of sweeping structural reforms which are required for the U.S.A. at this time.
Some Immediate Changes
The pivotal feature of an effective program of recovery of the U.S. economy, will be the inclusion of a drastic restructuring of the composition of employment and real (i.e., physical) incomes within the society as a whole. The general thrust will be, in effect, to reverse the post-1963-1966 trends in shifting composition of the categories of employment. These reversals will be brought about largely through rewriting the principles of the monetary, financial, and taxation systems. These changes must be in directions consistent with those constitutional principles illustrated by the celebrated reports to the U.S. Congress by our first U.S. Treasury Secretary, Alexander Hamilton.
For example, essential services in the "soft" category of basic economic infrastructure, such as Classical modes in education, Hill-Burton standards for health-care, and services of Classical physical science generally, will be rapidly increased, together with increased rations of employment in the sectors of agriculture, manufacturing, engineering, and general building and maintenance of "hard" forms of basic economic infrastructure. Employment in "white-collar" categories of sales and non-scientific professional services, will be sharply reduced. For the immediate years ahead, this shift, reversing recent trends in structural composition of employment of the national labor-force, thus reversing the post-1963 trend toward so-called "post-industrial society," is the principal economic-policy measure required, as a source for introducing and accelerating increases in the average physical productivity of the labor-force as a whole.
The rebuilding of the U.S. economy will occur as an expression of chiefly two sets of interdependent priorities. As a general rule, the primary mission of the U.S. government's role, will be to foster the conditions required by consideration of national economic security, as we used to define national economic security, during the 1933-1964 interval. The second factor will be a relatively high priority placed upon utilization of potentially useful elements of fallowed physical-economic assets, such as those of neglected entrepreneurial agricultural and industrial potential. The direction given to realization of those two objectives of national economic security, will be supplied by the development of the foundations for a science-driver mission-orientation, as the leading-edge mission of medium- to long-term U.S. economic-development policy.
For obvious, practical reasons, in the present case, as during the Franklin Roosevelt-led economic recovery of the 1933-1945 interval, the principal shift will be a reflection of a large-scale increase of public and related employment in the building and maintenance of essential forms of both "soft" and "hard" basic economic infrastructure. The reactivation of idled industrial and related work-places of the private sector, will be gradually superseded in importance by additional such work-places. The most rapidly growing sectors of private employment, outside basic economic infrastructure, should be in the development of closely-held, technologically innovative entrepreneurships.
U.S. policy-shapers, and others, must be reminded, that it is not the giant stockholders' corporation, which was the driver of U.S. economic progress. It was the closely-held entrepreneurship, each led by one or several personalities of some exceptional scientific or analogous talent. It was these, local community-based entrepreneurships, which provided large enterprises with the innovative technologies on which the sometimes ill-deserved good reputation of the giant corporation often depended.
Otherwise, economic reconstruction will enjoy the impulse supplied by special national mission-orientations, including space-exploration programs. These mission-oriented "crash programs," military and otherwise, will be modelled on such precedents as those of France under Minister Jean-Baptiste Colbert, and by Lazare Carnot and the École Polytechnique later, which have made decisive contributions to the leaps in productive powers of labor, and standard of living. Unfortunately, because of a lack of even elementary knowledge of the principles of technology among most professional economists today, the reason for the unique kinds of success realized by programs such as the pre-1969 U.S. space program, especially the Kennedy "crash program" for the manned Moon-landing, are not now competently assessed generally.
During the short to medium term, the increases in employment will occur chiefly in two overlapping general classifications. First, there must be an emphasis on rebuilding the physical capacity of already standard qualities of physical production of goods, and of basic economic infrastructure, up to approximately the percentiles, and relative composition of employment, of the total labor-force represented more than a quarter-century ago, prior to the Carter-Brzezinski catastrophe. This means, that government and banking must direct much of the shift in employment-patterns, away from technologically unskilled categories of sales and service occupations, into approximately the same categories and rations of the available labor-force of a time prior to a quarter-century ago.
In addition, there will be large-scale projects, largely funded through issuance of Federally created low-cost, long-term credit, in the essential categories of mass transportation, energy production and distribution, water management and sanitation, and in education and health-care programs. As under President Franklin Roosevelt, during the 1930s, the most important factor of real (physical) economic growth will be, initially, in large-scale public works in these categories of infrastructure-building.
This initial phase of rebuilding the physical economy and employment, will overlap an initially gradual, but accelerating factor of scientific and technological advancement. Government-sponsored science-driver programs, such as the space program, will be a leading element in technological spin-offs spilling into growth of the general rate of increase of per-capita productivity. As in the case of the spill-overs from the Kennedy Moon-landing program, especially the programs in motion prior to the crucial cut-backs of 1966-1967, the general rate of increase of productivity will continue to flow into many categories of designs of products and improvements of productive processes, during as early as the first decade of a recovery program.
These programs of investment and employment will be steered by combinations of interacting sets of changes in U.S. monetary, credit, and taxation policies. These policies will be crafted to shape the future of the economy for one to two generations yet to come. In short, we are designing the next long-range physical-economic cycle; we are building the intention of the "orbital" cycle into the next cycles of the economy, in advance. This is somewhat similar to what the Fifth Republic government of President Charles de Gaulle knew as "indicative planning," not Soviet-style, "socialist state planning."[57] The U.S. economy's private sector, is to be returned to being essentially an entrepreneurial economy, rather than a "shareholder value" economy, a production-oriented society, rather than a consumer society, as I shall now explain again, briefly, at this point.
In the British system, which Karl Marx wrongly praised as the scientifically competent version of "capitalism," the economy is intended to serve the special interest of a political system based on service to the interest of a Venice-modelled caste of rentier-financier and related forms of oligarchical interest. In this oligarchical system, the British monarchy performs the function of an hereditary doge for an imperialistic form of global, rentier-financier, maritime power. So, Hobbes, Locke, Mandeville, Adam Smith, and Jeremy Bentham, typify what (Sir) Henry Kissinger has praised as British ideology, from the bottom up.[58]
In opposition to the British system, the American constitutional system of political-economy, as described by Hamilton, Friedrich List, and Henry C. Carey, among others, has the following characteristics. The function is to secure the national defense and general welfare, through emphasis on physical-economic measures required to promote the increase of the productive powers of labor, both per capita and per square kilometer of the total land-area of the nation.
Thus, there are two most prominent structural differences between the British and the American systems. First, under the British system, the power to create money and credit is lodged within a private financier interest, as typified by the role of the Bank of England. Under the American constitutional system, the absolutely sovereign power of the republic to issue currency, and create credit (national debt) at will, resides sovereignly in the Presidency, but with the consent of the Federal legislature. The natural expression of the U.S. system is the dominant role of a national bank, rather than a central banking system, the latter including the explicitly anti-constitutional Federal Reserve System.
Under the American system, the responsibility for the development and maintenance of basic economic infrastructure lies in the area of shared responsibility of the Federal and state governments. In the American system, the development and maintenance of basic economic infrastructure is conducted under the relevant, respective authorities of state and Federal governments, as through a system of regulated public utilities maintained through a division of labor between these two principal levels of government.
The development and maintenance of basic economic infrastructure, is, as typified by the Tennessee Valley Authority (TVA) case, the foundation on which private entrepreneurship is enabled to prosper through investments in technological progress.
The included object of any competent recovery measure, is to free the U.S. economy from the disabling shackles of the British system's influence, to return fully to the American System of political-economy. Hopefully, the United Kingdom will join us in bringing about this reform.
Strategic Defense and Economy
About two decades ago, I knew then-U.S. Representative Jack Kemp as a pleasant, and hospitable fellow, whom I met several times in his office at the U.S. House of Representatives. He was keen on "incentives," but, unfortunately, he, like his virtual "evil twin," Senator Phil "Boll Weevil" Gramm, preferred his remedies to be very simple ones.
"Incentives" are extremely important for the functioning of an economy, in the degree that they may express an efficient intention to do good, in the sense of Kepler's use of intention. Incentives, in the best sense of that term, are the expression of an experimentally verifiable universal physical principle. However, as anyone who has worked with the issue of sales and marketing policies, and sales incentives, should recall, most of the "incentives" concocted by the more typical, simple-minded sales managers, do not even attempt to attain such empyreal virtue. Simple-minded sales and other so-called "economic" incentives tend to backfire, in one way or another, sooner or later. Like diets which make you slimmer in the process of killing you, simple-minded, monetary and related "incentives," such as monetarists' measures of so-called "fiscal austerity," are often witch's potions, whose side-effects may be worse than the disease for which they are advertised as remedies.
The fact, that the accounting office says two measures of performance are correlated statistically, does not mean that they will continue to correlate in that way, if one of the figures is used as the primary basis for a novel sales or marketing incentive. The apparent goal will often be achieved, temporarily, but usually with undesired long-term side-effects on the account of more essential, ultimate objectives.
The relevant point here, is to understand why simple-minded use of "incentives" will usually defeat the very purpose which the credulous authors of such policies had thought they had intended, as former Representative Kemp's Kemp-Roth legislation produced some among the awful consequences which are displayed among the economic ruins of our formerly robust U.S. economy today.
