Posts Tagged ‘Public’

Synthesis Found: GOVERNMENTALISM WORKS.

August 13, 2013

In “Synthesis Lost” the honorable Paul Krugman courageously ponders the unthinkable:“you have to ask why, if markets are imperfect enough to generate the massive waste we’ve seen since 2008, we should believe that they get everything else right. I’ve always considered myself a free-market Keynesian — basically, a believer in Samuelson’s synthesis. But I’m far less sure of that position than I used to be.

Indeed, the economic beliefs that built-up civilization, East or West, rested on a completely different notion: the irreplaceable genius of government funded & commissioned Public Works.

Pont Du Gard: Not built By The Free Market

Pont Du Gard: Not built By The Free Market

The aqueduct above brought water to Nimes (Latin Nemausus, local Celtic god).

The first three aqueducts built into Rome, about 23 centuries ago, later carried 400,000 tons of water into the city, each day.

The first one, the Aqua Appia (312 BCE) was one of two major public projects commissioned by the censor Appius Claudius Caecus; the other was a strategic, super strong and super durable road between Rome and Capua, way south.

Eleven (11) giant public aqueducts served Rome at her peak, some piercing mountains through tunnels. Although extremely expensive to build and operate, the water the aqueducts brought to the public was free. So were the uncountable baths found in all Roman cities (many had curative properties… Thus, RomanCare was free!).

Rome was not called a Republic for no good reason.

That Republic worked as long as the law limiting wealth absolutely was enforced; as I have argued, globalization was the undoing of the law first, and the republic, next. A vivid lesson for today, when the situation is pretty much the same.

Don’t try to explain the relevance of Public Works to the economists who helped bring the present Greater Depression, slowly morphing into a Great Degeneration. They will look around with boiled cod eyes.

In “Colbert Good, Keynes Not So Smart” and in “To Save The World, Please default!” I have attacked Keynes as one of the creator of the vengeful Nazi mental system and a promoter of the powerlessness of the plebs (I may fire another blast against him, and his admirers some day soon). “Keynes” does not deserve to be honored in economics. All the more as the correct parts of “Keynesianism” have been known ever since there are serious governments, and they erect pyramids.

Here is a proof:

Grand Canals Of China: Built By Government

Grand Canals Of China: Built By Government

The Grand Canal Hangzhou-Beijing, 1,800 kilometers long,  was built from 581 BCE to 1290 CE (when the Mongols/Yuan finished an elevated section to reach Beijing, using locks, the first summit level canal in the world). At some point during the Sui dynasty, 14 centuries ago, over a 6 year period, 3 million worked on the Grand Canal.

Looking at this, one understands better why China has built a gigantic Very High Speed Train network. It’s the very Chinese thing to do.

The Middle Kingdom found, all by itself, just as Egypt, the Middle East, Persia, Roma, and Europe (starting with Francia and the re-emerged Italian Republics), that only public works can achieve certain tasks. The most important tasks.

Grand Canal: Public Utility For 26 Centuries.

Grand Canal: Public Utility For 26 Centuries.

So much for the concept “Keynes”. Now for eliminating the so-called “free market”, as a most fundamental concept. (In a follow-up essay, I will explain what allows the free market in the first place,”governmentalism“).

There is an entire religion around the free market. It is immodestly compared to god, complete with his ”invisible hand“. Adam Smith, a student of the French physiocrats, had mentioned the “invisible hand” no more than a handful of times in his entire works. Wall Street made a cult of these two words… Yet, Adam Smith was a government official, and no rabid free marketer. Some of the French economists had previously stridently, and correctly, called for freeing the markets… but for excellent reasons. However:

***

THERE IS NO REALLY FREE MARKET:

This is a basic, but fundamental observation. The free market is a carefully contrived illusion, a myth. Plutocrats have recently exploited that myth, to make their hands invisible as they manipulate society into submission. (That’s why the plutocrats want us all to worship the ‘invisible hand’, so that we will worship their invisible influence too!)

As long as there were ferocious Marxists all over to bark naïvely about “capitalism”, plutocrats had to stay honest enough to prevent a critical mass of critics to not go over to the other side. But, when Stalinism collapsed, the ex-USSR embraced the Harvard version of plutocracy (not as bad as Hitler’s, but still pretty bad). On the other side of the Amur, cynical Chinese plutocrats embraced all capitalists willing to change from their pesky, expensive workers at home. Soon enough, the German Socialist Chancellor introduced tough reforms of the German welfare state, making it distinctly less comfy… And it, literally, worked!

The leftists, the progressives, the socialists, the liberals and the humanitarians were thrown in total confusion and spastic despondency by this collapse of the idols. Still are. (Hence Obama’s feverish clinging to Warren Buffet and Summers).

All the more as a heavy propaganda from the plutocrats, pouncing for the kill, insisted that the ‘free market’, namely themselves, was everything. In a word: god.

Yet. There always was no free market, and there will never be any free market. The free market is a playground set-up by the government, always. That’s done through various laws and regulations, and the exchange of personnel.

That became very clear in 2008. The ex-chairman of Goldman Sachs, Sec. of Treasury that G.W. Bush and Barack Obama had left in total control, Hank Paulson, went on his knees to beg Nancy Pelosi, a democrat in control of Congress, for nearly a trillion dollars to save all the largest banks of Wall Street (we are now, with “Quantitative Easing”, and counting a similar aid in Europe, well above ten trillions!).

Pelosi gave the People’s money to Paulson.

Yet that was not hers to give. In a democracy, people would have voted to see if they wanted all their money to go to the richest owners in the land.

Left unsaid was the fact that the richest people in the land had lost all their money to the… richest people in the land. To themselves! It’s a case of insurance fraud: plutocrats stole the loot, and then asked the people to pay for it.

Pelosi gave all the People’s money to the richest, because she is an immensely rich woman, and got there by being extremely kind to families controlling assets 100 times (of more) her own wealth. By being kinder than ever, to the powers that be, no doubt her family will prosper, further and better than it would otherwise.

The entanglement of plutocracy and supposedly democratic politics is a worldwide phenomenon. For example Pompidou, director of bank Rothschild in France, was selected as Prime Minister by president De Gaulle, and then later succeeded him. In Britain, past Prime Ministers Thatcher, Major and Blair, were handsomely rewarded, no doubt to encourage their successors to be just as kind to plutocrats. Clinton, a simple man driven by basic instincts, was little more than the puppet of Goldman-Sachs’ Robert Rubin, and then his assistants Summers and Geithner (all of them plutocratically connected, just as Susan Rice, a fixture of plutocracy under Clinton, now Obama’s National Security Adviser.).

In the Obama administration, most personnel with a say in economics are young multi-millionaires shuttling back and forth between White House, giant banks and Wall Street; this corruption is even considered an objective criterion of seriousness. It is reproached loud and clear to Janet Yellen, the very qualified, and prophetically accurate, Vice President of the Fed,  who ought to be the obvious successor to Bernanke, to “lack experience” at being such a corrupt double dipper!

