In his two books Peter F. Drucker only stated the premise of the two economic systems but did not complete the analysis but went on to spend the rest of his life defining "management" based on his concept of the "corporate community" which we will use as a basis for our third section on the knowledge society in the information age. In the meantime, I have completed his work, actually in 1944, and I will herewith give you the results and benefits of my scholarship.
You are familiar with the economics of trade and mercantilism: that is classic economic theory. The economic theory of the industrial society is quite different and unknown and unsuspected.
While economic man and his mercantile society grew out of seaport cities and guilds that made hand crafted items from natural products and sailing ships that traded with foreign countries, the industrial revolution grew out of the lords of the castles inland and their agricultural economy. The farmers were serfs or slaves bound to the land while the lord of the manor had complete jurisdiction over his landed estate. Therefore the industrial society is more conducive to fascism than democracy. There was no money. The farmers had to give a tithe of their crop to the lord and what amounted to record keeping is the basis for industrial money which is nothing more than a claim check and not legal tender. All farms had to make things especially machinery to keep the agricultural operation going. When they hooked this up to the power generated by the waterwheel at the local grist mill industrialism was born and when the steam engine was invented it broke its tie to location and then the industrial revolution moved to the city or created cities.
Today, the Lords of the Castles based on agriculture are the CEO's of multinational corporations based on manufacturing and their army of white knights are now their lawyers who do battle for them.
Here are the basic differences between a trade economy and a manufacturing economy. Merchants trade in a limited supply of natural or hand made products. Money is backed by tangible products, namely gold. Goods are exchanged. Money is saved and becomes capital which is used for investment in new enterprises. Manufacturing, on the other hand, is based on the unlimited production of synthetic goods which are distributed. Money is a claim check for goods produced. All money must be cashed in and none saved, no capital amassed, no capitalists, no capitalism.
The purpose of the mercantile system is to monopolize trade and to restrict production, the capability of the industrial system is unlimited production such that if carried out to fulfillment every one would be a millionaire and work would be reduced to an hour and a half in the morning as a chore. Ever since the industrial revolution 150-200 years ago it has been under the control of the mercantile system and restricted and held back and prevented from showing what it could do. It has not been allowed to show its full potential.
President George W. Bush has put out his economic stimulus package of tax cuts and other incentives and proposals to reduce unemployment and increase consumer spending. There is a national public debate on its effectiveness. I am lost in the arguments while some pundits say it is ill advised. What I think is that the average Joe, i.e., the average American, one who is a citizen, who can vote or who is registered to vote and, say, speaks English, I mean speaks American, should have equity in corporate America, i.e., own stocks and bonds and treasury notes and bank CD's, such that unemployment is not a financial crisis as it is and employment becomes a mere pastime. This universal public ownership of stocks and bonds need not necessarily be by capital purchase but possibly by assignment or tax write-off. This would be a great boon to America since it would remove the average American citizen from the patronage system and allow a more rational public dialogue of national issues. According to Gordon S. Wood in his book, "Radicalism in the American Revolution," Vintage Books, NY 1993, he says that the thirteen colonies could fight and win a revolution against the British because they were free at the time of the patronage system. We were back on it soon after. The basis of a free nation which we are supposed to be is to be free of the patronage system. Equity in corporate America would do it, it would make the average American free and equal and self reliant, all necessary conditions for members of a free society.
In the mercantile system, which is the one we have, when a bank loans money or extends credit, it is based on tangible assets that the bank has or deposits the bank has. Of course the client puts up collateral but that does not enter into our argument here. Were the Industrial System to exist in its own right, then when an industrial bank, were one to exist, the bank would have no capital assets of its own but loan money or issue credit based on the intangible assets of the client such as being unemployed but ready and willing to work with plenty of know how. No tangible collateral required. Just the potential for making money.
Were South America and other Third World Countries to learn this lesson, it would free them from the IMF and the World Bank. This is the best kept secret. This means that you can issue credit or print money based on the existence of the unemployed who are ready and willing to work. If Roosevelt had known that in 1930 there would have been no great depression.
We have two money systems in operation in our economy at the same time, using but one currency. The purpose of the mercantile money system is to accumulate capital by savings and reinvestment. The caveat of the industrial money system is that it all be spent and none saved. Mercantile money removed from the system at half cycle by being put into savings creates a void and plays havoc with the the industrial system and produces the business cycle of boom and bust. To compensate for the void and to prevent the business cycle it would be legitimate to just print money equal to the void and to introduce it back into the system which would come to tens of trillions of dollars per year.
