Archive for November, 2008

REFORMING WORLD FINANCE.

November 28, 2008

MAKING WORLD FINANCE SANE, EFFICIENT, AND DEMOCRATIC.

The new US government of Barack Obama should push to reform the world financial system. Clearly the old order was not just unsatisfactory, but it outright collapsed. It has also collapsed in a highly unfair way, with some of the richest even profiting from the crash. If the old system is not reformed now, it never will be, because the need to do so will never be as strong (see P/S).

What should the reform of the world financial system be made of? I suggest:

1) Regulate the market of any derivative so that it can act as a damper, not an amplifier of the fluctuations of the market function it is a derivative of (favor commercial operators, limit leverage, etc.). In other words, make sure that the tails do not wag the dogs, as they do now (see P/S).

2) Create MARKET EFFICIENCY and MARKET DEMOCRACY. As long as some operators have full information, and their computers are acting on it in the next microsecond, while most non professional market participants are doing other things, like working, sleeping or day dreaming, not all operators can take action in a fully informed way. In other words, one cannot have an efficient market as long as only a few are informed in a timely manner. We need time to allow most market participants to have equal access to information. In the age of individuals having a lot of their retirement in market equity, we need to make sure that MOST PEOPLE ARE INFORMED BEFORE PRICES MOVE SIGNIFICANTLY.

To do this: get inspiration from the foundations of physics, or from traffic safety. In both cases, there is a SPEED LIMIT (in physics the speed of light). So put a speed limit on any traded security (bond, stocks, currencies, commodities, etc.) by regulating a limit of say 3% a DAY on any security, up or down.

Another way to slow down the frenzy of transactions (which favors manipulators and speculators, and other similar parasites) is to put a not so tiny tax on each financial transaction. Such a Financial Transaction Tax would be most positive on government deficit too. Or one could try a combination of both speed limit and significant transaction cost.

Rich financial types will scream that this would kill “liquidity” (probably thinking allegorically about all the money they need to fill the moats around their castles). They will scream that trading could not occur, etc. But they can be answered, point by point. And the first answer is this: finance as the exclusive wealth making haven of the plutocrats would be over. Finance would now be first in the service of the real economy, and everybody, not the province of plutocracy. Limiting moves per day, or making them costly will limit excessive speculation. Small investors, that is, most investors, would welcome this.

3) The dangerous and abusive non sense of having people in non democratic regimes (China, Middle East, etc.) forcefully save so that their government and plutocrats can lend money to the USA, because Americans do not save enough, should be discouraged. Americans should be incited to save, like everybody else, so they can invest in their own country with their own money. So put high energy taxes in the USA and an Added Value Tax. The AVT recenters the economic activity towards saving, and away from frantic consumption. (In the European Union, the AVT is a minimum of 15%. By law. The British government just momentarily lowered its AVT from 17.5% to 15%, in the hope it will help with the UK recession… But other European countries did not touch theirs.)

4) In the USA, a CEO CLASS has appeared. These people sit on each other’s boards and give each others’ riches and perks. They have helped to transform the USA into a plutocracy: not only do they control Wall Street, but also industry. That allows them in turn to rig the work of politicians, by buying them off with the prospect of future riches. Then they tweak(ed) the tax code to their advantage. Look at the spectacle of ex president Clinton, now an immensely rich man, but not thanks to his past salaries or personal investments from said salaries. Clinton is now reaping the fruits of years of friendliness towards the hyper rich when he was president. The rise of a worldwide plutocracy is an extension of this. Ultimately, just as happened previously in the Imperium Francorum, the empire of the Franks, a feudal regime with lords will replace all democratic pretense. Fighting the plutocracy starts with breaking the CEO class. Putting representatives of unions on the boards (as done in Germany) could be a first step. Of course, for nationalized companies, civil servants should be disseminated in management and boards.

5) Raise taxes on the hyper rich, worldwide, and regulate fiscal paradises. (The largest fiscal paradise, many argue, is the USA itself! If the USA cooperates with the EU, there will be no more fiscal paradises.) Reestablish the financial reforms made to prevent a return of the Great Bubble and Great Depression that followed it (i.e. re-regulate banks stringently, reestablish the up tick rule, etc…).
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Patrice Ayme

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P/S 1: The list of proposed changes is not exhaustive: there will be other bits to tidy up. Bretton-Woods anchored currencies on gold. Nixon yanked the dollar out of its gold connection, anchoring currencies on the dollar thereafter. This needs to be looked at.

P/S 2:  In parallel to the financial reform, there should be a reform of the world economy, a reform of globalization, taking into account strategic goods (i.e., the world location of all high tech products, starting with… cars), agricultural subsidies (bad, except in starving areas), carbon emissions, and carefully maintaining strategic imbalances insuring the military domination of the powers that have imposed a rough approximation of peace in the last 63 years. And, of course, and first of all, making sure that the creation of new jobs somewhere does not mean the sheer disappearance of the corresponding, preexisting jobs somewhere else, but, instead the mutation of the later to comparable socioeconomic situations (that conservation law was not formally imposed so far, and would necessitate some new governmental machinery). 

P/S 3: If the world financial system is not changed now, people will get used to being abused by it. Their indignation will fade, they would adapt, and be profusely thankful for the first slightest improvement. We would move towards a return of greater plutocracy, or, in other words, the feudal system. 

P/S 4: In our interpretation of what caused the decline and fall of Rome, the original cause is the unsustainable rise of the Roman plutocracy.

Globalization the wrong way, plus various financial tactics, the most prominent being world wide tax evasion and huge leverage, have allowed the recent apparition of a plutocracy manipulating countries and populations against each other for its own benefit. This is a bit, but on a grander scale, what is going on presently in Russia, where tremendously rich oligarchs float above a miserable population distracted by fun and games like invading Georgia. Thus world financial reform should try to diminish the influence of world plutocracy (Russian plutocrats have a foot, or more, safely in the West, thus escaping the full might of the Russian government, a general tactic of plutocrats everywhere). The Gracchi brothers tried to pass wealth reform in Rome, to break the unbearable ascent of the plutocracy. They were assassinated, with thousands of their supporters.  Rome marched firmly into plutocracy, dictatorship and civil war, for the next six centuries.

P/S 5: To buy and sell with little liquidity would be child’s play in the computer age (it would have been very difficult before it, that is why it did not occur in history). A complex set of rules could allow trades, depending on who wants to do what. When a security is limit down (say) for the day, up-tick trades could be allowed (so investors could buy at limit down; for selling they would have to wait until next day in their place in the queue, considering their trading history; that would severely handicap extremely frequent traders (like “quant” hedge funds), but not the most sedate ones (like the most thoughtful mutual funds)). If the volume of trading is too huge, automatic lotteries could determine who gets in or out. 

P/S 6: Some people (Nobel Laureate Krugman, for example) have clung to the belief that speculation of the futures’ market cannot influence the price of the underlying commodity. That is completely wrong. They tried to hold to that argument as the price of oil futures shot up. Now they have fallen silent. Why? Because something even more grotesque happened. The price of oil in dollars collapsed from $147.5 to $50 in three months without any change in demand or supply (staying stuck around 86 million barrels/day). Two-third down: it was all a question of the futures collapsing, as hedge funds had to de-leverage (under the polite pretext that they anticipated a severe worldwide recession). The oily tail waged the oil dog.

P/S 7: The housing bubble collapse and its associated foreclosures should not have been a big deal for the banks (by themselves they would have just dented profits). Problems, such as the disappearance of some banks’ entire capital, came from the banks’ massive investments in derivatives, some of them unknown not only to regulators, but to the banks themselves. Pluto hides below the ground, in the Dark, indeed.

P/S 8: One of the master ideas of world financial reform is to make finance a slave to the People, and cut off the evil pathways plutocrats have been using to make themselves ever richer, on the back of the People.

Still another possible example of such an evil pathway is the “Carry Trade” where financial operators borrow in a country with low interest rates, just to transfer the capital to a high interest rate country. This has made some plutocrats very rich. It should be looked at very carefully to see if there is enough good in it, or if it should be mitigated, or outright outlawed. At first sight, it defeats the purpose of providing “liquidity” (i.e., money) to the low interest country (the fundamental reason why the interest rates are low there). Such an inquest would not be a wild attack against riches and capital a la Marx: legitimate pathways to get richer who profit the People by motivating exceptional individuals should be encouraged (and would be encouraged even more, since the evil pathways would have been closed, thus funneling more activity and creativity towards what profits to all, and not just a few parasites).

REAL CHANGE: OFF WITH THE PLUTOCRACY, AND ITS SINS.

November 17, 2008

THE PLUTOCRACY OF THE “WEST COUNTRY MEN”, WHO FOUNDED AMERICA, CREATED SLAVERY AND RACISM. THE EXPLOITATION EXTENDED RECENTLY TO MOST OF THE AMERICAN PEOPLE. WHY OBAMA HAS NO CHOICE BUT TURNING INTO A NEW SOLON.

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Overview: In his second inaugural address, Lincoln portrayed slavery as America’s Original Sin. Barack Obama had the courage to use the idea during his presidential campaign, and that met with the approbation of enough US citizens to get him elected in a landslide.

Thus the subject has become honorable. We will proceed to dig, and give an explanation for American slavery, and a few other sins besides, such as American racism. The present failure of the American health care and financial systems is also a direct consequence.

In all things human beings do, the philosophy of their civilization dominates. If it’s all about gory human sacrifices, as the Aztecs used to enjoy, bloody human sacrifices it will be, and the bloody minds to go with them. But human sacrifices is why the Spaniards wiped out the Aztecs and Incas, and why Rome wiped out Carthage and mauled the Celts: there is a cost to primitivism, and progress shall exact it.

We show why and how most of the evils specific to the USA originated with plutocracy. Worse: plutocracy created English America. To really get rid of the basic evils of America, one will have to get rid of the spirit that has made it so friendly and obsequious to plutocracy. Only then America is going to lose its daddy, and will have to change its metaphysics back to where the Founding Fathers had it, namely NON Christian.

Verily, the USA is unique in one way: no other country was deliberately started by some of the richest men as an investment to bring in material profits ASAP. OK, Americans like to forget the first 180 years of the English colony of America, but that is when all the psychological seeds of the USA were planted. (Most of the rest of American civilization is just standard European enlightenment.)

PLUTOCRACY INVENTED SLAVERY AND RACISM IN AMERICA, 400 YEARS AGO. From scratch: neither racism, nor slavery, were European traditions (if one forgets that mustard seed, the murderous Christian obsession with the Jews). No time was lost in the search for profits. Not waiting for African slaves to show up, the plutocracy warmed up by enslaving white people (the exactions of contemporary history against the white middle class are thus a return to tradition).