Intentions tend to succeed, only if, and when they reflect a comprehension of the complexities of the interaction between, on the one side, the individual and his act, in a local setting, and, on the other side, the reciprocal relationship between that action, in that local setting, and the economy as a whole.
The popularized attempts to develop methods for optimizing the relationship of local actions to the economy in the large, such as input-output systems analysis based on Professor Wassily Leontieff's methods for mapping of the U.S. economy, are a step in the needed direction of correlating the particular and the whole process, but they err in conceding to the pressures to reduce these reciprocal relationships to a linear approximation.[59] The linear approximation is, in fact, useful, provided one is willing to learn from it, but without actually believing it. Linear input-output "modelling" is useful when it is employed as a method for adducing meaningful, and real ontological paradoxes in the current linear thinking of professionals generally, or managements in particular.
On the subject of choices among incentives, one of the most widespread and dangerous forms of lunacy today, is the monetarist doctrine respecting inflation. The idea that inflation should be checked by fiscal austerity, and depression resisted by tax-cuts and monetary pump-priming, is the root of the folly of most recent decades' discussion of economic incentives. Jack Kemp was only one among the majority of members of Congress of his time, who were lured into that kind of error.
The management of such matters, belongs properly to the department of regulatory functions of government. The success of the 1945-1963, post-war-reconstruction phase of the Bretton Woods monetary system, is an example of this. The system of regulation set up under Franklin Roosevelt, as continued in U.S. domestic policy until the disastrous Nixon and Carter administrations, is an example of the only effective methods known so far, for providing incentives to the combined public and private sectors of a modern agro-industrial economy.
Here, for similar reasons, all attempts to apply the mind-map of standard financial accounting to an economy, fail, often disastrously, for precisely the same reason. We require a truly "non-linear" conception of this reciprocal relationship between the individual action in a local setting, and the whole physical-economy in which that local action is situated. Any approach which is contrary to my warning here, is therefore, as is said among professional economists, a potentially fatal "fallacy of composition" of the array of facts considered.
Contrary to the implied assumptions of Leontieff et al., all of the crucial economic relationships are intrinsically non-linear. Consider some of the most basic principles of economy to be applied to policy-shaping in these matters.
We must think in the same way indicated by my adoption of Riemann's conception of differential (physical) geometry, as the appropriate standpoint from which to express the way in which the characteristic "curvature" of physical-economic space-time must be defined. In this application, the use of the term "non-linear" were better understood by following the prescriptions I set forth within the preceding chapter: substitute the term "non-Eulerian," meaning also "non-Lagrangian," "non-Cauchyian," as also, "non-Newtonian." Typical is the demonstration, by Carl Gauss, as by Leibniz earlier, of the absurdity of the entire, axiomatically linear ("reductionist") mathematical system from which Euler adduces his famous folly on the subject of what he termed "imaginary numbers."[60] Since this is a crucial point for all competent economic policy-making, I summarize the essential definitions here.
In the evolutionary development of modern mathematical physics, from Cusa, Leonardo, and Kepler, through Leibniz, Gauss, and Riemann, the most characteristic feature of the development of the relevant formalities, has been, as I have emphasized here earlier, the process of discarding each and all of the types of arbitrary, "ivory tower" sets of definitions, axioms, and postulates, which characterize the methods of Aristotle and of the prevalent, defective forms of classroom and textbook instruction in so-called Euclidean geometry. This point is so crucial for understanding the possibility of an economic recovery, that I must restate this point now, once again.
In the rise of modern science through, chiefly, the initiative of such of Cusa's writings on scientific method as his De Docta Ignorantia, the most characteristic expression of progress in science itself, has been the process of eradicating all Aristotelean and other reductionist forms of "ivory tower" definitions, axioms, and postulates from mathematics, and replacing those with a new kind of "axioms," notions of extended physical-space-time magnitudes, concepts which are rooted entirely in the act of discovery of a universal physical principle. I have described that, once again, earlier, in this present report. For the purposes of today's urgently needed reforms, that must be recognized as the central principle of the history and future development of all modern economy.
The state of mind associated with today's financial-accounting and related forms of academic economics dogma, such as the notion of "sound measures of practical business management," is that those states of mind tend, in fact, not only to ignore, but to deny, even aggressively, the mission upon which all economic progress absolutely depends, the factor of anti-entropy in the physical economy. The foolish belief known as "benchmarking," expresses that kind of widespread mental disorder among today's leading business mis-managers. Hence, all of the so-called incentives, of the monetarists and others, on these matters, prove to be worse than foolish in their effects.
Such disoriented mentalities as those seduced into the cult of benchmarking, represent a reversion to the pre-scientific level of the Eleatics, Aristoteleans, and sophists such as the modern followers of William of Ockham. They substitute a distorted shadow of experience for the substance, thus degrading the mathematical formulations copied from physical science, to a sterile mere describing of appearances, as if at the blackboard, or the currently common surrogate for the blackboard known as the computer. In the end, it simply does not work, which, as the present world economic crisis attests, may turn out to be "the end" in more ways than one.
Thus, professionals afflicted with such popularized academic follies as those, inevitably tend to repeat Euler's folly, as typified by his foolishly deprecating complex numbers as merely "imaginary numbers." It is in precisely the paradoxical implications of number theory, as considered since Cardan's cubics, that the modern mathematician has discovered afresh the fact shown by Gauss's Disquisitiones, that it is not abstract mathematics as such, but the physical universe which has created even the simplest kinds of numbers, numbers whose manifest ontological paradoxes reveal the superior authority over mathematics, of the controlling hand of notions of extended (physical) magnitude.[61]
The fundamental rule for competent economists is: national, and world economies must progress or die. Each principle, and its derived technologies, which is generated as knowledge by cognitive discovery of hypothesis, appears as something new in the spectrum of economic action. It is this relative newness which is the only ultimate source of anti-entropy, and, therefore, ultimately the only source of actual profit. Any economic policy which resists such innovations, is intrinsically entropic, and therefore tends toward the worst ultimate outcome, either sooner or later. We are now dwelling in a time during which later has become, inevitably, sooner.
This needed anti-entropy is introduced to practice, not merely as commentary or interpretation, but in an appropriate form of action. This action requires several additions to the previously defined chart of cost accounts of any sane accountant or business manager. It represents an added cost, which must be served (e.g., paid), as the price of economic success, even economic survival. It is on this point, that standard accounting practice fails, on principle, sometimes fatally. The popularized, monetarist delusions of "fiscal austerity," typify the potentially suicidal, psychotic phase of such popularized errors of method.
Contrary to such varieties of ignorance and delusion, there are two general keys to solving the kinds of problems associated with the way in which financial accounting typically ignores the crucial aspect of the reciprocal relationship between local action and the larger situation in which that action occurs. First, consider the way in which valid new technologies are generated for application to specific situations. Second, consider the relationship between local action as such and the general environment as such.
To begin with, therefore, consider how, in modern economy, this role of creativity in making true net profit possible, is found most commonly in two kinds of institutionalized activity. First, it is found, on the one side, in an educational system which features pedagogical methods equivalent to a Classical humanist program, and also features related emphasis on both pedagogical reenactments of crucial discoveries of principle, and fundamental research experiments based upon the lessons derived from experience in mastery of pedagogical experimentation. Second, it is expressed to great positive effect by what are described as science-driver programs, work in the footsteps of Leonardo da Vinci and Kepler, such as the program for science of France's Jean-Baptiste Colbert, or the initial period of life of the Monge-Legendre École Polytechnique, and, more recently, Twentieth-Century nuclear and space programs as conducted principally as initiatives of Germany, Russia, and the U.S.A.
Although the science-driver program is, at least implicitly, an extension of the work of the educational system as a whole, it has well-known special features of its own. The investment of resources on a large scale by governments, has an effect on the physical economy akin to the way in which modern warfare has impacted the technological and related development of economies, since Leonardo da Vinci's and Machiavelli's time. Again, the revolution in warfare launched jointly by Lazare Carnot and the Monge-Legendre École during the 1792-1794 interval, is the neatest example of the relationship between large-scale science-driver programs and the related technological effects in the history of modern warfare. The U.S. economic mobilization for war, under Franklin Roosevelt, expresses that connection.
The most significant implication of that connection, proves a case directly opposite to the opinion of many loose-tongued contemporary pacifist ideologues. It was out of the development of crash-program approaches to the defense of the modern sovereign nation-state against ancient and feudal traditions of perpetual warfare and world-empire, that the modern military doctrine of peace was achieved. Machiavelli reflects this in his policies. The 1648 Treaty of Westphalia, on which all valid attempts at civilized life has depended axiomatically since, expresses the same trend. The 1776-1783 war-policy of Benjamin Franklin, et al. expresses that outlook on the role of technological progress in securing the establishment of an order conducive to peace. The modern theory of a strategy of defense, came chiefly from the combined influence of scientist-soldier Lazare Carnot and the German Classical humanist Gerhard Scharnhorst.