What we need to do to stimulate the slowed economy is to create some industrial banks to be in addition to the banking system we now have. But before that we need to restore the people's bank that we have lost such as thrift banks of savings and loans, create more Credit Unions and extend their services beyond the unions and Land Banks that print greenbacks and to develop the ideas started up in Ithaca, NY called Ithaca Hours or Community Money. But in addition to all that we should institute the new concept of Industrial Banks that issue credit to people ready and willing to work and start new businesses. This would be investment money and not contribute to inflation but would only increase business. Inflation could be controlled by busting up monopolies and creating more competition. New businesses should be sheltered, protected and coddled until they can walk on their own feet as full fledged enterprises just as we do with children or flowers and young plants in flower beds in nurseries and green houses. We raise our children in school and colleges for twenty-one years before we turn them out into the world. We should do the same for new and fledgling businesses. Our economy and especially if you want to stimulate it depends on a plethora of new healthy businesses. That is where all new growth to the economy comes from. Large established multi-national companies do not provide this growth but rather act like old dinosaurs. OK. New business enterprises should be given special dispensation and they could be funded by the new Industrial Banks. This way we can create new jobs and add to consumer spending.
Well, just as the Industrial Society is coming into its own, we are exporting it overseas which I approve of. Let the Third World countries move into the Modem Age the hard way, the way we did, one step at a time. Send them our down and dirty jobs We have had them long enough. Let them get their hands dirty while we move onto nice clean Office Complex Campuses in the coming Information Age.
For the knowledge age people will be paid to go to school as if it were a job, and it will be education for life. People or employees will be paid to learn and to work. There will be a blurring of the line of demarkation between work and learning. It will be more like a think tank. Information is very important and there is a market for it. There will be no secrets, information will be freely available, no classified information, government security or no! While traditional think tanks are political with hidden agendas these will be above board and straight, information fonts of knowledge.
We will then have full employment and total consumer spending. And the world will be at peace because countries who trade with one another and do business do not wage war with each other, and all our technical problems will be solved by our think tanks. For instance, a think tank will reorganize the structure of politics and congress and make them work like a well oiled machine. Kabitz, kapeech?
Well, this is my view of the new economics. I would like this to be debated publicly and nationally. Send copies to all your contacts and spread the word and email me your comments.
America was founded on a new continent with virgin forests and streams, natural resources, a whole continent between two oceans. It could become the most powerful and prosperous country in the world and with the Industrial Revolution the possibilities seemed endless. Everyone could be rich, with a plot of ground, a house, quality of life, a small farm, and have independence and freedom. That is the American Dream.
In the Civil War the Union army needed guns. Guns were made by professionals and individually hand crafted and were in short supply and expensive. A man, probably Colt, came to Lincoln who assembled a Congressional Committee to whom Colt presented several boxes. One contained barrels and another stocks and the rest each the several other parts that go to make up a rifle. He said, pick any barrel from the one box and any stock from the other box and any other parts from the other boxes and put them together and see if they fit together. And they all went together. Because they were mass produced universally in unrestricted production. The Industrial system is unrestricted production and the Mercantile system is restricted production. In the Industrial Revolution the making of the guns in mass production did not need any mercantile professionals and the Mercantile Institutional professionals such as Insurance, Real Estate, Lawyers, Stock brokers and bankers, are all working to prevent the Industrial Revolution from working.
In the beginning automobiles were made by professionals and hand crafted as play toys for the rich and famous but Henry Ford changed all that with his assembly line and mass producing them as affordable people's cars for the middle class. His famous model T. He got rid of the Mercantile professionals and produced his cars in unlimited numbers which opened up the American West and made Americans mobile.