The white slaves (the so called “indentured servants”) were brutalized, sometimes to death. The cause of this devolution into savagery was the search for profits, divinized all the way. The power (kratos) of money (and the devil that goes with it, the subterranean Pluto) ruled the English settlement in America .

In the process of grabbing an entire continent, it was convenient to hate the races that lived there. Never mind that the French called them the “beautiful people”. Natives had to be eradicated: they hindered profits. Thus the concept of race, and the practice of racial hatred, became foundations of the conquest of America. (It worked: but for the blacks, the United States of America became all white; now it’s becoming mestizo again, because of immigration from the other Americas, where the Amerindians were not fully eradicated.)

This unique American creation, racial slavery, reversed thousands of years of Western history. It was amazingly counter revolutionary. In an important sense, it was a case of DEREGULATION gone all the way, a completely barbaric deconstruction of civilization. Ever since, deregulation and devolution have been strong undercurrents of American culture.

The Old Bible, a cook book of recipes on how to influence their parents by torturing children to death, vicious tribalism and holocausts, became naturally entangled with racial slavery, and the holocaust of the American natives. Thus, when Bush invaded Iraq because his “Higher Father”, God, had told him to, he was following to the letter a four century old American tradition. It may not be civilized, it may not be European, but it’s all very Biblical. Worse: it worked.

Why did it work? The Marquis de Sade would have laughed at the question. Instead we present deep observations connected to the deepest biology imaginable. It is a bit subtle. Basically biological democracy is intrinsic to the simian evolutionary strategy, and plutocracy is antinomic to it. This has all to do with brain capacity which forces insects into fascism and plutocracy. Democracy gives more mental power, so is optimal, but the apparition of capital has made plutocracy a constant pitfall. To stabilize itself, plutocracy tends to make civilization fascistic. That should make it inferior, but when Europeans had to invade vast spaces, such as Central Asia, Siberia, or North America, holocausting most of the Natives, fascism has been vastly superior. Thus…

For those four centuries, the very barbarity of the evil plutocracy provided “We The People”, the rich owners of America, with riches, ever more, culminating with the frenzy of the twentieth century, when the very defects of US plutocracy synergized with the real qualities of the American people and culture, to create a world empire in a generation. This had a lot to do with the Dark Side of the human character, so carefully honed right from the start in 1608. Now the new Amerindians became the Europeans themselves, fulfilling an old wish of the Puritans to come back and conquer that Europe that despised them.

That somewhat informal world empire the USA created for itself is eerily reminiscent of the Athenian empire, 24 centuries before.

There are striking similarities between the excesses that led to Athens’ fall and recent US strategies (sometimes word for word, as if an unimaginative devil repeated by rote what had worked so well before to bring rage and annihilation, and whispered the words into top US leaders’ ears). Athens, in particular had stolen all the money of her allies, the Delos League Treasury, using it to build real estate in Athens (the Long Walls, Parthenon, etc.). That upset its allies, friends and subordinates throughout the Athenian empire.

The present financial crisis is a massive fraud perpetrated by a large chunk of the plutocracy of the USA, through criminal “securitization”. “Securitization” stole friends and allies, to build, well, real estate in the USA. The analogy here is with the Delos theft is great.

Recently deprived from abusing blatantly the “blacks”, the old fashion way, US plutocracy, under Nixon leadership (the ex right hand man of McCarthy), veered towards enslaving the entire US population as if it were made entirely of “black” slaves. Why to use chains, when you have HMOs? The idea was to chain people with bureaucracy, to extract more wealth for the few, by spreading the abuse all over. Health “care” plutocratic style, and the collapse of the financial markets (while hedge funds for the rich make like the bandits they are), are the most recent twists on this general idea of spreading the abuse from the “blacks” in particular to everybody in general.

That little plan kept unfolding under Reagan and plenty of Bushes and Rubins. But now the outraged people, refusing to pay mortgage, has decided to be led by one who was good for slavery a short while ago.

Mort-gage is French for death-pledge. No wonder. Revolt is brewing, but the plutocracy is not panicking yet, it’s trying to control the Obama administration, with its paws and pawns all over. The first aim of the predator is to immobilize the prey.

There cannot be any real change in the USA as long as the plutocratic principle, MONEY RULES, can sit happily on top, in plain view, and people cannot see how malevolent its influence is.

Things will come to a head, as the forces of civilization and the people try to get organized, worldwide, while, and because, the ice caps are melting. That means fighting mental dwarfism and the plutocracy that fosters it.

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WHY PLUTOCRACY KEEPS ON BLOOMING:

Plutocracy is kratos, power, of the rich, the subterranean, the God Pluto, the One that operates in the Dark (think derivatives and credit swaps; think also of Persia secretly financing Sparta to fight Athens, or American plutocrats “paying” Hitler under the table, as the billionaire Thyssen put it elegantly).

Democracy means “peoplepower”. It is in complete contradiction with plutocracy, which means “moneypower”. Between democracy and plutocracy it is a fight to death. Sometimes one dies, sometimes the other. They are perpetually killed and reborn throughout the history of civilization. The natural state is democracy (as Rousseau would point out). But civilization rests on power, and that means capital.

Money represents and symbolizes power (yes, literally: ultimately the correct future theory of rigorous economics will rests on energy, as physics does already, but with more general action principles; thus economic theory will prove to be is richer: it is more what we want the universe to be, whereas physics is what we started with, before we twisted everything with our creative minds).

In a free market economy, some people gather money, and other spend it right away. Such is the variety of psychobiology: from many, even more. So there will be always richer and poorer people. Any democracy finds itself with people getting richer and other poorer. The process is moreover non linear: it feeds on itself: per the nature of the exponential, the rich get richer, and the poor, poorer. Thus left to their normal devices, societies find themselves with a few extremely rich people, and everybody else extremely poor. Plutocracy is the state where only a few have most of the wealth, and also most of the power (think about American plutocrats buying American elections).

Thus, TO PREVENT PLUTOCRACY EXTRAORDINARY MEASURES ARE NECESSARY, IN ANY SOCIETY. Hence societies have found necessary, since ever, to destroy or redistribute the power, or the money of the rich. As Barack Obama puts it:” spread the wealth”. Absent these efforts, plutocracy grows malignant.

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WHY PLUTOCRACY IS BAD, EVEN BIOLOGICALLY SPEAKING:

Despotism is a form of plutocracy. The worst plutocracies rule by trying to use the full power of fascism.

Plutocracy and democracy have biological roots, and they are as deep as it gets. They are the systems that fit best different inherited capabilities. We are on one side, insects are on the other. We have relegated a deeper biological look at these in the annex after the main text.

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HOW CIVILIZATION MAKES PLUTOCRACY POSSIBLE, TURNING HUMANS TO INSECTS:

Plutocracy is not natural to simians. But it is a consequence of power that is hard to avoid. Civilization, though, is all about ever more power. As obvious resources are used up, more raw power has to be applied to get to less obvious ones. Also population may be 100 times higher than can be sustained without very advanced technology, which is all about clever power.

Human societies invented trade, not just in ideas, but in goods. Trade was absolutely necessary: a Homo Habilis living in a geographic region with just sand and mud absolutely needed a few good stones to survive, and would do whatever it took to get them. Millions of year passed by, language became plenty good enough, fire was used in all ways, modifying even diet, allowing Homo Erectus to eat otherwise inedible vegetables. Trade was ever more important. At some point currency and capital were invented. They allowed further progress towards ever more power. Sorry Mr. Buddhist, and Ms. Marxist, but INCREASING POWER IS WHAT HUMAN EVOLUTION IS ALL ABOUT. To second guess power, and claim we could do without it, is downright silly. Buddhist societies, its monasteries and its monks, rest on the enormous power of the peasants, a power that is clearly not sustainable in the long term (due to exhaustion of soils and water, certainly not with the present enormous populations of Buddhists!).  Even at a medieval level (without frequent and extensive holocausts).

Those creations, trade and capital, are as human as human can be. The wild attacks of Marx against capital, conceptually identifying it with blood, are unwarranted. If anything, capital allowed the human species to distanciate themselves from the goriest tasks.

The dark side of capital, though, as explained in the preceding section, is its tendency to congregate. This concentration of power –PLUTOCRACY– deeply violates the democracy of ideas at the root of the superiority of primates, and hominids especially. As civilization evolved the most successful societies were able to take active measures to fight plutocracy, and hence to be more intelligent. (These measures were sometimes amazingly violent, as when Vikings or Indians burned the dazed wives with the rich husband’s body).

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LIVING ON ONE’S KNEES, LICKING THE TOES OF THE RICH, OR HOW NOT TO THRIVE:

Many Americans repeat ad nauseam that there is everything good with the power of the rich. The Reagan lovers went on, for decades, singing the praises of the rich, those who create jobs (according to them). By that argument, lions create blood, because it’s all over their muzzles.

Those in love with riches say that being rich is a proof of success, and success should be rewarded (a somewhat circular argument). In this case, as in many others, the USA shows its youth and inexperience. Created by the plutocracy, and endowed by the plutocracy, an American culture has evolved where the highest respect is given to riches. One is reminded of Louis XIV’s France. Ort more exactly, James I England. Not coincidentally, James was one of the investors who founded English America. 

In English North America, it was not just the power of the rich, but, right from the start, the rule of the rich (true the Puritans quickly substituted to it their own rule in Massachusetts, covering their exactions with the Bible). The rule of the rich contradicts the power of the people, since, by definition of what rich means, the people is not rich.

If only one mind does all the mental work, as in a despotic regime, not too many new ideas are generated. That is basically why North Korea is poor: it is led by very few minds. When thinking like termites, live like termites.

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WISDOM KNOWS BEST OR WHY EVERYTHING ELSE BEING EQUAL, DEMOCRACY CRUSHES PLUTOCRACY:

Poor ways are not relative. Elephant societies that have lost their experienced matriarchs are disrupted for generations, because the matriarchs knew best. Absent the matriarchs, elephants don’t know what to do. Their dung is full of stress hormones. There is an idea here for human society: absent wisdom to provide guidance, leaders will get stressed. Leadership is not enough, wisdom is beyond it. G. W. Bush tried to lead without wisdom, and that frat boy and heir got stressed out. A stressed out individual with the finger on the nuclear button is not what most of us want.

Throughout Africa, chimpanzee cultures thrive. But they tend to be all different: ideas cannot circulate, because chimps do not have enough of a symbolic language to describe and transmit those. Cultural superiority is achieved by many minds blossoming. That brings many ideas, and the best of those can be selected, grabbed and amplified by the group.

