Archive for January, 2008

THE USA CONFUSES PLUTONOMY AND ECONOMY AND ENDS WITH PLUTOCRACY. WHY THE CLINTON LEGACY IS PART OF THE PLUTOCRATIC PROBLEM, HAVING BEEN ALL ABOUT MONEY, AND WAR, NOT ECONOMY AND JUSTICE.

January 27, 2008

REELECTING CLINTONS WILL ONLY ENCOURAGE THE PLUTOCRACY SOME MORE. HOW TO MAKE MONEY FROM PEOPLE’S FLESH, AND OTHER RECENT US SUCCESS STORIES.


Abstract: The USA used to have an economy (say in 1940). Now it has a plutonomy led by a plutocracy, and it has not been good for the majority of people on the planet, including average US citizens, who are hurt and mystified. In particular the plutonomy created HMOs, making money from people’s lives. The most extraordinary con job may have been the Clintons’ presidency, supposedly a democratic twin headed monster president, who prepared, helped and instigated many of the errancies the G. W. Bush presidency would soon more thoroughly implement. To bring change to the USA means to get back to a real economy, and industry, away from just restricting the concept of economy to a strict plutonomy, a transfer of wealth from the poor to the likes of the Clintons and their friends.

***

Economy means house-management (oikos-nomos). The meaning was distinguished by philosophers, 24 centuries ago: a country is viewed as a house, and it has to be managed. In a house, there are many things to do, and the power of the purse is just one of them. Thus economy does not mean, and should never have been made to mean, just money-management. That later concept translates as pluto-nomos (in English, plutonomy). The US obsession with GDP, and spending money, and stimulating the population by throwing money, games and war at it, are manifestations of a confusion between economy and plutonomy (which was voluntary imposed by the Rich and some greedy little helpers in academia).

If one confuses plutonomy and economy one ends quickly with plutocracy (money-power, the rule of the Rich), because if one reduces the economy to money management, who else but those who have the money to manage the house?

One can argue that the USA has been officially a plutonomy ever since HMOs, the “Health Maintenance Organizations”, were created in 1973 by president Richard “I-am-not-a-crook” Nixon (as he prepared to flee the White House). It was an extraordinarily bold idea: HOW TO MAKE (a lot of) MONEY FROM THE SICK AND DYING.

The HMO Act provided “Federal financial assistance” in setting up HMOs. It’s insulting to the most elementary decency that the neocons scream when they hear of Federal help in setting a national health care system. Well, true, they already have one, and it’s perfect for them, and they don’t want one which would serve the majority of people. Simply, the existing national health care system set up by Nixon is a PLUTONOMIC HEALTH CARE, to make the Rich richer. Neocons are paid, very well, to scream inanities. So scream they do, at their masters’ command.

The US plutonomic health care achieves great profits, by costing MORE THAN TWICE per person, in percentage of GDP, of what the French health care system costs. The difference in percentage is mostly money going to the Rich, an official proof that health care has been corrupted by the profit motive in the USA to the point it’s more than half of it (it’s more than half, because the French system also makes money, but tightly reined in).

Since the US system looks for profits, not health care, far from being the best in the world (as French health care is, followed by the Italian one), it is number 37, and sinking, well below all of Western Europe, Oman, Singapore, Chile, the UAE, Columbia, Morocco, Saudi Arabia, Israel, Dominica, Costa Rica, etc. The US plutonomic health care puts the average US citizen or company at a great disadvantage, while transferring wealth to the Rich, ever more. Its only reason for being is that transfer of wealth, and it symbolizes the fact that the USA is transforming its economy into a plutocracy, rather than into anything else.

The Rich have found a trick to enrich themselves more, called the US heath care system, so, since they apparently have all the political levers of power in their hands, they activate them, and impose it on the carefully baffled population.

During their eight years in power, the “democratic” Clintons did not change the economy in any fundamental way (in particular, they did not undo the HMO system Nixon had built). If anything, the average citizen saw conditions get worse (the few economic averages looking better did so only because the Rich (in particular, the bond traders dear to Clinton) was getting richer). The only thing the Clintons did was to talk, big time. They talked ecology, and did strictly NOTHING (putting ultimately the entire US industry, economy and society at a disadvantage, while wrecking the planet). Of course, some of the Clinton trash talking was first class: Clinton, a huge white guy, with a white wife and a white daughter, even succeeded to persuade people he was the “first black US president”. With persuasion like that, Clinton was able to go to war with Iraq, and make everybody believe G.W. Bush started it.

As a relaxing aside, let’s notice in passing that Citigroup, the largest US bank, most struck by the credit crisis, used to wax, lyrical, on the concept of “plutonomy”. In 2006, Citigroup insisted that average citizens did not matter at all: like ants, although massive and numerous, they could be neglected.
Big on the board of Citigroup is that Pluto expert, Bob Rubin, ex-Clinton Treasury Chief, great benefactor of bond traders, and big Hillary Clinton adviser.

Small world, that plutonomy, and that is the entire problem of the USA. Mr. Rubin is apparently one of these characters symbolic of what Hillary Clinton calls her “35 years of experience”. “35 years of experience” at what? This sort of financial engineering? “35 years of experience” spreading a spider web in the center of the Plutonomy? Thirty-five years of experience at becoming super rich quick by peddling influences? This sort of experience, US soldiers have been dying for.

The war against Iraq was extended under Bush, but it started, and went on for years, under Clinton (with a blockade and air war). The Clintons have been neocons in disguise. Strident neocons claim to hate Clintons, because they do not want to reveal their secret friendship, they are all more powerful that way. The sub prime crisis is basically a con job (it makes sense that neocons will be cons). Facing the destruction of his bank, the largest in the USA, Citigroup, a few weeks ago, what did Rubin do? Well, he nominated a new CEO, and stayed in command.