There is no such a thing as an economy independent of the government. The government rules. The real question is who is ruling the government. (In the USA, the likes of Susan Rice rule, for now more than 20 years, in her case; she was only elected by the plutocracy, but that’s good enough; Summers, just as unelected, was in the White House already 32 years ago…).

In a democracy, We the People rule. In a plutocracy, an oligarchy of admirers of the Dark Side rules, more or less invisibly. That oligarchy will use whatever means to stay in power, and their impudence knows no bounds. As Anne of Austria, queen and regent of France, sneered to the head of the Paris Parliament during the Fronde:“Do you believe this is a republic?”

Question, Ms Anne of Austria:”When and how did it stop being republic?” Answer: well, insensibly. Just the way a frog is being boiled by rising the temperature slowly. And that is exactly what today’s plutocrats, who hold the government, are doing.

Banks using leverage insured by the government are not private, but agents of the state. Indeed, they could not exist without that insurance and implicit back-up (“the lender of last resort”). They claim to be private, so that the few individuals who manage and “own” them can grab what are, truly public funds and public profits.

Jamie Dimon, for example, is a rogue agent of the private-public financial system. The government gave him the huge bank Bears-Sterns in the famous “Jamie deal”.

A number of private mercenaries feeding at the teat of the Public are the dark lords of that system. While of course denying that this teat is a teat, or has any milk, or value.

(That’s why plutocrats love Summers; because he is so dark; the richest banks have been given eight trillion dollars, in the USA alone; the problem Summers will have to solve is how they keep most of that while making it appear otherwise; the trick of paying TARP with QE may not work again…)

There is no such a thing as an independent financial system when the fractional reserve system is used. Finance is an instrument of the government, at least proportional to the leverage used. For example with 3% reserve, one can view a bank as 97% government (and 3% private!).

Why? Because if there was no governmental back-up, people who have deposited money in the bank, understanding that the bank has lent 30 times the money it really has, would rush to recover their money. In hours, the bank would have zero reserve, and then would be bank-rupt.

Hence a new synthesis has to be founded, with these truths made central. I call it “governmentalism”.

Grand Canal: No Mountain Is High Enough To Stop The Government

Grand Canal: No Mountain Is High Enough To Stop The Government

It’s nothing new.

***

Patrice Ayme

No Public, No Brains, Crash

July 9, 2013

CRASHES (Examples: ROME, AFGHANISTAN) CAUSED BY LACK OF PUBLIC INPUT:

Abstract; Having a republic (“public thing”) is not just nicer to the public, in everyday life, it’s also a military advantage, when war comes.  The important concept here is the notion of “public”. Rome crashed militarily from too much fascism, for too long and for no good reason, bringing the dreadful consequence of lack of public support, let alone input.

The USA stealth war in Afghanistan (1979-2013) and the rise of the USA as a surveillance state were engaged secretly and pursued without public debate. Thus no real public support, or intelligence. Time to cut the secrecy, and bring back the public. If one does not want to kiss the republic goodbye, that is.

***

When the fall of Rome is evoked, old fashion historians focus on military events at the end of the Fourth and beginning of the Fifth Century. Or they brandish hundreds of entangled causes of decay. Superficially the empire cracked because:

Adrianople: Fascism Is From One Mind, & If An Idiot, Toast

Adrianople: Fascism Is From One Mind, & If An Idiot, Toast

The military crash of Rome blossomed at the Battle of Hadrianopolis, August 9, 378 CE, when the Gothic cavalry decisively annihilated  the extremely experienced Oriental Roman field army (including the emperor Valens, single-minded author of the disaster).

(Although the mysterious defeat and death of Augustus Julian in Mesopotamia (earlier, in 363 CE) was more fateful.)

The disaster at Hadrianopolis/Adrianople was a near fatal blow to the prestige, military, economy and tax base of the core of the empire. The empire was unable to recover for a number of reasons. In particular because plutocrats were too mighty to be taxed.

In 400 CE, the legions were ordered out of Britain and the Rhine Frontier. The Franks, shock troops and nation “infeodated” (under treaty and oath) to the empire were left in charge. Instead of having the defense of the empire staying a public thing, it was subcontracted!

However, during the winter solstice of 406 CE, the Rhine froze over, and an enormous coalition of savage Germanic nations charged through Gallia and Hispania, all the way to Africa (in the case of the Vandals).

That was the fatal blow to the Western empire, the “Occidental Part”. Population and economy collapsed. The Vandals, from their African redoubt, established an empire that reigned on the Western Mediterranean, cutting the grain trade, starving Italy, shutting down international trade, etc.

The Goths seized Rome four years later (410 CE). A century later, the Franks, in a full consultation with the Consul Anastasius (who reigned in Constantinople as Augustus for 27 years until his death at age 88), would finally destroy the Goths at the Battle of Vouillé, in 507 CE. Rome, that is, Constantinople, then made Clovis Consul.

Real Man: Clovis Killed King Alaric Himself

Real Man: Clovis Killed King Alaric Himself

Thus 101 years exactly after the savages broke through, the Romans (aka the Franks) turned things around militarily at last. True, they had been busy meanwhile, destroying the cause of all that turmoil, the Huns (who had pushed the Goths and other Germans west, to start with).

Vouillé had avenged Hadrianopolis. 129 years later. History can unfold slowly, although it goes faster these days.

But the most interesting question is what happened at Hadrianopolis.

And, even more fascinating, why did it happen?  Roughly, the defeat happened because the Roman system was fascist, with one single jealous man at the top. The intelligence of the collective was reduced to the intelligence of one.

Actually it was a bit more subtle: the top emperor, Valens, was jealous of the success of one of the top generals, Sebastian, who had defeated some Goths, and of his nephew, the young Gratian, emperor in Occident, who had also defeated fierce enemies, the Alamani (the Franks would finally destroy those “All Men” two centuries later).

Valens wanted his own victory. Although everybody in the Roman military structure, including the officers in his own field army, and the Frank Richomeres, head of Gratian’s guard, told him to wait for Gratian’s army, which was only 400 kilometers away. So Valens marched his army ferociously for 7 hours over difficult terrain in full sun, and when thoroughly exhausted and dehydrated, engaged battle, without even knowing where the redoubtable Gothic cavalry was.

One man had taken all the decisions, all the wrong decisions. The one-man-alone-in-command factor was the fundamental cause of the defeat.

One can compare with two other spectacular defeats, this time the defeat of famous Republics. At Cannae an enormous Roman army was annihilated by Hannibal. What happened? The Romans fell into a trap: Hannibal retreated to give the Roman center an illusion of victory, drawing it in, and then enveloping the entire Roman body with cavalry, squeezing it, similarly to what would happen, six centuries later, at Hadrianopolis.

At Cannae, the Roman army was unwise, imprudent, outsmarted. However the army was not engaged in a march of obvious idiocy because of one man’s folly, as it would be at Adrianople. If it had been, that would have been stopped right away (as happened say when the French army tried to defeat the Brits in Toulon; as France was a republic, Napoleon, then just a captain, was able to contest the strategy of his superiors, was supported by politicians, and won a great victory).