The industrialization of this idea generating mechanism is called civilization, and its democratic form is the most reasonable, the most reason generating, hence the most powerful. That is why the SOCIETIES THAT KEEP THEIR PLUTOCRACY UNDER CONTROL TEND TO BE THE MOST SUCCESSFUL. Therein the superiority of Western European societies: although despotic, the European Middle Ages, moderated by secular law, was the most democratic regime on the planet, by far. And that came to include the old English colony of America; the later was a dictatorship onto the “blacks” but became a democracy among the rich: (only) citizens with property could vote.

To be successful, plutocracy has to be wary of an independent intellectual class: that is where revolution could come from, plutocracy knows it.

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PLUTOCRACY GOT KILLED, AND ATHENS WAS BORN. WHEN PLUTOCRACY THRIVED, ROME DUMBED DOWN. SAME WITH THE USA:

Revolution is what happened in Athens in the century before Pericles, when Solon threw down the plutocratic, fascist order installed by Draco; Solon was the typical “engaged” super intellectual. After some initial difficulties, within a few decades, Athens blossomed into her greatest age, an age when the gap between rich and poor was not much. An age soon characterized by giant State spending in military matters (Fleet, Long Walls) and civilian works (Acropolis).

When the USA was a nation of scientists and engineers, say around 1945, inequality in the USA was low (as measured by the Gini index). That was not so great for the plutocracy, and, very conveniently a witch hunt against intellectuals and their fellow travelers was launched. This “McCarthyism” was greatly helped by Richard Nixon, one of the central servants of American plutocracy in the twentieth century. Thanks in no small measure to Nixon and its health scheme, wealth inequality in the USA is presently high and getting higher. Perfectly related to this, the USA went from being the most knowledgeable society on the planet to rank 60th (sixtieth!) in the proportion of college graduates receiving science and engineering degrees. Naturally enough, most Americans do not believe in evolution. In the USA, it’s all about devolution, under the Biblical God’s watchful eye.

Plutocracy has made America dumb, anti intellectualism is a facet of that. Both stupidity and anti-intellectualism were even more prominent in Rome. Rome had billionaires intellectuals, like the USA has billionaire universities. Why are figure head intellectuals the richest when mental wealth is the poorest? Because those worthies have been bought, and those billions were their price. Roman emperors stooped as low as paying engineers to not use their inventions (in the USA the auto executives seem to behave the same).

Now, to save the planet, ideas have to get mightier than wealth, and this is the fundamental reason for opting out of moneypower, and going back to peoplepower. Material wealth is no friend of thinking, because it is all about the rat race and winning it, whereas thinking is about respecting one’ s mind and that of others. Wealth is about the race, and quashing, thinking is meditation and appreciation. One is all about rats, the other well beyond.

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PLUTOCRACY IS READY FOR THE NEXT ROUND: ARE YOU?

The subprime, real estate and credit crises were a new type of fraud made to make the fabulously rich even richer, and, as we speak, they are getting ever more so, since what counts is relative wealth in comparison to the middle class.

Contrarily to what is usually claimed, the frantic ascent of the incompetent American plutocracy is not all about Bush. Graphs on the inequality of riches have been perking up, ever since Nixon. Clinton’s respected Secretary of the Treasury, Mr. Robert Rubin, was all for expanded financial engineering (as opposed to real engineering). For Rubin the right economics was whatever made bond holders happy. Never mind what the bonds were holding.

People such as Mr. Rubin are in low orbit around president-elect Obama, ready to land and spread their wings and their nets, once again. The plutocracy is ready for its next conquest, its new frontier, the Obama nation. And who is ready to resist it? Is Obama ready? Well, to resist, first one has to be armed with some knowledge of what has been, and thus of what will try to be again.

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ENGLISH AMERICA ORIGINATED AS A PLUTOCRATIC PROFIT MAKING DEVICE:

The USA is the only country that started as a “joint stock company”, the “Virginia” or “London” Company, and it shows. American culture was born as a typical financial exploitation scheme: it was the Lehman Brothers for 1608 CE, on steroids. Enemies would be quartered.

English America was created to generate profits, but somehow grew into a country that views itself as sophisticated. Unrestrained plutocracy was the original creative force of English America (aka the “Virginia Company”). It was a case of total deregulation: a financial entity was given a continent to do as it pleased “from sea to shining sea”, and allowed to make its own law, as long as it imposed the Christian religion. The growth of this mental structure, of this plutocracy, is the master force behind various exploitative schemes of the English colony of America, from slavery to the present financial crisis.

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THE MYSTERY OF AMERICAN RACISM: WHERE DID IT COME FROM?

Where did the so-incredibly-violent, nearly unbelievable American racism come from? Why the big problem with skin color? Even a few years back, well after the defeat of the Nazis, so called “inter racial” marriage was forbidden in many American states. Somebody with the slightest suspicion of African inheritance, to this day, is called “black”. Ferreting African ancestry is an obsessive characteristic of the American character, truly a form of insanity.

Thus, sometimes, so called American “blacks” have blue eyes and red hair. At least, in Hitler’s Third Reich, when so called Jewish blood was sufficiently diluted, one was considered “Aryan”. Not so in American: the mark of Africa is indelible, such strong stuff that it will make you black, even if you are all white and pink. Just as bubonic plague, that will make you back all over for all to see, so is African ancestry in American culture. (There is no doubt that the Obama presidency will change this.)

American racism is deeply anti European. They may have enjoyed feeding screaming convicts alive to the beasts, but the Romans were not racist. There were African and Arab emperors. Some emperors were born in Britain, or Spain, and even in Gaul. One entire dynasty came out of Africa. “Saint” Augustine was a native Berber (and also a top Roman citizen).

Jews had full right as citizens, plus a few more (because Rome recognized that the Jewish religion’s jealous God tolerated no other.)

American racism only compares to the old racism in India, between upper and lower castes, established 3,500 years ago. Genetic studies have shown that the genetics of upper and lower castes are indeed different. Some Indians have been shocked to learn that Hinduism, their religion, was racist (whereas Islam, the big enemy, is not). Now, of course, it was completely obvious, but it’s nice to have scientific proof.

Indian racism was installed after a massive invasion by, well, old European stock (from east of the Caucasus). Thus it has this in common with American racism. But American racism went further, since it exterminated the natives.

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HOLOCAUSTS ARE PROFITABLE, SAYS AMERICAN RACISM:

It is now fairly established by recent scholarship that Hitler improved the financial status of his Reich by stealing from the Jews. This was nothing new, the method was used many times in the Middle Ages by the English and French kings, and other despots (more craftily than Hitler, they did not kill all the Jews, so they could come back, and do it again). In general, removing a large part of a population tends to augment the relative riches of the rest. This happened after the plague of the fourteenth century that ravaged Europe (killing up to 50%).

By 1619, the inventors and investors of the Virginia Company were desperate. They were hungry for profits, but there were none. The English plutocrats that founded the stock company now known as America, had lined up alleyways with human skulls, back in Ireland. In America, clearly the natives had to be exterminated; for four generations, they had resisted the European invasion with military might (and for much longer if one goes all the way back to the Vikings!) The London investors were looking for gold, not Indians.

So they fully launched racism, slavery, frantic exploitation of man by man, and entangled them all, in a harmonious whole. Burning Indian villages and paying for scalps were next. Why and how could such gross violations of European law and civilization occur?

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THE BIBLE TAUGHT THAT EXTERMINATING INDIANS WAS GOD’S WAY:

Well, that’s why “God” was put in charge, big time. First the Virginia Company Charter, as modified by the Chief Justice, ordered to convert the Natives, and that, hopefully would give an occasion to exert “great vengeance” as God has it in the Bible.

In any case, the Old Testament illustrated, with vivid examples, the extermination according to race and tribe, and God was shown repeatedly torturing and killing entire countries, sometimes just to psychologically harass one individual God was particularly obsessed by. A preferred tactic of “God” is to torture children to death, to make their parents feel bad. Relative to these fundamental procedures, slavery is viewed as human. Those methods were applied to the letter, and found most useful in counter insurrection: relatives, wives, even children of Native resistance fighters were killed or enslaved. This is where the 400 years of racist horror came from. Once one has done worse, it’s easy to do less.

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THE MEROVINGIANS OUTLAWED SLAVERY:

Where did the idea of American slavery come from? On the face of it, slavery was illegal in (secular) European law. It had been unlawful for a millennium. Slavery was outlawed by Queen Bathilde of the Franks (circa 660 CE). The Merovingian Franks had forged a gigantic empire, the “Imperium Francorum”, all over present day France, and most of Germany and surrounding areas, and its influence extended far out, all the way to the Lofoten islands. Bathilde herself had been captured as a child in Anglia, England, in a war the Franks were conducting there with some allies. She had attracted the eye of the young king of the Franks who bought that rebellious youth, freed her, then married her. Then he died, leaving her in charge.

In the next century, striking back against the invading Muslims, the Imperium Francorum would extend over Italy, part of Spain, and push all the way to Eastern Europe (Venice, the Papal States, and a free Hungary were creations of the Franks, and so was the war against the Bulgars, who invented in reaction Eastern Christianity). The Franks’ secular law became Western European law. Slavery became unlawful over most of Western Europe. Christians and Jews were full citizens with equal rights. Not being a slave was one of those rights.

There were two places where slavery still was legal: Great Britain and the part of the Iberian peninsula the Muslims occupied (this has a bearing to the rest of this story)..

When the Franks and the duke of Normandy, definitively took control of England and Wales (1066), they freed the slaves there (20% of the population). The barons in England, a mix of French nobles and local individuals of very varied ancestry, considered, correctly, that the English monarch was in power per their good graces, spent centuries trying to grab ever more power for themselves. They would call French grandees to their rescue as soon as they thought they own “English” king had overstepped the powers they had been good enough to grant him. This process of contestation followed by negotiations led to the Magna Carta, insurrections, and Parliament. Soon England was the most democratic country in the world (explaining a lot of the hostility with its suzerain, the more absolute French monarchy).

***

 

SLAVERY WAS A PLUTOCRATIC FORM OF EARLY LEVERAGE, AND THAT IS WHY THE PLUTOCRACY GOT SLAVERY RESTARTED:

In Old Rome, slavery had been a wonderful thing for the hyper rich. Seneca, the philosopher (in the Roman meaning of the term), claimed he had no idea how many huge properties he owned overseas. Many citizens of Rome did not work much, thanks to millions of slaves. The viciousness and omnipresence of slavery in the Roman Empire amazes. There were firms specialized in the torture of slaves. (Not just in recapturing slaves, and roughing them up, as in nineteenth century USA.)

Under the Franks, Venice was allowed to traffic in slaves (Slavs, as their name indicates, captured in south Russia and sold to the obsessive Muslim slave masters). But that was happening outside of the Imperium Francorum proper. In the Imperium Francorum, the law was secular. God, either in the Bible or the Quran, loves slavery. Saint Augustine thought that slavery was one more punishment given by God.