Maybe Rubin will be soon back at the helm of the US economy, telling H. Clinton what to do, as he did with her husband. When B. Clinton learned from the plutocrats what he would be doing as president, back in 1992, he said to Rubin, then the head of Goldman Sachs (a huge investment house for the hyper rich): “What you are telling me is that I will be doing what fu…ing bond traders tell me to do?”. Well, he did, making him still one more genius of the plutonomy. The plutonomy loves election where both candidates are on its side.

In countries were there is a real economy, not a plutonomy, the house has NOT been reduced to money. In Europe, politicians are struggling to manage the house in a way the restive population will tolerate, and the population attaches more value to values rather than just money. Hence Europe conducts much more of an industrial policy than the US. The idea is to preserve high added value jobs inside Europe. This is fully compatible with the world’s open market: the European Union is arguably more open to the world economy than the USA (look at Foreign Direct Investment, or the Open Sky Treaty).

The US plutonomy does not care about jobs inside, only the money it makes. That is best made outside. The US plutonomy has installed the factories overseas, and needs the US customer just to pump the system. No more US customer, no more pump. From the plutonomic point of view, as Citigroup explained, the US citizen is just a device to pump the pump. In the USA, the population is not restive, thus the plutonomy can reign, unhindered.

The US population used to be different: May Day, Labor Day in the rest of the planet, celebrates grave labor struggles which occurred in the USA in the 19C. Manipulations by the plutonomy have turned that struggling spirit around: massive immigration, tough legal enforcement, media, historical, religious stupidities have all conspired to make US citizens docile… Ex-foreigners, like the billionaire Murdoch (Fox News, Wall Street Journal, etc…), an Australian heir who became a billionaire in the United Kingdom, by not paying much taxes, while helping Ms. Thatcher’s own plutonomic revolution by media manipulations, helped to throw the US army straight into Iraq.

So where does the idea of invading Iraq sits in this overall scheme? To understand the motivation of US leaders, maybe we should backtrack a bit, and wonder why, as Athens was engaged in war against Sparta, she decided to attack Syracuse. The answer, of course is hubris: overbearing arrogance, exaggerated, maddening, demented pride or presumption, leading to ill advised acts, like the war of choice of Athens against Syracuse. We are all familiar with the reasoning: there was a bloody sadistic tyrant, the great democracy needed to rescue the oppressed, etc… Athens did not thoroughly compute, anymore than the USA did, what could happen if she lost the war. Well, the Athenian army got broken, and Athens ruined. Next, Athens was not fighting by choice, but for survival.

If a democracy such as Athens can be rendered mad with hubris, a fortiori so for a plutonomy. Hubris starts when what is outrageous comes to be considered normal, and even a moral right. While the United States represents less than 5% of the world’s population, over 25% of the prisoners around the world are housed in the US prison system, the largest number of any country. What does the US plutonomic propaganda says about this? “The USA is the country of freedom.” With mental processes like this, why not being addicted to oil, consumerism, credit and war?

US neocons wear their name proudly (con means “swindle, fraud, dupe”). They boast the USA will be like Rome, imposing its might on the world. But two remarks are in order: first Rome decayed quickly into mental fascism (aka “totalitarianism”), and had no competitors as she did (whereas the EU is now more powerful than the US in all ways, but the sword). Secondly, Rome was very careful, and tried to engage only in wars which were justified, profitable, necessary, and winnable (it was reproached to Iulius Caesar to have breached these principles of precaution, and to have committed war crimes throughout his campaigns in Gaul, leading the Roman Senate to illegally withdraw his command, which precipitated Caesar’s crossing of the Rubicon.)

It’s high time for the US population to look outside of the hypnotizing show the plutonomy has been offering to them. That way, Obama’s candidacy is encouraging, because Obama has a much greater experience around the world, outside of the plutonomy, rather than how to make huge money from relationships by peddling influence (the way Hillary Clinton’s big picture makes manifest). Among the other top candidates, the Clinton and Mc Cain have crucially collaborated with G. W.  Bush, in some of his worst acts (in particular, instigating and supporting the Iraq war).

The Clintons now run as friends of the people. But in truth they are friends of the plutonomy and the plutocracy. They did not engineer any significant changes during their eight year rule, in striking contrast with very active republican presidents such as “I-am-not-a-crook” Nixon or Reagan, who were very busy organizing their counter revolutions with drastic measures (for example, to save on the cost of mental hospitals, Reagan freed the mentally insane). Whereas the Clintons could do nothing drastic and positive, Nixon and Reagan never ran out of drastic negatives to implement.

The Clintons thus reinforced the plutonomy: GDP, and its “productivity” augmented, which means, considering the absence of any drastic change in which the economy was organized, that the WASTE did go up (that’s a flaw of the concept of GDP). Interest rates went down, true, and that kept the bond traders happy, as Clinton had been ordered to do if he wanted to be reelected. So the Rich could leverage more, get richer, and the internet bubble was engineered. The Clintons were well rewarded financially, and that made them happy too.

The Clintons were, and are, all about money: they did not build a bridge, or a hospital, or a high speed train line, they did not help the ecology, or US industry. Money got bigger, and the poor smaller. Then, of course, G. W. Bush came, and it got to be more of the same, just worse… Spending is all what a plutonomy knows. Spending alone does not make an intelligent economy. Verily, spending alone does not an economy make.

Spending alone does not make a war just. If the USA wants a beautiful economy, and a war it can win, and worth winning, it’s time to gather big brains, not just big bucks.

Patrice Ayme,
Tyranosopher.
Patriceayme.com

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DEMOCRACIES THEMSELVES CAN GET BURNED, WHEN THEY PLAY WITH FIRE: WHY THE INVASION OF IRAQ WAS A MISTAKE, AND HOW TO GET OUT.

January 21, 2008

SOMETIMES FASCISM HAS ITS REASONS THAT DEMOCRACIES HAVE NOT. 

The New York Times’ Roger Cohen wonders: “Does Bush’s fraudulent, blunder-ridden rush to war matter more than the prizing of 26 million human beings from a sadistic tyrant who modeled himself on Hitler and Stalin?” (New York Times, January 17, 2008).