After WWII returning GI's needed housing. Not army barracks or high rise apartments as the government would supply nor tracts nor ghettos but decent single dwelling houses on their on plot of ground in a community that would give pride and quality of life and freedom. Levitt built his houses by mass production with no professionals and at a low settlement charge and reasonable prices. He built whole communities and by mass production one would be proud to live in and all the Levittowns were a great success. However, the evil Mercantile professionals were not happy with Levitt and wanted to punish him so they hounded him through the law courts and Levitt died a broken and poor man in the bankruptcy and tax courts. The evil Mercantile money mongers waiting in the wings won again to defeat progress and the Industrial revolution. Chalk one up for the Mercantile monsters. Today you can't buy a house without going through myriad mercantile professionals and encountering numerous government bureaucratic restrictions and each house is tailor made to suit one at a time and at a high price and in short supply and much too big for the average American. We need more houses and at a reasonable price. Get rid of the mercantile professional and bring back the Industrial Society Levitt. Where are the Levitt's when we need them?
The Institutions of the Mercantile Society are busy sending out their professionals, lawyers, stockbrokers, real estate agents, bankers, and insurance agents to stop the Industrial Revolution from benefiting the the American people. The free market needs freedom to operate and the Mercantile Society want total control.
In 1936 Peter F. Drucker saw Hitler in Germany destroy the Mercantile System and wrote about it in his book written in 1939, "The End of Economic Man," and wrote a sequel, "The Future of Industrial Man" in which he describes Hitler's efforts to bring Germany into the modern age by creating an Industrial Society by making all the wrong moves which he lists in his book and taking Germany into oblivion and disaster. Today, sixty years later, America's president, George W. Bush, is taking us down the same path to oblivion and disaster. What Saddam Hussein does is none of our business and we have no need to fight a war with Iraq.
What we should be doing instead, is trying to create an Industrial Society in which the industrial economic system can operate with its own institutions and not be subjugated to the Mercantile Institutions that want to suppress it. What is the most important political issue today both foreign and domestic? Its the economy--stupid!
First I am going to explain the Industrial Economic System to you and then compare it to the Mercantile Economic System and show you why they are opposites. Our economy has two economic systems working in it that are opposite and work against each other with but one currency. This spells havoc for a healthy economy and most of our trouble. Next I will create an Industrial Society for you in which to have the Industrial system operate. It is so unlike what we are doing now you won't believe it. And once the Industrial society is set up I will show you how it will lead right into the Information and Knowledge Age with no sweat. A shoe-in.
The Industrial Economic System is a machine. A simple machine. It is amoral, it can be used for good or for evil, it doesn't matter, it is just a machine and it is just like any machine. It has moving parts that need to be well oiled and it needs to be allowed to do its job without interference in order to operate. Its mangers should be allowed to manage without interference from the government nor can it operate under the auspices of the Mercantile Society which is dedicated to restricting its behavior if not stopping and destroying it altogether. It is like any other machine: You push the button and it does its job. It does what it is designed to do. In this case, to make you rich! What's wrong with that? I think that is an admirable endeavor can you imagine the promise and possibilities that we all become millionaires? Well, this is how it could happen but first a description of the Industrial Economic System as a machine and how it works.
Theoretically take all the corporations in America and on paper make them one company. Now, this company is going to get a hold of some money, industrial money not mercantile money, to invest in the production nationally of goods and services, say for one week. Now we are going to take one item and calculate its cost. There is labor, material and overhead. We are going to calculate this in March after the fiscal year so we know what the profit is in hindsight and we are going to call it a cost and pay it to the company owner ahead of time. This is industrial calculation, not mercantile calculation. So we now have our first equation. Investment money equals cost of production. It is the first of two graphs for the business cycle. Now for the second equation. Since all investment cost eventually go into income which equals total purchasing power which should exactly equal total retail price including delivery and taxes. This equation then is the second graph on the business cycle chart. In the industrial business cycle money does not circulate, is not legal tender nor is it backed by tangible gold. It is a claim check and has a single cycle with two stops or half cycles.
In the Industrial System money as claim check is the same as checking your hat and coat when you go into a restaurant. After eating you hand in your claim check and get your hat and coat back. You have to claim your hat and coat or they will just sit on the shelf and they will be minus a claim check. This is as simple as it gets. In the Industrial System the entire paycheck has to be spent and not saved. We will save something somewhere else to make up for it. In our present double system where industrial money is treated as if it were mercantile money some of the paycheck is saved and put into a savings account in the bank which invests it. This leaves the industrial money unable to complete its cycle creating a void of trillions of dollars with that much goods left on the shelf with no money to buy them. If the government doesn't issue that money as fiat then the system causes a depression until that much value is destroyed by being wiped out by the system and workers are laid off and join the unemployed.
