Monday, February 02, 2004

To satisfy the aspirations of individuals and groups, cultures and races, in peace, within a world community. 

Dear Peter,

Greenspan shows a remarkable faith in the "free" market. Some people might experience "pain" but, according to Greenspanism, all will turn out well.
He does not even touch on what must be some of the most worrying features of the American economy - features that cannot be confined, in their effects, to the American economy but that must affect us all, for good or bad. I won't run over those features again - the trade deficit, the budget deficit, the huge personal, corporate and government debt, the rundown in public infrastructure, the decline in living levels of large sections of the middle and lower income classes in the United States, the inadequacy of fixed-capital investment, the decline in savings, the poor record of profitability and so on and on.
Greenspan has a natural ambition to become a historical figure who got things right. He will, by hook or by crook, hold things up, if he can, until he retires from the scene, replete with honours.
One question is whether that will mean that, by delaying the inevitable, our dilemmas will become even more acute. There is little to encourage optimism that it won't.
It's remarkable that a man of Greenspan's experience could give such deep and almost unqualified support to an utterly "free" market. Let me be clear that I do not deny the validity of relying on the market to the extent that we can - the extent that it gives both the economic and social stability that we had, for example, in the period from 1945 to 1969. I support "flexibility" too as advantageous, again within the boundaries of that economic and social stability that will give us fair levels of living for all and opportunities for reducing the grosser degrees of inequality.
Greenspan glorifies "protection" in a way that is particularly galling to many Australians right at this moment, because the Americans have stubbornly resisted giving free access to Australian agricultural products. In other words, a free market is acceptable to the Americans only when it suits those who have the power within the American political, economic and socio-cultural system. Personally, I am glad that the Americans have stubbornly refused to modify - or modify in any substantial way - their egregious agricultural polices, because I hope that the result will be that the negotiation of a free-trade area between the US and Australia will break down. We should NOT link our own economy - and society - to a failed or at best failing economy whose faults are so deep, so widespread and so fundamental.
Taking up your point, with Greenspan now, are we "witnessing the progressive move of an Olympian to the lunatic fringe"?
It often seems like it.
When any of us becomes so deeply committed to what we have done in the past - and feel the need to justify it - we start to reason in terms that are illogical and that finally take us to the lunatic fringe. I think of an Australian Foreign Minister of fifty years ago with whom we witnessed a "progressive move ...to the lunatic fringe." Is Tony Blair moving to the lunatic fringe in his frantic need to justify going to war in Iraq? Will some members of the Bush Administration - although Bush himself looks as though he might be the smart guy, guilty but not going crazy because he was never "intellectually" involved or even, I suppose, aware?

I'm going down to Monaco on Tuesday, 3 February. My email there is -


I hope to talk again to Kurt Richebaecher who, though he tends not to be rich in solutions, does identify the problems that confront the world and more especially the US economy. He is a dedicated analyst and researcher and a formidable and perceptive critic of Greenspan. It will be interesting to hear what he has to say.
Just one final point. One of the things I meant to say above is that much of what Schumpeter wrote was valid and valuable. His book, "Capitalism, Socialism and Democracy" was one of my most valued discoveries some sixty years ago and much of it still remains valid. The idea of creative destruction lies at the heart of capitalism - indeed, at the heart of economic growth and development within whatever political or economic system. I suppose I can say that "creative destruction" is at the heart of the human character.
What we must consider, at this present juncture, however, is whether the emphasis has been too heavily on destruction and too little on drawing a full or even reasonable degree of benefit from one of the greatest periods of creative science and technology that we have ever known.
We must remember too that we should be creative, not only in scientific and technological terms, but in terms of creating progressively a society and political system that satisfies the aspirations of individuals and groups, cultures and races, in peace, within a world community. One of the most disappointing features of the last twenty years or so is that our scientific and technological achievements have brought us such little joy and that our social "sciences" have shown such limited capacity to match the dramatic forward lunge of science and technology in so many fields.

James Cumes
----- Original Message -----
From: PGS
To: James Cumes
Cc: Gary Santos ; rainesco@earthlink.net ; Qasim KZ ; William Engdahl ; Abe Killian ; Peter Kirsch ; Henry C.K. Liu ; Peter Myers ; Gavin Oughton ; Peter Wakefield Sault ; Israel Shamir ; Philev@e-znet.com ; Wolfram Graetz, Architect ; John Craig ; Arno Mong Daastoel ; Gunnar Tomasson ; David Chiang ; Stephen Zarlenga (E-mail) ; Peter G. Spengler ; jozefimrich@authorsden.com ; Basil Bolt ; Ronald Mendelsohn
Sent: Sunday, February 01, 2004 5:44 PM
Subject: Creative Self-Destruction

Dear James,

why would Alan Greenspan introduce a speech before the HM Treasury Enterprise Conference
in London with a reference to the Great Depression and Keynes`s explanations?


Following within less than two weeks after his remarks on further globalization
against the hazards of inflated dollar claims?

"With the seeming willingness of foreigners to hold progressively greater amounts
of cross-border claims against U.S. residents, at what point do net claims against
the United States become unsustainable and deficits decline?"


Having read both statements, one gets the impression that we are witnessing the
progressive move of an Olympian to the lunatic fringe - from the pillars of monetary
order into the thrills of monetary entropy.