Numerous are the debatable points underlying this statement.

Before getting in the meat of the matter, let’s observe that the verb “to prize”, from the French prendre and Latin prehendere means: 1. Something seized by force or taken as booty, especially an enemy ship and its cargo captured at sea during wartime. 2. The act of seizing; capture.

As we will see below, Anglo-Saxons like to capture Iraq, indeed, as Mr. Cohen puts it so eloquently.

After the catastrophe in Iraq, the Bush administration changed tack, and accepted to negotiate with Libya, North Korea, and Iran. In all these cases, so far, so good: they all dropped their nuclear weapons programs.

There were reasons to the way Iraq was, and they were not restricted to that one man, Saddam Hussein. One should not exaggerate the importance of “tyrants”. Certainly, when Rome was completely rotten under Nero, it was not the fault of just Nero himself. Actually, once the Roman Senate ordered Nero’s execution, and the emperor killed himself, the regime went on just as before.

When dealing with an antagonistic regime, one often deals with more than one man, and the man at the top is not necessarily the worst. In July 2007, Muammar Khadaffi agreed, as a personal favor to the spouse of the French president, to facilitate the release 5 Bulgarian nurses and a doctor maliciously condemned to death. Unfortunately, as the lady was sitting in the presidential jet at the airport, other officials in the Libyan administration refused to let them go. Cecilia Sarkozy then suggested it was high time for the French secret service agents of her security detail “to show what they had in their pants”. The French agents got off the plane, went to the Libyan prison, fired their guns, destroyed locks, freed the Bulgarians, and everybody happily flew back to Sofia, French flags flying. Morality: never underestimate the seduction of speech, and truth, even with “tyrants”, and do use appropriate amounts of force, as authorized by the discourse agreed upon prior. Just as Khadaffi has recently cooperated with the Western powers, Saddam Hussein was cooperating with the UN in 2002/2003. And just as in Libya, the political system in Iraq (the Baath party) was a dam against the raw Quran. A war of choice is always bad, of course. And so it is for fascism. Fascism is bad when it is a fascism of choice. But often, as we will see, only then.

It is often assumed that Hitler and Stalin were principals in German and Russian fascism, and it superficially looks so. Superficiality can be misleading, though: neither of these tyrannical creatures really instigated the culture of fascism they were exposed to in their youth. Having learned well, they went beyond. They did not create the basic ideas, emotions and ways of behaving of their realms. They just amplified them.

The Prussian General staff of 1914 was culprit of the exact same charges that were made against their spiritual children, the Nazis, in 1945. In essence those charges were war of aggression and militarily instigated war crimes. When fascists in Germany saw that the Prussian generals of 1914 had not been subjected to universal reprobation, and hanged, they proceeded to accuse a city in France, west of Paris, of the crimes of the First World War, and decided to do the same as their distinguished predecessors, in the apparent hope that more would be different. It was. Stalin learned all his tricks from Lenin, and then bettered him, so to speak.

Both of these historical deep contexts generally get the silent treatment, because shallow historians prefer short range versions of causality which serve better the immense intellectual following Nazism and Stalinism enjoyed. Many people viewed as top intellectuals and academics were, curious to say, fanatical groupies of fascism (Heidegger, Sartre and many renown French thinkers). To this day, many intellectuals repeat word for word arguments invented by Hitler and Stalin (and which are still just as wrong as when they were first uttered).

This personality cult, which makes Hitler and Stalin more important than they were, exonerated the cultures they came from, allowing those to keep on thriving. It also made the concept of the personality cult bigger than it deserves. Although it’s true that personality cult is at the heart of fascism, since fascism is the surrender of the many to the one, the deeper question is: why did the dominant cultures in Germany and Russia become so friendly to fascism? Well, history provides the answer. Clearly, for example, Luther and Ivan the Terrible were forerunners of Hitler and Stalin (Ivan had more excuses than Luther, by the way). Exhibit a few more examples like these, and a thick maze of entangled causalities starts to weave historical substance into reason. Hitler did to the Jews what Luther called for. All those who revere Luther are accomplices of Auschwitz, knowingly or not, whether they like it or not. When Luther was made king, that’s called Hitler.

In the case of Iraq, the “sadistic tyrant” aspect of Saddam Hussein is not most important. A quick look at Saddam’s life shows that becoming a sadistic tyrant was all too natural: from early on, he was living in a very bloody atmosphere. Any leader of Iraq would have been a “tyrant”, more or less sadistic. The real question is why is fascism so prevalent in Iraq? Do some forms of fascism in Iraq have excuses?

First of all, Iraq is a Muslim country, and the Quran is more than fascist friendly. The Quran ORDERS the believers to obey absolutely those in power as long as they are Muslim (the Quran orders other things, besides that fascist principle, of course, but so did Himmler; Himmler recommended to play beautiful classical German music at night, after killing Jews all day long). Since the Quran is so short and repetitive, many of the Muslim priests know about this, and preach it . Yes, they don’t like to be called priests, that’s part of their war against the West, but that’s what they are. And that is a related point: the Quran is anti-Western in a fundamental way. It was concocted by desert dwellers against the huge proto Western civilizations which threatened them, the Greco-Roman and the Persian. Muhammad personally led a giant army into the Roman empire, in a raid towards Palaestina (the Greco-Roman occupied and half-destroyed Israel). Thus a lot of Saddam’s anti-Western activities were in line with the Quran’s fascist sense.

A closer inspection of Iraqi laws under Saddam, though, shows that a lot of his anti-Western rhetoric may have been more of a smoke screen than real substance: de facto, as Saddam himself pointed out, many of his laws were good, pro-western laws (in contrast with Quranic, anti-western “laws”). The status of women and Christians in Saddam’s Iraq, for example, was much better than under raw Quranic Islam (and has faltered since the USA installed its mess in Iraq).