Modern policies of strategic defense, like my own proposals for what was later publicly presented by President Reagan as a "Strategic Defense Initiative (SDI)," used the military implications of a science-driver program, as an approach to durable peace. That created the opportunity which has been mislain during the seventeen years since Soviet General Secretary Yuri Andropov flatly rejected President Reagan's (and my own) proposed discussion of the matter, and since the utopian faction, typified by my since-deceased enemy Daniel Graham's utopian faction within U.S. military and related circles, implicitly allied themselves with Andropov, in doing their utmost to sabotage the program from the U.S. side. A study of the fortifications designed, constructed, and commanded by Vauban, and Carnot's articulation of the principle of strategic defense, attest to the historical implications of my own, and President Reagan's proposals on strategic defense, back during, especially, the 1979-1986 interval.[62]
Today, "crash science-driver" programs will be the cutting technological edge of the effort to put both the U.S. and world economies back on the pathway toward sustained growth, out of the present world depression. The political impact of the physical benefits of such progress is large, but should not be permitted to blind us to the more crucial social factor.
The crucial point is, that a people which locates its human identity in the cognitive nature of the human individual and his or her social relations, is the only conception of man which could ever promote a durable peace on this planet. All utopian schemes have shown themselves to be simply the babbling of the kinds of fools who wander into war out of the effects of their own folly. Proposals for "world government" and "globalization," or "world rule of law," are the most likely causes of the generalized, even perpetual warfare, which is being proliferated on this planet today. Typical of the sheer horror of such lunacies is the joint proposal of the madmen H.G. Wells and Bertrand Russell, for achieving "world government" through the terror of "preventive nuclear warfare."[63]
Peace was never a self-subsisting state of political affairs; peace, as distinct from the temporary absence of warfare, is achieved only through those forms of cognitive progress, as in Classical culture and science, which foster the individual's and nation's conception of man as a cognitive being.
The science-driver program, with the cultural optimism it fosters, is inherently both the best way to win a war, and also the surest pathway to durable peace. Its characteristic feature, is that it accelerates the rate of discovery and transmission of new physical principles into large-scale infusions of these discoveries into the practice of both the machine-tool sector of industry, but also into the broadest possible application of these new technologies into production and use in general.
Changing the Situation
In my summary review of the economic implications of colonialism, in the preceding chapter, I emphasized that the relative productivity of the firm and its operative, varies most significantly with the total economic situation, such as that national economy within which those productive and related activities are situated. One of the most compelling illustrations of this is the case, as is being reported in Freeman's portion of this report, of the impact of the Tennessee Valley Authority (TVA) project, in bringing about a revolutionary change in the productive powers of labor, in both agriculture and industry, throughout the affected region.
Contrary to typical anarcho-syndicalist and kindred illiterate gossip on the subject, productivity does not radiate primarily from the point of production into its immediate environment. Productivity is transmitted, primarily, through the increase of the potential productivity of the region or nation, as is illustrated so brilliantly by the history of the TVA. The chief factor, in determining the potential productivity expressed within a region, is, as the TVA case illustrates the point so dramatically, the development of the basic economic infrastructure, the framework within which the acts of production are situated.
Return to the earlier discussion of the economic principle of the fossil, as the notion of a fossil is to be defined more broadly, at least implicitly so, against the background of Vernadsky's Noösphere.
For example: Biological development generates relatively higher species, and also broader selections of changes in available species. The new repertoire of interacting species, then becomes the situation on which the successful emergence of a new species or variety depends. So, in producing qualitative changes in the environment—as development of transportation, energy, water-management, educational, and health-care systems illustrate the point—more favorable conditions for the expression of cognition appear. These new conditions then become a kind of fossil-resource on which the productive potential of the relevant labor-force depends. The injection of a new technology into a situation so improved, then represents the reciprocal relationship between discovery of new principles of technology, and the realization of the application of those technologies as higher relative physical productivities.
Not only are new species, and their fossil effects needed; the supply of such fossils must be either renewed, or advantageously superseded by new choices, if the process is not to be degraded by attrition. This phenomenon is another example of the role of physical-economic cycles.
For this, we must look more closely at the practical meaning of the term, "technological composition of employment."
Ask yourself this question: "When we speak of a `division of labor,' what is the physical object of which we are speaking?" Any object must have an intrinsic unity; otherwise, it is not an object, but merely a loose description of some poorly defined, actual or possibly existent effect. In this instance, the appropriate object is "increase of the productive powers of labor." The subject of this object is an implicitly measurable amount and type of "change."
Ask, then, "What kind of change is this? On what scale do we measure this?"
As I have already emphasized, no competent measurement of economic change can be made, except in terms of long-ranging cycles of entire economies. We shall come to the matter of the standard for defining what are not much more, nor much less than "entire economies," in due course. For the moment, as a matter of approximation, consider the U.S.A. as a whole, over a period of two generations, as an example of an "entire economy."
Then, construct something comparable to a Keplerian "orbit" for that period. In this orbit, unlike the repeating orbits of Kepler's planetary system, it is the rate of change to a higher state, rather than apparent arrival at the relatively same point, which is the object considered. Take a simplest sort of first approximation. Instead of an elliptical orbit, a catenary ("hanging chain") trajectory, defining this in the relatively simplest way, as Leibniz et al. defined this notion of physical curvature (as distinct from a circular, "ivory tower" curve, such as the cycloid). In first approximation, the result for a single long-ranging cycle would be a single approximation of what is known among economists as the functional equivalent of a form of "Kondratieff curve:" a "hanging chain" form, but upside-down, and of a specific form akin to the catenary. In the model we desire, the actual curve would be the result of compounding a series of staggered, overlapping such curves, whose sum will be a kind of successively upward-moving cycles of a roller-coaster ride, up to destinations which are, successively, higher states of potential relative population-density.
The object of designing the long-ranging period of a generation or two, is to define a kind of super-experiment in which such a desired effect will be achieved. Now, the fun begins!
We are not building a model of something which has occurred, but of something we must discover how to cause to occur. We have several kinds of change to consider, in building such an experimental plan of action.
Start from that modified "model" of the Noösphere, which I have specified in the preceding chapter, as a modified form of Vernadsky's definition. This "model," which is a variable "model," referenced to actual known phenomena, provides us the basis for the first step in constructing our experiment: Define the setting of the functional relationship between mankind (society) and the universe, for the condition mankind's potential relative population-density must be increased.
This approach takes into account, from the start of the investigation, known characteristics, including the cyclical factors introduced by attrition. Since we know that the Biosphere itself has a built-in anti-entropy factor, our task is to add mankind's contribution to increasing that margin of anti-entropy. In other words, if we know that some important feature of the existing Biosphere tends to replenish itself at a certain rate, such as the rate at which certain minerals are brought to near the surface of the planet from the interior; and if we know that the rate at which we are consuming those minerals is greater than the apparently spontaneous rate of renewal of the resource; how does man more than make up the deficit, either explicitly, or in effect?
For what should be obvious reasons, one of the best kinds of experimental questions to include in our roster, is the challenge of man's exploration of the Solar System. The first step, of course, is to get beyond our atmosphere, into geostationary orbit, and to man's landing, more or less regularly, on the Moon. That is the precondition for the next step, outward movement within the Solar System as a whole, beyond the Earth's Solar orbit. The first big step beyond that, is the establishment of a manned research-station and advanced base of operations, on the subsurface of Mars. The next step beyond that, requires consideration of the problem of discovering fuels and fuel-systems which permit continuously powered, willful flight into the region of the outer planets of the Solar System.[64] And, so on.
Consider the challenge of the so-called Sänger project: the use of a so-called "scramjet" system, of speeds of up to Mach 7 or 8, to reduce vastly the cost of lifting an object from the Earth's surface to the top of the atmosphere. By "breathing" oxygen from the atmosphere, rather than carrying the weight of that oxygen as fuel within a rocket, more than an order of magnitude of physical cost is avoided in delivering a pound of net weight to geostationary orbit. We are using up the same amount of oxygen, and thus putting no more than an approximately equivalent strain on the replenishment of the "consumed" oxygen.
The fact that we are using oxygen as a fuel, should point out to us, that the Earth's atmosphere was produced, like the oceans, rivers, and lakes, as a fossil remain of living processes. Flight into space, is not a subject of abiotic physics; it is an expression of the lawfulness of the Biosphere, and is an action which expresses the still higher lawfulness of the Noösphere.
The importance of posing such challenges, is that this set of questions, bearing upon exploration of space beyond our atmosphere, bears in a crucial way on the task of understanding the workings of the man-nature relationship within the bounds of the Earth's Biosphere. Looking at the implications of that mission, as part of the continuing present and future mission of continuously increasing mankind's potential relative population-density, is the only scientific way to define a science of economics, and of national political-economic policies for today. It is from that standpoint, and no less, that the science and politics of the Noösphere must be defined for the circumstances of today's systemic, planetary crisis.
Now, within that context, consider the differential function which corresponds to the integral "orbits" so situated. Look at the "structural characteristics" of the division of labor within the labor-force as a whole, from this vantage-point. That considered, return to the question: How do we define the momentary (i.e., short-term) factor of change, for its effect in changing the long-ranging cycle as a whole?
It would be desired to develop formal geometries for the implied purpose; it is indispensable that the idea of such a physical geometry be securely planted in the mind of the economist as policy-shaper. Therefore, focus attention here on the following points of illustration.
