Sovereign Nations Must Put
The System Into Bankruptcy
Speech to EIR Seminar:
Berlin, Germany
November 5, 2001
Lyndon H. LaRouche, Jr.
In my incarnation as a management consultant, which occupied most of my activities of the 1950s and the first half of the 1960s, I was often told explicitly, or implicitly, by clients: "Don't blame me, blame my accountant." The point is, the fellow would say, "I had always gone by our accounting department's analysis and forecast of our company's future, in guiding the way we invested in various ways; the way we allotted our resources to production, and other things. So blame my accountant."
Today, we have the same kind of pathology, of reliance upon accountants, in the form of general public opinion and government opinion, which obviously does not function. This is because the population, especially in the past 35 years, has more and more become economically insane.
In the former period, we used to think partly as accountants think, but partly as human beings think. As accountants, we thought about the figures we invented and put into invented forms called Accounting and Financial Reports. As human beings, we looked at the physical changes in the environment; and as economists, we looked at the changes in the conditions of production and distribution, in physical terms. And therefore we measured the physical performance of our accounting and financial systems.
In the middle of the 1960s, the world underwent a change: that, whereas in the period from 1945 to 1963, Western Europe and the Americas and Japan in particular, had prospered under a system which was by no means perfect or by no means fully just; but nonetheless, there was a net growth in per-capita physical product, in per-capita standard of living, in per-capita productivity, and the general productivity of industries. From about the time that coincides with the assassination of Kennedy, the ouster of Ehrhard, the ouster of Adenauer, the first assassination attacks on de Gaulle, and the introduction of the terrible Harold Wilson government in the United Kingdom, we have seen a consistent decline—not only in the physical standard of production.
Think, for example, of the case of Germany. Think of great industries; take, for example, AEG from the early 1960s. What is AEG today compared to what it was in the early 1960s? Think of famous firms which have disappeared, which were an integral part of what was called the German economic miracle of the post-war period. They have disappeared, or are looted. Great firms, which were once proud firms, and represented a high standard of technology and productivity and employment, now still exist, but they exist like the walking dead. They have lost their engineering capability, through outsourcing, through benchmarking and other forms of insanity which have destroyed the economy.
Insane Financial Policies
So over the period of the past 35 years, there have been a succession of changes in the way the world thinks about economy. And political parties, politicians and bankers, and so forth have played a key part in this, in telling people to "look at the figures—look at the financial figures." The reliance on finance and accounting to the detriment of considering and comparing physical results, has resulted in a condition that today in the United States, we have an insane man—and I say that advisedly, as Americans are permitted to say things about Americans that Europeans are not supposed to say, but I can tell the truth about the United States as an American political figure. We are insane. We have Greenspan, the Federal Reserve Chairman, who is not only abysmally immoral, personally, but insane.
We have an effort on the part of Greenspan and others to pump up the financial markets, the stock markets, and so forth, by the most wildly hyperinflationary methods seen since Germany in 1923. The businesses are collapsing, employment is collapsing, firms are being liquidated; and yet they don't pay any attention to that in the press reports or the propaganda; they talk about "Oh! The market is coming back"; while everything else is going. The physical economy is collapsing, infrastructure—all kinds of things are collapsing. And there is not much attention paid to it in the policy making circles.
Even in the case of the present Bush Administration, which since the developments of last Summer—not only the Sept. 11 events, but the events of Sept. 10, the day before—began to change its policy, to say that the government must intervene with a statist policy to revive the economy. Now, what the Bush Administration has done, will not work. Trying to get military producers to produce junk that doesn't function, may keep the stockholders of those firms happy for a short period of time, but they are not producing any wealth. It's a swindle. Dumping hundreds of millions of dollars worth of bombs on a country which probably doesn't have hundreds of millions of dollars, as in Afghanistan, is not exactly the way to build a world economy.
But nonetheless, there is a change, a recognition of a change. But the change reflects the fact that the present system doesn't work. The problem today is that people are still blaming the accountants. Finance ministers, governments, and others are saying, "We must have a reform." What kind of reform? We must have a reform in various programs; we must have a pension reform; and all kinds of reforms. But they do not represent changes in the system, they don't represent any correction of errors which have been built into the system over 35 years.
Remember we had a period, from approximately 1945 to the middle of the 1960s, in which the Bretton Woods system—which was a gold-reserve based, well-regulated system, a protectionist system—caused those who participated in the system, as nations, to improve the standard of living, to improve productivity and, generally, the perception of prosperity in the future. From the changes that occurred during the interval between 1964 and 1967—a trend of changes—we have gone downward. We went downwards since 1971; the floating exchange system has bankrupted the world. We have gone through subsequent changes; I will indicate a few of them, to indicate how this thing goes.
We should recognize, therefore, that the problem is not a problem of how to fix the present system, but how to replace it. We have more debt than can ever be paid under the present system. No one will ever get out of this debt under the present financial system. Let's look at world history and what I mean by a systemic approach, in these terms.
Overlapping Changes To The Post-War System
Modern post-World War II history can be divided into several overlapping periods. Chiefly we have the period from 1945 to 1971, the period of the post-war Bretton Woods system, of a fixed exchange-rate based on, not a gold system, but a gold-reserve system. It was a production system well designed to meet the immediate needs of the post-war world for reconstruction of economies which had been shattered and depleted by depression and war. The focal point of this was, again, the credit of the United States, in extending U.S. credit as backing to extension of long-term and medium-term credit to Europe, for the reconstruction of Europe, and similar kinds of programs in other parts of the world.