The same hold for the defeat of France in May 1940. Just like Hannibal at Cannae, but on a much grander scale, Hitler and his generals, thoroughly desperate to start with, decided to be lucky, as that was the only thing that could save them. It did. They conceived the phantasmagoric plan to draw in the army of the Republic, by smartly attacking the Netherlands first.

Just as the Romans at Cannae and Hadrianopolis, sure of victory, the French rushed in their elite armor and armies forward. Then the Nazis, undetected thanks to Lady Luck, and how crazy their strategy was, cut them from behind.

So the difference is subtle. It’s a question of degree. The mind of one, versus the mind of the many. At Hadrianopolis, the orders given to the army were outright insane. All top military officers begged emperor Valens to reconsider. He refused, because he could, being the head fascist. But his head was no good. It was permeated by Christianity, that is, superstition.

At Cannae and the Battle of France, the armies of the Republics, blinded by hubris, confronted adversaries who were desperate, in all logic, and thus could only try to be lucky. And they were.

Then, of course, luck carries only that far against the intelligence and character that a superior public brings. Rome took seventeen years to defeat Carthage (218 BCE-201 BCE), the French republic, thanks to its reluctant, or even initially hostile, but finally enthusiastic allies, six years to annihilate the Nazis.

Conclusion? War is always the most serious business. One has always to be ready for the worst. Hubris ought not to be invited. And the public is both the brains and hearts of war.

The USA started the war in Afghanistan by 1979, under Carter, to block the Afghans, Russians and… despised French to exploit the resources in Central Asia without profits for Washington/Wall Street, and to show all who was the boss (Brzezinski claimed it was just to destroy the USSR, but he is dissembling).

At the same time, to make war by proxy, the USA decided that Pakistan’s dirty work in Afghanistan was best complemented by others. So Washington recruited Bin Laden and other fanatics, in cooperation and collaboration with Egypt’s Muslim Brotherhood, and its collaborator and enemy, the Saudi Inter Service directorate (notice all these people are alive and well).

That attack on Afghanistan was hubristic, greedy, full of imperial overstrech. Those adjectives count as three moral negatives. In Afghanistan, the USA had, at best, only one (fake) moral positive: namely the specious, devious argument that their rogue mercenary Bin Laden had attacked from there. (Yeah, and who made Bin Laden into a soldier of god, and armed him, to start with?)

Perhaps the most important asset in a long war, is moral superiority. Morality is the extension of war to the realm of the possible.

Moral superiority is why, ultimately, the Republics won against the fascists Hannibal and Hitler. Or why, ultimately, the Franks defeated the Goths (the Franks were tolerant, inclusive, more civilized, and supportive of the 97%; not so with the Arian, exclusive Goths).

Reciprocally, lack of Roman moral superiority is why the Romans were defeated by the Goths (both sides were Christian; but the Goths had made a peace proposition that was advantageous to Rome, and that Valens rejected hubristically).

A fourth moral negative in Afghanistan is that the USA made a cynical usage of a primitive superstition, precisely because it was primitive, hateful, and illogical. Right from the start, in 1979, the USA fought to establish, or re-establish, fundamental Islam in Afghanistan (as the USA had done in Iran, or Pakistan, let alone Saudi Arabia or Egypt).

Once again the prominent tactic was that superstitious people can be easily manipulated, as the CIA had done in Iran, by instrumentalizing the Shiites against PM Mosaddegh (culprit of oil nationalization, and general insolence). However, Afghanistan, as a republic, and the benign monarchy before that,  had been pretty much free of superstition and at peace, so the USA strived to re-impose, twice, on Afghanistan a fascist, sexist interpretation of Islam.

This is no way to win a war. Morality cannot foster, or tolerate, big contradictions. As it is, the West has nothing much to defend in the Islamist republic of Afghanistan. Best to negotiate directly with the Taliban. Or, barring that, to just withdraw.

One lesson of the Roman military collapse, was too much energy was spent fighting war in the Middle East without enough overall civilizational superiority to win once and for all. All this energy playing military Sisyphus was as much energy that was not spent on the crucial frontiers: the Balkans, and, especially, the Rhine-Danube gap. Or reacquiring civilizational superiority.

Instead, what we presently observe is that the USA is turning stealthily into a military regime, complete with secret supreme court of surveillance and secret laws. How can one have secret laws in a res PUBLICA? Are not laws the architecture? Are they not public, by definition, in a republic?

It’s time to stop that drift. Obama should yank the USA out of Afghanistan, after making to the Taliban an offer it can’t refuse. He should also remember that Rome rotted from inside first. The more secret the rot, the worst the gangrene. Industrial strength secrecy has no place in a Re-PUBLIC. Moral force is domineering for wars, and the survival of civilization, in the fullness of time.

History is not just complex. It has meta-layers of complexity, as psychology does, and because psychology does, on the grandest scale. Those who do not want to learn from history, do not want to learn from psychology.

***

 

Patrice Ayme

Banking Demons.

May 21, 2012

MONEY CREATION BY THUGS = CIVILIZATIONAL COLLAPSE.

***

 People of more than zero influence are waking up to the fact that they have to admit that there is something  wrong with the banking system as it is. A delicate task: something has to be revealed, but not so much that the pyramid upon which the wealthy rest, would crumble.

 Paul Krugman, long extremely partial to private banks, wrote an editorial in the New York Times on the subject of how outrageous banking, as presently practiced, is. Krugman could have written this years ago. But he did not. Instead he waited until the plutocratic party went one outrage too far.

 In Dimon’s Déjà Vu Debacle, Krugman focuses on the fact that the state insures the banksters. Of course the state does much more: it reassures the banksters, thus encouraging them in their crimes. But not just that. The state gives trillions to banks so that they can play with each other. Krugman will not tell you that. For years he has been pushing stridently for Quantitative Easing, giving trillions to banks, no strings attached.

 Same idea as Reaganism, or Sarkozism: give to the rich, so that the rich will give to you.

 The bank JP Morgan Chase lost 3 billion, or maybe 5, or 100 billion. No problem, says Romney: it’s not their money, it’s theirs! If it’s not to some banks, that money, it’s to some other guys. Guys like me, guys, say romney, and he beams with pride.

 In truth, though, that money is neither to the banks, nor to those other guys. That money is yours. Private banks are in charge of creating public money, in guise of private credit.

 Some will say: this is how capitalism works. No, that’s how a particular form of fractional reserve based financial parasitism works. Proof: the Nineteenth and Twentieth century revolutionaries (Marx, etc.) did not talk about it. Instead they mostly talked about the abuse of workers by great capital. (Now there are not even workers to abuse…) At most Marx complained a bit about the monopoly of banks. The scam existed already at the time, but it was discrete.

 Romney lauded the plutocratic doctrine in relation with JP Morgan’s loss. Milder partisan of the established order, such as many in the democratic party, feel that Romney is going too far. More importantly, he wants to take their place. So, to their regret, they have to mention a bit of what’s wrong with banks.