The willful increase of society's potential relative population-density may occur solely through the willful processes of cultural progress by Classical pathways. Therefore, the paradigmatic expression of such action within the activity of the nation's population, including its labor-force most emphatically, is the transmission of discovery of universal physical principles within, and by means of the social division of labor within the population as a whole. This generation and transmission of universal physical principles, and of the technologies so derived as by-products of such discoveries, is the form of action which defines the anti-entropic curvature of mankind's willful practical relationship to the universe as a whole.
This generation and transmission occurs through the education and other development within the population as a whole. It is focussed on the relationship between production and the system as a whole through the transmission of such knowledge within, and across the lines of division of labor in production and related activity. Therefore, look at the structural composition of the employment of the total labor-force, from that vantage-point.
The progress in long-ranging development of the realized productive powers of labor of economies, is associated with certain patterns of change within the structural composition of the division of labor in society as a whole, especially in the departments of production and design of products as such. This is typified by the advances in both the general cultural level of social practice within society, and the scientific and technological advancement of the education and competent practice of the labor-force. Look at the latter aspect first, and then return to look, from the top down, at the cultural development of the population at large.
Start at the base of the general division of productive labor, of what used to be called, often, "blue-collar" labor. The upgrading of the standard skill-levels, standard of living of households, and degree of influence of Classical forms of cultural activities among this primary stratum of "blue-collar" labor, is the proper basis for the first-approximation estimate of the productive potential of the labor-force considered as a whole. The ratio of employment of skilled labor, to semi-skilled and unskilled labor, is the first approximation of an estimate of relative productivity of the labor-force as a whole. The physically defined capital-intensity of investment in production and design of products, refines the broad estimate. Crucial is the rate at which advanced technologies are being generated and also injected into the productive process and design of products.
These estimates must be qualified to take into account the level of development and maintenance of basic economic infrastructure. It is the immediate interaction between these features of basic economic infrastructure and the degree of development of the social division of labor in production as a whole, which is the primary determinant of relative productivities of national economies as wholes.
The refined estimate for physical output as such, is obtained, in first approximation, by the role of the state, directly and indirectly, in promoting and implementing a science-driver into the development of the combined infrastructure and the design, production, and distribution of goods. The emphasis on this mission-dedicated role within both general and higher education, and the machine-tool sector of research, development, and production, should be the principal concern of government's role in promoting technology-driven progress in the increase of the potential relative population-density of the national economy as a whole.
This emphasis on science and technology, must be complemented by a war against the dangers of what is most usefully defined as "cultural constipation." The lack of general practice of Classical forms of cultural life, complemented by the want of a Classical humanist mode of education in schools and universities, will tend to produce a population which is, in first approximation, crippled in its scientific and technological potential, and, at a later point, virtually incapable of coping with the kinds of realities which a successful form of economy must address.
The simplest anecdotal illustration of the latter point, is that it was the stated devotion of Abraham Kästner, Gotthold Lessing, and Moses Mendelssohn, to defense of the work of Gottfried Leibniz and J.S. Bach against the decadence of the Eighteenth-Century Enlightenment of Abbot Antonio Conti, et al., which made possible the American Revolution, and all of the greatest cultural contributions to the advances of European civilization during the late Eighteenth, Nineteenth, and Twentieth Centuries. As a matter of contrast, we have the willful destruction of the culture of the Americas and western Europe, in particular, through the post-1945 spread of the influence of countercultural pestilences such as existentialism and the 1960s launching of the mass-based phase of the "rock-drug-sex youth-counterculture." Classical humanist educational methods, and Classical culture, have been uprooted by aid of the spread of the drug-culture. Most sections of the university populations of today are functional illiterates in both the physical sciences and in matters of history; we see, thus, in day-to-day experience, the resulting inability of the generation of recent university graduates to cope with the realities of technology in general, or the economy in particular.
The list of factors just identified here, typify the characteristic of that unified object of action, which transforms the potential and actual productive powers of an economy over the span of one to two generations. These changes, for better, mediocre, or worse, can be assayed in the current moment, by treating the current moment's action as reflecting the relevant long-ranging cyclical tendencies. That, in brief, is the essence of all competent long-ranging forecasting. That is the key to shaping present policy-making for its impact on both the present and future.
The proper definition of productivity, therefore, requires a comprehension of the interdependency between two factors. One is the characteristic of the total economic environment in which production is occurring; the other is the impact on that economic environment, by the quality of relative technology being locally applied within that environment. The radiation of the technology within the environment, changes the environment, and the environment determines the impact of the technology. In mathematical terms, the environment is typified by the notion of a characteristic curvature of the physical-space-time represented by that society at that time; the new technology represents the factor of change in the curvature. The two considerations are related by situating the two within the conceptual framework of a physical-economic form of Riemannian differential geometry. This is another example of the way in which physical-economic cycles appear.
Now, consider, briefly, the way in which "free enterprise" fits into this image of the policy-shaping functions of long-range forecasting. Look back toward "free enterprise" from a flight into Solar space beyond Earth's orbit.
In developing a space-oriented "crash program" mission, we start from the fact that we have available the combination of, first, a repertoire of known physical principles and productive capabilities, second, the ability to define, in at least a preliminary way, the unknown principles and technologies the mission will probably require, and, finally, a set of some of the crucial parameters which must be regarded as controlling for the attempted primary target of the mission as a whole. Thus, a space-oriented "crash program" mission is to be examined for its qualities as a much better focussed expression of the same kind of "indicative planning" for long-ranging economic development adopted by the Fifth Republic's President de Gaulle.
Look at this against the background of the catastrophe which struck the Greater Boston, Massachusetts area's Route 128, when the guillotine fell on much of the Kennedy space program's development initiatives, during 1966-1967. Look at the included impact of that 1966-1967 trend on that and adjoining "upstream" regions of New England today. All well-defined "crash" development programs, such as the Franklin Roosevelt TVA project, tend to fall neatly into place within the entrepreneurial environment's potentialities, simply because the mission itself is well defined in broad terms.
Such "crash programs" call into play the cognitive impulses of the able entrepreneur, scientist, inventive engineer, and others. The British "operations research circus" as described by P.M.S. Blackett, is also an illustration of the relevant point. In part, that "circus," as so described, was "scrapheap" science, and the post-war U.S. efforts to codify "operations research" was predominantly a nerd's ivory-tower nightmare. Follies aside, when entrepreneurs and persons of a sense of scientific mission are called into play by a sense of national mission, the relatively best results are obtained, in net effect, as in no other way.
That is the crux of the distinction between "indicative planning" and "bureaucratic" management. Large-scale, government-conducted organization, building, and regulation of large-scale basic economic infrastructure is indispensable, and is approximately half of the proper total output of a healthy modern economy. However, it will succeed only to the relative degree it is in symbiotic partnership with the entrepreneurial factor in closely-held farms and manufacturing facilities, and with a pervasive emphasis on preference for the Classical tradition of emphasis on cognitive activity, in the leading positions within the institutions of society as a whole.
The "crash program" mission thus typifies the combining of all these diverse, essential factors of national economy in an essential way. A good "crash-program" mission orientation, puts a point on the shaft of the economic spear.
This brings us to the matter of monetary and financial policies.
B. Money, Credit, Finance, Prices, and Taxation
Once we have adopted the improved view of Vernadsky's Noösphere, which I have freshly summarized in the preceding chapter, there should be no remaining intellectual obstacle to recognizing that the basis for economic processes lies within the bounds of a science of physical economy. It is sufficient to include the recognition, that the specifically human powers of cognitive discovery of universal physical principles also subsume the physical effects produced by the conceptions associated with Classical humanist forms of culture.
From this vantage-point, it is but one more intellectual step of recognition, to recognize that there is no "natural," purely economic basis for the relative values of prices and money, but the political-legal fictions arbitrarily imposed by whatever agencies have, for the moment, seized control over the affairs of a society. A summary of that issue must be inserted here, as the most efficient way to clarify the wild-eyed errors of today's popular opinion on the subject of "my money." Once that error is exposed, the remainder of the argument falls rather neatly into place.
In modern history, the worst among the currently widespread extremes of more or less popularized lunacy respecting economics, dates from four well-known, Eighteenth-Century aberrations, listed in the following historical sequence. First, the concept of laissez-faire, by, variously, the Conti network's feudal ideologue Quesnay, Bernard Mandeville's Faustian theory of glory achieved through promoting vices, and the British East India Company's Adam Smith's "free trade"; second, the notion of wealth created through fictitious capital gains, of John Law, et al.; third, the popularization of the proto-Nietzschean, "Robinson Crusoe" model, as adopted during the Twentieth Century by the infantile John von Neumann and his accomplice Oskar Morgenstern; and, fourth, the deluded search for a mathematically perfected "natural price of gold." The Nineteenth Century added a fifth, kindred quality of delusion, the deluded search for a primeval hoard of financial capital, with or without leprechauns, as by Karl Marx.
All five of these delusions have a common basis in that pathological state of mind known as the Eighteenth-Century British and French "Enlightenment," whose common name is the Ockhamite empiricism of Venetians Paolo Sarpi, Abbot Antonio Conti, and their followers.