In the mercantile system it is the point of sale from which all blessings flow and it's called marketing. In the Industrial System the point of importance is the planning stage. Distribution is more like Sam's Cub or an S&H Green Stamp Redemption Center. So much for the Industrial Economic System and now for the Industrial Economic Society that is going to run this system.
A group of people want to start an industrial manufacturing company to produce product or service, and put hundreds of the unemployed to work so they go to the committee and ask for hundreds of millions of industrial dollars. They get it and build a plant, install management, hire the unemployed and start manufacturing. It doesn't matter if they are feasible, make a profit and survive or whether they go bankrupt. Just chalk it up to experience.
We have chartered this industrial manufacturing plant, financed it, built it and put it in business, but who owns it? The committee or another one equal to it and associated with it issues shares of stock in the company. The stock shows ownership in the company as well as paying dividends. A block of stock is given to each of the members of the original group. Also up front a block of stock is given to each member of management and to each worker. This block of stock will pay dividends large enough that they may never fear the stigma of unemployment. Now, for every dollar the worker earns as income he also earns brownie points. These are what you save. When you get enough of them you trade them in for more shares of stock. When you get enough shares that you don't have to work you can retire. In the Industrial Society you are supposed to spend your entire salary and not save any of it so you save something else, you save brownie points.
As possessor of stock you are also an owner of the company and therefore entitled to a say in management and a vote on issues, have input on the planning committee and get paid part time for being part of management. You do not work forty hours a week on your machine. You work ten or twenty hours sharing the running of the machine with others when you're upstairs helping with planning in management. Or you can go home early and pursue avocational interests. It will also be possible some day to only work an hour and a half each morning as a chore to earn all your money. This stock ownership is what makes the Industrial Society and which gives the workers meaning and function and which Peter F. Drucker is so concerned about.
In the Industrial System when the worker at the machine pulls down the lever to add value to the product the worker is making two things: He is making the product and also making the money to purchase it at retail which actually is his salary.
In the eighteen hundreds a rich New York City financier wanted to build a palatial mansion in upstate New York near Rochester. He died and his rich widow lives on at the mansion. The local town wanted a park, a swimming pool and a library. So she bought it for them. This is the mercantile way so now here is the Industrial way and how it would work in the Industrial Society. The local town wants a park, a swimming pool and a library. In the Industrial Society, if the materials are available and also the labor you just print the money and build them. Money is no object. That is what Peter F. Drucker says in his book, "The Future of Industrial Man." Money is no object. If the materials and labor are there and available, just print the money!
Remember, this is not mercantile money, it is industrial money. It doesn't circulate and it doesn't contribute to inflation. Industrial money is a claim check that travels in two half cycles to complete its full cycle and cancels out. However, the one full cycle must be completed. How does it get canceled out? When the industrial banking committee that originally issued the money or credit gets it back, it cancels it. What are determinate are materials and labor, not money. So, since there are plenty of materials and labor we should all be rich, right. This is in goods and services, not in money. Okay?
So get cracking, pull-out all the stops, make me rich and make the American Dream come true for everyone.
Once you have this set up and in place sliding into the Information Age will be simple and easy.
In the Industrial Society such money would be easily available but in the Industrial Society money is not the object, it is not primary nor is it first because it would be easy to get. It is a shadow or reflection of the real thing, an after thought. Money is peripheral. In the Mercantile society the guy with money is king, he calls the shots, but not in the Industrial Society. In the Industrial Society the guy who owns shares of stock is king. He is on the planning committee and elects the banking committee. When we do come into the Industrial Age we are going to have to streamline our voting procedures because everybody will own stock. And companies will be smaller, just departments under some kind of umbrella super corporation. These department sub corporations might even be gated communities since in the information age people will be able to work at home through their computer networks on the Internet. So the key to Industrial Society money is fluidity.