So sure, Saddam was a fascist dictator, and so were Stalin and Hitler. But hundreds of millions of people followed the later two not just because they were terrorized, but because it was hip to share their ideas. Most Germans were not really terrorized by the Gestapo, they had been coaxed and induced (in part by media manipulation, but mostly at school) to think in a Nazi way. Stalin and Hitler were political adaptations of deeply fascist cultures they grew in (the most obvious of these perenial fascist mental structures being anti-Judaism, a stapple of Christianity that the deeply Catholic Hitler and the seminarist Stalin learned early on).

Was some of Saddam’s fascism justified? After all, there were no Islamist suicide bombers in Saddam’s Iraq. One of Saddam’s right hand men was a Christian (Tariq Aziz). Women were not has subjected to sexism than in many other Arab countries, and so on.

Let me explain. Let’s reconsider Stalin rather than Saddam. It feels good to criticize the monster Stalin, but, as he put it: “we must industrialize in ten years or be annihilated.” Without Stalin’s extremely fascist and homicidal methods of forced industrialization in the twenties and thirties and the demoniac way he fought WW II, Russia, as a population, may have been annihilated by the Nazis (Putin has noticed this). Stalinism, viewed that way, becomes a mixed bag. Even the USA rejoiced that its pet Stalin monster, well fed and supported by the American way of war, killed up to 50 million Russians in his successful global effort against Germany.

Another example of benevolent fascism: when Churchill became PM, he went all out against Hitler too. As France lost a crucial battle, and got invaded, Churchill proposed to the French National Assembly an instant union of France and Great Britain as one country (that would have allowed France not to surrender; the idiotic French PM, ill advised by his anti-British mistress, refused). Not to be bowed, he soon ordered the destruction of the French fleet, over the virulent objections of the British Navy, who was not keen to assassinate her dear friends and colleagues. But that was Churchill’s point entirely: he wanted to immolate a lot of friends, to encourage the others. His logic would have been familiar to Hitler or Stalin, and was an old British tradition (as Voltaire noticed). Finally, secretly, the British PM gave orders thoroughly violating the Geneva Conventions to make sure that if any Nazis landed erroneously in England, they would wallop in poison gas, drink out of poisoned water works, in burning cities. Even Hitler did not fight that dirty in 1945, but Churchill would have. Churchill was of the opinion that fascism in the ultimate defense of democracy was no crime. He was 100% right. It’s the oldest tradition: primates evolved that way. Fascism was always the ultimate weapon of the savannah dwelling social primate.

So let’s backtrack, and this is not just about Saddam, it is pertinent to the opinion one should have of the various kings and emirs (Morrocco, Saudi, Jordan, UAE, Oman) and various presidents (Algeria, Tunisia, Egypt) and leaders (Libya. Pakistan), etc… All over the Middle Earth the anti-Western, fascist culture of the Quran, has bathed the whole place for more than a millennium in its deleterious atmosphere. OK, a few pretty ideas therein, but also some extremely poisonous ones, and it does not take much arsenic to spoil the soup. By being so anti-Western, and anti-Jew, and anti-science, and anti-law, and anti-progress, and anti-secular, and anti-female, and pro-war and pro-fascist, the Quran ended spawning an anti-civilizational culture (and it shows: the area of the world which was the richest, and most advanced, became the poorest, and most obscure, all on its own: invasions came later). This is the fundamental problem of Iraq, and of a lot of the Middle Earth. Only fascism can destroy fascism, so the most enlightened leaders of Quranic lands have to use enough fascism to keep the Quranists in control (since the apocalyptic Quran is so friendly to the outright destruction of “all cities”, all exalted warriors and crazed maniacs approve of it highly and coagulate below its banner, making them a potentially lethal nuisance, and requiring, for survival’s sake, to crack down on them enough to keep them in their burrows).

Of course oil vultures from the West have been able to use the civilizational disarray and fragility the Quran caused to their advantage. Anglo-Saxons imperialists, in particular, spent a goodly part of the 20C occupying Iraq, and killing Iraqis, to suck the oil out, under various pretexts. It’s not the first time the Anglo-Saxons come and “prize” millions of Iraqis from the brutal tyrant of the moment; it was done before, nearly a century ago, in the twenties, by the Brits. Of course, a few years later, rebellious Iraqis, hoping for deliverance, expressed their love for German fascists. Guess what? The Brits swooped back again, and “prized” the Iraqis again! After killing all the Jews in Israel, Hitler’s army was going to”prize” Iraq too, and deliver it from its British tyrant (those plans came to nought after defeats at Bir Hakeim and Al Alamein).

Conclusion: The outright military assault of Iraq, and the destruction of all its secular civil society by the USA was not just a crime, but a major mistake. By rushing into a war of aggression, with the “Neoconservatives” screaming from every US media outlet that Iraqi oil would pay for the war, the USA violated massively the Geneva Conventions. It’s illegal to attack countries without a casus belli and it’s even more illegal to make them pay for it. Moreover, it’s unwise: Prussia did this to France in 1871, and this story ended, 74 years later with the total complete and irremediable annihilation of Prussia. Look at a map: Prussia is nowhere to be found.

What happened there? Bismarck’s fascism was boosted (to Nietzsche’s and Bismarck’s dismay) by the next generation of Prussiano-German fanatics (the ones who ambushed the world with World War I). The next generation after that brought the Nazis. The danger is indeed that, once fascism is engaged, it’s self-amplifying, from one generation of idiots brainwashing the next generation, of even greater, more hubristic idiots. And it can happen to democracies, lest they take care.

Just as the world turned its back on the increasing Prussiano-German fascism, after 1871, the world turned its back on the USA after 2003. The dollar collapsed, and the world has increasingly been unable to take the US seriously, except as a polluting nuisance melting icecaps. US leaders were taught the hard way that making Iraq pay for its invasion by the US was not an option; so the US treasure drained in the sands. Bush’s war has turned out to be a diplomatic, economic, financial, intellectual and moral disaster for the USA. So as not to persist along the erroneous schemes of Prussia in 1871, it’s urgent to give the Iraqi baby to the United Nations ASAP (just ask France how it’s done). Since this sounds beyond the intellectual reach of the Bush administration, another US government will have to implement it.