 Romney said that JP Morgan’s loss was excellent, because it benefited somebody else, namely an evil plutocrat laughing all the way to his private jet. Romney conveniently forgot to mention that, ultimately, it’s the taxpayer who foot the banks’ bill (as Krugman finally points out, when, as I already said, he could have done it years ago). Romney is pedagogical.

 Extolling the theft of taxpayer money by hedge funds may look like a blunder on Romney’s part, but of course it’s not. Romney and his operators are clever, they know what they are doing. What they are doing is to prepare the minds to finding this sort of reflections part of the natural order of things. Instead of a blunder on Romney’s part, it’s an attempt to have all Americans become friendly to the notion of rising, shining, and boasting in the glory of that evil plutocracy is best to bring a better world.

 In other words, Romney is not just running for himself, but also, deliberately, on the behalf of plutocracy. It looks clumsy, but it’s crafty, and manipulative at the emotional, “subconscious” level.

 I immediately sent (a version) of the following comment, which put the problem in a wider context, to the New York Times (a context readers of this site will be familiar with). It should have appeared among the very first comments, thus influencing thousand of readers, and endangering the established order. Instead something happened, and it was published in # 195 position (!) Typical treatment given to my comments, when they are too clever by half.

 “It is of foremost importance for the plutocratic order that the following is not understood by the masses. What Romney and the class he campaigns for do not want the simple minds of the People to comprehend, is that BANKS ARE ACTUALLY PUBLIC INSTITUTIONS.

 OK, if a number of individuals put money together, and then lent it, that, and only that, would be a true private bank. Instead what is happening is that banks, especially very large banks, lend much more capital than they truly possess. They can do that, thanks to the full complicity of the government, which, then, in turn, become their accomplice and creature.

 Such is the nature of the Fractional Reserve Banking System. Banks, using leverage, something only possible with the backing of the state, create all the credit, and therefore, most of the money. Money creation, a basic public function, has been farmed out to private individuals.

 Just as tax collecting was farmed out to “general farmers” under (some of) France’s Ancient Regime, and (some of) the Roman empire. However, in France and Rome, money creation stayed an exclusive activity of the state.

 So let me rephrase it: instead of calling banks private, one should realize that any bank using leverage is a public institution. It’s a fact, not an opinion. It’s a crucial fact. That is why, on his first day in office, president Roosevelt could, and did, close all banks in the USA.

 Insisting that banks are private is like insisting that public money making is private, a monopoly the state give to unsupervised, unelected individuals.

 That public character of leveraged banks makes all bankers, including Mr. Dimon, head of JP Morgan, and loudly admired by Obama, into public servants. As they lend to their friends (in finance, or their collaborators in their class (hedge fund managers who use leverage, as they all do), that makes those bankers and the banking they do, fundamentally corrupt.

 When banking executives pay themselves immense amount of money, they do so with public money. The head of the unit of JP Morgan which was playing with derivatives, Ina Drew, a blue eyed blonde, earned more than 31 million dollar in 2010-2011 alone. (She has now been fired to the regret of Dimon, who did not want to fire his “sister“… Said the New York Times.)

 This nature of banking, the exploitation of the public sphere, by a few self selected private individuals, has grave implications on Quantitative Easing and the like. The USA’s central bank gave (or lent at such low rates, it was like giving) trillions of dollars to the very banks and managements which caused the 2008 financial crisis (example: Goldman Sachs). It was quite a bit like paying off the mobsters who just burned your house. Payments are ongoing, and explain why the likes of Dimon fill Obama’s mind with awe.

 In Europe, the central bank lends at 1% to banks which then lend that exact same money to the states at 6% or 7% (Spain, Italy) or well above 50% (Greece). In other words, the public finances the plutocrats rather than the real economy.

 Merkel then barks, and push to cut off funding for public transportation in Greece, so common people cannot go to work anymore, but can, instead, be accused of laziness (feeder trains from suburbia into Athens have been often stopped, and the tracks overgrown with weeds. Meanwhile Merkel sells Porsches to her friendly plutocrats in Greece). Why does she do all that? Because she is protecting the leveraged banks by shifting blame to the common Greeks.

 (Not that the Greeks were blameless: tax avoidance was a tradition in Greece, something that forced the country to live on credit more than could be sustained.)

 The fundamental nature of the present crisis is the rise of plutocracy, naturally accompanied, as it always is, by the crushing of democracy (see all students having to pay colossal tuitions, so that only the children of the hyper rich can study, just like in the middle Ages; and if you protest, the Quebec government will come to arrest you, so please, approve!)

 The present “fixes” only make the situation worse. (As was demonstrated, say in Greece!) Those “fixes”  consist into shuffling ever more money to banks which then lend that money to their friends, or then to states at usurious rates, while augmenting stratospherically the public debt to said banks. This only augments the power of banks, hence of the financial plutocracy, and thus the crisis.

 Is it deliberate? Probably. I have mentioned it on Krugman’s blog for years, but Krugman, who is very intelligent does as if he did not notice. Why? because if he did, he knows he would sitting in the hot, ejection seat. So he bids his time while munching on caviar, and sipping champagne.

 The only way out is a general default, as advocated in:

 https://patriceayme.wordpress.com/2011/09/14/to-save-the-world-please-default/

 Radical, sure. We have to grab the problem by its roots. Otherwise, we face collapse of civil society, while drowning and boiling.

 Accompanied by a stiff regulation of banking, along the lines of president Roosevelt in 1933. Instead the Roosevelt laws were dismantled under president Clinton, a greedy critter, well rewarded since.

  A few little men of modest extraction, get absolute power, and they want to keep some thereafter. That echo of power is provided by the Lords of Finance. As long as they took the right decisions. Singing hypocritically with U2 lead singer, the so called Bono (not his real name, just a bon mot to make him sound good, bon, bono, bueno, etc.) will help.

  Bono, like Bill Gates, sings about the misery in Africa, while raking the billions in one of Goldman Sachs’ latest conspiracy (he was on the Facebook IPO, and made nearly two billion). Warren Buffet has served the public buffet of forbidden evil foods, and they splurge. Those all too visible plutocrats also make the same lethal mistake as the tiger in Kipling’s Jungle Book… Hopefully their public splurging may attract attention from the destituted commons.  They don’t know that the Lord of the Underground, Pluto, makes itself invisible, for very good reasons. They are blinded by the very goodness they perceive in themselves, after inverting all values.

***

Patrice Ayme

SMALL STATE, GREAT DEPRESSION.

January 31, 2009

CIVILIZATION IS ABOUT THE PUBLIC THING DOMINATING THE PRIVATE URGE. OR WHY THE USA NEEDS TO GROW ITS CIVILIAN STATE. SUSTAINABLY.