As Portugal, just liberated from Islam, started to expand overseas, plutocrats in Portugal, remembering what the Muslim slave masters had taught them, pushed to reinstate slavery. So the Abrahamic God, a friend of despots, slavery, and torturing children, confided to the Pope, in the fourteenth century, that Africans could be enslaved. The Pope dutifully wrote a bull recommending that. As in Iraq with oil nowadays, there was money to be made in Africa with sugarcane.

***

 

AS ENGLAND WAS DOING OTHER THINGS, SLAVERY ENTRENCHED ITSELF IN DE FACTO INDEPENDENT AMERICA:

The English Parliament had become increasingly powerful. Only a minority voted, that of the rich, the landowners. They constituted a plutocracy that started to use foreign wars pretty much as the rich Romans had before. A victim was Ireland. By 1608, King James and his plutocratic accomplices, the “West Country Men” funded the English colony of America. It was the earliest recognized “joint stock company”, the “Virginia Company”. The aim was profits.

Profits came only with tobacco, and slaves farming it. Slaves? How come? Were not slaves unlawful in England? Sure. All slaves sent to Europe were freed right away. But there was that Papal bull, and by then England was wracked by civil war, religious war, rebellion, revolution, the king’s execution by parliament, dictatorship (Cromwell), “Glorious Revolution”, and a successful foreign invasion (from the Netherlands). By the time the British tried to reassert power, it was the eighteenth century. Meanwhile the English settlers had made their own laws and governments for three generations. They were also the richest, healthiest people on earth. The old fashion way, as celebrated by the Old Bible, had a lot to do with it.

Over half of all white immigrants to the English colonies of North America during the 17th and 18th centuries consisted of indentured servants. In 1639, the official punishment for a runaway indentured servant was death by hanging, after a bit of whipping. Early on, it was death by quartering alive.

President Washington, who got started in the military and real estate, played the Brits, the French, the Indians, and the average Joes against each other, in a masterful game. He finished as a big slave master, and the richest man in the USA. He resisted his friend Lafayette’s entreaties to outlaw slavery. Twelve US presidents owned slaves (yes, more than 25%). It was no accident, it was a system of exploitation, fostered by an attitude towards man in general: man was to be punished, as the Bible had it, as the Puritans had it, and, all the more, since it generated profits. That mental scheme, that greed is best, is pursued to this day with the scheme of making huge profits from health or from the subprime world fraud.

***

 

SLAVERY IN AMERICA AS EARLY DEREGULATION AND GLOBALIZATION:

North America was too cold for sugarcane, but the hyper rich in America acquired millions of African slaves, to produce very profitable tobacco. Slavery was all about the rich, getting richer, not held back by extraneous morality. The hyper rich in America committed the crime of slavery, it’s not everybody who did it. Those slaves were indeed extremely expensive to purchase. Most people had nothing to do with it.

It is a situation similar to what has developed with the democratically defective, but plutocratically expanding globalization that haunts the world today. By colonizing America, the richest of the rich evaded European law, allowing them to leverage and amplify their wealth. Just as slavery was forbidden in Europe then, exaggerated pollution and slave labor are forbidden in Europe and North America right now. So what do the richest of the rich do? Well, they go overseas and make alliances with local despots to turn around these all too civilized Euro-American laws. It’s basically the same idea as with the slave trade (African slaves were purchased through local African despots, and European settlers and great white chiefs Jefferson and Jackson acted like despots relative to some Indians, while instating perfidious alliances with others).

***

 

THE GOOD OLD SACRO SAINT BIBLE, OR WHERE AMERICAN RACISM AND GENOCIDAL VIOLENCE CAME FROM:

Some, mesmerized by hope and glibness, claimed that the racial Civil War started 147 years ago, and ended with Obama’s election. That is beside the point: as we said, racism and slavery were just means to an end, outrageous profits by the richest, the consequence of deeper mental structures that have not been excavated, let alone made explicit. Africans were enslaved in English America in 1619, 390 years ago… And (most of) the whites 400 years ago. Those 400 years gave plenty of time for deeply ingrained attitudes to implant themselves in American culture, not all favorable to civilization.

And when they were favorable to it, it was to a runaway civilization, its economy rendered crazed by unsustainable consumption. One has to understand that North American civilization thrived on destruction of what was there before. The craze was self reinforcing.

Catholicism was promoted by emperor Constantine in part to avoid the Old Testament. The Old Testament was certainly racist. The Old Testament was about the sort of tribalism and racism Rome had, rightly, no tolerance for. One of the rare positive aspects of “Orthodox Catholicism” was precisely its rejection of the tribal attitude of the Old Testament, making it not only compatible with Rome, but extending it universally, just when Roman military power petered out. The Old Testament recommends, preaches the torture of children, to death. For example when God has a problem with Pharaoh, or with King David, what does God do? Well, God torture their children and kill them. Seven days of suffering in the case of David’s son. Relative to this, the most exalted language of a preacher such as Reverend Wright is nothing. Even the worst Nazis (for example Himmler) had to admit that killing innocent people was a heavy burden. But, for the jealous God of the Bible, it is the standard operating procedure.

Luther and Calvin brought back the old testament. Calvin, a lawyer so crazed he had to flee his native France, enjoyed seeing professors who differed on the details of Christianity burn alive, close and personal. It got worse. A group of fanatical religionists with intellectual pretentions around Cambridge, England, unsatisfied with the church of England, that they viewed as Catholicism in disguise, decided to go beyond Luther and Calvin, back to the ideas that even Constantine found too primitive to accept. The Old Testament was what the Puritans adored. Nobody else did, so they decamped from Britain to the Netherlands, and from there to America when their rebellious teenagers threatened to turn Dutch!

As the Puritans settled America, they read their beloved Bible, again and again and again, and decided to live according to it. Thus they learned by rote the justification of tribalism and holocausts found in the Bible. Think about it; that’s all they read. The English settlers in America were clearly the Elected People, others had to be disposed of, it was all in the Book. By that time, the seventeenth century, such an attitude could not have survived in Europe. Advanced thinkers were listened to, in European power circles, but there were neither intellectuals nor power in America. So the racist attitude thrived among the local elite. “God bless America!” became the chant that would never cease.

The Puritans found that some English mariners had settled up north, marrying local women. Very unchristian, not in the Bible. The Puritans marched north, and killed these “rough fellows”.

***

 

AMERICAN PLUTOCRACY NEEDED NEW VICTIMS TO EXPLOIT, THUS WE BECAME ALL BLACK:

As civilization progressed, slavery and racism became untenable in America. Luckily for the USA, fascism was strong in Europe, and the two large democracies there, exhausted themselves crushing it. Although the USA was descendant, allied and friend to France and Britain, it took its sweet time to come to their help, and messed up with Germany as much as it could to make a bad situation worse. The result? The USA owned (most of) the world.

American plutocracy had to go somewhere else for big profits. It turned to the world, and changed modes of exploitation, going to a business supported by a worldwide network of military bases more extensive than any before. But first the problem was that Britain, France, Spain, the Netherlands, Portugal, and other Europeans were in the way. Local despots were used for leverage, and a succession of surfing on various wars solved the problem in one generation. Sometimes the same enterprising Americans helped both Stalin and Hitler (let’s drop a name: Harriman). Arab despots were so wealthy, arrangements with them proved most lucrative (that will remind one of earlier arrangements with African kings for the slave trade).

It was all a bit iffy. The connections between Nazism and US plutocracy should have been very difficult to hide, had the American people a critical sense appropriate to democracy. So God helped, just as it had helped for slavery, holocausts, and the like.

God would help the plutocracy as it switched from exploiting a particular color of skin. to all skins. The key to exploitation is to bestow on people the minds of sheep. Nothing like Christian religion for this, because it is crammed with contradictions construed to kill all trust in logic in the believer (example, as Muslims would point out, for Christians, 3 = 1). The Plutocracy forced God fundamentalism on the people: “In God We Trust” was imposed in 1956. After making the common folk stupid, God would tell Bush to invade Iraq.

The plutocratic parabola went skyward under Clinton (following Rubin’s advice). Under Bush the entire plutocracy became so crazy that the entire world could not ignore it anymore. It got the idea of conquering the world physically, or at least, where the oil was. France, the progenitor of the USA in at least three ways, seeing that the US was losing all its bearings, got in the way. But that was not enough: flushed with hubris, and ever bigger bubbles, the plutocracy avenged itself by engaging in ever more dangerous and abusive financial practices. Having had to forget the enslavement of Africans, the plutocracy had the revelation that most Americans could be treated as means to ever greater riches. In a sense the new “blacks” were the entire middle class.

But going to war is dangerous: one never knows what will happen. The American plutocracy tripped in Iraq. Its defeat is absolute: the treasury got drained, the infrastructure (material, mental and spiritual) went down, and middle class income started to falter as energy prices balloned. To save itself, the middle class defaulted, exploding the corrupt banking sector, and the pieces flew all over the world, in one of the greatest humiliation ever to be seen.

***

 

SLAVERY AND RACISM, AND ITS MODERN DESCENDANTS, WILL NOT BE THOROUGHLY ERADICATED UNTIL THE FULL DEFEAT OF PLUTOCRACY, A PRE CONDITION TO THE FULL RETURN TO DEMOCRACY:

Some will say the USA is a democracy, 120 million people just voted. But democracy is not JUST about voting (besides that’s a low rate of participation: the USA has 305 million citizens).

Democracy is also about having democratic institutions. For example, teaching establishments not exclusive to the rich is a must in a democracy. Unfortunately, that’s increasingly not the case in the USA; the plutocracy pretty much controls higher education. (Yes, Obamas, Barack and Michelle went to Harvard, but that is mostly token; true Obama may well prove the undoing of the plutocracy, but we are not yet there!)

Democratic health is also a must (in the Middle Ages, the rich and the poor looked like two different races, from the different circumstances of their health; there is quite a bit of that coming back in the USA, with the obesity epidemic).

Slavery and racism are not out there, a flaw of the white American race. Slavery and racism are flaws of the American system of thought that originated as tools of the rich in America, while English American society devolved back to savagery. The Puritans were praying to “God”, so that they may themselves could prey, just like “Him”.

The greater war of rich against poor is far from won: many mass psychological structures of the USA support the plutocracy, not the People. Just look at the coins; they do not trust the People as the One “E Pluribus Unum” was the original slogan of the USA, but not anymore: the plutocracy saw the danger and ordered a switch to the Bible and its jealous, crazed, infanticidal God. The coins now order us to trust another one, “God”, the one that taught us slavery and brought the invasion of Iraq (among thousands of similar goodies).

New modes of exploitation were found (health care, biased to the rich tax code, cheating on inflation, subprime, etc.). The entire American people were enslaved, and felt black, in more ways than one.