Typical of that so-called "Enlightenment" generally, is the hysterical pretense of "being scientific," which is to say, seeking to reduce everything to a matter of ivory-tower mathematical schemes at the blackboard. What the anti-scientific, ivory-tower schemes of Ptolemy, Copernicus, and Brahe did in that way for astronomy, was carried to an extreme, as farce, for economics, by what von Neumann and Morgenstern did with their infantile "Robinson Crusoe" myth of marginal utility. Similarly, all of the economic dogmas of the five types I have derided here, were invented as names for that elusive devil in the detail of statistics, that infinite pick-pocket which Adam Smith named "the invisible hand," and the more honest Charles Dickens, plainly renamed the principle of the "The Artful Dodger." None of these five, are actually theories; they are, in fact, lunatic cults.
There is nothing natural in the behavior of money in an economy. Money in modern society is a political fiction, whose best possible intrinsic feature is that, when compared with barter, its use tends to facilitate trade and investment. However, its most essential role in modern society is its role as an instrument essential to maintaining the functional sovereignty of the modern nation-state and its economy.
The emergence of certain standards concerning the imputed functional meaning of money, is chiefly the result of the hegemony of the English-speaking economies in the post-Seventeenth-Century world. The interaction of two English-speaking systems—the relatively hegemonic British System, and the contrary American System—has given a certain general shape to what is otherwise a medley of wildly differing assumptions. The nearest approximation to a sane attempt at posing an actual theory of money, is achieved by study of the way in which physical economies respond to what are predominantly arbitrary forms of monetary, fiscal, regulation of trade, and taxation policies. It happens, that U.S. policies closest to those strictly definable as American System policies and practices, present us with the nearest approximation of a practical doctrine on the management of money.
Therefore, there has never been any competent theory precisely defining a way of fixing the value of a national currency. There have been arbitrary measures which intended to regulate the currency and its uses, some of which were less ineffective than others. For reason of the increasing role of the English language in the development of modern economy since the accession of England's Henry VII, a comparison of the development of monetary and related practices in Tudor England, and the view of that Tudor experience expressed by the pre-1688 Massachusetts Bay Colony, provides the best pedagogical bench-mark for approaching the subject of money in a system of modern nation-state economy. The most significant example from this study of pre-Eighteenth-Century practices, is the use of the issue of paper money within that Commonwealth. The remarks of Cotton Mather and Benjamin Franklin on this subject-matter,[65] are of essential relevance.
Therefore, given the array of complexities and conflicts among the ancient, medieval, and modern history of monetary and related systems, I define the broad requirements of a monetary policy from the specific standpoint of the situation of the U.S.A. in the world today. I emphasize the internal economy of the United States of course, but also take into account the implications of the nature of the world around us, into which our efforts must be integrated. Since no competent theory of money per se is possible in the real world, our definitions of monetary and related processes must be grounded, functionally, in the science of physical economy.
There is no sane form of monetary policy per se. All relatively effective forms of monetary policy are inseparable from the imposition of political conditions broadly classed under the heading of "regulation." These include customs duties, as such; tariff and trade regulations, both domestic and foreign, generally; price-regulation; and the use of taxation not only as a means of raising funds for government, but of shaping the flow of money-capital within the physical-economic process.
Among the most relevant examples of regulation, for our purposes here, is the proper use of investment tax-credits. I discuss that topic now, as a way of introducing the remainder of my remarks on monetary policy.
Investment Tax-Credits
It is in the vital interest of any national economy, to prevent the takeover of its monetary-financial system by what are known as "financial bubbles." Any economy which is dominated by what is called today "monetarism," will create a form of financial-economic cancer called a financial bubble. This was a tendency built into the U.S. economy by the influence of Arthur Burns et al., a tendency which was greatly aggravated by the Nixon and Carter administrations, and accelerated still more by such examples as Garn-St Germain and Kemp-Roth. The systemic feature of the present world economy, which distinguishes this present crisis as a breakdown-crisis, rather than a mere cyclical depression, is the fact, that the cancerous influence of recent decades monetarist fads have turned the world's monetary-financial system into the worst, most bloated financial bubble in history.
One among the most efficient instruments concocted for dealing with the threat of cancerous financial bubbles, has been the graduated income-tax. By imposing heavy tax-rates on purely financial capital-gains, and giving relatively favorable tax-treatment to useful investments in the physical capital of technological progress, we have a result which may appear to some to be a "tax-incentive," but is actually an anti-inflationary mechanism for regulating the flow of financial capital within the economy as a whole. The object is to steer the flow of physical-capital formation and accumulation into categories which are most useful, and to drain off excessive flows of financial capital into the cancerous sink-holes of short- to medium-term financial speculation. Such taxation policies as these, flow in design and purpose from the constitutional principle of the promotion of the general welfare.
For a better insight into a prudent investment tax-credit policy, look at such eligible classes of investments from the standpoint of the elementary principles of physical economy.
On the condition that the relevant development of basic economic infrastructure is provided, investment programs oriented to increasingly energy-dense, capital-intensive modes, express the embodiment of relatively advanced technologies into both the design of products and production processes. This has an effect, as a secular tendency, to lower the net physical cost of unit-production, while improving the product. Thus, it is the desire of prudent government, to ensure that a share of the gain in productivity be returned to the investor, with the thought that this steering of the flow of income, will tend to increase the concentration of capital formation in areas of activity which better serve the improvement of the general welfare.
The use of the regulatory powers, and power to tax by government, is one way of steering the domestic flow of activities of the national economy into beneficial directions. The other measures are chiefly budgetary.
The latter are typified by investments in three areas: a.) hard infrastructure, such as mass transportation, large-scale water management and sanitation, and power generation and distribution; b.) soft basic infrastructure, typified by educational and health-care systems; and, c.) "crash program" types of science-driver programs. These programs are sustained, as government itself is sustained, chiefly through general taxation at various levels of government. The system the United States had developed, up to the middle of the 1960s, is a fair approximation of a sound arrangement.
A similar approach is applied to regulation of both domestic and foreign trade. The general object of sane government is the establishment and maintenance of what has been sometimes called a "fair trade" policy.
A sane "fair trade" policy does not consider any price as sacrosanct. Rather, it is in the national interest that the nation maintain sufficient productive resources within its borders to withstand the equivalent of an extended siege. It is urgent that these resources be of a relatively competitive quality, in product and productivity, This means that the quality of the labor-force households must be maintained by fair household incomes and other means, and that the level of technological improvements be consistent with national economic security.
This has nothing to do, intrinsically, with trade war or such matters; it is purely an internal matter of sane, orderly precautions taken in the interest of national economic security. We are wise to be as generous as possible in our dealings with other nations, but we must also be committed to the kinds of agreements on "fair trade" policies which foster their national economic security, as the same kinds of such measures benefit our own.
Wages policies, and related matters, fall under the same heading as "investment tax-credit" policy.
The basic expression of national economic self-interest, lies in the cycle of development of the young individual from birth through adult maturity, an interval of up to twenty-five years. The quality of life, education, and so forth afforded those households during that interval, should be assessed as we should assess an investment tax-credit policy.
For example—this contrary to the Nazi doctrine concerning "lives not worthy to be lived," which persists in circles in several nations, including the U.S.A., today—the care of the senior citizen is as essential to the general welfare as the care of the child and youth. The loss of the kind of social relations which used to be supplied by the extended-family relationships among relatively stable families and communities, has been savagely impaired over the course of the post-1945 decades, especially since 1971. The most important part of the development of the child and youth, is the sense of cognitive aspects of cultural connections over a span of one to two centuries preceding. This sense of "who I am now," in respect to preceding and coming generations, is not only an essential source of a moral sense of social identity, but is essential to the development of the cognitive powers of the young individual.
There is no short- to medium-term price-mechanism in a so-called "free market" setting, which could possibly converge asymptotically upon a "fair price." If it is said, today, that "the price is right," we may be assured, usually, that that price is wrong from the standpoint of the general welfare of society.
The points of illustration just supplied, typify the way in which rational forms of intentions shape the way in which a money-economy should work. By building such intentions into the structures of monetary, financial, budgetary, regulatory, taxation policies, and so on, society defines a set of parameters which will regulate the way in which the effects of pricing interact in the economy as a whole. These measures act as constraints, which have an effect akin to the role of universal physical principles in Riemannian views of a solar system.
Such constraints do not determine the actual course of the economic process by themselves. Physical-economic growth depends upon the insertion of cognitive innovations into this quasi-axiomatic framework. That situates and defines those changes in the economic process on which net physical-economic growth depends.
Theories of Money
The Anglo-American system is now gripped by the terminal stage of the greatest monetary-financial collapse in history, the greatest systemic form of economic collapse in European history since the so-called "New Dark Age" of the Fourteenth Century. This present world crisis has several extremely relevant points of crucial similarities to that "New Dark Age." Most crucial is the political-legal-moral issue: Who shall be paid, and who, on the contrary, shall be obliged to "eat their own paper," in the presently inevitable, and long-overdue process of monetary-financial bankruptcy.
