What are YOU most concerned about? If you are typical, it is not the threat of hydrogen bomb war, the space race, crime, or even the Vietnam War. The average American, Canadian, European, Australian citizen is most concerned about making ends meet FINANCIALLY. But WHY are the most prosperous nations in debt? WHY are people worried about keeping jobs and puzzled about the economy of their own nation, state and city?
"COST OF LIVING UP 6 PERCENT"; "Cities and States Going Bankrupt"; "Deficit Spending Sets Record"; "Further Inflation Ahead, Say Economists"; "Unemployment Worst in Nine Years"; "Total U. S. Debt Tops Two Trillion"; "Wage Demands Rise"; "Strike Imminent"; "Trade War Looms"; "Balance of Payments Deficit Sets Record"; "Welfare Costs Skyrocket"; "Big Business Bankrupt." Such are the varied — yet intricately related — headlines in your daily newspapers and weekly news magazines, constantly blaring forth the tragedy of our world system: economic chaos and crises!
Unemployment or Inflation Choose!
For most people, however, the main "economic crisis" is their private paycheck. It isn't going as far as it used to. Pensioners, and others on fixed income, particularly feel the squeeze. Their incomes remain the same, but the value of their dollars (or pounds or francs) diminishes. Survey after survey of American problems shows that of all the problems that face Americans today, the how-to-make- ends-meet issue seems to dominate. Year-in and year-out, personal economics seems to be the biggest furrow in people's brows. With such financial insecurity, many wonder: "Where is my next paycheck coming from?" "When is the government going to 'freeze' my salary?" "Why save money when inflation robs me of buying power?" and most worrisome: "What if unemployment strikes me?" Most families are only two or three paychecks away from bankruptcy at any given time. There are few real assets to draw on. Yet, today, we are told we cannot have full employment without our dollars or pounds losing value — commonly called inflation. Most nations choose inflation rather than suffering unemployment, and that brings a host of further problems. Worried government leaders must then concern themselves with budget deficits and a rising national debt. With these problems comes the threat of being priced out of foreign markets, sanctions against the debtor nation's products, tariff walls — and possible trade war. Of late, the world economic thermometer has indicated a perennial "crisis condition." But WHY continuing money insecurity — both personal, national and international? Why must hard-working human beings face financial worries? Why must the world's richest nation have a two-trillion-dollar public and private debt? Who or what is to blame?
Experts Baffled
The basic causes of economic problems are buried in the mish-mash of economic blame-gaming between different "camps" of experts and laymen. Everybody can find somebody else to blame. The unions blame management, management blames the unions. The "Keynesians" are at the "monetarists'" throats, and vice versa. The housewife blames the grocery store chain, and the store blames the supplier. The farmers blame the government, and the political leaders blame the previous administration! Nearly every sophisticated economic system has been tried — but all seem to fail. Crisis conditions continue, and no economist has the answers. One joke among the economists themselves is that if all of the world's leading economists were laid end to end, they still wouldn't reach a conclusion! Top economists know they have an unruly "tiger by the tail" Leading economist and Newsweek columnist Henry C. Wallich has written that: "In economics, nothing is certain, anything is possible, and everything depends on everything else. The plain difficulty of understanding what goes on in the economy is the first big handicap faced by economists.... Economics is not an exact science... absolute certainty is vouchsafed to no science and complete conviction in this world can only come from ignorance." Why such a startling admission of helplessness from a leading economist? Partially, because economics is not an exact science. A physicist or chemist deals with unchangeable, immutable LAW. But economics — a branch of the social and political sciences — deals with HUMAN BEINGS. And humans are predictably unpredictable.