Well, it may be time to remember that Rome did not have racism, but Rome had plutocracy, and ultimately, that plutocracy destroyed Rome.

 

Conclusion: THE HEAD OF THE PLUTOCRATIC SNAKE HAS NOT BEEN CUT OFF, YET ITS VENOM IS STRONG.

After 400 years of slavery and racism, and their consequences, by electing someone half African biologically speaking, the English speaking settlement of America has embraced who it literally burned yesterday. It’s no coincidence that people have chosen to be led by who would have been looked at as a slave a little while ago: Exploitation could not target “blacks” exclusively anymore, so it targeted everybody, and everybody has struck back by tasking slavery as the new symbol, a bit like the Christians took the cross..

Obama sincerely wants real change. But the idea of plutocracy, as what is best, and what knows best, at the helm of America, is 400 years old. The enormous material and military successes of the USA intuitively long led people to believe the USA was been on the right track. This happens in all aggressively expanding empires. With plutocracy at the helm of the USA, civilization is on a collision course with the USA.

It’s plutocracy that destroyed the Roman republic from inside and even the empire. The Athenian republic was destroyed in exterior wars with fascism, the ultimate stage of plutocracy.

Recent polls show that US citizens believe the USA is not on the right track. This gives hope. Doubt is a first step towards a better wisdom. What should Obama do?

Well, being very mentally creative is the only way out. Thus tapping the internet to tap the minds of the multitude without going through the structures corrupted by the plutocracy, should help. Learning to distinguish good ideas, unattached to authority to back them up, is a must.

But first of all, the plutocrats should be thrown out of the living room, sent to pasture, and taxed and regulated close to extinction. Athens during her greatest age was plutocrat free, and that was no accident.

Time to “think anew and act anew” as Lincoln put it.

***

***

Patrice Ayme.

***

ANNEX: THE BIOLOGICAL ROOTS OF PLUTOCRACY AND DEMOCRACY:

In a nutshell: plutocracy is a trick of small brains, democracy the strategy of big brains.

BASIC ETHOLOGY: WHY INSECTS HAVE PLUTOCRACIES, AND FREE HUMANS DO NOT:

Insect societies are natural plutocracies. Why? Because insects breathe through their skins, and the ratio of skin to interior volume goes down as size augments. Thus they cannot have big brains. To make sufficient mind, insects have to add many small ones. Social insects create fascist and plutocratic societies, or they could not be. Feeding special foods activate particular epigenetics, turning on special genetics, some animals end as workers, others as warriors, and a queen is born.

Big centralized breathing allowed the evolution of large terrestrial animals that supported big brains making individuals so completely autonomous that they could afford to experiment with new behaviors. Lamarckian style epigenetics went along for the ride (so now behavior came to guide evolution).

These neurological possibilities in turn made the occurrence of inventing new ways of behaving something that created a new, virtual universe that could be ordered by selection. Biological evolution used this maximally, and brainy species appeared all over. Yes, even sheep. The new selective pressure evolution found was to develop new ways, seen first only in the mind’s eye.

***

LESS BASIC PRIMATE ETHOLOGY AND ITS PRIMATE PRINCIPLE I THINK, THEREFORE I LIVE.

Primates pushed this even further, as they developed a biological physique to do whatever.

Little hands and feet to grab the world, stereoscopic color vision to observe it fully, large brains to analyze it, appeared in prosimians. Prosimians were intrinsic little engineers, that is how they survive.

Diminutive Golden Tamarinds, a new world monkey that looks like a micro lion with hands, feet and hyper intelligent eyes, will do whatever with their environment. They do not do one thing super well. They do not come with an advanced specialization as less advanced species do. They do not use nanotechnological skin to streak through water at 80 kilometers an hour, as the Malko shark does. They do not fly above the Himalayas as some geese do. They do not run fast. They just invent devious ways, to turn around what nature proposes at first sight.

Intrinsically primates evolved to be equalitarian as far as developing and presenting ideas. Equality gave a greater place to ideas. Many minds in parallel suggest more ideas than a few minds at the top. Societies of brainy animals depend upon their mental capability to generate the correct ways. To each chimpanzee group its own culture, fruit of its own idea generating capability, which crucially depends upon having many minds contributing. Spiritual democracy is no luxury among chimps, it’s how they survive. All the more since they do not have enough of a language capability to transport information at a distance (so each chimp culture is a world on its own).

One has to understand the following biological principle with enormous practical consequences for politics: TAPPING ALL IDEAS OF THE COMMUNITY IS AN EVOLUTIONARY REQUIREMENT IN PRIMATE. Yes, it is their greatest advantage, yes, it is a psychobiological drive they have, but ultimately that is how they CAME TO BE. MENTAL EQUALITY IS US.

***

P/S 1: Some may say that a discourse such as the preceding one has an anti-American slant. Why not concentrate on the flaws of the British Empire and the French revolution instead? Well, the answer is that racist slavery in the USA was a uniquely vicious combination, probably surpassing the level of horror of old India, long ago. The British caused the American Revolution by trying to prevent the Americans to spill all over Indian lands, and then tried to win it by giving freedom to any slave coming their way. On the face of it, that was all very progressive.

The French, anxious to get even for the loss of Canada, nevertheless encouraged, excited, intervened and won the American Revolution, in a traditional extension of what England and France had been doing for each other in the preceding centuries. But that does not mean they did not find American ways deplorable: even the “Ancient Regime” of the monarch, Louis XVI, forced American exiles in Paris (Jefferson, etc.) to behave as if their slaves were employees, not slaves. Because such was the law. The Merovingian law.

P/S 2: Solon, an archon elected to the Aeropagus, was given extensive powers (inscribed in axones) to change the Athenian Constitution (early sixth century BCE). He rolled back many of the draconian measures of the plutocratic Draco. Many measures of Solon would be viewed as highly socialist today, highly managing of trade and immigration (encouraged for tradesmen). In his poems, Solon condemned greed and arrogance. He also outlawed slavery of Athenians, especially for debt (remember the gage of death Americans are supposed to bear?).

STIMULATING THE RIGHT WAY.

November 11, 2008

 

DEFICITS IN THE SERVICE OF HIGH RETURNS ARE NO DEFICITS. STABILIZING GLOBALIZATION WITH THE VERY HIGH TECH GREEN SOLUTION.
***

Stimulating activity by throwing money at the same bad old economy will not help much, if at all. (As Science’s editorial has it :”much of the $ 152 billion economic stimulus package is likely to be spent on products made in China”;  09/19/08). 

Paul Krugman writes: “Barack Obama’s chances of leading a new New Deal depend largely on whether his short-run economic plans are bold enough. Progressives can only hope that he has the necessary audacity.” (Krugman, NYT, Nov 10, 2008). Krugman computed that the US government should come up with a supplementary 600 billion dollars stimulus program (on top of the one trillion financial rescue package already decided). We, going in the same direction, but much further, think that the infrastructure stimulus should be much higher, proposing to finance a big chunk of it with taxes on habits we do not want to keep.

Indeed, hope will not be enough. We need the AUDACITY OF FACTS. The socioeconomic system, and even the Constitution, of the USA has been turned upside down by the plutocracy. This started long ago, and common US citizens were carefully trained and brainwashed to ignore it, allowing to increase plutocratic abuse ever more. Ignoring an obvious danger happens all the time: the passengers on the Titanic played in snowball fights after the iceberg had brushed along the ship. But now the ship is going down, and laughter has turned to screaming.

Differently from the Titanic, though, this time the ship does not have to go all the way down. Differently from the period from 1929 to 1930, this time one can make the right decisions.

There are several caveats to keep in mind. First we are all in this together. That’s rule number one. It’s not a situation of “my country, right or wrong”. Nationalism was tried in 1929-1930 (the Smoot-Hawley bill) and led to disaster, namely the fight to death of the French republic (belatedly seconded by an unarmed Britain) against the united front of all the fascists in the world. That struggle, starting in September 1939, was World War Two. A massive holocaust ensued (75 million killed). By then, though, the French republic had no choice, all alternatives were insufferable. We still have lots of choices. 

The Smoot-Hawley bill of July 1930 tried to save US industry from its own overproduction by preventing Europe to keep on exporting to the USA, thus punishing Europe for a crime Europe had not committed. Europe retaliated in kind. The relationship between France and Germany on one side, and the USA and Britain on the other, became really bad (and this goes a long way to explain the rise of Hitler). The former two reproached the later two to have engaged in bubble economics (which was indeed the case, but irrelevant to the plans one had to make, especially in light of the risks). Paralyzed by antagonism, a common restarting of the world economy was not organized. Worse happened soon, as German and American plutocrats got fascism to power in Germany (January 1933). The USA and Britain played the Hitler card for a while. This shows the sort of extremes a depression can lead to. (see P/S).

Today, one cannot feed American prosperity by starving China. Let China make TVs, computers, couches, even planes. Let IKEA sell them cheap. Nothing wrong there. What is wrong has been that the displacement of economic activity towards China, was UNCOMPENSATED by the rise of some other economic activity. China did its job, managed its economy, and competed with the West, as it should have, that’s the essence of the free market. But the West got lazy, and did not mind that all the jobs were going to China without creating new jobs in the West, of a type China could not compete with. Many of these big bad Chinese are simply honest, hard working peasants who applied themselves very hard at school, and in their new job in the city. And now they make excellent shoes. So?

Financial engineering (as promoted by Rubin under Clinton) is a form of laziness. Far from providing people in the West with jobs, it stole all the money to leverage those who had all the money some more. The strength of the West used to be its more advanced thinking, thanks to better schools. California used to have the best schools, now it has the worst. But now California is full of billionaires. The billionaires don’t like to pay tax, and, to pay less tax, have organized campaigns against taxation. They know well that if the common people paid more tax, they would themselves end up paying much more tax. So now California schools are the worst in the USA.

THE WEST SHOULD INVENT, PUSH AND DEPLOY MUCH HIGHER TECHNOLOGY, AND SELL IT WORLDWIDE. That is precisely why high technology green jobs have to be promoted. GREEN LAWS will force other countries to buy the advanced green technology, while they sell their less advanced technology (as they already do, and should do more).

An example: in modern countries, for well over 150 years, most of transportation has been made by trains. Even in the USA, trains transport most of the goods, and do so more efficiently than any other means (obsolete US diesel trains transport goods four times cheaper than the most modern trucks; in Europe, it’s more like ten times more efficient). The installation of a modern twenty-first century train network across the entire USA would bring in for several trillion dollars of jobs (in France financing of the high speed train network was initially from State financing, but is now private, except for the hyper expensive transalpine tunnels).

DEFICITS IN THE SERVICE OF HIGH RETURNS ARE NO DEFICITS. They are profitable investments. Deficits are unacceptable, and self defeating, when they are used for chronic spending.