If the financial creditors are supported in their claims, then the planet as a whole will now be plunged into a genocidal, global physical-economic collapse far worse than that of Europe's Fourteenth Century. In that case, the population of the planet could drop as much as 80% or more during the coming generation, while entire nations and cultures, which still exist today, will quickly disappear from the current scene, spawning thus additions to the list of humanity's extinct, dead languages and nationalities.
There is another leading similarity to the period, from England's Henry II through Richard III, under whose sway Venice orchestrated not only horrible Crusades and inquisitions, but kindred horrors, in its efforts to establish and consolidate Venice's position as an imperial maritime form of financier-oligarchical power. The thrust of the utopian Anglo-American faction behind the current waves of wars and imperial globalization, is, as one historian has described it, today's "distant mirror" of the process which led into the Fourteenth-Century "New Dark Age."
From that and related lessons of history, we should have learned already, that when an overreaching financial power has brought on a bankruptcy such as the present global one, the relevant law which must be applied, is the principle of natural law known variously as the general welfare, or common good. No buccaneer's booty for the carpet-baggers or other predatory forms of financier interest, could be tolerated. Financial claims have no intrinsic rights under such circumstances, except as society may recognize certain claims as morally privileged, solely because of their usefulness to the present and future general welfare.
Under any sane doctrine of law, a bankrupt must take responsibility for at least as much as were the consequences of his or her own willful folly. Specifically, whoever had the power to dictate the policies which led to ruin, must assume the primary responsibility for the losses incurred by all. Thus, it was those financial and related oligarchical interests, which imposed on nations the ultimate bankruptcy which was inherent in the present system, which must accept and bear the relatively greatest portion of the burden in the crisis. If the contrary policy were followed under conditions of today's crisis, a genocidal outcome worse than the Fourteenth-Century "New Dark Age" would be inflicted upon all humanity. That latter consequence can not be permitted, and no argument can withstand that judgment of natural law.
The proper general course of action in all such cases, is to create a new monetary-financial system which works. Financial claims which perform a useful function for society under the old system, should be honored, in whole or part, under the new. Payments of pensions, modest savings of individuals and closely held enterprises, the relative modest capital of useful entrepreneurs, and so forth, are continued as the most convenient way of effecting the smoothest possible transition from the useless old form of monetary-financial system, to the new. The banking system is kept alive, even if bankrupt, because its continued existence as an institution of lending and deposit is in the vital interest of the nation and its community of nations. Bankrupt corporate entities continue to function, even in bankruptcy, if those continued functions are ones which are in the interest of the general welfare.
In effect, in any monetary-financial collapse on the scale and extent of the present global crisis, it will be necessary to create a new monetary system, eliminating the old. No alternative to that is tolerable. In many cases, existing currencies must be either replaced by new ones, or extensively reorganized. Since the changes must be sudden ones, measures of reform must be as close to what has been proven to have been successful previously, as possible. Therefore, the successful precedent of the 1945-1964 Bretton Woods post-war reconstruction model, should be applied to the task of defining a global version of a multi-polar system of kindred features among sovereign nation-states; that is simply the only visible choice of an equitable use of proven precedent available.
For various reasons, rather than attempt to replace the U.S. dollar with a new currency, it were better to protect the dollar with protectionist regulatory measures. The measures required must include the establishment of a U.S. National Bank. The following scenario typifies the approach required for this reform.
Since the Federal Reserve System is implicitly bankrupt, it is the constitutional obligation of the U.S. government to take over the Federal Reserve System itself, in receivership. This will place that System itself under the administration of the U.S. Treasury. The plan will be to phase out Federal Reserve notes, discreetly, over time, while creating a new instrument of Federal credit for reconstruction-based recovery of the U.S. economy. This will require a system of gold-reserve-denominated U.S. Treasury dollars, whose leading function shall be to serve as an integral part of the mechanism of issuing medium- to long-term credits at borrowing-costs of between 1% and 2% annual simple interest. Lessons from Franklin Roosevelt's terms in office should be employed, whenever suitable and feasible.
The objective should be to bring the level of U.S. physical and related output up to above physical-economic break-even, and also in terms of Federal tax and other revenues over the medium-term period. The credit issued should be focussed on the combined objectives of short-term stabilization and medium- to long-term growth.
Once again, on this point, as on points argued here earlier, we must not lose sight of the reality, that economic processes function in terms of the underlying influence of long-ranging cycles. Remedies for a crisis of the present type, for example, can not be successful over a short term; therefore, there will be no solution available for this crisis, which does not rely upon the creation of state credit as a mechanism for bridging the gap between present bankruptcy and future break-even.
Through this mechanism, the following types of measures should be taken for reform of the U.S. private banking system. All banks which have functions of deposit and credit which are essential to continuation of orderly functioning of society, should continue to be used as instruments of delivery of payments due on pensions and scheduled release of savings, as well as new transactions, under provisions for use of Federal credit. The life of the ordinary citizen and community should continue with a minimum of disruption.
C. International Measures
One of the unavoidable major features of any feasible recovery from the present systemic breakdown-crisis, will be a sharp reversal of the recent decades' trends toward "globalized" forms of "free trade." The U.S. economy provides adequate illustration of this general point.
Since the past thirty-odd years of ongoing, systemic destruction of the U.S. physical economy by radically monetarist measures, the U.S.A., like the centuries-long British empire, has maintained its power through increasing dependency on what are sometimes termed, euphemistically, "invisible earnings." The United States has, in effect, become a parasite, subsisting on such forms of tribute as its growing current accounts deficit on import-export transactions, and its forceful collection of vast monetary-financial influxes into highly speculative U.S. financial markets.
Through Anglo-American financier interest's control over the International Monetary Fund, the international monetary-financial system was rigged to such effect. The aggregation of financial power so organized, enabled the United States to subsist physically, and to posture as the world's great success which it was not, by increasing reliance on imports of relatively cheap goods from dependent nations of the world, thus filling the gap caused by the willful collapse within the agricultural and industrial sectors of the internal U.S. economy.
Try to find a Russian-produced good in a store in Moscow, today; or, with some relatively greater likelihood of success, a good actually produced in the U.S.A. being sold in a U.S. shopping mall! Thus, the evidence plainly available to any U.S. household visiting a U.S. shopping mall, has been, that the United States has been surviving as a nation through its role as an importer of last resort. The United States loots its national income as virtually tribute from abroad, and then spends some of that income to buy the cheap goods to replace what used to be produced by the U.S. labor-force. Thus, the United States became the market on which producing foreign nations depended for their financial income; so, the United States became the "lender of last resort" and is now on the verge of becoming the world's "bankrupt of last resort."
That is to emphasize, that, over a year ago, the U.S.A.'s position as an "importer of last resort" came near its end.[66] Nations which depended upon this artificial, temporary U.S. role as a market for cheap-labor and related goods, are now suffering an accelerating collapse in their ability to balance their domestic budgets through exports. This involves both long-term and recent cyclical trends, both of which bear on showing the urgency of reversing the recent decades trends in "free trade" and "globalization" policies.
The immediate cause for this recent trend, is shown by studying the U.S. and world economies from the standpoint of my 1995 "Triple Curve" imagery (Figure 1a). Official statistics of governments, monetary agencies, and private groups are highly unreliable, but, allowing for the wide margin of outright fraud and wild error which are demonstrated to be typical of such reporting over the recent two decades, it is clear, that during the recent two years, a critical cross-over point was reached in the behavior of data as reflected in Triple Curve accounting. The United States reached the point, at which the amount of monetary output needed to sustain the nominal trading value of marketed financial assets had increased to the point that the monetary input required exceeded the financial roll-over effected (Figure 1b).
In a real economy, physical-economic stability and growth depend upon the generation of an adequate margin of new physical capital inputs from the existing production and circulation of goods. Under conditions of imposed "free trade," the margin of actually net capital formation becomes negative, as a result of driving prices down to levels at which true national-economic costs of production are not met. So-called "fiscal austerity" measures intended to bring financial accounts into balance through looting physical capital and human bodies alike, define the causes for the systemically cyclical, downward curve for real output in the Triple Curve imagery.
Therefore, to restore any of the relevant national economies, and the world economy as a whole, back toward physical-economic breakeven levels, will require a reversal of "free trade" measures generally, and also an utter obliteration of so-called "globalization" policies. If those changes are not made, no recovery from the present systemic collapse were possible.
This means the reinstallation of the kinds of protectionist policies characteristic of the American System of political-economy. The included objects, are to re-nationalize production, while building in a margin of net capital-formation into the production by national economies as entireties. The possibility of a systemic recovery, depends on generating that margin of capital-formation through production of, chiefly, physical goods. This margin of capital formation provides, in turn, the included basis for state creation of the fiat credit needed to finance the economic recovery.
I reference, once again, the report of Dr. Wilhelm Lautenbach to a 1931 secret meeting of the Friedrich List Society, as I have in some earlier locations. The use of methods of fiscal austerity to manage an economy in economic depression, is sheer lunacy. Fiscal austerity has the effect of idling productive resources, such as large portions of the labor-force and productive capacity. In other words, "fiscal austerity" under economically depressed conditions, destroys the very productive potentials by means of which the depression could be reversed! In any economic depression, the function of a sane and moral government is to provide the circumstances and stimulus under which idled productive potential is put to useful work. The mechanism for doing that is the directed use of state credit.