As far as Iraq is concerned, there is good hope that, once the UN is nominally in command, with US troops executing what would have become UN policy, with the help of all of the planet’s armed forces, it could be stabilized. The United Nations has, potentially, infinite resources, and it has never wittingly, or, at least, for long, violated its own charter, which incarnates Civilization, that very Civilization with a capital C, that the Quran was written to destroy. Incidentally, the same method would help Afghanistan. The immense physical and mental power of the UN may allow to install secular democracy in Iraq. The USA, by itself, will not.
Patrice Ayme,
Tyranosopher.

WHY THE USA CAN’T EXPORT ITSELF OUT OF ECONOMIC TROUBLE, AND OUGHT NOT TO TRY.

January 13, 2008

Many US economists have suggested that the US could compensate faltering US demand by increasing exports, forcefully creating a salvational imbalance on the back of foreign lands. This was tried before. It caused the Great Depression.

In the twenties, US industry had gone into an overproduction bubble. The sum of all markets had become too small for US production. The ingenious US Senate found a solution: preventing aliens industrialists from selling products in the USA. Thus, those apprentice sorcerers-economists thought they would increase the size of the market inside the USA, for US products. And it worked! For about two months.

The ressentful aliens spoiled it all. They retaliated in kind, rising their own custom duties sky high. Suddenly the export market for US production disappeared, and what was lost outside was larger than what had been gained inside.

This caused catastrophic damage to the US economy, because the USA was the world’s largest exporter (just as it is now).

US industry had to fire workers massively. Those, in turn, had to stop buying US products, and US production had to be decreased further, leading to ever more firings, and ever more decrease of production. (Then banks started to fail, and the Fed, instead of providing liquidity, did nothing of the sort, etc…)

Lesson?

Production should be in balance with consumption, and this is a world phenomenon, and to achieve this:
1) Let the local market adjust. And, if that is not enough:
2) Provide or restrict liquidity in a timely manner.

In the early thirties, the Fed viewed its role solely as “to take the punch bowl away when the party gets going”. When people are dying of thirst, as they were in the early thirties, that’s a mistake (that the Fed did, then).

Fast forward 70 years.

Greenspan provided liquidity after 1996 in an already overheated US economy. Apparently for Greenspan, the job of the Fed was to fill the punch bowl some more when the partygoers were already drunk. This led to the Internet Bubble. When that imploded on its own, Greenspan provided even more liquidity, creating the housing Bubble, and when that started to falter, gave it further juice with a Credit Bubble.

In a country such as France, the saving rate of families is 15%. In the USA, thanks to the Credit Bubble, it’s negative. In other words, US citizens are lending to each other money they do not have.

The US is a (supposedly) capitalist country which has run out of capital (everywhere one looks in the USA, capital investment is lacking, be it for bridges, trains, airliners, healthcare, the auto industry. Not one refinery has been built in ages, and they are not yet equipped with scrubbers to eliminate sulfur in diesel fuel. Most stuff is built in China. In California, the governor is talking about immediately cutting the education budget by 10%, releasing 22,000 convicts, etc… It’s a house of IOUs built on local property taxes, soon to collapse with housing and credit.

The proposed salvation has been to relaunch exports, because, in aggregate, US citizens do not have money to purchase anything without getting deeper in debt from … foreigners.

To give some more historical perspective: the French government of Louis XVI, having ruinously liberated the British American colonies from Great Britain, spent 45% of the government’s budget servicing its debt. This caused directly the French revolution (which occured within a few weeks of the US Constitution and first presidency, when the French General Assembly, unable to solve the budget crisis, proclaimed it was going to write a Constitution instead, just like in America).

Economists who propose to solve the US socioeconomic crisis by exporting are proposing something very similar to what was proposed by the US Senate in 1930: to EXPORT THE PROBLEM.

They are proposing for US citizens, paid in a debased currency, to work for other countries. Unfortunately those other countries are aware that having an industry is not just a question of having an economy, but more fundamentally, is a strategic necessity. One cannot defend oneself if one does not have the means to make tools and weapons. Europeans and various Asians are fully cognizant that way.

The long view: France got strong relative to Spain in the 17C and 18C, by manufacturing most of what Spain needed. In exchange, the Spanish dictatorship gave gold. All serious European economists have got to remember this, and it’s unlikely they will let the Euro play the role of gold, Europe that of Spain, and the USA masquerade as the new France, maufacturing everything for Europe.

France, indeed, has the most diverse industrial base in the world because she has a very long military memory. Faced with a total US embargo in 1939, whereas the Nazis were totally helped by US industry, France could depend only on herself. So, from drugs, to computer chips, to thermonuclear fusion, rockets, helicopters, planes to electronic skis, to telecommunications, the French do it all, state of the art. This strategic methodology is imitated by all ambitious countries, to the best of their abilities. Those countries are not going to sit and watch their industries die as the USA invade them with products produced with a debased currency. China and Japan have learned their lesson in the 19C. The first to scream will be France, and, backed up by the gigantic Europe Union, and its domesticated bear, and friendly panda, she has the means to stop that latest US non sense.

Thus it’s unlikely that the USA will be anymore successful in an economic war on the world in 2008 than it was in 1928. The result will be the same: retaliation. In 1930, the USA was ruined by the economic backlash. So would it in 2010.

A one way US export “boom” would be an aggression against the world. It would have much in common with the aggression in Iraq, namely ignoring how other people feel, how they think, and how similar their problems are. And trying, once again, to use force onto others, instead of using discomfort onto the USA, to solve problems the US itself created to itself. The US socioeconomic problems cannot be exported, they have to be solved at home.

