Thinking about the Crash

Are we in for Seven Lean Years?



By John Taylor; 2008 Nov 29, 7 Qawl 165 BE



I have been sitting on an essay about debt for quite a while, held back by the fact that the more I think about it, the weaker my grasp of finances seems to get. How to write about what perplexes and befuddles you? Yet as an aspiring Baha'i I abide under a divine dictate to be "anxiously concerned" about the times I am living in. Surely it would be remiss to let the collapse of world-embracing financial institutions go by without comment.



My desire to deal with economics is not all my doing. Thomas of late has often been dunning me with the question, "What is money?" No doubt the financial meltdown is being discussed in his Grade Four class. Silvie, in Grade Nine, is asking, "Is there going to be a Depression?" I dread both questions because I honestly do not know. Money and markets and economics have always mystified me.



Yesterday I spent a long time trying to write an essay on another topic, but could not finish because of a migraine. That night I went to sleep and dreamed that I was in a shifting game, an enterprise or negotiation of some kind involving money. Strangely, my opponent was a little friend of my nine-year-old son Thomas (not an actual friend that I can name, a new one) and at one point I said to him, "I owe you a hundred and fifty dollars." The game continued for a long time after that; at times he would owe me, other times I owed him. We stopped and later on he came up to me with a note from his parents saying, "You said that you owe our son a hundred and fifty dollars. Please pay up." The dream ended there, with me feeling aggrieved that I should be taken into account in this way. I should owe only the final tally in the game, not what I owed the kid at one point. So now I take this as a sign that I should forget my flaws and limitations and just write about economics and get it over with. I may fall on my face, but I find that I fail miserably I always learn by writing about it, even if it is not of the best quality.



Everybody is talking about this financial collapse but every expert that I listen to has a different analysis and a different diagnosis. Each sounds more convincing than the one before -- this sounds just like the scenario that Baha'u'llah talks about in His letter to Queen Victoria: one very sick patient, the world, with many doctors crowding around, each with a different diagnosis and a contradictory prescription. The Divine Physician meanwhile, is crowded out and ignored by one and all.



Thomas has been asking me what money is so endlessly that I finally relented. We all sat down watched once more the Internet video "Money as Debt," that I ran across last summer and wrote about in the following essay:



http://badiblog.blogspot.com/2008/06/p39ab-new-master-talk-to-socialists.html



Another talk in which mention the money as debt problem is:



Workplace Constitution, IV; 2008 July 03, 10 Rahmat, 165 BE



http://badiblog.blogspot.com/2008/07/p06-ending-public-debt.html



This time around I looked deeper into the footnotes to the film to be found at the "Money as Debt" website. Briefly, the thesis in this film and website is that the reason we are in such trouble right now is that both governments and individuals have unquestioningly handed control over the money supply to private hands. Even as the system collapses and American hegemony is threatened, nobody seriously considers that there might be an alternative to private banks and lending institutions. The U.S. government just handed over hundreds of billions of dollars to some of their worst-run institutions.



The monetary reformers who inspired this film are suggesting that we consider the possibility of using alternate ways of creating money through credit, such as using publicly-owned infrastructure as "collateral" for lending, rather than handing it to private financiers and their corporate lackeys. Decisions that affect the public should be in public hands, they say.



In several essay instalments after the above-mentioned July 3rd essay I explored the possibility that the Master in His talk in Montreal to the socialists was proposing just such an alternative to private lending institutions. Abdu'l-Baha's "community storehouse" idea is a communally-owned, locally run institution with first access to local resources and taxation. It is tasked with equalizing personal income over good times and bad.



The name "storehouse" suggests that He had in mind biblical precedents, such as Joseph's interpretation of Pharaoh's dream suggesting that he use seven "fat years" to fill a storehouse in preparation for a coming famine of "seven lean years." His proposal, then, is not to be confused with either welfare or a guaranteed annual income. He sees the aged and disabled cared for by this body unconditionally, but every able person capable of a career would be invested in and given credit by the storehouse. This would assure that the locality benefits from locally generated prosperity, and tide all workers over during hard times.



At the same time, unlike clumsy centrally-run welfare schemes, the Master's storehouse would not encourage a sense of entitlement or prop up unproductive workers with uneconomical careers over the long term. Presumably, if a local storehouse bungles or for other reasons resources prove insufficient to support the population, the storehouse could go bankrupt, unlike a government; in that case, the population of the locality would be reduced, a city would become a town or a town a village.