Economic Upset — A PEOPLE PROBLEM
Economics is inextricably tied to people. It is people, after all, who make money and spend it. The consumer I wage earner can upset the best-laid plans of renowned economists. Trends, fashions, moods among consumers may send entire industries into bankruptcy. War disrupts all fundamental plans in politics, business and labor. A second "people problem" in economics is the dominant role of a few important decision makers. These are the leaders of business, labor, and government. The actions of the nation as a whole, or its leaders, can make or break an economy. Yet the actions of neither are forecast by laws. Their decisions are essentially unpredictable. It is one thing to theorize that IF wages are kept stable, IF government does not overspend, IF industry keeps prices at a fixed and equitable level, THEN inflation can be avoided. But governments MAY overspend; unions MAY demand exorbitant wages; industry MAY jack up prices out of sight. And external catastrophes — war, drought, weather upset, political unrest — may upset the best-laid economic plans. All are "legal"; all happen. It is, in fact, the very absence of law and authority which leads to economic chaos. The opposite condition — sound financial principles thoroughly applied, with use of wise and just governmental authority to implement right laws — would guarantee sound economics. Look at some of the factors which can wreck any economy. Most of them are man-made. Is it any wonder that no government of men has been able to keep a national economy healthy over a long period of time? The problem is simply one of people — what they want and do. "Virtually all people," writes economics professor Leonard Silk, "still ardently desire the higher incomes and greater supply of material goods that economic growth brings. They like much less, however, some of the by-products of growth such as heavy urban concentrations of population, smog, social tensions, long journeys to work, and the 'rat race.''' (Contemporary Economics, page 268.) Can we change the system? Professor Silk is not optimistic. "Only a small minority would now prefer to give up growth altogether in order to avoid its unpleasant side effects." (ibid., page 268). In that case we will continue to suffer the shattering "people problems" of economics:
The "Big Two" — War and Cities
Economists categorize the two major "people problems" as either external (war, foreign aid, trade, space, atomic energy, etc.) or internal (welfare, education, transportation, agriculture, medical care, and poverty programs). The economic policies of nations are almost solely determined by these volatile social subjects. Most external economic upsets can be traced to the warring selfish human nature of nations — whether hot war, cold war, trade war, or arms races. And most internal economic headaches can be traced to the dislocating population implosion called urbanization. The major cause of any siege of inflation throughout history has been overspending for armaments and war! When a nation must print more unbacked money to spend on armaments, soldiers, war-planes, and veterans' benefits, there is no way to avoid inflation. More money is circulating, but fewer consumer goods are being made. Most wars in United States history caused a doubling of prices in about five years' time! The ravages of World War I caused much more serious "hyperinflation" (prices multiplying by millions of times over) in Germany and other European nations. The same fate struck China and Hungary after World War II. In the last five years, war-torn Vietnam and Indonesia have suffered similar fates. Serious inflation has virtually never struck during peacetime. War also saddles a nation with a back-breaking debt to repay. The yearly interest on the United States war debt is greater than the entire U. S. national debt was in 1930! War also ruins the industrial and agricultural base of any nation where the war is fought. The Thirty Y ears' War, for instance, retarded central European economic growth by the equivalent of a century! The American Civil War retarded the South's whole economy for two generations, and New England's shipping for a longer period. The best-laid plans of economists have consistently been ruined by unpredictable wars and revolutions. The "airtight" theories of Adam Smith in 1776 (see following article, Two Centuries of Economic Thought) were ruined by the American and French revolutions, the Napoleonic wars, and the equally destructive Industrial Revolution. The Industrial Revolution, in turn, was responsible for another catastrophe — urbanization. The flight from farm to city is the root cause of most internal economic woes. It is the primary cause of runaway welfare, labor's exorbitant wage demands, consumer debt, unemployment, insecurity, and other personal economic crises. Land and its produce are the basis for all human security. When the land is ruined by improper farming, or if the land is abandoned for a ghetto apartment and an industrial job, that security is lost. Unemployment and rising prices ensue. The end result is an artificial economy, artificial money, artificial security, and a totally artificial way of life. In the end, economists find themselves forced to deal with effects — unemployment, rampant welfare, commodity price chaos and so on. They lose sight of the fact that the major cause of "internal" economic woes IS the original dislocation of society.