Patrice Ayme
 

ENERGY IS THE FUNDAMENTAL UNIT OF ECONOMICS.

January 3, 2008

 


ECONOMY WILL REACH MATURITY AS A SCIENCE WHEN IT IS MEASURED BY ITS TRUE FUNDAMENT, ENERGY.
(12/23/07)

Abstract: Come to think of it, bare bones economics is all about energy management in the house. This means that not anything goes, and it also means that energy should be the store of value and computational conduit of economics. In one word: its currency. Energy economics ought to be the first order of economics. Behavioral/Neuroeconomics should only be a second order, corrective term (although, fundamentally, it also depends upon energy!). Thus considered, economics will turn out to be, in important ways, more fundamental and mentally powerful than a substantial part of physics (its Lagrangians being more free!). Economics is all about energy, it’s time to face the fact, especially in the context of finite planetary ressources; energy grounded economics will allow for a sorely needed more precise and thorough accounting, in the light of what we wnat to accomplish on this planet.

SHOULD THE ECONOMY STILL BE MEASURED WITH SHINY SHELLS?

Mathematics is only very refined, local, logics: it’s not God. It’s best applied to disciplines equipped with units that mean something objective (i.e., which can be experimentally ascertained without depending on human good will). Otherwise, it’s garbage in, garbage out.

Instead, the fundamental unit of most of economics is “money”, a man made convention, as far from objectivity as one can get; the Sovereign can change it at will. Thus economic theory is pretty much reduced to what the Sovereign wants it to be. We don’t need books to tell us that. Example: Stalin killed (dozens of) millions as he forcefully industrialized the USSR; but then this economic war machine was able to defeat Nazism.

In most places, money started with marine shells (which were hard to get in most places, so represented a store of value). We will argue that the time has come to boldly go beyond that. Instead of self indulgently basking in anthropocentric economics, the time has come for economics to get a unit and so become a natural science.

MONEY CAN BE DILUTED, BUT IT CAN ALSO BE LEVERAGED:

Representing worth with money has been known, at least since 3C Rome, as highly problematic. Most of Roman money was affected with devaluation. Roman money had become increasingly a convention (the coins contained ever less precious metals, ever more copper, and thus their nominal value were ever higher relative to their real value). The weakening central state was unable to enforce the nominal value of said convention as the entire economic activity of international trade shriveled (although the Roman Solidus, solidly made of pure gold, was not devaluating)). By the 13C the early Yuan (Mongol) had established a very fierce state in China, and its associated paper currency was just as strong (the Mongols (just like Roosevelt later) forbid the use of precious metals for currency). But when war came (against the Ming), it was paid with paper money inflation (the Ming won and did away with paper currency entirely).

As defined in Wikipedia, economics studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law, or management), hence “rules of the house(hold).” Adam Smith, in the “Wealth of Nations” (1776) proposed that economics had to do with providing a “revenue or product … to enrich both people and sovereign”. There had been some debate about what “product” consisted of. Early French “physiocrates” erroneously viewed only agricultural production as the only product which mattered. The main one, by formation a surgeon, a peasant at heart, was a very close adviser to Louis XV. In the seven year world war against France of 1756, an economically outmatched Great Britain borrowed massively, with financial engineering, to build up her Navy and Army (and Prussia besides). Consecutively, Britain won, and used ever more financial engineering towards massive industrialization, leaving the French peasants behind (relatively speaking…). Smith to some extent expressed what the latest facts had already proven: new technology works better than nostalgia.

After Smith, “product” came to mean money. it was progress then (as the British victory demonstrated). Economical theory stayed stuck in this context during the next two centuries. Twentieth Century macroeconomics uses money as a measure, making economics into a social science, because money is, after all, a social convention imposed by force.

We will argue that it is high time to become a bit more scientific, and free economics from money, just as, after Smith, it got freed from agriculture.

THE ECONOMY IS MORE THAN MONEY: WHILST THE COINAGE WITHERED, THE ECONOMY THRIVED!

As Constantinople could not find any way out of its shrinking fascist sandbox, a lot of the Greco-Roman economy tied to money slowly died in Occident. The rest of the occidental economy somehow survived. This shows that the currency, as usually conceived of, is less fundamental than the economy itself: the death of the former may not kill the later. This is not surprising. But what happened next during the Dark Ages is. In a further blow for usual economics theory (which puts coinage front and center), a spectacular retournement de situation occurred.

Not only the post Roman economy did not die when the Roman currency and administration did, but it actually thrived (full and somewhat irrelevant disclosure: by 800 CE, the Franks used “argent” (silver) as currency: they had reestablished a coinage; the fact remains that their economy progressed spectacularly, and for the better, without much of a currency). It is as if, far from impeding the economy, the penury of coinage may even have facilitated reacquaintance with more fundamental principles to reestablish economics on a sounder basis. It’s probably what happened; the Greco-Romano-Christian economy was entangled with a very high degree of exploitation of man by man (giant properties, slavery, etc…). To change economic system one needed to change societies, i.e., change the general guiding metaprinciples.

THE ECONOMY DEPENDS ON PHILOSOPHY MORE THAN IT DOES UPON MONEY:

The Romans had not been able to introduce any deep philosophico-economic reforms. Instead they had tinkered in vain with their currency, tax system, and finally called onto that fascist, Jesus, to help them out (that distracted them from the deeper stuff). A few last big military efforts without church confiscation finished the Roman state authority (absence of confiscation made the theocracy more financially important than the secular state, for all to see, so people looked for the bishops for governance: after all, they had all the money, and the respect of the state; conversely Charles Martel, the leader of the Franks, nationalized the Church, as Islam loomed, four centuries later, to make the exact opposite point: the Frankish state mattered more than the Church).