This worked more or less well. The performance varied from nation to nation. Germany had a very successful venture in this direction. Germany was the most efficient of all the countries participating in this system, because the credit system and the industrial system was better. There was some attempt to imitate that in France under de Gaulle. But that was the situation.
So we went from a period which covered the old Bretton Woods system, which was also a system based on a peculiar arrangement of nuclear war and détente, between two nuclear superpower alliances, the Anglo-American and the Soviet. That part of the system continued until 1989-1991. But in the meantime, there was an overlapping change from a post-war Bretton Woods system based on a gold-reserve standard, to the floating exchange-rate system, which has been the principal cause of the global disaster we suffer today.
Then, in 1989-91, there was another change. The Soviet power disappeared. At that point, an interest centered in London and New York City, a financier interest of a rentier quality—not a capitalist interest but a rentier financier interest, which controlled the world largely through control of financial markets, and the control of governments in the interest of financial markets—this system attempted to set up a world empire; an Anglo-American world empire modelled upon the precedent of medieval Venice. Venice from about the first phase of the fall of the Byzantine Empire—its first phase of fall, about 1,000 years ago—until the decline of Venice as a nation-state power at the end of the 17th Century.
In that period, Venice developed a system of control of most of European civilization and its periphery, as a financier power, as an imperial maritime power, through financial manipulation of the affairs of the nations involved. Venice collapsed after a last effort at imperial revival at the end of the 17th Century. But at that point, Venice and its methods were continued under the Dutch and British monarchy. That is, as identified specifically by William of Orange, the tyrant of London, and his designated successor, George I and his followers in London.
George I was essentially an agent of the British East India Company, which was an extension of the policies of the Dutch East India Company of William of Orange.
So this interest, typified by Shelburne in the 18th Century, controlled most of Europe through a certain kind of relationship to its Hapsburg competitor in Spain and Austro-Hungary.
The Republican Nation-State
Under these conditions, the United States emerged, with the support and backing from Europe, as the attempt to create a modern nation-state as an alternative to this system of relations between the Anglo-Dutch-Venetian style monarchies and the Habsburgs. We went through a process which continued until the victory of the United States in 1861-76, Lincoln's victory over the British and over the Confederacy, immediately the British puppet, which made a change in the world economy. You can see, in the 1861-1877 period, a change in the policies of Europe.
Now, Europe never developed—except for one experiment by Charles de Gaulle in one phase of the Fifth Republic—a true republican nation-state form of any durability. What existed in Europe were reforms of essentially a feudal system, a parliamentary system, of parliamentary governments which became somewhat democratized in the sense that the interest of the general welfare was a pressure upon the state apparatus of the regular state and also of governments. This was the improvement.
But these improvements were adopted in Europe especially after the victory of the United States over the British, as well as the Confederacy, in 1861-1876. The emergence of the United States as the leading world agro-industrial power, over this period, caused a change in 1877 in the economic policies of Germany under Bismarck, the famous industrial explosion in Germany. It caused changes in Russia, notably, in the policies of Mendeleyev, who was at the 1876 American Centennial Celebration and who, with the Tsar's agreement, launched the building of what became the Trans-Siberian Railroad and large industrial projects. There were other things: Japan—Japan was reorganized by the United States by Henry C. Carey, the then aging leading U.S. economist, an adviser of Lincoln. The advice of Carey was crucial—-he was in Germany in 1879—in the influence, through those circles in Germany, of introducing the Carey conception, or the, as it is otherwise called, Friedrich List conception, into Germany.
In the case of Japan, Carey sent his personal student, E. Peshine Smith, as the adviser to Japan who started the industrial transformation of Japan. So, you had developing across Eurasia, and in other parts of the world, the American system of political economy typified by names such as Carey and Friedrich List.
In 1901, with the assassination of McKinley, that changed, for the worse. The changes had already begun by about 1892, in France and elsewhere, around the Dreyfus case, and other things. But in 1901, the assassination of the last pro-patriotic President of a series—William McKinley was assassinated by assets of the Theodore Roosevelt family—caused Theodore Roosevelt to become President, and a fundamental change was made in U.S. policy and U.S. relations to Europe.
Prior to that, under all patriotic Presidents, and patriotic currents in the United States, the chief foreign partners of the United States had been—since the time of the American Revolution—influences in Germany, and especially the Classical circles; influences in Russia, which had been part of the League of Armed Neutrality; and, Japan had also become an asset of the United States against the British interests. And the United States was in opposition to the Anglo-Dutch interests internationally.
This continued despite other changes until 1901 and the assassination of McKinley, at which point the United States entered into a new system of relations. It broke its attachment to the Russia of Witte and of Mendeleyev; it broke its attachment to Germany; and became an integral part of an international maritime alliance, the so-called transatlantic alliance, between the British monarchy and the United States. And with the Dutch monarchy added in as part of the pattern.
So therefore, except for the Franklin Roosevelt period, from 1933 through 1945—except for that period, the United States has been a part of an Anglo-American world financier maritime imperial power. |