The Second World War was financed with a huge deficit, and the economy sprung forward, during and after. Notice too that this was made in a completely totalitarian way (a young Canadian, Galbraith, was made economic czar by FDR, because he was not biased with vested interests and past relationships). Roosevelt did not have time to waste.

Whereas the huge income and capital gains tax augmentations of Hoover were a mistake (and would be even more mistaken today), other taxes (say on energy, and compensated by subsidies for people of modest means) could actually stimulate the economy.

Indeed, in the present setup, fossil fuels are subsidized (if the same criterions of safety and lethality were applied to coal energy as they are for nuclear energy, it’s likely not one new coal plant would be built; still the US, or Chinese, or German economy rest on coal ever more). Fouling the air we all have to breathe is a serious problem, and the greenhouse heating could result in billions killed, but authorities, and many hare brained ecologists, have obstinately refused to draw these consequences of fossil fuels. Although the bill is already coming due (the United nations evaluated the number of people already killed by greenhouse heating at several hundred thousands, and bad air due to coal kills as much every year directly). Most of the danger comes from the inertia it will take to switch energy systems (historically it takes 50 years).

Thus realistic taxes on fossil fuels would make green energy and modern electric trains, and green housing highly profitable, and thus spur the economic activity of the free market. To switch to green will engage spending of the order of many years of total GDP. The enormity of it all is viewed as a curse and an impossibility, by the people who cling to the past. But, for the people who look forward towards improving the world, and avoiding the gathering catastrophe, and simply, for those who look for work, high technology and high industrial spending for the green economy, far from being a curse and an impossibility is redemption and solution.

Taxes on fossil fuels would also provide government with capital for health care and education. Overall, TAXES ARE SIMPLY A WAY TO DISPLACE THE ECONOMY FROM THE CATASTROPHIC SITUATION IT IS GOING INTO, TO WHERE IT COULD STREAK TO FUTURE GOODNESS. Only taxes and regulations (which are taxes in hiding) will displace the economic, and even social activity from the false gods of recent decades to the proper gods of probity, and humanity at its best.

A preferred American proverb is: no pain, no gain. It’s Puritanism at its best. One could go further: “No pains, no brains”. Pain may even be a pre condition for further mental activity. So now that we have suffering, it may be the first step towards hope, thus, well, there is hope, indeed…
***

Patrice Ayme
Patriceayme.wordpress.com
***

P/S 1: Hitler was all for bubble economics, propelling it by US direct investment and by stealing the Jews. Hitler’s smoke economics, soon turned into the human smoke of Auschwitz, consisted into a military and dual use built-up (example: he constructed a Autobahn network, so he could quickly transport his army across). Hitler’s bubble economics was paid for by plutocrats, huge deficits and by stealing the Jews (an old method “Saint” Louis of France, and other anti Jewish despots of the later Middle Ages would have recognized as their own). 

As a supplementary boost, Britain and the USA went on to help the Nazis, with a combination of diplomacy (1935, UK; 1937, USA), heavy direct investment, more or less secret  industrial collaborations, and countless other ways, some, grotesque. It’s hard to figure out all what went through their minds, but a friendly attitude to amoral business and principled racism goes a long way. (Finally after enough Guernicas and Kristallnachts, Britain aligned herself behind France; the US plutocracy, though, stayed faithful to Hitler, to, and through, the bitter end.)

P/S 2: US trains, and the lines supporting them, are obsolete, both for cargo and passengers. They go way too slow, they use polluting and inefficient fossil fuels, and they are not safe. The installation of a modern twenty-first century train network across the entire USA would cost several trillion dollars. That means that, should such a network be built, it would bring in several trillions in GDP with a very high future return on investment (Very High Speed trains have proven very profitable in Europe, over the last few decades). People would start to prefer to go from San Francisco to New York by train rather than by planes! The latest Lignes a Grande Vitesse (High Speed Lines) in France are built for 250 mph (400 feet per second), so Los Angeles to New York could be done in 10 hours, by train, city center to city center (not only are trains much more efficient, but they are way safer: French TGVs have been attacked by terrorists several times, with only a few passengers killed, because, considering the immense speeds, the trains are made especially resistant to crashes… and cannot be crashed into buildings; French TGVs have crashed into everything, from terrorists’ concrete slabs to one large truck, with only the conductor killed in the later case; the trains are made to stay upright and stay together as a zigzagging snake, storing energy that way, in case they leave the rails).

By definition those trains would be made in the USA, not China. And, even if French (say) technology is purchased, it would still be built under license, and create a lot of high tech jobs (just taking care of the metallized carbon pantographs and the catenary lines made for train streaking at 120 meters per second may employ up to 20,000 people all across the USA;  and that does not count the much larger personnel in care of the rails, or the train sets; all this involve very high tech: at the speed Very High Speed trains go, like the new AGVs, most of the braking is done by using the Maxwell laws of electromagnetism in two different ways, feeding back the energy to the network; the speeds are too high for standard braking; in test emergency braking, supplementary conventional braking see the carbon brakes reach 1500 degree F; new materials are tested all the time, and adaptive electronics is all over).

P/S 3: In the sixties, France went on a wild goose chase of developing her own nuclear civilian technology. Perhaps because a French woman had discovered nuclear energy, and France was first to start a military nuclear program, it was a matter of pride that a different approach from the American one would be pursued. Nevertheless, after a while, French scientists had to admit that gas reactors were way too unstable (such a reactor exploded at Chernobyl). The French government swallowed its pride, and purchased technology from a US company, Westinghouse. Thus was the civilian nuclear industry born in France. The latest French reactors descend from US designs. This is trade at its best (by the way the only forges capable of making immensely strong steel for inner nuclear vessels are located in France and Japan, and they are overbooked). 

All this to say that there is nothing wrong about the USA swallowing its pride and purchasing European technology. There is a long tradition to this. During W.W.I, the French 75 mm gun was built under licence in the USA, but that worked only after French engineers showed to their American colleagues how to become precise enough. The knowledge of how to achieve such precision was thereafter useful to the entire US industry.

P/S 4: Stimulus packages by just giving money to common folks are ineffectual. because the behavior of common people has to be modified. So cut capital gains to zero (for people making less than $300,000, say). Also compensate fully people of modest means for the high energy taxes they will have to pay (by modifying their behavior, they will then make money out of it). As Catherine Kudlick, New Jersey, puts it in, commenting on Krugman’s call for a stimulus:

“I worry about any stimulus plan that tries to emulate FDR’s New Deal. I worry not because it’s a bad idea in theory, but because, in practice, we face a much different economic world. Globalization makes any stimulus package today a much different animal. For example, with my $300 from the last stimulus package, I bought a couch from IKEA. IKEA is a Swedish company. The couch was made in China. And, it was delivered by two immigrants of dubious legal status, who barely spoke English. What does this do for the American economy? It seemed the only American making money in this transaction was the sales girl in the store, who was probably making close to minimum wage. I wish someone would address the issue of globalization in regard to any government economic stimulus package. I mean, we’re using taxpayer money to stimulate the economy, so shouldn’t it be primarily the AMERICAN economy that we’re stimulating?”

That is precisely why high technology green jobs, with the very highest technology, have to be promoted. And that is precisely why tax policy has to direct the effort.
***

HUGE CRISIS, HUGE ANSWER.

November 7, 2008

NO USE FIGHTING THE CROCODILE WITH A BANANA. MORAL FIGHTERS CRUSH BIG EVIL WITH BIG GUNS. DEFICITS IN THE SERVICE OF HIGH RETURNS ARE NO DEFICITS.

Abstract: Just as for the second world war, the little difficulty out there was a long time coming, and the way out of this present crisis also requires a huge economic reorganization. Differently from W.W.II, new taxes on habits one does not want to keep (such as financial manipulations, waste) will go a long way towards both helping in the resurrection of a new, real economy, and the dismantlement of the old, kleptocratic one that has so utterly collapsed. Why would one want to keep on being submitted to waste and financial manipulations by a few overlords? They are what caused the crisis. So punish them, so that they can disappear from the face of the earth. Indeed, crisis spells opportunity. Especially in health care. The admirable European health care systems were set up after the devastation of W.W.II, precisely because they felt easy to do relative to the enormous rebuilding of the devastated real economies (with entire cities bombed out flat). Thus, here now, the financial and economic crises will allow to get health care reform out of the way, and, as a little sideshow. In turn a reformed health care will be one of the major factors in financial and economic resurrection. Taxation will not just pay for civilizational and economic improvements, it will encourage and allow new behavior while repressing sinful ones. It ’s all very evangelical. So tax, tax, tax, baby, tax!
***

Obama has to think huge. Immediately. Why? Because the crisis is huge. And if the crisis is not addressed fast, it means great depression, worldwide, and then, of course, pretty soon, a great war that will put all preceding wars to shame. Crying about holocausts is good. But it is much better to prevent them by striking their preconditions before they click together. So this present economic crisis, the fruit of a perverted version of plutocratic globalization, has to fixed, and fixed now, before everything falls seriously apart. The crisis is huge, and only huge can fight huge. Trying to tame the crocodile with a banana will not help. What we need is a big stick, or, better, a big gun.

Some suggest that Obama will not be able to go ahead with his (rather modest) health plan, because, to answer the sudden financial and economic crisis, after years of neglecting infrastructure, priority has to go towards restarting the real economy. According to this myopic reasoning, all the money for health care will have to go to restart the economy instead of worrying about the poor and the diseased. The revisionists say that pouring concrete, setting up power lines, building high speed trains, funding fundamental research, and building clean power plants is somehow adverse to correcting the plutocratic, profit making health care.

Well, nothing could be further from the truth. We are in this crisis because the plutocracy was left free, for decades, to set up a world economy not just in its service, but in its exclusive service, and American health care is one of the facets of the exploitation machine of the People by the hyper rich. It was set up by Nixon. Nixon style health care is a particularly egregious example of plutocratic exploitation, and calling it a facet is too nice a picture. Exploitative US health care has been the head of a hydra, all of whose heads have to be cut off. Simultaneously, or they will regrow.

In truth, one needs to both urgently fix health care and the infrastructure. And that’s just part of it. Maybe one could also address the problem that president Eisenhower, in his farewell address, claimed was the most urgent facing humankind. Eisenhower was following Roosevelt’s observations: “Don’t forget what I discovered that over ninety percent of all national deficits from 1921 to 1939 were caused by payments for past, present, and future wars.”

Everything can, should be, and needs to be done at the same time: investing in high return activities is worthy of any deficit. Micro accounting should be out, and visionary economics in the service of future civilization back in.