Had the Lautenbach report been adopted as Germany's policy in 1931, Adolf Hitler would have never come to power in Germany.
Applying the lessons of the Franklin Roosevelt recovery, and also the related lessons of the essential role of protectionism in permitting successful relations among the Americas, Europe, and Japan, during the 1945-1964 interval, provide a proof-of-principle argument to be used for the basis of defining an equitable, multi-polar system of international monetary and related cooperation now.
This will require the architecture of a gold-reserve system, comparable to that of the 1950s. It is important, of course, that there be no confusion between the useful notion of a gold-reserve standard, and the inevitable pernicious effects of a gold standard like that used by London prior to changes introduced by Franklin Roosevelt. This could be premised on the U.S. dollar, but could also be established as a fresh way of assessing the lesson from such examples as the IMF Special Drawing Rights conception of the 1970s. If Special Drawing Rights, in a drastically reorganized international monetary system, were denominated as a gold-reserve unit, that system could work successfully, on the condition that certain other measures were included as an integral part of the agreements.
Consider two classes of such agreements: a general agreement on trade and credit, and the need for a matching technology-driver for the world economy as a whole. The paradigm for the first of these needed agreements, could be usefully identified as the intention to establish a Hamiltonian form of international cooperation among sovereign nation-states. The second, is represented by special projects. The two typical special projects to be used for illustration here, are what my associates and I have identified as a "Eurasian Land-Bridge" cooperation, and international cooperation in nation-based science-driver "crash programs," including space programs.
There are two kinds of physical sports. One is based on competition among players, or teams of players. The other are sports in which the individual, or a team, challenges itself, and challenges others to challenge themselves similarly. It is the second model which should define the relationship among sovereign nation-states, each cooperating in the quest to discover better ways by means of which each can better itself. The point is to bring humanity, at last, out of the jungle, and into a civilized form of cooperation, rather than football-field, or Nintendo-game styles of competition, in the cause of improving national life.
From that standpoint, the present tasks of the community of sovereign nations, can be summed up as the complementarity of the efforts to improve mankind's mastery of the challenges of both inner and outer space. Take the case of Africa as an example.
Help Africa!
The essence of the greatest political and social issue, is that if oligarchs can succeed in bringing about acceptance of the notion that one section of humanity as a whole can be treated as hunted and herded animals are, no part of part of humanity can claim, under law, to be free from the same treatment a hunter or herder affords to the creatures upon which he preys. Thus, the unfinished issue of Africa becomes the pivotal moral and economic expression of that question, on whose solution the welfare of all humanity depends.
Therefore, whereas the cooperation of western Europe and Russia with China, India, and others, in bringing Eurasia up to a required level, is the most crucial mission now challenging humanity as a whole, success in Eurasia were not likely to be truly durable, unless modern European civilization's brutish injustice to Africa, including slaves extracted from Africa for exploitation in the Americas, were also remedied in a decisive way.
The combination of the obvious, comparable development objectives for Eurasia and the Americas, sets a standard long-term objective for the coming generations of humanity as a whole. Winning that objective requires that the case of Africa be addressed in an exemplary fashion. Reciprocally, what we demonstrate our principle to be, in our approach to the matters of Africa, will be both a test of and a model for our thinking about the present and future condition of humanity as a whole.
The international community's special responsibility toward the African continent, is to provide the margins of assistance needed to ensure that the large-scale basic economic infrastructural requirements of the continent are put into place through cooperation with the responsible governments of Africa itself. This assistance should recognize the long-term potentials of the continent in respect of the present and future need for Africa's sovereign development of that concentration of mineral and other Biosphere resources it contains. Look at Africa as an expression of the Noösphere, and prepare to develop its Biosphere accordingly.
The relevant projects on which the international community should be focussed for this purpose, are, first, the categories of large-scale development of transportation, water management and sanitation, energy production and distribution, and urban systems. Secondly, the development of public-health and educational systems as systems. These efforts include long-range intentions for the development of the Sahara as a region of economic progress and habitation, this done chiefly through the deployment of large-scale basic economic infrastructural systems, as an extension of the infrastructural development of the African continent as a whole.
Thinking about Africa in such directions became significant after the victory of the U.S.A. over the Confederacy in the 1861-1865 Civil War. The conception of rail transport from Capetown to Cairo, although a British imperial conceit, nonetheless reflected the existence of a natural axis of development, up the Nile, through the Great Lakes region, and down to the tip of Africa. The French project, prior to Fashoda (1898), for a sub-Sahara route of rail transport, from Dakar to Djibouti, is another example. There are numerous other specific, large-scale examples, many of which I have addressed, in published collaboration with others, over the period since 1975.
My emphasis has been, and remains, that rather than thinking of rail connections as such, we must recognize that, as in the best features of the U.S.A.'s development of its transcontinental railway system, a main-trunk land-transport line must define transport as merely one essential component of a development corridor, in which water-management, energy-generation and distribution, and nodal urban systems are integral requirements. What the Americas and Eurasia should undertake as the area of their leading, joint responsibility, is to provide Africa the assistance, by aid of which relatively impoverished Africa can have rapidly in place, the network of development corridors on which the effective development of the economies of Africa depends absolutely.
By supplementing the mobilization of such development corridors with general systems of public health and education, a "full set" kernel of essential infrastructure is made available.
Apart from the need for large-scale assistance in creating such a network of development corridors, the point to be stressed, is that this development must be an assisted development by Africans themselves, rather than as "cargo" dumped upon their land-areas. The creation of teams—akin to the teams which Egypt was developing, prior to a shutdown, by foreign powers, of an effort of this type within Egypt and Sudan—is a good example of the approach which would succeed. What must be envisaged, is a phased technology-transfer, in the course of which an increasing percentile of the development operations, are taken over and run by recruits from the population in the vicinity of the projects' development.
The point of that emphasis, is to foster the development of an appropriate labor-force, which will serve as a growing cadre-force for the broad-based economic development of the area, its economy, and population as a whole.
For example, Africa, under conditions of development, has all the natural potential for an agricultural revolution oriented to the growing markets in Asia. The use of infrastructure programs to address the critical bottlenecks for agricultural development, if combined with rational forms of urban development, provides the potential for the targetted objective of broad-based development of "full set" African national economies. In such economies, the mineral potential of Africa, rather than being exported as a mere colony's exports, must be a processed resource from which the semi-finished and finished products of the Africa economy are produced, for both domestic and foreign use.
Such international cooperation in support of the internal self-development of Africa, should be considered a complement to the exploration of Solar space. This means, science and technology pioneering, with the same quality of developed means, in outer and inner space.
The Land-Bridge as a Syndrome
I have emphasized the following point repeatedly in earlier locations, so it will be sufficient to summarize the relevant argument here; but it must be summarized in this immediate context.
At the present time, western continental Europe (to say nothing of the United Kingdom) is implicitly bankrupt. Under presently prevailing conditions, hopelessly so. The only available hope for overcoming that condition, is the opening of large-scale markets for European machine-tool-grade and related technology in Russia in particular, and Asia in general. Only by bringing the level of the machine-tool-grade and kindred exports from Germany and other European nations, up above the threshold of a national physical-economic breakeven-level, can western Europe survive in the form it has recently existed, until now.
Four conditions are required for this reversal of a presently onrushing catastrophe.
First, a new international monetary system, as I have specified, must be summarily adopted and set into motion.
Second, Europe must revert to a system of perfectly sovereign nation-states, each with the authority to create state credit. This does not require reversal of the customs-union aspects of recent trends of unification of the economies, provided the sovereignty of the nation over its currency, banking, and credit, are fully reestablished.
Third, western Europe must become a partner in the economic and mutual security aspects of a growing tendency toward large-scale cooperation among Russia, China, India, and other states of Asia. Hopefully, the U.S.A. will become a contributing participant in such arrangements.
Fourth, there must be mechanisms established for long-ranging credit, at simple-interest rates not in excess of 1-2% per year, respecting long-term development and trade-investment agreements among the sovereign national member-states of this area.
The intent of such reforms must be to establish a long-term process of development, based on outflows of machine-tool-grade and related technology from areas of high potential, into regions which suffer a current deficit in this capability. The leading emphasis must be on basic economic infrastructure, especially development-corridor development, and accelerating the rate of development of agricultural and manufacturing productivity and output under the stimulus provided as a by-product of large-scale infrastructural development.
Adopt similar approaches to reestablishing healthy forms of sovereign nation-state economies throughout the Americas. Agreements among states of the Americas, which are modelled on the legacy of the kind of American System of political-economy implicitly defined by Alexander Hamilton's famous Reports to the U.S. Congress, would be the optimal basis for the relevant agreements.
D. In Summary: Avoiding the Tragedy
The United States, in particular, is teetering at the brink of a Classically tragic end to its existence. Contrary to the Romantic mythology of the English and German literature courses, a Classical tragedy is never caused by the wrong imposed upon a people by its leader. It is caused by the leader's failure to override the tragic folly of the people themselves.