The Fruits of a Dislocated Economy
As nations are dislocated — as mass migration from farms to cities occurs — the economic woes become evident. Runaway welfare is a case in point. As post-World War I Southern sharecroppers and "Dust Bowl" drifters arrived in the city canyons of America, jobs weren't always waiting for them. On the other hand, city dwellers began to find jobs scarce because of the influx of farmers. Often, there was no available income other than the welfare rolls of an already near-bankrupt municipal government. The trend hasn't changed much. As The PLAIN TRUTH reported in February, public-assistance rolls virtually doubled between 1965 and 1970. As a result, many city and state governments are dangerously near bankruptcy. There is no solution to this fiscal insolvency until removal of the root cause — the urban packing of huge masses of unskilled people. Another by-product of our social structure is the seeming impasse between labor and management. Most people are willing to work hard if motivated. But what motivation is there in riveting exactly 1381 rivets (union maximum) for $3.56 per hour (union minimum) on the screeching assembly line of a smog-infested city? Eventually such workers will want high wages for the same productivity, because their production has nothing to do with their lives, and their salary has everything to do with their lives. The great feeling of malcontent among urban wage earners is a contributing factor to the great preoccupation with escape. Many workers find no challenge in their work and have few established goals in life. As a result, such workers become overly mesmerized by personal activities, recreation and material conquests. To seek pleasure and solace in "things" requires more money. After all, television sets, boats, and sleek new cars are not given away. This has led to another disrupting factor in economics — the establishment of a debt-based, buy-now-pay-later society. Today's society — especially in America, but also in any other urbanized society — is based on debt. Debt is virtually required! A family cannot become "established" in society unless their home, car, and most of their furnishings are all bought on credit (meaning debt) or by the use of debt cards (called "credit cards"). Citizens of the United States now owe other citizens of the U. S. two trillion dollars! This unbelievably large number boils down to $10,000 of debt for each American man, woman, and child. If Americans refused to go any further in debt, our economy as we know it would collapse! Multi-billion- dollar corporations, as well as the Federal government itself, would file for bankruptcy. The United States and Britain are in serious economic trouble. Bankruptcy threatens state and city governments, and may soon strike national governments as well. Meanwhile, other nations — Germany, Japan, Australia, Canada — are only a matter of a few years away from the same impasse now facing Britain and the United States. All nations are under the same economic curse, the same well-trodden path toward economic downfall. For example, perhaps a dozen nations today must face not a six-percent yearly inflation — but a 100-or-more percent yearly inflation. Until WRONGLY STRUCTURED SOCIETY and GREEDY HUMAN NATURE are changed, the world will be under such an economic curse. Depressions and inflation will continue to plague our nations no matter what new ideas economists offer to treat the detailed effects of these two root causes! There must be sweeping reforms and fundamental changes in the world economic system. But how to "get there from here" is the crux of our dilemma. To institute proper economic reforms is impossible, given the structure of our present world economy. For example, if, beginning tomorrow morning, the entire Western world bought nothing more on credit, worldwide depression would strike, paling the 1930's into insignificance. This very fact shows how far away from economic sanity the world has strayed. It makes plain why no economist, no government leader has been able to solve his nation's economic woes. The whole economic system of this world needs to be scrapped. A new system must be built from scratch, based on true values. No ism of man — capitalism, socialism, classicism, Marxism, mercantilism, or Communism — has worked. Historically, Adam Smith's "invisible hand" failed, as did Keynes' "visible hand" of governmental manipulation. Now a "strong hand from someplace" is needed to change the very building blocks of society and human behavior. It will take an act of God.