As the Franks grabbed power, they established a philosophical system which was an opportunistic mix of many superior philosophical principles, some coming from Germania, some from Rome and Greece, some from the Sea, some maybe from what they imagined Troy to be. All together, those new philosophies had a huge socio-economical impact. The Roman imperial, international economy, which thrived for centuries, was centered on the availability of a coinage, and the related Pax Romana. It was doomed though, because it was unsustainable, in great part because fascism was so hostile to any progress (even materialistic progress, because it caused instability). The Franks’ new philosophico-social principles allowed for sustainability, and technological progress ( i.e., mentally growing out of militaro-economic difficulties).

Among those superior principles the Franks implemented were more equality, less plutocracy, much less sexism, no more slavery, more high tech and education generalized and enforced, no more religious terror, the termination of theocracy, and finally a professional army paid by the confiscation of church property. This is a lot of fundamental philosophical reforms that Rome-Constantinople could not, and would not do (instead often preferring their exact opposites). The result? The economy and technology of the Regnum Francorum roared ahead (in spite of military invasions from the north, the west, the south, and the east, by Vikkings, Muslims and Mongols). By the 10C, the Western Europe the Franks had created had the highest energy usage of the planet, per inhabitant. And thanks to newly invented beans, people were well fed. Plenty of food and energy is a more fundamental yardstick of a good economy than a good currency.

SINCE ENERGY ACTS ON SPACE AND TIME ITSELF,  IT MAY AS WELL DOMINATE THE ECONOMY OFFICIALLY:

In astronomy the units are space and time. But it was found, many centuries later, that energy modified them. Energy can literally (at the limit) make space go around in circles. One may guess that what makes something go around in circles is more important than that something: energy should be more important than space and time. Indeed it turns out that it is not too clear how many dimensions space time has, and of which nature it is, whereas energy is a much clearer concept, measured in a one dimensional real line (we do not have non commutative multidimensional energy yet!). Energy is one of the most fundamental concept in physics (one could call energy an ultrafilter in conceptual space).

As Richard Feynman puts it in “The Feynman Lectures on Physics” : “There is a fact, or if you wish, a law, governing natural phenomena that are known to date. There is no known exception to this law—it is exact so far we know. The law is called conservation of energy; it states that there is a certain quantity, which we call energy that does not change in manifold changes which nature undergoes. That is a most abstract idea, because it is a mathematical principle; it says that there is a numerical quantity, which does not change when something happens. It is not a description of a mechanism, or anything concrete; it is just a strange fact that we can calculate some number, and when we finish watching nature go through her tricks and calculate the number again, it is the same.’

Energy is found at the basis of all present physics (in a sense, it even implies non locality, which rest on the conservation laws which rest on the conservation of energy!). The theory of gravitation (“General Relativity”) is about how energy acts upon space-time. Quantum Theory and Quantum Field theory are all about finding ways to compute precisely with the “Principle of Least Action”, which says that fundamental processes minimize (locally) the energy they involve. We saw above that economic theory, as conceived of so far, is mostly about money flows. But money, a social convention enforced by military power, is not conserved. Whereas energy is. To try to make a mathematical theory where the unit is not conserved, or, if you will, where the unit is not a unit, is to try to build a castle with a cloud.

VIEWED WITH A CLEARER PHILOSOPHY, IT’S CLEAR THAT THE “PRINCIPLE OF LEAST ACTION” IS AT THE HEART OF ECONOMICS TOO:

“Economy” means “HOUSE-MANAGEMENT”. Intuitively that management is going to accomplish the most  tasks if and only if it minimizes the energy spent when accomplishing all and any task. In other words, per its very emotional definition, economy, as a manager, is directed by the same fundamental principle than physics: effecting the maximal number of processes while spending the “Least Action”. Thus the natural unit, the natural dimension, if you will, for the economy ought to be ENERGY (this answers in one shot all the “perplexities” which were affecting the honorable Keynes, see the post-scriptum).

All human activities are, can, and ought to be, measured in terms of energy.

Evaluating even the highest mental work in terms of energy can be done. A PhD can be evaluated in term of energy content. The more sophisticated work, the one with the highest added value, comes from the advanced education of its author. It ought to be valuated in terms of the energy deployed in providing said education (taking into account, in a cascade effect, the energy content of the education of the teachers of the sophisticated author, itself coming from the energy content of the sophisticated knowledge the preceding generation of teachers was imparted, etc…).

Coal thermal plants produce energy, in the short term. But, so does setting one’s house on fire. Indeed, when considered in the fullness of time, it is clear that the carbon dioxide produced by coal plants will result in an enormous greenhouse effect which will have a huge cost in energy units. (Carbon dioxide is a gas which has long regulated Earth climate; without it, Earth would be a snowball, too much of it, and it would turn into hellish Venus.)

Part of the cost of coal thermal plants ought to include, what will be, in the fullness of time, the significant energy of edifying a seventy (70) meters high dam around all lands that one does not want to see turn into corral reefs. This is a cost which is sure to occur: all glaciers have melted in the past, 35 million years ago. The Artic ocean reached 23 degrees Celsius (84 F)… before the temps rose even further as heated up methane hydrates erupted from the bottom of the seas.

This turns on its head Paul Samuelson’s theory of discounting (which he himself doubted as universally valid; that discounting theory was in a 6 pages paper published in 1937). Simply, one cannot discount Armageddon, especially when one has found a sure way to bring it about. Actually we cannot afford to discount anything anymore; and as far as counting with GDP, that’s not something we should want to do either. 

GDP IS TOXIC, AWE IS AWESOME:

GDP is the fundamental computation in present day economics. It’s the sum of all monetary activity. One may as well sum up all the hot air. GDP is completely obsolete as a measure of economic value, considering which values our house should value (as we said, not setting the house on fire should be a primary value).

The problem with GDP is that GDP DOES NOT MEASURE ECONOMIC ACTIVITY IN A CIVILIZED WAY: it augments in traffic jams. Worse: a country with an enormous activity in terms of energy could see ALL of this energetic activity negated if, ultimately, the cost of all this energetic production in terms of pollution exceeds the value of what it brought in the first place. That a frantic economic activity only makes us run backwards energetically would be definitively uncivilized.