***

Overview and the Roman analogy: President Johnson’s attempt to impose and grow a “Great Society” while bombing the hell out of Vietnam, brought up an adverse reaction (from the same crowd that had fed the hysterical anti-intellectualism of McCarthyism before: Nixon was Joseph McCarthy’s right hand man). That reaction became the essential folly of American politics, a systematic undermining of progress, and even sustainability, under the cover of a crafty propaganda. That essential folly consisted in privatizing and profitizing everything, while dismantling the State, and growing a malignant plutocracy on the quivering flesh of the dying public sector. The essential idea was that a better State is a smaller State, with a bigger plutocracy, while keeping an enormous worldwide military in charge of oil procurement and juicy deals. We have seen that show before: it was called Rome. (OK, Rome did not use exactly the same oil, but its trade in distant commodities was huge, and absolutely necessary to sustain the core of the empire.)

We demolish that folly, with an arsenal of philosophical, geographical and historical considerations. Yes, Rome took five centuries to collapse, but Rome had no rivals, so it took a while for the vultures to gather. The US collapse, if left unchecked by imaginative measures, will be much faster. (Remember how fast the USSR went down? Partly as a consequence of its civilizing mission in Afghanistan? Although the USA would not explode in small pieces anymore than Russia did, quick impoverishment through a dollar collapse is entirely imaginable.)

To be against the State is, fundamentally, to be against civilization. Indeed, civilization is fundamentally a move of the private towards the public, a move from small groups towards the collective.

Under the corrupting spell of the plutocracy, this aspect of philosophical economy, that civilization is a move towards the collective, has been neglected, precisely so that plutocracy would blossom beyond the reasonable. This analysis, supported by hard data, has a very practical political consequence for the Obama administration: the size of the State ought to grow in the USA, to improve both the economy and the civilizational level. To do so, consumption and energy taxes have to be allowed to assume their proper role of enforced savings and investment. This is what it will take to escape the plutocratic trap Rome fell into.

The Imperial Roman State shrank first, turning to ever greater fascism to keep on going, but, in the end, it was unable to provide basic services, and, finally, in spite, and because, of a huge military surge, it was unable to defend itself against its foreign enemies.

Why did the whole process of decline of the State occur to start with? Because of the growth of tremendous plutocracy occurred at the detriment of the State (this also happened in the USA since Nixon). Simply put, the richest Romans found ways to pay much less taxes than needed to have the State keep on going (just like money manipulators in the present USA). The progeny of this rich class became the main ingredient and inspiration of the “feudal” class of the Middle Ages (in the USA they would be the present “CEO class” and “Wall Street”).

Not only could not the Roman State sustain itself on its reduced tax base, but the intellectual class got nearly exterminated. Superficially it looks as if Christianity was the cause, but it was not the ultimate source of that destruction of the mind. Indeed, there is nothing plutocracy distrusts more than the sort of wild, ferocious, uncensored thinking on which civilizational supremacy is founded. That is why great civilizations sink when plutocracy gets too powerful: all too often, the first thing plutocracy does, when it acquires control of the State, is to decapitate thinking, because it is just clever enough to realize that intellectuals can give good reasons to the People for not accepting the rule of money. That, of course, is self defeating, because, after a while nobody has any correct ideas anymore (and that is exactly what happened with Rome).

Another example of the defeat of the mind, somewhat similar to Rome: Egypt was long at the very forward edge of civilization (among other things, a lot of “Greek” mathematics seems to have originated in Egypt, and Egypt was first to use steam for power). Egypt seems to have become way too plutocratic, and too theocratic; it certainly became brain dead as Rome did later to a great extent. So Egypt was civilizationally left behind by the excited and excitable, “Dionysian” Greek City-states; after nearly a millennium of that intellectual rigidity down in Egypt, the Greeks took control. The Egyptian State  had become too small mentally.

Rome became too small mentally very quickly. The Roman depression was first intellectual and ethical. Then all the rest of society got corrupted (several striking mileposts of corruption were passed under emperor-philosopher Marcus Aurelius).

The present mental depression in the USA is quite similar (the mileposts had to do with the plutocracy’s arrogance, just as now). It is crowned by an economic depression. Rome had a complicated mix of civil wars, plagues, depressions, spectacular victories, economic re-expansions, etc… The irreversible destruction of the State was at the hands of an ever more selfish and demented plutocracy, but the way down in Rome was immensely complex: intellectuals fled to Persia, or the extremities of the empire, then some came back, and in many places only military events were able to crush a still expanding economy. Finally pieces of the disintegrated empire were able to re-expand in all ways (under the Arab Caliphate, or the Franks, or even Constantinople).

The fundamental reason for the decay of Rome was that when the State gets too small, the public sector cannot support the private sector anymore, and the later collapses too. Thus not only is there an optimal size for the State, but there is a LOWER BOUND TO THE SIZE OF THE STATE ALLOWING THE SURVIVAL of the civilization that supports it.

Indeed, whereas many civilizations have thrived superbly without much private sector [Incas, Constantinople, Stalin, etc.], if the State gets too small, a vicious circle is engaged, of ever diminishing returns and one ends down the drain of civil war and collapse [like Easter Island, or the Mayas, or Rome, not too speak of various Muslim states]. Under President Lincoln, the weakening of the American State was refused, and war was accepted instead. Hence a horrible, very violent civil war that made the French revolution look reasonable in comparison. That helped the USA not follow down the same road as the Mayas. (Europe is building itself as a super State, but using only the law and forever talking; this is an approach whose time has come, since war was tried ever since the Carolingians, and did not work.)

Dangerously approaching that lower bound is exactly what is happening presently in the USA. The way out is to grow the State, from the bottom up (and not the other way, from the top down, by reorganizing the plutocracy, as Rome did many times, starting with Sulla and Augustus, the plutocratic friendly method that Thatcher-Reagan imitated). Bottom up construction is exactly what Barack Obama is doing, with its “recovery and reinvestment plan”. In this first stage, it’s actually more of a People salvage plan.
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CIVILIZATION IS THE PUBLIC THING:
By the very origin of the word “civilization”, civilization has to do with the concept of city [townsman = civis in Latin]. Civilization is not about anything below (“sub”) a city (“urbs” for Rome, “civitas” for other cities), thus civilization is fundamentally not about suburbia. Hence, when, in the last few decades, US society abandoned the cities, and fled to suburbia, it made a move away from civilization. Of course it did not help that this flight was motivated by (legal) tax evasion, racism, and aversion to the poor (since it cost to move out, the poor were left behind, the fundamental idea). It was also an aversion to public life, to public debate. What else in a country where an “argument” is semantically equated to assault? The concept of a city is a human grouping, where economies of scale, but also richness of scale, wealth of ideas and debate, are achieved. And only there (OK, now we have the internet).

CIVILIZATION REQUIRES PUBLIC SERVICE, because it is about living in public, precisely because one is served by the public, hence it is, by reciprocity, about serving the public (since one is here to be served by the public to start with!). These basic truths should be basic ingredients in economic thinking, but they have been overlooked. All too much economics has become all about equations that mean nothing human, or even real.