Economics means household (from the Greek oikonomos), and until 200 years ago, economics was merely a pragmatic way of running a household, village, or city state. It wasn't until 1776, with the publication of Adam Smith's Wealth of Nation, that man began to expand these "household" principles to the national level. Adam Smith wrote of the "invisible hand" — supposedly a natural God given equilibrium of wages, production, land, and rent — which any economy will reach if left alone. This was called, in French, "Laissez-faire et laissez passel', le monde va de luimeme," or "Don't interfere, the world will take care of itself." But Adam Smith didn't foresee ravages of human nature in wars and revolutions. In the generation following The Wealth of Nations, the French and American revolutions caused widespread destruction and inflation in those countries, leading to the Napoleonic wars and the War of 1812. War and revolution are primary "people problems" of economics. Next came the debate between David Ricardo, Smith's leading disciple and Robert Malthus, the famed "population explosion" prophet. Malthus simply pointed out laissez fa ire was not working! But Ricardo's theories showed on paper how beautifully it should work (during peacetime). Both Ricardo and Malthus failed to foresee the next "people problem" — the dislocation caused by the Industrial Revolution. Because of human greed during peacetime (about 1815 to 1848), economic power was centered in a few individuals, the industrial giants. Cheap labor was lured from the farm; children were employed in 15-hour-a-day sweat shops. The robber barons of the 1800's ruined the theories of Ricardo.
Marxism and Monetarism
Then came "Round Two" of economic theory — Marx, Mill, Marshall, and monetarism. In 1848, revolutions broke out all over Europe, as exploited workers rose to "break the chains" of industry, the fruit of laissez faire. Also in 1848, Marx and Engels wrote the now-infamous Communist Manifesto, and the brilliant classicist John Stuart Mill wrote Principles of a Political Economy. Marx wanted all economic and political power in the hands of the people (called "proletariat," or workers). He called for now-accepted concepts such as 8-hour work days, and Social Security. But his idea of power to workers has obviously failed. Due to the same culprit — human nature — workers have often become "robber barons" in their own right by demanding more than they produce. Marxist, Socialist, and Communist economies obviously don't work.' "Classical" economics reached its peak in John Stuart Mill, gifted (200 IQ) son of British economist James Mill. He called for "calculated intervention to spread the benefits of progress," or a slightly visible hand. Mill died in 1873, the year of perhaps the worst depression of the century — the Panic of 1873. Due to the influence of Marx and Mill, workers' wages and benefits grew, BUT during the half-century 1879 to 1928, unemployment averaged an estimated 10.2% for all workers in the manufacturing, mining, and transportation fields. Even in "prosperous" years, unemployment stood at what is considered now a recession — 6%. Such panics and massive unemployment were considered "acts of God," in the laissez faire tradition. To interfere was considered near blasphemous. Professor Alfred Marshall continued to teach Mill's classical theories for 50 years, until Marshall's death in 1924. Throughout the period unemployment and panics reigned, and the biggest of all hit in 1929. Parallel with Mill and Marshall was the belief in monetarism, the regulated supply of money based on gold and silver backing. But irregular "gold rushes" caused inflationary siege, yet didn't prevent panics.
Keynesian Economics
The stage was set for round three — the modern era of Keynesianism. The Great Depression severely weakened classical economics and monetarism (our worst depressions struck while under the gold standard). But, nevertheless, "most of the respectable economists stuck to their Ricardian guns," wrote Leonard Silk, Brookings Institute economist. "They called for workers to accept lower and lower wages until they were all re-employed... the Depression was a temporary state of unbalance, and prosperity was just around the corner, they said." But such ivory-tower pronouncements didn't convince the 13 million American unemployed, starving and broke transients. The economic world was ripe for a change — and classically trained Britisher John Maynard Keynes (pronounced canes) filled the need of the day, with his 1935 treatise, General Theory of Employment, Interest, and Money. He turned classic theory upside down, by advocating governmental planned deficits to "prime the pump" (or planned surpluses to cool down a boom), planned inflation to prevent unemployment, and national accounting systems (GNP and its components) to be the basis of such planning. The debate between Keynesians and monetarists has raged for 35 years, but since U. S. President Nixon became the first Republican Keynesian, such planned deficit theories can now be called "establishment," the classicism of the 1970's. But Keynesianism too is failing, due to human nature in the government sector (as well as business and labor). Keynes called for half deficits, half surpluses, but political expediency has given us about six deficits to each surplus since 1931. All economic systems have failed or are failing. What is the root cause of such universal failure? Men of genius IQ have failed to give mankind a workable economy, because no genius can change human nature.
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