Suppose a group of people around a picnic table want to make something for themselves. No money is needed, when they are through they divide up the spoils and go home. Suppose that it is a little bit more complicated and you need a journal, diagram and notepad paper and pencils to keep track of what is going on. Notepaper takes the place of money, and lots of paper is needed. Call these paper tags claim check money. That is called fluidity, but it is secondary not primary and it is based on the intangible asset of work and not the tangible asset of gold. Notepaper in the Industrial Society, as opposed to Mercantile money, is Industrial Clam check money. Whatever you contribute to production gives you a claim to your share of the finished product
Now suppose that you do not want your share and leave it sitting on the picnic table. What are we going to do with it? Now suppose a picnic table enterprise requires a hundred dollars investment. You're in. You give them a hundred dollars. The know how and labor you contribute to the production is worth a hundred dollars, so they pay your salary of one hundred dollars as income and you get your hundred dollars back. Now your share of the finished production is priced at one hundred dollars. Now suppose everyone wants their share of production and pay a hundred dollars each and all of the production is claimed so now the picnic table enterprise has a hundred dollars from each participant which is exactly what it owes the bank or each participant collectively who invested. Now the debt is canceled and everything is even.
Now suppose you do not want your share of production and you do not pick up your product on the picnic table but just let it sit there. Instead you take your hundred dollars to picnic table II enterprise and invest it there. First, the money you invested at picnic table II was the only money available to purchase your product you left sitting on picnic table I, so when you removed it from circulation by investing it at table II you left your product sitting on table I with no money in the system to buy it. Industrial money has two half cycles: One where the product is made and one where it is sold. The cycle must be completed in order to cancel out. If money is removed at the half cycle to start a new investment cycle, a VOID is created equal to the retail price of the product left sitting on the shelf and of course with a void created, there exists no money to buy it. Also there is an outstanding bank loan deficit equal to the retail price of the product. This just shows how devastating the Industrial money system can be when encapsulated within the mercantile economic system. So long as the Industrial system is not recognized and acknowledged as existing within the Mercantile system and compensatory measures are not taken to correct the imbalance it just shows how much havoc it can cause. Now get the statistics for one year on how much money was put into savings and investments. It probably comes to hundreds of trillions of dollars. And this is what is causing all our economic problems.
There are several things that can be done. Since there is no money out there to buy these excess products, the store owners who possess them can barter or swap them by some system and pass the savings on to their employees or customers. I suggest that it can be done with credit cards but it is a little tricky. Another way would be for industry or government to introduce that amount of money or credit into the currency or economic system. Again it could be done through credit cards or outright government checks sent through the mail with no strings attached to every citizen. Using the methods of Ithaca Hours might provide a solution. It's a system developed by Paul Glover in 1991 in Ithaca, New York, whereby fiat money is printed and introduced into the system as community currency. The full story can be found on their web sites: www.ithacahours.org, www.ithacahours.com and www.lightlink.com. As for the bank debts, they should all be canceled and made null and void. Actually they are canceled when you send your investment money to table II.
If these acts of compensation are not taken then nature steps in and does the job for you. A Depression descends on the economy putting many people out of work and onto the ranks of the unemployed or underemployed, goods are undervalued and the stock market takes a plunge until equal value to the tune of trillions of dollars are extracted from the system. This is called the business cycle or boom bust. From the very start of the boom the seeds of the bust are sown because people save money and put it into investments from the very beginnings of the boom cycle. Were the Industrial Society in control there would be no depressions nor recessions or business cycle, only good times affluence.
For a rouge estimate say that the average wage earner saves a hundred dollars a week and puts it into a savings account or invests it in stocks or bonds. The savings bank puts that account into investments so that all savings go into investments starting a new two step cycle and leaving the first cycle uncompleted creating a void. That is almost six thousand dollars a year per wage earner. Now say that there are 90 million breadwinners in the United States. That comes to over 540 trillion dollars of money missing from the economy formerly ear marked for purchase of goods now left on the shelf with no money to buy them. What about the goods on the shelf? Industry could claim them by devising some sort of complicated barter system using credit cards or government could just print the money. The government could just print 540 trillion dollars a year and just give it to the people. The government could send a check for ten thousand dollars a year to every citizen of the United States tax free with no strings attached. This would remove the fear and stigma of unemployment and give everyone a sense of freedom and remove them from dependence on the patronage system, (read "The Radicalism of the American Revolution" by Gordon S. Wood, Vintage Books, NY 1993) The government could pay for the war, remove the National Debt, give everyone free health insurance ,a free college education or continuing education, feed the hungry at home, build adequate housing and remember it's housing that drives the economy. Think of the possibilities. Or the government could just give the newly printed money to the people to buy the goods left on the shelf. Of course this can only be done in an Industrial society, it can not be done in a Mercantile Society.