Best regards

-----Urspr√ľngliche Nachricht-----
Von: James Cumes [mailto:cresscourt@chello.at]
Gesendet: Freitag, 30. Januar 2004 12:16
An: Gary Santos; rainesco@earthlink.net; Qasim KZ; William Engdahl; Abe Killian; Peter Kirsch; Henry C.K. Liu; Peter Myers; Gavin Oughton; Peter Wakefield Sault; Israel Shamir; Philev@e-znet.com; Wolfram Graetz, Architect; John Craig; Arno Mong Daastoel; Gunnar Tomasson; David Chiang; Stephen Zarlenga (E-mail); Peter G. Spengler; jozefimrich@authorsden.com; Basil Bolt; Ronald Mendelsohn
Betreff: The Keynesian Ways

The Keynesian Ways

In connection with the instabilities of the national and world economies, the question has been put to me -

"Specifically, what was wrong with the old ways of the 'Keynesians'?"

Their trouble was that, by the end of the 1960s they had succeeded far too well. They had transformed economies and, with it, societies. The economy and society that I knew in the 1960s and that was still going from strength to strength, was in utter contrast - it was whole worlds away - from the economy and society in which I had grown up.
Where the Keynesians "failed" was in not being able to convince those who ruled our economies and societies in the late 1960s that this new Keynesian economy and society could not be maintained in good working order by the worn-out economic dogmas of the past.
You see this application of old ideas in the policies of the Nixon Administration and the Fed in and after 1969.
The policies then applied only made things worse.
The anti-Keynesians and those who wanted to spread their own "remedies" then leapt at the opportunity to blame, not the success of Keynesianism and the muddleheaded policies mistakenly undertaken to sustain it, but Keynesianism itself.
The accusation of Keynesian "guilt" was a perfect strategy by those who had seen their interests damaged by everything that had happened to create a more stable economy, with growth, from the New Deal onwards.
It was a perfect strategy for the Hayeks and those who had chosen "The Road to Serfdom" as their bible.
And it caught on - splendidly - throughout the world.
The system that had saved the world, in economic and social terms, after WW2, was condemned as the fount of all our troubles.
Who stood up to say otherwise?
I know of very few who did. Indeed I cannot recall that, in the crucial years of 1969 and afterwards, anyone really put the case for Keynesian policies effectively - and they still do not.
I did put that case right from the start - just how effectively is for others to judge. At that time and afterwards, I regretted that Keynes was no longer with us. If he had been, I said, he would have seen more clearly than most - if not all - just what changes - highly beneficial to world economic, social and political stability - were needed.
He was no longer alive and there was no one of his quality to take his place.
The drudges of the "science" of economics were left to command the scene alone.
We see the result today in economic instability, dramatic social inequalities, strategic uncertainties and the world's most powerful political units without any real clues about where to go.
Just as in the 1930s, there's now a feeling that we must somehow hold on and, like Mr Micawber, hope that something will turn up.
We'll be extraordinarily lucky if it does.
Might I just add one or two thoughts?
There is still - thirty years after - some tendency to blame the "oil shock" of 1973 for the inflationary and other problems of the period.
That is of course a nonsense. The 1973 oil crisis did not make things any better. On the contrary, it accentuated our problems. But our problems with inflation, stability, growth had started at least four years before. They were well into their stride before the oil crisis hit the fan.
The other thing is that, for thirty years, economic theory and policy have consisted largely of a succession of catch-cries.
We've had money-supply and supplyside, the free market and privatisation, free trade and globalisation....
There is no need to condemn the ideas behind the catchcries completely and unequivocally.
For example, the idea that some nationalised industries or activities should be "privatised" could make sense. A trend to nationalise just about everything - if it existed - needed to be stopped before the obvious advantages of a robust private-enterprise system were destroyed.
But weak minds always grab hold of a simple idea and race off recklessly with it.
Once the idea of "privatisation" got some currency, every weak mind grabbed hold of it - and the strong-minded anti-Keynesians saw the glittering gains that it could mean for them.
Privatisation became a cult and has reinforced the other features that have bred instability, low growth, inequality and the rest.
In the world's number one economy - at the moment number one; others are catching up - a particular danger has arisen from privatisation of security and defence-related industries. So the wheel is perhaps coming full circle. From the threat that nationalisation would convert a private-enterprise economy into a centrally controlled, socialist economy, we are now reaching to the point at which a too-private economy might be or is already being transformed into a corporate/fascist economy - and a fascist political and strategic system.
The catchcry of "no new taxes" expressed so succinctly and with such worldwide impact by George Bush senior, preceded him in the "Voodoo economics" - as Bush himself called it - of the supplysiders and Reagan. Again, there was an element of validity in the concept of reinforcing the supplyside; but it got hopelessly distorted in the way it was implemented. Instead of leading us back to a well-managed Keynesianism, it led us into the financial instabilities that are becoming increasingly apparent in the second Bush Administration.
So we come back to the question, "What was wrong with the old ways of the 'Keynesians'?"
The answer is that their ways were, in practice and with proof over a quarter of a century, the best that we managed to find during the twentieth century. They lifted us out of the despair of the 1930s after fighting a war that was, in part at least, a product of that despair.
However, like all systems or policies or whatever, they themselves brought about changes of an economic, social and political kind that, after a period, called for modifications. If we want to be precise, that point was reached round about 1969.
The fundamentals of Keynesianism remained valid; what was needed was to adapt them to the new circumstances they had created.
Now, after thirty years of wandering in the wilderness, we still need what would be, fundamentally, Keynesian approaches and Keynesian policies. They would be based, essentially, on the same means of promoting and maintaining investment, productivity and production, as those we depended on in the 1945-70 period. However, we would need to implement those policies in the light of the economic and financial, social, political and strategic situation as it exists right now in 2004.
We should not look for another catchcry - Keynesianism instead of monetarism or privatisation or globalisation, but a rounded consideration of what economic policies are needed to give us stability and growth - prosperity and more equality - a planet at peace that looks wisely at its own health and those who are sustained by it.
This is not an impossible task; but, for thirty years and more, we have been impossibly inept at going about it.

James Cumes

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