Mr. Coats,
Your idea that state-directed credit does not “stand the test of history” is not at all true. What I would assert does not stand the test of history is the very IMF liberal free trade system you espouse.
The nations that have implemented the IMF conditions of cutting investment in public works, health care, and state-directed credit for the “General Welfare”, have all suffered drastic cuts in living standards and an increase in poverty. All the so-called “structural reforms” called for by the IMF, all under the assumption that if these nations cut their budgets, economic growth would naturally occur, only caused disasters in the nations such as Greece and earlier Argentina, which were forced by manipulated financial circumstances to borrow money with the “deadly financial strings attached”.
The late economist and statesman Lyndon LaRouche forecast the likely breakup of the fixed rate monetary stability of the Bretton Woods System before Nixon took the dollar off the Gold Reserve System in August, 1971, and further forecast that unless a new just economic system was established, the Western international financial elites would create a system similar to the one used by Nazi Finance Minister and Reichsbank President Hjalmar Schacht during the 1930’s to destroy living standards, which would lead to depression, global fascism, and global war.
In 1975, Mr. LaRouche proposed an International Development Bank to replace the IMF, so that credits could be lent to sovereign nations, to build big infrastructure projects to increase the productivity of the physical economy, credits that could be paid back as living standards increased. This proposal was adopted at the 1976 Non-Aligned Nations Conference in Colombo, Sri Lanka.
What the IMF and other Western financial institutions implemented after the fixed rate gold reserve system was destroyed was a policy of looting nations’ wealth by knowingly allowing financial elites to speculate on currencies, while also changing the terms of trade, which then massively increased these nations’ debt, bankrupting them. Then, the IMF comes in with a loan with the deadly conditions, to refinance the manipulated debt, ensuring that these nations can never get out of debt and can never develop.
Such loan-sharking methods, designed to destroy nations, while stealing their wealth, while also arranging for the political destruction or even assassination of leaders who refused to play by the rules of this game, is ably described by John Perkins in his book, Confessions of an Economic Hit Man”.
So, we are not dealing with a nice academic economic theory. We are dealing with a murderous policy, which has led to the collapse of economic development worldwide, not simply in the underdeveloped world, but in the West as well, where the policy was initially carried out in the late ‘70’s and 1980’s under the name of “controlled disintegration.”.
Behind this policy was a deliberate Malthusian population reduction intent, as the original British Empire’s British East India Company used their employee Malthus to justify the policy of letting the poor starve, and famines to be deliberately created, as in India and Ireland.
The issue is not simply public state-directed credit vs. Private Capital. The issue is for what purpose is money used? The idea that if you just protect property rights, money will regulate itself is absurd. As Mr. LaRouche demonstrated, there is a science to political economy. For societies to grow and develop, the real source of wealth is the promotion of human creativity. There must be new technologies, new inventions, an increase in what is termed “ energy flux density”, and new more productive infrastructure platforms.
To build all this requires credit, and the model for promoting and regulating this credit was termed by Alexander Hamilton and the great 19th Century American economist Henry C. Carey, the “ American System”. It is the use of protective measures against those imperial forces, such as the British Empire, which wanted to destroy sovereign nations, and the use of credit mechanisms to direct credit to productive,l ends, such as through a National Bank, that the goal of increasing the productive wealth of a nation can be developed, and the “ productive powers of labor “ can be increased, to use the term of Hamilton.
Big projects, such as canals, water projects, and railroads were necessary to carry out such a policy. And the idea of leaving to the “market “ to determine if the credit would be made available would be a very sick joke ensuring the continuation of an economic imperialism which did not want to promote the General Welfare, but keep nations down, to better control the world.
So, the method I am promoting is not the failed Soviet model, but the American System model of Hamilton and Henry C Carey, which is the same model for Lincoln and Franklin Roosevelt. For Lincoln, he used the Greenbacks as a source of credit to finance industry and agriculture , as well as the Civil War and the building of the Trans-Continental Railroad, planned during his lifetime but built after his death. FDR used the Commodity Credit Corporation to provide the credit needed to build many of the New Deal projects.
You can have private banks, but they can’t be allowed to speculate and simply make money. The money must be regulated, which is why a restoration of Glass-Steagall is so necessary, in the face of the combined hyperinflationary/ deflationary collapse we are now looking at.
We must use state-directed credit to rebuild the physical real economy, which China is doing with the Belt and Road Initiative. But we must wipe out the speculative derivative bubble of the Western banking system with Glass-Steagall , then issue new credit to build a modern nuclear and fusion-powered System, while we use the existing fossil fuel economy till we replace it with a more energy -intensive mode such as nuclear and fusion, not go back to the literally Dark Afes with inefficient , low dense, and unreliable so- called “ renewables “.
The China Belt and Road Initiative and the interest in joining it by the extended “BRICS-Plus” group of nations is a current day reflection of the once very successful American System. It would do the US well to return to the American system and the Principles of the Declaration of Independence which underlie it, to finish the American Revolution, by extending these principles to the whole world.
That is the real secret of the “New Bretton Woods”. A group of nations, which must include the US, must come together and decide to dump the British System , which includes the IMF, and establish a new system of real economic development, not simply promote “ making money”. To make sure the credit goes to the right areas, text or call me, to see how Hamilton and Carey answered these arguments.