So the government comes in as well as the mercantile institutions of insurance lawyers, real estate agents, banks and stock brokers and try to run business and it is no longer market driven, especially the housing industry. We have to get rid of the professionals and return the housing industry to where the market decides what is built, not some bureaucrat. The flood plain rules for instance are ridiculous. So there is a flood every couple of hundred years, so what Bring back Levitt and his mass production methods of producing affordable housing on a production line with no professionals. With him there would be no shortage of houses and no restrictions such as over sixty-five with no children or assisted living or retirement homes. All industrial activity in both the Mercantile Society and the Industrial Society should be market driven.
. . . Air is free and freely available. Suppose that some one came to you and said, give me control of all the air and I will return you share at will and things will be just like before. What would you say? Would you do it? You say yes and then you find out that they lied to you. They only return eighty percent to the people so that you have to do what they say to get your share. They now control you. The utilities are trying right now to get monopolistic control and ownership of water, which is free now and charge you a high price for it and restrict its availability. Well, that is what the central bank did with money in the early part of the last century. At that time money was freely available, and that is what helped this country grow and become great. Any economy in order to function and be affluent has to have plenty of freely available currency like blood circulating in our veins and arteries. First of all we had people's banks. Every little town in America had a local people's bank. For every dollar people put in their savings account the bank could loan out five dollars in credit or loans. In these little town banks the bank president put his picture on the dollar bills. Then in the cities there were the Savings and Loan Thrift banks, another kind of people's bank. Workers in mills and factories in the cities lived in row houses and needed two mortgages to purchase them. Savings and Loan banks provided the second mortgage. People put their nickels and dimes each week in their savings account in the Savings and Loan thrift banks which only made loans on second mortgages. Then there were the Land Banks, another form of the people's banks. Everyone owned land whether a farm or an estate. Several land owners would put up their land, no money was involved and form a bank that could then lend out money at five times the value of the land. This made money freely available and the money was called greenbacks. This country was built on greenbacks. Then silver was discovered in Colorado. It offered the opportunity to fuel the economy, and expand America with cheap currency, but when the people failed to elect William Jennings Bryant president with his promise to make silver legal tender and back our currency he claimed that he was crucified on a cross of silver or was it gold? This meant that gold which was in short supply would be our currency and would be under the control of foreign gold interests in New York. A more recent development for factory and office workers who are employed by companies and corporations are the Credit Unions. Employees can start a savings account in these and have it deducted from their wages on a regular bias and the money can be lent out to the employees at low interest rates because the Credit Unions are not under the regular banking rules. Another form of fusion of money into the economic system and become part of local community currency are the latest fad in community currencies such as Ithaca Hours in Ithaca New York, the home town of Cornell University. The movement was started in Ithaca, NY in 1991 by Paul Glover and called Ithaca Hours and has been very successful. Coupons like dollars and printed up and spread by quasi banks and perfectly legal and introduced into the local economy and act as real money. It has spread to other towns across the nation and into foreign countries. In Great Barrington, MA a butcher and grocery store owner wanted to expand his store, but had no money for the new construction so he issued discount coupons to his customers which they could redeem later at discounted prices. He raised enough money to build his new store addition.
The powers that be told Woodrow Wilson that they would make him president if he would do five things when elected one of which was the creation of a Central Bank, the Federal Reserve Bank, which he did but it took until 1928 to be finally realized and its purpose was the consolidation of its centralized control of money. One of the advantages of the Federal Reserve Bank was that small town banks needed extended credit at Christmas time which they could provide. They also wanted to restrict access to money by destroying the people's banks. In 1928 its first act was to call in all the loans in the people's banks which precipitated in 1929 the worst Depression the United States and the rest of the world had ever seen. Of course President Herbert Hoover was blamed for it and not elected to a second term.
Hoover would have gotten us out of the depression in 1932 and gotten us back on an affluent track by using capitalism, free market investment capital methods. After all he was an engineer and not a politician had he been elected for a second term but instead they elected Franklin Delano Roosevelt, a known Communist and socialist who hated Capitalism and the free market and refused to use any of those methods. As a result the depression lasted sixteen years and he was elected for four terms but I don't know why. I would not have elected him for one term.