Recently, for example, the Democratic Party was led to an electoral catastrophe by its selection of Vice-President Al Gore, just as the United States today hovers at the brink under President George Bush. As in great Classical dramas, the threat of doom lies not in either of the two candidates, but in the selection of such candidates by the political parties and public opinion which caused inadequate leadership to be selected. The fault, in all cases of true tragedy, lies in the people themselves, in the popular culture, in the generally accepted assumptions of the majority of those people.
In U.S. politics today, a tragic quality of prevalent personal immorality is frequently expressed by the slogan: "Go along, to get along." Or, by statements to the same effect, such as the silly (and, technically absurd): "You can't put the toothpaste back in the tube."
The problem lies with what the Romans called vox populi, or, "popular opinion," as the same thing is called today. The billionaire-owned mass entertainment and news media, dictate the opinions which the people learn, and the people are controlled by what they then insist is their own opinion. Such is democracy in the United States today: people democratically saying what they are afraid to be overheard not saying.
In just that way, the majority of the U.S. population was brainwashed into abandoning national economic policies of the Franklin Roosevelt legacy, which had worked, in favor of the past thirty-odd years' opinions which have led this nation into the present global economic disaster. Nearly every once-relatively-successful culture in known history, died in a similar way. There have been, naturally, a few happy exceptions.
In Classical studies of this problem, as the problem is presented in the greatest Classical stage-tragedies of European culture since ancient Greece, it is recognized that there is but one type of remedy for the tragic follies of customary popular opinion. The remedy for tragedy is known in those quarters as "the sublime." By "sublime," one means to rise above the mediocrity of popular opinion, and to see the relationship of the present spot to what should be recognized on the horizon. Escape from tragedy begins, when a people ceases to say, "We have been betrayed," and to ask one another, instead, "How have we failed?"
To induce you to act to save yourselves, I must induce you to recognize how and why your own habituated present beliefs, and conditioned, knee-jerk reactions, misled you into this sucking swamp which grips our nation today. To that purpose, I have been obliged to address a number of points about history and culture, but, above all, I have concentrated on pointing out to you how a real economy actually works, and which presently generally accepted beliefs about economy would cause us to destroy our own civilization.
I have spoken to you as all important leaders of civilization have spoken to their people in times of crisis comparable to this one.
May you be blessed with the wisdom to have heard my counsel.
[53] The British System signifies what emerged around the combination of the Eighteenth-Century British monarchy and the British East India Company, out of the tumultuous passage from the reign of the tyrant William of Orange to the seating of George I. As Graham Lowry and Philip Valenti have emphasized, among others, the process of division between British and American systems was defined during the first decade of that Eighteenth Century, around the key figures of Gottfried Leibniz, Cotton Mather, Jonathan Swift, et al. The heirs of Leibniz, Mather, and Swift, most notably Benjamin Franklin and his collaborators in North America and Europe, including the British Isles themselves, define the core of the Eighteenth-Century basis of a distinct American intellectual tradition.
[54] This is not to deny that the tycoon was often his own worst enemy. In general, the most difficult problems in both closely held entrepreneurships and corporations, those which lead to bringing in the "outside consultant," are sometimes rather simple ones, but which, simple or not, require bringing in an outside arbiter who, like a corporate sort of "marriage counsellor," will sniff out and facilitate correction of some quirk embedded either in the behavior of the chief executive, or the management generally. Here, I emphasize the essential contribution of the entrepreneur, without exploring the afflictions to which that species of functionary may be susceptible. The fact that a husband uses bad language, is no excuse for a woman's divorcing the man, and marrying an elegantly trained parrot. The fact that "tycoons," as described by me here, are a necessary species, does not mean that they may not be susceptible to the kinds of diseases otherwise rampant in our society.
[55] I saw this phenomenon in consulting and related practice, over the 1950s and 1960s. I was shocked, but not surprised, to see a related kind of incompetence creeping into the functioning of my own association, during the periods my freedom of functioning was crippled by assassination-threats from high-level circles, or otherwise. Whenever some among my associates assumed that I was out of action, they tended to introduce business practices of a type which I had repeatedly denounced as typical varieties of the common diseases of mismanagement. This was difficult to correct, because of the understandable tendency of those with the usual excessive inclinations toward a purely accounting-administration outlook, to protect their practices against the lurking hazard of my potential intrusion, and correction of such blundering. The worst problems, to similar effect, were those follies induced by government-controlled assets planted and maintained inside operations. The management which seeks to perfect the management coordination of existing practices, potentially dooms that enterprise, by excluding the innovations on which success of the undertaking depends absolutely.
[56] The frequent argument for celibacy of the clergy has often claimed the authority of the argument which I have made here. The mind shackled to what are perceived to be the immediate, and distracting personal obligations of family affairs, easily loses sight of the more pressing interests of his own immortal soul, and too easily corrupts his own conscience by susceptibility to such arguments. There are few corrupt politicians who did not, or might not have excused themselves, "I did it for the sake of my family and friends." "Go along, to get along," is a typical expression of such forms of immorality.
[57] On "indicative planning," see Jacques Cheminade, "How Economic Planning Worked Under France's Charles de Gaulle," EIR, April 16, 1993; and Cheminade, "FDR and Jean Monnet: The Battle vs. British Imperial Methods Can Be Won," EIR, June 16, 2000. The fruits of the choices made during those years can still be seen in France today, notably as in the nation's strong nuclear energy sector. Franklin Roosevelt's use of the Reconstruction Finance Corporation, by which Roosevelt guided issues of state-issued and -directed credit to reconstruct the U.S. economy, was used as the model to establish Germany's highly successful, post-World War II Kreditanstalt für Wiederaufbau (even the name being a translation of the English), as Richard Freeman discusses in his contribution to this report. The crucial issue of the state's role in securing the economic welfare of the nation was also posed by Dr. Wilhelm Lautenbach, in a plan presented to a 1931 meeting of Germany's Friedrich List Gesellschaft (see Helga Zepp-LaRouche, "The Lautenbach Plan for Economic Recovery," EIR, March 20, 1998). Lautenbach's proposal was titled "The Possibilities of Boosting Economic Activities by Means of Investment and Expansion of Credit." Had it been implemented, the economic conditions which enabled the Nazis to come to power would have been eliminated.
[58] Henry A. Kissinger, "Reflections on a Partnership: British and American Attitudes to Postwar Foreign Policy, Address in Commemoration of the Bicentenary of the Office of Foreign Secretary," May 10, 1982, Royal Institute of International Affairs (Chatham House), London. The full text is in EIR, Jan. 11, 2002.
[59] As I did during the 1950s, I take the side of Leontieff against the "ivory tower" faddists of Tjalling Koopman's Operations Research circus.
[60] Pedagogicals summarizing and assessing Gauss's argument on the matter of the complex domain, are provided for my associates and others, by Bruce Director. For a published selection, see Bruce Director, "The Division of the Circle and Gauss's Concept of the Complex Domain," 21st Century Science & Technology, Winter 2001-2002.
[61] This notion of the physical role of the complex domain is implicitly as ancient as Plato's writings on the ironies of the Five Platonic Solids, as in his Timaeus, and as emphasized in modern times by Pacioli, Leonardo da Vinci, and Kepler. The proof presented by those ancient and modern sources, pre-figured Gauss's argument in the matter of bi-quadratic residues, and show up in such important locations as the successive corrections to Euler's mistaken assumptions on prime numbers, by Dirichlet and Riemann. Both geometry and number are products of the physical universe, not abstractions imposed upon the universe; they reveal this parentage in crucial ontological paradoxes, as the cases of the Golden Section and bi-quadratic residues attest.
[62] My first published statement pushing for development of the possibility of a strategic ballistic defense based on "new physical principles," was issued during 1979. My proposal for such a policy was first issued in August 1979 as part of my campaign, against President Jimmy Carter, for the 1980 Democratic Party's U.S. Presidential nomination. Later, at the close of 1981, I suggested an exploratory discussion of my proposal to relevant circles in the Reagan Administration, and launched the campaign for that policy in February 1982, both publicly, and in my back-channel discussions with the Soviet government on this and other subjects. The formulation of the relevant segment of President Reagan's March 23, 1983 televised address, was prepared on the basis of the essential features of my earlier specifications in the back-channel discussions of Feburary 1982-February 1983.
[63] Note, as documented in my numerous earlier locations on this subject, that the original proposal for world government through terror of nuclear weapons, was made publicly by Fabian Society intelligence official H.G. Wells, in 1913. This policy was integral to the 1928 utopian alliance between Wells and Bertrand Russell, over the theses of Wells' The Open Conspiracy. This was the working hypothesis of Russell's founding of the Unification of the Sciences project, and of Russell's often-repeated proposal of September 1946, to use "preventive nuclear warfare" against the Soviet Union as the weapon of terror employed to achieve the early establishment of world government.
[64] This is one of the questions which make the exploration of the possibility of controlled matter-antimatter reactions such a fascinating topic of advanced experimental work.
[65] Cotton Mather, Some Considerations on Bills of Credit (Boston, 1691). Benjamin Franklin, Essays on General Politics, Commerce, and Political Economy (New York: Augustus M. Kelley, 1971, Reprints of Economics Classics). See also H. Graham Lowry, op. cit.
[66] Lyndon H. LaRouche, Jr., "The Demise of an Importer of Last Resort," EIR, Jan. 19, 2001.