Regards,
Gerald Belsky 444-414-5123
Dear Peter and Gerald, Your Committee for a New Bretton Woods sets out many central
planning, industrial policy, etc. proposals that have failed the test of
history. You are right that China, having almost 19% of the world’s population
was a major contributor to growth and the decline in poverty following the
liberalization and increasing privatization of its economy in the 1980s. But
with or without China the increase in living standards and decline in poverty since
the industrial revolution have been DRAMATIC. There is a huge amount of data
documenting this but here are three representative tables. https://www.humanprogress.org/dataset/real-gdp-per-capita/ https://www.humanprogress.org/dataset/share-living-in-extreme-poverty/ https://www.humanprogress.org/the-great-decline-in-poverty-over-time/ However, as a member of the existing Bretton Woods Committee
and retired staff of the IMF, let me focus on banking and public sector banks. While
I have led or participated in many IMF technical assistance missions to countries
suffering from the inefficiency and corruption of state-owned banks, the Soviet
Union is the only country I know of that had a system of central bank
allocation of credit of the sort you seem to recommend. Hopefully I needn’t comment on how that
worked out. Governments have an important role in any country. My contention,
strongly supported by historical experience and economic theory, is that the appropriate
role is to provide the legal/regulatory framework in which private actors can
do their thing. This includes the enforcement of property rights and contracts,
accounting and transparency rules and such things that promote market
competition (infrastructure, education, and safety net financing). Economic
growth requires allocating resources most profitably and an environment that
rewards useful innovations. With the proper legal foundation, this is (and historically
as been) achieved best by private actors. If a private bank lends to friends and
relatives, it will lose to its competitors if its friends do not make the best
use of that credit. Sadly, this has not been true of very many state-owned
banks (the closest proximation to your central bank monopolist lender). One
after another struggling country has giving up their state-owned banks and the
misallocation of the country’s resources that have contributed to their slow growth
and continued poverty. Unlike private banks, which suffer loses when they lend
to poor borrowers, state owned bank losses (favors to relatives and friends)
have been underwritten by the state (i.e. by tax payers). Such concentrations of power at the top attract leaders who
enjoy exploiting such power. The historical evidence is overwhelming. Create it
and they will come.
Sincerely, Warren Coats
Dear Mr. Coats, I believe the idea is that if “we [were] part of a global revolution against economic empire,” then Putin wouldn’t be directing it. A national bank with the power to create credit/money for public investment is certainly vulnerable to corruption; but how is our privately owned and controlled banking system doing? Your point still stands, but it is most persuasive only when the baseline is an imagined ideal, not our present reality. And even were this proposed national public investment bank to match Wall Street’s impressive level of corruption, we’d at least get some public wealth creation out of the deal. More accurate than “[t]he growth of global trade has dramatically reduced global poverty” would be to say that the current global economic system has seen some poverty reduction, but that is overwhelmingly due to the contribution from China. The proportion of people in extreme poverty has been marginally reduced, but in absolute terms, worldwide there are more people in extreme poverty today than there were decades ago. You are no doubt familiar with the so-called elephant graph, but look what happens when you exclude China. For an opposing view to the celebratory narrative on poverty reduction – what we hear often from the NYT, “The” Economist, TV pundits, etc. – I recommend Jason Hickel’s The Divide. It’s essentially just a summary of reams of important research, but it is presented in a very readable narrative form. As with any argument, it may be wrong, but the ball is in the court of those propounding the celebratory view – and to my knowledge, they still have not offered any serious rejoinder. All the best,
Peter Peter Beattie Assistant Professor; Assistant Programme Director, MSSc in Global Political Economy The Chinese University of Hong Kong +852 3943 9794 Social Evolution, Political Psychology, and the Media in Democracy: The Invisible Hand in the U.S. Marketplace of Ideas (Palgrave Macmillan, 2019) Dear Mr. Belsky, Yes, we do need to resist America’s bullying and empire tendencies. But your approach goes in the wrong directions (e.g. a National Bank that controls credit is a time tested receipt for corruption). The growth of global trade has dramatically reduced global poverty. Reshoring-buy American would bring that to an end without improving our own economy—quite the opposite. You note that “ a new economic order, based on development and justice, is already being discussed among Russia, China, India, and the "BRICS-Plus" nations.” You seem to suggest that we should follow such a centralized and politically driven model. I don’t want Putin direction my economy or my individual life. Such people raise to the top of such systems.
What is "screaming nuts" about establishing a New Bretton Woods economic system, when the current Trans-Atlantic financial system is hopelessly bankrupt? The system will collapse either through a hyperinflationary blowout or a deflationary collapse as the central banks raise interest rates, causing mass bankruptcies. Something new is needed, especially if we are concerned with the "General Welfare", not protecting the speculative bubble of a relatively few billionaires. In addition, the question of a new economic order, based on development and justice, is already being discussed among Russia, China, India, and the "BRICS-Plus" nations. In so far, as the legacy of America, going back to the Declaration of Independence, is of an anti-imperial nature, shouldn't we be part of a global revolution against economic empire, instead of acting like the British Empire? Also, in so far as this question of a new just economic system that works for all nations, ourselves included, is directly related to the question of stopping the drive toward global nuclear war, I would urge you to watch the Schiller Institute Conference, Sun., July 3, "This July 4, Declare a New Bretton Woods": This July 4, Declare for A New Bretton Woods!! | The Schiller Institute | This July 4, Declare for A New Bretton Woods!! | The Schiller Institute |
|
|
|