Business had set up the gold Standard to keep government out of business so Roosevelt did away with the gold Standard and started what he called deficit spending or deficit financing to prime the pump which by the way never jump started in his 13 years in office. So what did he do with his deficit financing? He set up a socialist governmental bureaucratic alphabet soup of agencies from the CCC to the NRA to the WPA. The CCC were young men who went out and planted trees, the National Recovery Act was going to be where the government set prices for business but The Supreme Court shot it down and the Works Program Administration was where a man leaned on a shovel all day and got paid for it or he moved a pile of dirt from one place to another and then moved it back again. The government could just as well sent him a check in the mail and been done with it but that wasn't socialism. While all this deficit financing gave people government jobs it did not prime the pump and business never did get out of the depression. Of course in 1932 Roosevelt could have issued deficit financing for investment money in new businesses based on the large army of unemployed if America were to have been an Industrial Society but that would have been too sophisticated for him and against his socialistic principles.
I have always said that graft was the oil that lubricates government machinery and makes politics work. Without it, it would be like trying to run your automobile car without oil in the engine crankcase. Try sometime and see what it is like. Likewise, a well running economy like your car engine needs oil to lubricate it and make it run. That means plenty of money currency fluidity. The Federal Reserve Bank with their policy of restrictive money has made our economy run as if it were a car engine with no oil in it. That is the state of our economy and what is wrong with it. We are running like a car engine with no oil in it.
In 1940 Pabst Blue Ribbon Brewing Company ran a contest for the best solution for getting us out of the Depression. There are four factors of production: Men, Machinery, Materials, and Money. There were plenty of unemployed ready and willing to work, there idle machines and plenty of materials but no money. Where was the money? I said introduce investment money into the system, even deficit finance but then what do the judges know? The winner begged the question and said that an economic advisory to the president be set up. One was set up and he was made its first chairman but the economic problem was not solved.
There was not one cent for investment in new business. We were actually in Deflation which scared away legitimate free enterprise investment bankers and investment in the stock market. Then the war came along and the picture changed. German U-boats has sunk all allied shipping including cruise ships. Before we got into the war but were sympathetic to the allies cause we had what was called Lend lease. We gave England all our old navy ships that had been in dry dock.
A man named Kaiser was a wealthy and successful construction engineer so the British offered to finance him if he would build some ships for them and when we got in the war we paid him. In a shipyard in Seattle he made liberty ships in modular parts and then welded them together on a production line and was sliding them down into the water for their shakedown cruise at one a minute. Joke. At a cocktail party in Washington DC he was asked if he had a minute. Would he come over in the comer and build him a Liberty ship. Ha Ha.
Once the war started investment money both private and government came out of the woodwork like Niagara Falls. No one asked the question where was the money when we needed it back in the depression! This is something that I have never understood nor why no one asked the astounding question when it did appear during the war. And of course, socialism and government bureaucracy were compatible to the centralized control needed to run the war and Roosevelt was ion is element. After the war government bureaucracy continued to grow at an ever expanding rate. Lyndon Johnson gave it its biggest boost with his Great Society. (Read America's 30 Years War by Balint Vazsonyi, Regnery Publishing, Washington, DC, 1998) and a series of small wars induced by the Military Industrial Complex extending big Government to what is called Statism and Federal tyranny such that the states are crying out against what are known as unfunded mandates and government regulations. The Federal Government has taken the place of the British we revolted against in 1776.
A word about Socialism as centralized statism. Socialism is based on the family unit where everyone knows your name and it is based on trust. It might even be extended to the larger tribe which is an extended family unit but still family and made up of people you know and trust but when it is extended to the Nation and to people who you call strangers and whom you do not trust the whole system breaks down into tyranny and the centralized control of totalitarian statism.
Communism is a form of socialism and is a religion based on the O.T. of the Bible, which is a form of tribalism and living under Mosaic Law and the Ten Commandments with obsequiousness to tyrannical male god. If that is your cup of tea go for it but I am a sort of New Testament type of guy, you know, someone who believes in freedom and democracy and equality and the Bill of Rights in the United States. Constitution, private property rights and the free market, Libertarianism, and individualism. That is the kind of guy I am.
In "The End of Economic Man." Peter F. Drucker shows how the rise of Hitler's Nazi totalitarianism led to the decline of free enterprise. Here in America Roosevelt was no different than Hitler in Germany in his effort to cause the demise of free enterprise with his socialistic new Deal totalitarianism that was dedicated to the demise of Economic Man. Hitler then tried to lead Germany into the Industrial Age, which Drucker outlines in his book, "The Future of Industrial Man," by leading Germany into war and making all thee wrong moves that led to Germany's catastrophic demise. Sixty years later in America President George W. Bush is following Hitler's lead to bring America into the Industrial Age by following the path to war and making all the same mistakes that Hitler made which bodes bad for America's future. If America wants to create an Industrial Society it will have to follow a different course or it might end up in oblivion.