Those truths have been overlooked for the obvious reason that flaunting them does not help the plutocracy, which is financing most people who think about the economy in the USA. Those economists (not Marx!), roll out the profit motive, and little else besides. And by “profit” they mean money (hence power onto others, which is all what money is). One thing those worthies forgot, though, is that there is profit simply by living in public. There are NON FINANCIAL PROFITS to living in public. But these non financial profits are important, because they led to the creation of cities. Not every profit is financial, indeed. Fundamentally, humans are animals, and animals find a lot of activities profitable, that have nothing to do with financial profit (for the good, simple, and amusing reason that animals do not have finance; well, OK, the way things are going, Americans do not have finances either.).

Because of the public nature of the city, intrinsic to its attraction, civilization employs a mix of the public economic activity and the private economic activity.  To understand the nature of a civilization, one has to think here in depth about a few entangled concept, among them: private, public, job, compensation, profit. A job is fundamentally a service one gives to other(s), in exchange of what, one gets compensated by reciprocated services (not necessarily the same, and often in the form of money, the universal exchanger for services). If, of course, what one provides is not viewed as a service, one is not compensated. So jobs vary in diverse societies. Tanzania just outlawed (2009) traditional faith healing. That involved chopping albino people into pieces and preparing drinks with special properties with those (40 were butchered this way since mid 2007).

Thus, although many societies reward their thinkers, including many societies of “savages”, others, typically of the plutocratic type, do not. But then no civilization can survive without thinkers, Athens, and even Rome, had top philosophers as advisers to the political leaders. The USA has a “national science advisor”, but no official “national philosophical advisor”. Still the USA is confronted to serious philosophical riddles, some very practical. Scientific problems should not be so problematic, because, after all, science is about what is known for sure.
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THE PRIVATE ECONOMY IS SUBORDINATED TO THE PUBLIC ONE:
Under the influence of the Neo-Cons puppet masters and their Thatcher-Reagans, many influential people, and not just in the West, got persuaded to go along a program of PRIVATIZATION OF EVERYTHING. One could say: financialization of everything, an ugly word to go with an ugly concept. The plutocracy rewarded them well, for this stroke of genius, which ignored most of human neurology. In Russia, the application of that concept, pushed by American economists, brought the country in a decade from “communism” to plutocracy.

(Actually the plutocrats pushed their insolence to invent their own word for one of their techniques, securitization, where they bundled together the properties of the public, so that they could buy and sell them). For quite a while, this privatization worked well, just as when a plane cuts off the engines, it keeps on flying. In this case, the engines were dropped off, so the plane, much lighter, flew higher, and captains Thatcher and Reagan, and their admirers, proclaimed victory on gravity.

Private is what functions best with the free market, motivated first by financial profit, public what functions best according to law, regulation, monopoly power, and plain and simple power-. For example when the State does not have the monopoly on the military, one gets a civil war. This happened at the end of the Roman republic, when, in practice, a few of the richest people each owned a part of the Roman army. Four centuries later, the Roman empire collapsed when the rich disconnected from the rest of society, with so much riches grabbed by, and for themselves, that the Roman army left outside was too small to defend the empire.

The private sector is less important than the public sector: Stalin fought Hitler with monstrous efficiency, and no private sector. Hitler mostly worked with a greedy private sector, with the result that he found himself with hundreds of half completed weapons projects at the end of the war. None of this non sense in the USA: Roosevelt installed a command economy run by a young Canadian, with very few weapon systems, and a total monopolization of the socioeconomy.

Now of course, the entire idea of plutocracy is to subordinate the public to the private. That is exactly what happened as the plutocracy hypnotized the entire US economy, and that was the program of the Neo-Cons, who, in the end, were just employees of the richest.
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QUANTITATIVE AND QUALITATIVE ARGUMENT FOR A BIGGER AMERICAN STATE:
So if the idea of the State cannot be dissociated from the idea of civilization, the next question, that no serious American economist seems to have considered, is this: IS THE US STATE BIG ENOUGH TO INSURE THE CONTINUATION OF CIVILIZATION? The answer is, clearly, NO. Everything indicates that the State should be grown massively in the USA (not in Europe). (When Barack Obama broached the subject, he felt obliged to express his automatic desire to not grow the State, according to the general standards of what passes for reasonable in the USA. Recently he has become more subtle: if it’s a bad program, it shall be cut, if it is a good program it shall be expanded.)

The total size of the US government is 36% of US GDP (Federal State plus regional states), but the USA spends at least 5% of that on the military (more than half of the World’s military expenditures). So we are left, in the USA, with a civilian State sector that is about 31% of GDP. That is two-third of the relative size of the States in large European countries. Those have government that are 45% of GDP. Two of these, France and Germany, are resisting better to the recession than the third one, Britain, mostly because they are more industrial and technological [Germany is the world number one exporter]. France and Germany have top notch industries, because their governments made them so. Trust the French and Germans to know where real power comes from.

There is plenty of evidence that the US State is too small to provide the country with the infrastructure it needs for its private civilian economy. The best example is health care: private US companies are supposed to provide it, a subject of endless hilarity around the planet. In general US health care does only one thing really better: make a few of the rich richer. US health care costs twice more, and does less well, than its European comparisons.

Another example is the US schooling system: at this rate of descent into illiteracy, an acculturation, one will soon have to import Indians to teach English and logic to Americans. Also US science, for decades the best financed in the world, now is not so [European are running many basic experiments that the USA does not plan to, but the reciprocal is not true].

Trains are the most basic part of transportation (even in the USA, their GDP transport contribution is the highest). But, whereas the subsidy for roads is above 110 billions, that for trains is one billion (1%).  France is presently building four high speed train lines [for 250 mph. 400 kilometers per hour trains], and is in the diverse stage of elaborating and planning several others. Such lines are immensely expensive. The USA does not seem to have the money for them. The first French high speed train line was publicly financed, twenty-five years ago, the others have been self financed with private capital. It’s the same picture around Europe, even in Russia (equipping itself with French and German trains, with technology and industrial transfers built in the deal).

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GIANT US MILITARY SPENDING IN PEACETIME IS NOT IN THE BEST STRATEGIC INTEREST OF THE USA:

Now to the suggestion that the USA needs a modern civilian economy, rather than a giant military, the Neo-Cons usually reply that they defend the free world, so the USA has a huge military budget, that the Europeans do not have, but profit from hypocritically.

There is some truth in this, but not much (besides France and Britain and their German sidekick have enough of a military punch to defend Europe as long as Russia or the USA don’t go completely crazy with their 10,000 rather unlawful nuclear warheads). But the research and development budgets for some defense systems (such as nuclear weapons) are absolutely gigantic, and undermine technological investment capability elsewhere.

Rather than piling the weapons high, it would be much more cost effective to negotiate effective disarmament treaties. Those can work.

An example: before W.W.I, there was an arms race between Britain, Germany and France (between the UK and Germany on the seas, between France and Germany on the land, although the later two nearly got in a sea battle earlier in Morocco). Effective disarmament treaties would have weakened the fascist Prussian army, simply by shrinking it. The huge “Prussian General Staff” (or more exactly the top six generals) was the direct cause of the First World War [the Sarajevo assassination was just a spark in a powder magazine, where most of the power was the Prussian military mind: it would not have exploded into a world war if the combustible material of giant military structures and build-ups had been removed prior to said spark].