When Roosevelt found the USA under attack from Imperial Japan and the Nazis, he decided to overwhelm the enemy with industrial production, by TOTALLY mobilizing the economy. Revealingly, Roosevelt created an instant economy that was every bit as totalitarian as Stalin’s. Nazi Germany, anxious not to displease the German people by acting totalitarian (!), did not create such a totalitarian economy before it was way too late, around 1944 (when Germany was already half destroyed). But Roosevelt did it right away, because fascism is the defense instinct of the people, and thus a democracy can turn fascist instantaneously, and does not have to make any excuse. To implement his plan, Roosevelt nominated a foreign youth without any attachment as economic czar (Galbraith). Car companies were ordered to make military equipment, and all industry was told to employ women (all the young men were drafted; that is, one American out of 12 was in the army.)

We presently need a dwarf version of such a redeployment of the economy. Come to think of it, the USA is in two wars and an economic crisis, somewhat like early 1942. These are not small wars: the Afghan war could well involve nuclear weapons (since Pakistan would be in violation of the Nuclear Non Proliferation Treaty, had it signed it, and since Al Qaeda is in Pakistan like the cancer is inside the dying patient.)

What went wrong in recent decades is what Americans do for work. One can work all day digging holes and filling them in, it does not help the community’s welfare. Looked at in the right way, that is what Americans have been doing. The plutocratic style health care the USA suffers from today has been such a mental and physical disease. Americans waste too much time and energy with the highly inefficient health care system, and, when they economize in health care, they waste their health too, causing a greater harm to the overall, real economy. (Let alone, hurting, of course, the society and the pursuit of happiness, the later being in the Constitution!)

Americans waste too much energy (bad mileage, bad urbanism, life in distant suburbs, bad roads, not enough public transportation, poorly built homes, etc.). Financial system operators got all the money for themselves (instead of leaving it inside the banks for the people and infrastructure to use), to the point they can’t extend credit or even transfer funds. Related to this, all the creative energy went into money manipulations instead of real infrastructure. In California, already with the worst educational system in the USA, all what the republican governor, a career weight lifter, can suggest is to cut the educational budget by a few more billions dollars: when you have cut to the bone, you can always cut the bones, that’s as much less weight one will have to lift. Thus the weight lifter thinks. Gulping steroids carry only that far. The weight lifter does not know Franklin Roosevelt who said: “The school is the last expenditure upon which America should be willing to economize”. In cases like that, you don’t cut the bones of children, you tax. That’s called civilization.

All in all, the USA, enslaved by the plutocracy, has become a super gigantic waste of activity, in the trillions of dollars of wasted energy each year (money is ultimately measured as energy). Americans are tremendously busy doing nothing valuable. Meanwhile the French enjoy their vacations and retirement, while the French economy is the world’s most efficient, per hour worked, and the superb French health care operates on half the cost of the US one (relative to GDP). Within two years, French High Speed Trains should be operating more efficiently at 225 miles per hour (with the new AGV technology). The International Thermonuclear Experimental Reactor (ITER) is built in Provence. Orienting the US economy in the same way is just a matter of choice. 

In any case, before this is over, in the next few years, the financial rescue plans will have cost several trillion dollars (whereas the Obama health plan is supposed to cost 1.6 trillion over 10 years). So, then, what are a few hundred billions a year invested here or there to reorganize, and get the industrial machine restarted, doing useful stuff? Soon the savings from reorganization and the profit from new production would be huge (in the trillions).

There is one method to get out of all this at the same time: it is to encourage behaviors and activities one wants, looking forward, and discourage all those one does not want.

How to do this? Well, NEW taxes and regulations. Such taxes should NOT strike hard individuals of modest means. That would be unfair, and socially and economically unwise. If nothing else, it would backfire. So they would be financially compensated for energy taxes, say. Even compensated, such taxes would modify the behavior of the multitude, since it would gain by becoming thrifty.

But uncompensated taxes have to strike very hard intolerable, unsustainable ways. Get the yachts, the private jets, and the leisure trucks.

New taxes on financial transactions will only punish rapid fire speculators (many of whom have been doing great in this crisis), and will pay handsomely for the health plan. Energy taxes have to be brought up. An Added Value Tax (already part of the EU Constitution, and present in 50 countries) should be next.

It’s all very simple: when in doubt, copy the EU, and try to be in doubt a lot.

Proper, ideal behavior is not all about “bipartisanship” among Americans, otherwise the USA would be invading countries right and left. We have just one planet, and other countries had the same dilemmas and crises before (since they were not milking an empire, they had them before). It’s no accident nor dictatorship, that most advanced countries do it, like, say, France. It’s a case of: same problems, same solution. France, the major republic with the universal right to vote well before the USA, being smack in the middle of Europe, and thus attacked, or in conflict, with all despots and fascists for at least 150 years, having lost several empires, has been forced to acquire a train of wisdom Europe now owns, and the USA may well be inspired by.

The USA has strayed very far from the course Europe has followed, and very far from the path Roosevelt drew (not to say FDR was perfect, he was grossly wrong in his interaction with France, helping to make Hitlerism much worse than it had to). The USA has strayed far from the solution. Time to see the error. One can guess that if everybody, all other countries, do differently, and the same, there is something to it.

It’s important that Obama does all what he said he would do (he surely would not want to be known as Oblabla). His health and tax plans are minimal plans, very bipartisan. But so is the crisis. It’s very bipartisan, because both parties created it. To get the arsonists to agree to throw some water on the fire, does not remove the heat. One may instead be burned by the steam.

Now that plutocratic illusions and make belief have come back to earth with the elegance of a crashing asteroid, all bipartisan games should be out of the window. In a case like that, Hollywood brings in a black president to handle the crisis, as a symbol that things have to change big time. So now we have the giant crisis, the “black” president, and thus, according to script, Obama has to go much beyond anything thought of before.

As luck has it, Obama is trained as a community organizer. The hugeness of the crisis condemns him to reorganize the community on a huge basis, right away. To work. Only one thing to fear: the fear of thinking small. The fear that small thinking brings to those who have opted to live as trembling prey rather than as the hand of fate.
***

Patrice Ayme
Patriceayme.com
***

P/S 1: Roosevelt again: “But, my friends, this Nation will never permanently get on the road to recovery if we leave the methods and processes of recovery to those people who owned — I say “owned” — the Government of the United States from 1921 to 1933.” (23 march 1938.) How does one disown the owners? Well, taxes.

P/S 2: France is led by the son of an immigrant of Jewish descent; it’s not just in the USA that these things happen. Sarkozy is even a lawyer, just like Obama. The USA is less out there as its sycophants want to believe. The USA is mostly original in the immense fright simple words engender, such as “nationalization” (accomplished with a plutocratic twist by the Bush administration), or “socialism” (after all welfare was a US invention), or May Day (the initial Labor Day, celebrating a massacre and plot against unionists in Chicago). What’s mostly original about the USA is how afraid of words and concepts it can get. The USA is the proverbial elephant taking refuge on a chair because it has seen mice. The mice, being any word or concept that so displease the plutocracy that it has taught the American People to fear it viscerally. From words come thoughts, and from thought, power. By forbidding some words, one forbids some thoughts and thus access to some forms of power. Similarly, by advising Obama to not touch most aspects of the economy, the plutocracy hopes to leave most of the powers it uses intact.

P/S 3: When he came to power, Clinton delayed health care reform by organizing a big blah blah blah about it for a full year.  When he finally moved, the plutocracy had its lines of defense fully erected, and nothing happened for the next 15 years. Right now, the plutocracy is fully humiliated, disorganized, and begging for money. It’s the perfect time  to chain and domesticate it before it can find new angles of attack.

CHANGE ONE CAN LIVE BY: TAX INTELLIGENTLY & SPEND WISELY.

November 1, 2008

 

AMERICAN BLIND CONSUMPTION AND MALIGNANT GROWTH LED TO CRUSHING DEBT, RECESSION AND PLANETARY DESTRUCTION. A WAY OUT IS TO TAX, IN THE SERVICE OF REASON, WHERE IT HURTS MOSTLY PLUTO, AND HELPS MOST. FORTUNATELY, THERE IS SPACE FOR THE STATE SECTOR TO GROW.

***

Abstract: Economic stabilizers and infrastructure spending go hand in hand and have to be added to the US economic arsenal. New taxes will help with the stabilization (contrarily to plutocratic mythology). An example is an immediate tiny tax on each financial transaction. By itself it will more than pay for Obama’s health plan (besides having the other good effect of hindering rapid fire speculators: a win win tax except for Pluto). Time to grow up, children, and stop parroting the plutocratic sirens.

*** 

Some United States opinion makers are splurging into pessimism about the US economy (see for example Paul Krugman, New York Times, 31 October 2008). The sadness arises from the retrenchment of the American consumer, making a bad economic situation worse, the sad ones claim. In recent years, Americanus Consumericus Vulgariswas pulling the entire world economy with his insatiable demand for goods. But now, no more: Americanus Consumericus is vulgarly exhausted. So Nobel Laureate Krugman deplores that “consumers were going to have to pull in their belts. But the timing of the new sobriety is deeply unfortunate. One is tempted to echo St. Augustine’s plea: “Grant me chastity and continence, but not yet”.”

Yes indeed trust that old hypocrite Augustine: “da mihi castitatem et continentiam, sed noli modo” (Confessions. 8.7.17). Indeed that “Saint” did not believe in what he preached. Augustine was a civilizational class disaster, one of the advocates of the Apocalypse, of Anti-Judaism, and other serious mental diseases. Augustine was such a dissipated character, that it was natural for him to ask God to help him indulge in orgies. A perfect American Saint.

Mr. Krugman overlooks the origin of the present crisis. The crisis started precisely with the rebellion of average Americans unwilling, and increasingly incapable, to pay banks through their noses. The crisis was caused by the retrenchment of the suffering middle class. It’s now in full retreat. What else do you expect, with all the jobs gone overseas to the point Boeing is unable to build its latest plane, as it tries, futilely, to bring the parts from all over the world?

Looked at it that way, namely that the present financial crisis arose as a long delayed rebellion of the overexploited American sheep, the situation of the USA is not as bad as it looks. It was high time! The situation is perfect to change the entire socioeconomic set up, and make the USA regain its natural civilizational status, that it used to have: strong, independent, intelligent, self sufficient. Quite the opposite of hysterical, ignorant, superstitious, shallow, hubristic and erroneous (enjoy the allusion!).

One has to think out of the box enclosing naive American economists, and look at the hard numbers, in the context of a worldwide view, and the full weight of history. The verdict? The USA has simply to augment the part of the State in its society, to introduce MORE RATIONALITY IN ITS ECONOMIC AND SOCIAL ACTIVITIES. Yes, “New Trade Theory” has been wrongly interpreted and applied: it does matter where the factories are. Yes, it does matter what people spent their money on, and what they direct their energy towards. Yes, it matters if a fraction of one percent of the population lords over the increasingly destitute and despondent rest. But the point is that the numbers show that the government has a lot of leeway to do what needs to be done (more than European governments do, because their State sector is already close to maxed out).