Paul Glover on his web site about Community currency says that among other things that he would like to see Ithaca, NY accept Ithaca Hours for municipal taxes saying that: it would have many advantages which he explains on his web site. Talking about taxes. I am against the Income Tax and would like to see it repealed. Some talk of a flat tax or a universal sales tax but I don't know about these. The one I am really excited about is a proposal to tax money and not people. Check it out at the web site: www.taxmoney-notpeople.com/frontpage.html. I got this link from www.abuzz.com run by the New York Times. It is the best website on the Internet for communicating ideas, questions and links with people.
America was founded upon the proposition of Freedom and Equality but these are opposites and mutually exclusive. They can not both exist together therefore they are promised but not realized. Therein lies Americas strength. Balance. I believe that I read this in Otto Rank's book, "Beyond Psychology." In Europe they tried to realize them first one then the other and ended up in tyrannical absurdity. Communism denied freedom and inequality and took equality to the extreme of the classless society and became a dismal failure. The reaction to that was Fascism which denied equality and took freedom and inequality to the extreme what with the Chosen people and Aryan master race and ended up in tyrannical absurdity. America only promised freedom and equality but did not give it and therefore got it and in Europe they gave but they did not get it. For a fuller explanation of this read Peter F. Drucker's "The End of Economic Man."
In his book "The End of Economic Man," Peter F. Drucker writes on page 51 that man in the eleventh to the thirteenth century in Europe first sought freedom and equality in the Spiritual sphere. It saw and understood man as Spiritual Man. When this order collapsed, freedom and equality became projected into the intellectual sphere. With Luther it was the use of free will and the intellectual interpreting of the Scriptures. And rationalism and philosopher-kings in the eighteenth century. "After the breakdown, freedom and equality became projected into the social sphere: man became first political and then Economic Man," The rationale of Capitalism promised freedom and equality and protected man from the demons of an irrational world of the fear of depression with its devastating unemployment and of war and its horror and havoc. With the collapse of Capitalism, Marxism promised a safe haven of freedom and equality in the collective classless society. With the failure of Communism Europe was faced with the irrational twin demons of depression and war. As Drucker says on page 55, "Through the collapse of Economic Man the individual is deprived of his social order, and his world of its rational existence." All because, as Drucker says on page 66, "For the last hundred years economists have unsuccessfully tried to discover the causes of the business cycle." Well, you have seen with your own eyes right here in this exposition the successful! Discovery of the cause of the business cycle.
It was the unrecognized growth within the mercantile economic system of the industrial economic system with which it is incompatible. The mercantile society suppressed its activity and restricted its behavior and made it use mercantile institutions with which it is unable to function denying its full potential. As a result it caused havoc in the economy reflected in the business cycle like a bucking bronco at a Rodeo show. The solution is to recognize its existence and extricate it from its incarceration within the mercantile system and give it existence in its own right with its own institutions and in its own Industrial Social milieu. Then we can fulfill the economic promise of affluence and freedom and equality in a rational world without the irrational demons of depressions and wars.
I would like to reverse the path that Europe took and start at the bottom with material security and freedom and equality in the economic sphere. Once attained man can move up to the higher spheres of first the social level and then, when accomplished in that, up to the political spheres and on up to the intellectual enlightenment and, when ready, on to the zenith of a new Spirituality. The Age of Aquarius is coming in a couple of hundred years and an end to religion and the old Spirituality, but first the economic freedom and equality and the freedom from fear.
Also, we have flower beds and nurseries to protect young plants and we have kindergartens and nurseries to raise young children where we coddle them and protect them from the hard cruel real world until they get their sea legs and are able to fend for themselves. Why do we not do that with new young industry which we should treat with the greatest of respect and hold almost sacred. This should include protecting young industry from government taxes and bureaucratic regulation that seasoned companies can withstand and young industry should be given all kinds of inducements and considerations and encouragements and lots of investment money made available to them. Also Taxes on industry as well generally should be reduced since taxes have a debilitating effect on business activity and also tends to cause inflation. A word to the wise.