The best defense for the USA and the West would be better treaties. So the bottom line is that the USA is doing its giant military thing, its giant military build-up, not for defense, but for other reason(s).

The later Roman empire also did the giant military thing: the Roman army was way bigger, by a factor of at least two, in the Fourth century than under Augustus (four centuries earlier). But it was also much less effective: troops deployed in battle against Barbarians kept on shrinking, because most troops were always somewhere else. Rome presented an early case of military-industrial complex gone nuts.

At least one thing is “positive” so far this time: the US army has kept a technological edge (which Rome did not keep; although higher tech saved both the Franks and Constantinople against Islam). Nevertheless, the fact remains that the Late Roman empire was economically weakened by its giant military, and the same argument can be made for the USA today. Closer to us, that was exactly the main problem of the Soviet Union, and that was so obvious that even the otherwise clueless Carter-Reagan crowd played that card very well, first by using Muslim Fundamentalists to fight the socialists and then Soviets in Afghanistan, and engaging an arms race, until the Soviet Union was spent to death. In their befuddled brains, the notion that the same could happen to the USA, on an even larger scale, has not blossomed yet. In their opinion, imperial overstretch happens only to others. Now the overstretch is measured with the quotient of military spending over civilian spending getting too high, that is, too militarized a public sector, or, equivalently, and neurophilosophically speaking, the quotient of intellectual fascism over general intelligence getting too high.

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ECONOMIC STABILIZERS IN EUROPE, THANKS TO BIG STATES, BUT FEW OF THEM IN THE USA:

Now that a severe recession has become obvious for all too see (it’s actually 10 years old for the middle class), the absence of economic stabilizers is going to compound the crisis in the USA. In more socialized, populist Europe, government social programs kick in and ENFORCE ECONOMIC ACTIVITY. OK, these are not activities that are motivated by financial profit, but they are economic activities nevertheless, and, it turns out that these activities that cannot, that do not need the profit motive are  the most important ones: financial profit is the cherry on the cake, it’s not the cake of life.

Thus, the most vital sectors of economic activity are legally mandated ones in Europe, and, as the profit economy collapses, this mandatory, legislated economic activity kicks in to compensate (they involve State mandated food distribution, at home for the old, etc.).

As Paul Krugman puts it for the case of health care: “The whole world is in recession. But the United States is the only wealthy country in which the economic catastrophe will also be a health care catastrophe – in which millions of people will lose their health insurance along with their jobs, and therefore lose access to essential care.”(NYT, IHT, January 30, 2009.)

Obama’s so called “Recovery and Reinvestment Plan” seems in part a desperate attempt to throw in emergency spending to stabilize the disaster. Indeed the governors of the States have cut down their spending as their revenues collapse, so they are making a bad situation worse. The State of California (one of the world’s largest economies), has “furloughed” its workers two days a month. This means that State workers will not show up at work for 10% of their monthly employment, and will get a proportional income cut of 10%. Europe has economic stabilizers, the USA has economic destabilizers.
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LOSING CIVILIZATIONAL LEADERSHIP:
Cities, from the start, were at the forefront of technology and civilization (in the usual sense). Technology and psychological progress and knowledge made them possible. Cities were created mostly for cultural reasons, be it only that of growing a better economy. Conversely, as the Greco-Roman empire went down, its cities went down first [for various reasons, military devastation being prominent]. Cities have only be made possible by keeping technologically ahead of their competition. The same is true for any state, any civilization.
Let me explain. The Roman republic rose, like the Greeks before, as the Phoenicians or the Cretans before that, and Sumer or Egypt even earlier on, or the Indus civilization, because it was more technologically advanced. Technological supremacy then allowed those civilizations to persist for a while. Conversely these civilizations went down when the technological competition caught up with them [with the exception of Sumer and Crete that were mainly destroyed naturally]. Egypt dominated in science and technology for three millennia. When it lost that supremacy to the Greeks, the Greeks naturally came in, and led a dying Egyptian civilization.

When the Roman legions persistently out maneuvered and destroyed the Macedonian phalanx, because they used superior military technology, Macedonia was crushed, and the Hellenistic world became Rome’s possession. Reciprocally, when, four centuries later, Roman armor was unable to arrest enough superpowerful Central Asian arrows, the Sassanids (Persians) could be held back only at what proved to be unbearable cost [and that cost was not just financial and economic; it included further militarization and fascization of Rome]. That loss of the military technological edge the Romans had occurred also with the Germans: at the same time that a Roman emperor was captured by the Persians, to be made into a living stool, for months, before being tortured to death, the Franks became the crack soldiers of the Roman empire, because of their astounding mastery of their amazing weaponry.

Thus the decline and fall of Rome was fundamentally a loss of technological leadership that came from a loss of civilizational leadership (the great emperor Julian, the fighting philosopher, saw this, as he tried to reverse the Christian superstition, but the penetration of a lance put an early end to that).

The propensity to lose civilizational leadership occurred probably way early, when the Roman republic, little intellectually inclined, and already under the spell of its arrogant plutocracy, crushed the Greek cities, and even its military allies, such as Athens (circa 146 BCE). This led Rome to lose any hope for sustaining the technological and civilizational capability that the best of Greece had retained. Greece had been submitted, with lots of difficulty, to various Macedonian, or post Macedonian, “Hellenistic” fascist regimes, ever since Alexander and his father; this had lasted two centuries, but the perfidious, hyper materialistic violence of Rome made the loss of the best of Greece irreversible.

The best course for Rome would have been to set Greece completely free, especially Athens and Corinth, and learn from them with humility. Instead Roman plutocracy crushed them (in an obvious class struggle). After the plutocracy had disposed of the Greek intellectuals, making them into stools thereafter, it remained to starve the Roman State. Although gold, bread and games were showered on the People, it was to put them to sleep (the same has happened in the USA). In truth, Roman plutocracy was so interested by its own profits, that it was ready to risk the empire rather than paying enough taxes. When German tribes threatened to invade the core of the empire at the apogee of its powers, in the Second century (circa 160 CE) , emperor Marcus Aurelius had to sell the imperial palace’s cutlery to rise funds for the Roman army (!). By then the plutocracy had eaten away the Roman republic ethical substance for three centuries, and it showed with a total loss of ethical control, even in the direst straights.

So, to survive, the USA needs to NOT do like Rome. The USA needs to keep on being a leader in civilization and technology. This will start with schools, to make American children into first class intellects (right now Finland and Korea are leading): the US States have been busy saving money by cutting school budgets. The US Federal education budget is tiny, and Obama has moved in to replace the collapsing State budgets. Good. Now, when Obama will have finished throwing a few trillions to stop the devastation, he will have to regain technological leadership, and that will mean financing serious, state of the art heavy industry.