George Monbiot has been pointing out in his books and a recent column that the economic genius John Maynard Keynes suggested a similar idea for the international order just after the Second World War at the Breton Woods economic summit.



"He proposed a global bank, which he called the International Clearing Union. The bank would issue its own currency - the bancor - which was exchangeable with national currencies at fixed rates of exchange. The bancor would become the unit of account between nations, which means it would be used to measure a country's trade deficit or trade surplus." (Clearing Up This Mess, http://www.monbiot.com/archives/2008/11/18/clearing-up-this-mess/)



This International Clearing Union would have ensured that both lenders and debtor nations have an interest in making debt and loans among themselves as light and temporary as possible. Instead, the powerful American delegation set up the present "world" bank, where all debts must be paid in American dollars. This makes the US dollar the de facto world currency, just as English is the unofficial world language. This, combined with veto power over the World Bank and WMF, assures that no matter how heavily the US sinks into debt, it will never be forced into the onerous cutbacks that the World Bank requires of poor nations.



The present financial meltdown recently forced outgoing US President Bush to hold a summit on how to reform the present order. But, as always, real structural change is kept way off the agenda.



"On Saturday the leaders of the G20 nations admitted that the Bretton Woods Institutions must be comprehensively reformed. But the only concrete suggestions they made were that the IMF should be given more money and that poorer nations should have greater voice and representation. We have already seen what this means: a tiny increase in their voting power which does nothing to challenge the rich countries' control of the Fund, let alone the US veto."



The Bretton Woods economic summit did have some good results, including capital controls, currency regulation that restricted the free flow of funds around the world. In recent years these laws were deregulated out of existence. Now private capital can bring recalcitrant governments to their knees by simply pushing a button and instantly pulling their money out of the country. This new power has been called an "invisible parliament," only instead of the people, wealthy capitalists do the voting. This was mentioned in another important article by Noam Chomsky that appeared online lately. Again, John Meynard Keynes comes up.



"The Bretton Woods system was designed in part to create a space for government action responding to public will - for some measure of democracy... John Maynard Keynes, the British negotiator, considered the most important achievement of Bretton Woods to be the establishment of the right of governments to restrict capital movement. In dramatic contrast, in the neoliberal phase after the breakdown of the Bretton Woods system in the 1970s, the US treasury now regards free capital mobility as a `fundamental right', unlike such alleged `rights' as those guaranteed by the Universal Declaration of Human Rights: health, education, decent employment, security and other rights that the Reagan and Bush administrations have dismissed as `letters to Santa Claus', `preposterous', mere `myths'." (After the Breakdown of Bretton Woods Exposing the Un-Democratic Face of Capitalism," )



Chomsky elsewhere points out, as always, that the entire political system is designed for the benefit not of the people but private capital -- owned by a super-rich elite, who, because of their effects on the world, are now being called the "pollut-ocrats."



"... after the dismantling of the postwar (Breton Woods) system, democracy is restricted. It has therefore become necessary to control and marginalise the public in some fashion, processes particularly evident in the more business-run societies like the United States. The management of electoral extravaganzas by the public relations industry is one illustration. `Politics is the shadow cast on society by big business,' concluded America's leading 20th century social philosopher John Dewey, and will remain so as long as power resides in `business for private profit through private control of banking, land, industry, reinforced by command of the press, press agents and other means of publicity and propaganda.'"



Although I greatly admire the critiques made by the likes of Monbiot and Chomsky, when it comes to prescriptions and solutions, they are rather thin. I have been listening to the podcasts of the teacher's television network in Ontario, TVO, which has been interviewing educators and other economic experts about the economic crisis. One recent study being discussed found profound ignorance of financial fundamentals all the way down the line, from the householder balancing their weekly budget to the suits in skyscrapers making billion dollar deals at the punch of a button. It is one thing for Chomsky to say that the people are being blocked from financial decision making, but surely ignorance is behind the impotence of the greater part of humanity.



One of the questions I will be trying to answer in upcoming essays is: how do we go from ignorance to knowledge in economic matters? Another more important issue behind this that I want to address is: "To what extent is our ignorance a matter of lack of sin, a wilful affront to God, as opposed to a lack of technical know-how?



--
John Taylor

email: badijet@gmail.com
blog: http://badiblog.blogspot.com/

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