Last week, the ex US Central Bank chief, Mr. Greenspan, one of the sad clowns of American finance, discovered to his “shocked disbelief” that the financial markets are not self regulating (!). Well, neither is the economy. That’s one of the main reasons why we have governments: to regulate the economy. More deeply, in a democracy, the government decides what the economy will be about: governments direct the actors to do what their parts will be. It’s not to the actors to tell us what the house (“eco”) shall do, and how to manage it (“nomy”). This attitude, of putting the horses before the cart, has nothing to do with socialism, or, a fortiori, Marxism. (Nobody is confusing das Kapital with blood here, whereas Marx naively did.)

In the USA, in recent decades, it’s the people with the money who took all the decisions: Rubin and Paulson, two hyper influential Treasury Secretaries (especially Rubin) were both chairmen of Goldman Sachs, and plutocrats in their own right. Rubin, with Greenspan’s help put the Clinton administration on the firm path to financial engineering and plutocracy. Real engineers went to China. Bush was an afterthought.

The State controls about 36% of the GDP in the USA (Federal State plus local states), but the State controls much more in all European nations. Government spending is 45% of total GDP in France and Great Britain (more exactly 44.7% in the later case, with the latest, 2007 numbers). The State portion of GDP is higher in Sweden, above 50% (see P/S).

Social programs kick in Europe, as automatic stabilizers in case of recession. They provide a spending stimulus, with the forced spending of welfare. This sounds paradoxical: higher taxes stabilize Europe in case of recession, in absolute contradistinction to the US mantra that one should lower taxes in case of recession (a mantra making the USA economically unstable, see the comparison with Chernobyl in the P/S). 

The astute observer will notice that Japan, mired in waves of chronic recessions for 18 years, has a much smaller portion of its GDP from the State than the USA, roughly half (GDP from the Japanese government has been increasing in recent years up to 20%, from a depressed 15%, a low point reached just when the recessionary waves started to roll.)

The retrenchment of the US consumer is just what the doctor should have ordered. What did the consumer do so far? The consumer went to Walmart and bought stuff made in China. Fine for what is necessary, but a lot of it is not. The American consumer has been consumed by consumption (“consumption” used to be the old euphemism for tuberculosis). Some of this consumption is indeed adverse to health: Americans eat out too much, and become obese, because restaurant fare is partial to fat and sugar. Thanks to the recession, Americans have now an excellent occasion to save while learning to cook wholesome foods at home, as if they were fully grown up adults. A fully grown adult should be able to prepare his own food.

A lot of the consumption has to do with buying things made overseas, that should rather be made at home. Car making, plane making, or rocket making, or electronic chip making are strategic industries, they cannot be located overseas as much as they are getting to be now without endangering the engineering supremacy of the USA. That later endangerment compromises in turn world security (even leftist socialists with anti-American tendencies will recognize this, to their dismay). 

Most European countries run better economies, with, and because the States are spending more as a percentage of GDP. Some of the right wing will scream, because they made such good money in the old system. But they should address their whining to the old Roman republic, or even to the Athenian democracy, 25 centuries ago. Those first democracies invented massive public spending. And that reached new heights in the (fascist) Roman empire that followed. The Romans did not just build a giant infrastructure with public money (roads, ports, lighthouses, aqueducts, theaters, baths, public health spending, public buildings, fortifications, enormous spending on the military and security and justice), but also invented food programs and welfare. And nobody will accuse the Roman empire to have been too left wing, and not conservative enough (deep down the Roman republic, and the later empire died of conservatism, the failure to not react to changing circumstances). Public spending was extended to health care in the European Middle Ages (for example, anonymous drops were organized for people who wanted to get rid of their infants, instead of throwing them in the river; lepers were treated so well, leprosy disappeared, etc.).

Clearly, the time for a new extension of the public economy has come in the USA. Just like US financiers could not self regulate, US consumers could not self regulate. That’s actually why consumers instituted government, 9,000 years ago, or so, in the first cities; to regulate themselves.

It could be objected that 100% government spending is Stalinism. That is true, but not the subject here. Stalin’s State was not a democracy, or even a State of Law. It was just a fascist regime preparing and making total war.

It could be objected that an astronomical taxation did not help Byzantium. And that is entirely correct. But, even then, sometimes it did. After all, Constantinople was imperial capital of the “Pars Orientalis” for 1,125 years, about 11 times longer than the much celebrated Arab Caliphate.

It is true that government spending does not react as quickly to changing conditions, but that is exactly why it should be directed to rather unprofitable huge infrastructure projects. Such projects do not allow short term profits, so they are inappropriate for individual profit seeking (people, after all, even capitalists, need to have a life!)

The largest private project ever may have been the chunnel between France and England. Unsurprisingly, the early private investors got wiped out. The tunnel had to be constructed for long term political and economic reasons, but short term profit should not have been one of them. Now the chunnel has an operating profit. Super giant tunnels presently under construction in the Alps to carry high speed train lines are now financed by the Swiss, French and Italian governments: no more make belief that the little private guys associated in companies can do it all, and live happy forever after. These are public-private entanglements, since private companies get the construction contracts, but (some, or most of) the financing is public.

So a strong State means a well financed State. That means crafty taxes.

Half an hour after his inauguration, the next president should sign a DECREE instituting a tiny PERCENTAGE TAX ON EVERY SINGLE FINANCIAL TRANSACTION. At the rate used in Europe, that would bring in at least 200 billion a year, more than is needed by Obama’shealth plan. And so on. Small (but expanding) taxes on energy will do wonders to introduce rationality in the US energy economy.

Sycophants persist in proclaiming the supremacy of Harvard, Yale, and company, where the (now revealed to be) ruinous American elite is coming from, but, meanwhile the average US education is on its way down, as surely as the unsinkable Titanic. Even in pure science, Europe has pulled ahead of the USA. The solution for the USA is to spend more, in other words to redirect economic activity from buying somewhat useless products in China, to schools, research and energetic efficiency, inside the USA.

Funds could be directed to the deployment of the green economy. Apparently profitable solar, wind and (CO2 absorbing) algae power plants can be built in the Western USA, with existing technology, but there are not enough lines to carry the power (clearly a public, not a private, project). High speed rail should also be built: the latest French technology would allow to install efficient 250 mph lines all over, but they will require a lot of effort and capital. So there will be work.

The old economy is dead. The new economy has to be reborn in a more rational way, that’s all. The last thing to do is to re-ignite blind consumption. It’s time to switch from consuming fluff to producing stuff.
***

Patrice Ayme
Patriceayme.wordpress.com
*** 

P/S 1: Most US economists feed at the through of the plutocracy, and so they subscribe to the well known platitude that the economy of the USA has been growing its GDP at an amazing rate, ever since the Messiah Ronald Reagan brought morning to America again. Never mind that the US middle class has been going backwards, surely and steadily, all what the US economists looked at was GDP, most of the augmentation of which was skimmed at the top by the richest million Americans. Thus, the economists insist that their masters are right: the richer the rich, the richer the poor (never mind this was disproven for more than a millennium during the Middle Ages).

Meanwhile, according to the rich American economists, the dismal European economy was going down ever more, proving once again how right their masters were. This is, of course, in truth, a complete lie.  According to official numbers, of the stunning US GDP growth rate, the USA should be many times richer than France, but it’s far from the case.

Europe is not going down, far from it. It is very clear for those who are familiar with Europe, that it is the other way around: the top economies there have been getting ever richer than the USA. How come such a big discrepancy between official US truth and reality? Well, it’s easy to lie with statistics. GDP calculations involve deflating the nominal GDP by substracting inflation (and inflation can be whatever one wants it to be, within, say 10%). The CIA and company also use Purchase Price Parity calculations upside down, to make the USA look better…  In other words American lying in finance and economics is not limited to the subprime/credit crisis. In economy, perception is reality: one lends only to the rich. If the USA revealed itself to be as poor as it is, less lending. But the USA is still rightfully trusting in God, because this continental sized country is intrinsically very rich with huge reserves of (sometimes rather dirty shale) oil, and gas, and coal…

P/S 2: Sweden had an overall tax rate of (a bit more than) 50%, from 1995 to 2005. Much higher, nearly double than that of the USA over the same period. But Sweden grew at a higher rate (2.5%) than the USA (2.1%). And that is compounded by the fact that the USA experienced a huge gain in immigration during that time (so the real US growth per person was more depressed). This is typical: high taxes do not imply low growth rate (although we claim a somewhat related converse, namely that insufficient government spending leads to low growth rate, through infrastructural failures (as happened in imperial Rome)). 

P/S 3: Gas nuclear reactors become unstable at lower power, and that makes them very dangerous. That is why the Chernobyl reactor in Ukraine exploded; there was a (voluntarily engineered) crisis when it was running at very low power. The economy of the USA is a bit similar. At lower power, that is, during a recession, taxes have to be reduced, but that, in turns, makes the US socioeconomyeven more unstable. In other words, the USA IS AN ECONOMIC CHERNOBYL IN WAITING. This has to be changed, because the crash of a large economy always end with massive war. So economic stabilizers similar to those in Europe have to be introduced in the USA, for world peace’s sake.

P/S 4: A recent rise in the German Added Value Tax caused a sort of consumer recession there, which was part of a carefully engineered retargetingof the German economy towards more industrial and engineering proficiency, with everybody sacrificing (and employers engaging themselves not to relocate to developping countries). It worked, and the German economic redeployment towards higher capitalization of the industrial effort left the rest of Europe behind, including the sister country and reference frame, France (which found herself with a sizable trade deficit, although France, a huge exporter by herself, exports half in total value of what the USA does (!)). Germany is again the world’s number one exporter, with about 1350 billion Dollars in exports in 2007). The USA should get inspired! (The French have noticed the German effort, and the fruits it bore, and opinion making there is oozing towards doing the same, and that is part of Sarkozy’s program.)

P/S 5: Some will object that a tiny tax on each financial transaction will decrease “liquidity”. Well, “liquidity” is a much abused concept, and a very abusive practice. The plutocrats have been using the money of “We The People”, that they found in the banks, to leverage themselves in obscure and should-be-unlawful ways. That is what “liquidity”, in practice, means. In general, there is plenty of evidence that there has been too much “liquidity”, and velocity of money, in the wrong hands always circulating. In other words, liquidity and velocity, just like leverage, have been tools of the plutocracy. Time for “We The People” to control them. Controlling with a tiny tax will require no bureaucracy, it’s a very efficient, streamlined financial brake.