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Conclusion: IF YOU WANT TO GROW CIVILIZATION, GROW THE STATE, AND ENFORCE EFFICIENCY WITH ALL ENCOMPASSING WASTE TAXES: To finance green, sustainable, energy, Obama will need sustainable money. Massive borrowing can go only that far. No sustainable money, no sustainable green. Lots of money, lots of green. A reasoning even US capitalists can empathize with. So Obama will needs an energy users’ taxes. Namely a tax on carbon, as in Europe. Yes, that will grow the government. So what? What’s wrong with growing civilization? Especially when it is the only way out of a death spiral?

Civilization is more than the ability to bomb people on the other side of the earth. Enough of that already. The USA needs to grow its civilian economy massively, and the public sector first of all, these areas were the profit motive, and private capital, or private initiative are not enough, or can’t wait long enough, to be the prime motivators. Immense public works need to be done, the hour is late, thinking has not been damaged so much, yet, that there is no coming back. That sorry state of affair is what happened to Rome at some point.
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Patrice Ayme
Patriceayme.com
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Notes: 1) If, as I claimed, civilization is essentially the Thing-Public (in Latin: Res-publica, republic), am I saying that regimes that are not republics are not civilized? Well, yes. It is no accident that Plato named his major work in political philosophy, “The Republic”. His republic was rather fascist, but still it was a republic.

This perception of civilization as the republic has been strong in the West, for two millennia. The Roman empire maintained the fiction for many centuries, that the republic was still going on. Italian history shows that the idea and practice of the republic never died; the Roman Senate went on until the Seventh century (it went on until the 1300s in Constantinople), and soon the Venetian republic was a march state of the Imperium Francorum. The Franks themselves maintained forever the myth that their kings were elected, until the arrogant French absolute monarchy of Louis XIII, and XIV, rose in all its horror (soon to collapse, within two generations into the French revolution). By the Tenth century a serious effort was made to reinstate the Roman Senate. The Holly German Emperors (namely the German speaking Eastern Francs) were elected throughout, and so on, and so forth. Thus, in the West, monarchy was never really legitimate (Britain is a republic disguised in a pseudo monarchy) Constitution).

2) One can grow the State by borrowing for profitable investments. But one cannot borrow money for chronic expenses for everyday spending. So it is OK to borrow for building power lines, high speed trains or solar plants, but it’s not OK to use borrowed money to pay for health care, or schools. A lot of the present “recovery and reinvestment plan” of Obama presently does just that, though: borrowing for recurring expenses. France got addicted to that hopeless technique under some loose (socialist and conservative) governments in recent decades. So State borrowing was used to pay for the general budget of the French State. The result was a dearth of valuable investment, and the fact that the entire tax on income is now used to serve the interest on the debt. (Still, under Euro guidelines, the total debt of France was limited around 66% of GDP, whereas the reasonable prediction for 2009 US debt is above 90% of GDP, absent new taxes (this is with an expected stimulus + TARP of 2 US$ trillion)).

Hence France lost most of her public sector investing capability (and ran her infrastructure growth mostly on the private sector, an unusual situation for France). Thus French growth slowed down enormously. The same would quickly happen to the USA, if it persisted to use borrowing for everyday expenses. Now, in the case of Rome, a combination of welfare and high unemployment  plus tax evasion by the rich, demolished the economy while weakening the State. Ultimately, most of Italy fell out of the economy of the empire. It would have been much better to tax everybody, while giving work to everybody (but that was not the agenda of the Roman plutocracy, which was not unhappy that so many people had no work, hence no power, thus making them unable to come back to democracy). Indirect, unavoidable taxes are best to tax everybody. With indirect taxes, there would have been no need for those horrible Roman income tax collectors (they would throw tax evaders, and their relatives and children into slavery). Nowadays, it is very easy to rise indirect taxes (two dollars a gallon on gas, or .1% on financial transaction, or 15% AVT are easy to set up). It was hard to raise indirect taxes in Rome (especially after the currency economy collapsed, and the Roman State reverted to bartering in commodities to feed its army!).

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3) Another side of the conspiracy against the State: Nixon invented HMOs, and financed those private companies with public money. That started the massive shrinkage of the State. Now Nixon fully connected with the plutocracy. Nixon was the right hand man of McCarthy, and became the VP of Eisenhower. The later seemed often to be president in name only. The Dulles brothers were in charge (one at the CIA, one at State). This puts in a different light the complaints of Eisenhower about the military-industrial complex (as he was leaving office). Now the Dulles were lawyers to the Nazis (before the war), and employers of many of them after. While the Dulles had been major employees of the Bush crowd, which had supported Hitler with so much enthusiasm. All in all, this constitutes the major conspiracy of the Twentieth century, and so it is no wonder that the “height of irresponsibility” (of giving themselves more than 18 billion dollars of bonuses with taxpayer money to celebrate huge losses to the taxpayers of the order of several trillions) that Barack Obama talked about is, in the light of such mighty tradition, very small potato. The sort of power that is used to set up drug trading over entire countries to finance black ops (that was done in Bolivia, Pakistan, Afghanistan, etc.), or set up world plots with the Nazis, let alone Stalin or Ibn Saud or Iranian Shiites, finds this sort of nice little bonuses, well, quaint… That is why, once again, if Barack Obama wants change one can believe in, he will authorize an inquest about what really happened during the Bush years. I claim it was just a chapter in a much larger book. Let the truth roll…

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4) Maybe it’s time to think about what to do to get out of deflation…
The USA got out of deflation with a command economy in 1942. Roosevelt and Galbraith decided what people would be working on, and work they did.
The Great depression in the late nineteenth century was much longer (although it also ended with a sort of world war, the Spanish-American war). Maybe because no huge command economy was put in place.
Notice that the European economic stabilizers of the social programs should act like a command economy… If things get worse.

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5) Let me insist on one theme that keep resurfacing in some comments to the preceding essay:

I was not trying to say that, the bigger the State, the better. This would not be true: clearly Constantinople was a case in point (it did less well in the periods when the weight of the State was too great). Middle Age Japan is also a counter example (below the Samurai class, people were nothing, they did not even have names), so Japan fell behind, not just Europe, but China and Korea, or even the Mongols (in a sense).

But I did say that there is a minimal size for the State in civilization. This minimum size was breached by Rome, various Muslim Caliphates, the Mayas, with catastrophic consequences. Below that lower bound, the State dissolves (Rome, Caliphates), or explodes under external shocks (Rome, Caliphates, Mayas, imperial China). Notice that the Japanese State reacted fiercely and powerfully to the Europeans, and was not invaded, or dictated to. There is also no doubt that, had Stalin’s dictatorship be just a tiny bit smaller or weaker, the Nazis would have wiped it out (a last surge of the Soviet State during the battle of Moscow won the war, but it was very close, as total panic and despondency had set in during November 1941; then fierceness from the NKVD and the Soviet State infrastructure saved the situation.)

Clearly the present USA is close to that lower bound for the size of the State. Part of Obama’s stimulus is stealthily trying to correct this on a permanent basis. It may be better to explain what is going on.

Patrice Ayme
http://patriceayme.com/