Such allegations were nearly made about the Chinese economy by the World Bank, in December 2007 (more exactly, the World Bank claimed that most of the Chinese augmentation of GDP (8 to 9%) was the pollution cost created by the 10 to 12% GDP growth; if true, this is grave, because it means that China is barely progressing economically, at a giant pollution cost.)

In any case, the same certainly holds for the USA, to some extent. In spite of its enormously increasing GDP, the USA has been unable to keep the most significant part of its economy, health care, going on at the top level it had long achieved. This reflects what the ultimate values of the USA have now become: not the best health care, as in the past, but the best military, as in Iraq.

Besides faith in the curency it’s expressed in, GDP reflects particular moral and hedonistic values (or rather their want). GDP is a computation with a moral and hedonistic agenda of a type it’s high time to reject. If a car has a lot of energy, and then crashes into a tree, it should not help. GDP says it does. A lot. GDP is not just friendly to waste, it encourages destruction. There was never a pollution cloud GDP did not like.

House management depends upon moral and hedonistic theories of value. We don’t want a house management which loves traffic jams, crashes, and poisonous gases. An economy which stuffs garbage inside the house and the atmosphere should be viewed, should be conceptually abbreviated as, garbage itself.

The Greco-Roman economy was essentially agricultural. Because of active discouragement from the central government, it could never break into the industrial stage (although there were germs of it: hydraulic plants and military arsenals). A better theory of economics was devised when “product” was generalized to include money (by Smith and his French teachers). Our activities have now progressed some more, and we need a more general definition of product than the one defined by money. We need to switch from GDP to AWE.

GDP CAN AND OUGHT TO BE REPLACED BY ABSOLUTE WORTH ENERGY (AWE):

Whereas GDP adds all the money, AWE adds all the real energy produced, once WASTE has been substracted. AWE takes into account the long term energetic value of whatever is being produced, after subtracting all the energetic cost, in the fullness of time. Switching from the money based GDP too the energy based AWE would represent a moral, hedonistic, and strategic switch from the teleology of disaster unimpeded, to its opposite, ever more comfortable sustainability.

AWE would expose the true cost, and the true worth, of any goods and services. AWE would be the sum of Energy Income and Energy Waste. Of course, the decision of what is Income and what is Waste would be partly metaeconomical. But only partly so: a lot of the Waste would appear just by considering the long run (such as how much it would cost to build a 70 meters, multimillion kilometers long dam around all worthy lands, in the case of coal

AWE would give a hand to the CARBON TAX. The carbon tax was inaugurated by Sweden (1991). The idea is to make more expensive goods and services which produces much too much carbon dioxide. The economics of money circulated by the pure free market are blind to carbon dioxide; taxation is needed, in a moralo-economic process similar to the taxes on tobacco. Whereas the Carbon Tax punishes the production of carbon dioxide, AWE would punish waste in general. For example the huge Chinese GDP increase would turn into a vary small increase of AWE. Viewed in the simplest energetic terms, AWE would reward energetic efficiency. But AWE does much more. It also encourages wisdom, because it highly values the chain of increasing culture, and less so frantic physical activity.

SUSTAINABLE PHILOSOPHY PLUS ENERGY ECONOMICS EQUALS NEW SCIENCE:

Some will say that it would be difficult to evaluate all processes and human achievements in terms the energy they represent, after subtracting the energy needed to obtain them, all in the fullness of time, as the AWE computations will require. But future science was never as easy as obsolete science. Science has always replaced the simplicity of the beast by the complexity of analysis. We now have huge computational power, we ought, and need, to use it. ENERGY ECONOMICS will be a new fundamental science.

Others will point out that it will be hard to integrate in this the value of a work of art, for example, because that will still be determined by how much people are willing to pay for it in terms of energy units, and people can be crazy. In other words, some will say that some of behavioral economics and neuroeconomics will escape energeconomics, and live in a transverse dimension.

Sure. But so what? The patients in the lunatic asylum also escape the Least Action Principle. We are talking here about finding a scientific basis, a ground for the field of economics, not a flight of fancy into why crazy people will do crazy things. Besides, the brain spends a lot of energy, and is around to find energy (bays, bugs, roots, etc…), so ENERGY ECONOMICS SUBTENDS A LOT OF NEUROECONOMICS. The later mostly exists because of the former.

MOST of the economy will find itself evaluated in a way suitable to differential calculus by the AWE energy computations. The free market of the free will still have a role, but a smaller role. Just like free will has a role in the health of people (but most of the health of people, at least in theory, can be objectively evaluated; AWE is objective too). Economics will become more rational, because AWE computations will change the economy (a miniature manifestation of energeconomics, the carbon tax, will, all by itself, modify the world economy.) The point being, we are mostly not free: energy domines (Sartre begged to differ, he thought people were free, but he mostly hanged around Parisian cafes.)

Interestingly, action potentials in economics (which describes the way energy shows up in a particular situation) will not have to be limited to those found in the natural world (“physics”). The genus Homo has a knack to make the reality he contrives more complex than the one he initially encountered. Thus ENERGY ECONOMICS WILL END UP AS GENERALIZED PHYSICS (at least inasmuch as the Action Principle is concerned).

Economy would then transmogrify from “dismal science’ to “generalized science”.

Patrice Ayme
Tyranosopher
Patriceayme.com
Patriceayme.wordpress.com

P/S: As Keynes put it: “The three perplexities which most impeded my progress in writing this book, so that I could not express myself conveniently until I had found some solution for them, are: firstly, the choice of the units of quantity appropriate to the problems of the economic system as a whole; secondly, the part played by expectation in economic analysis; and, thirdly, the definition of income.” (John Maynard Keynes, in his magnus opus of 1936, “The General Theory of Employment, Interest, and Money”). The approach above impacted all three of Keynes’ “perplexities”.