State of Mankind

A New Way Of Thinking

X. The Economy

CHAPTER X

The Economy

“The new aristocracy was made up for the most part of bureaucrats, scientists, technicians, trade-union organizers, publicity experts, sociologists, teachers, journalists, and professional politicians.  These people, whose origins lay in the salaried middle class and the upper grades of the working class, had been shaped and brought together by the barren world of monopoly industry and centralized government.”                          -George Orwell, 1984

                Quigley had a lot to say about the economic developments of Western Civilization in general, as well as the United States specifically.  Some of these developments are not apparent at first, but after some thought and study, they make a lot of sense.  We’ll start with a quick history:

                “When we turn to the developments which took place in economic organization, we approach a subject of great significance.  Here again we can see a sequence of several periods.  There were six of these periods, each with its own typical form of economic organization.  At the beginning, in the early Middle Ages, Western Civilization had an economic system which was almost entirely agricultural, organized in self-sufficient manors, with almost no commerce or industry.  To this manorial-agrarian  system there was added, after about 1050, a new economic system based on trade in luxury goods of remote origin for the sake of profits.  This we might call commercial capitalism” (Page 37).

                “The next period of economic organization was the stage of industrial capitalism, beginning about 1770, and characterized by owner management through the single-proprietorship or the partnership.  The third period we might call financial capitalism.  It began about 1850, reached its peak about 1914, and ended about 1932.  Its typical forms of economic organization were the limited-liability corporation and the holding company.  It was a period of financial or banker management rather than one of owner management as in the earlier period of industrial capitalism.  This period of financial capitalism was followed by a period of monopoly capitalism.  In this fourth period, typical forms of economic organization were cartels and trade associations.  This period began to appear about 1890, took over control of the economic system from the bankers about 1932, and is distinguished as a period of managerial dominance in contrast with the owner management and the financial management of the two periods immediately preceding it.  Many of its characteristics continue, even today, but the dramatic events of World War II and the post-war period put it in such a different social and historical context as to create a new, sixth, period of economic organization which might be called “the pluralist economy.”  The features of this sixth period will be described later” (Page 38).

                In studying the International Bankers, we have previously looked at the transition from financial capitalism to monopoly capitalism, and established that the major bankers in the former period became the ‘managers’ who ran the economy in the latter.  Before moving on to the pluralist economy, it is necessary to understand these others in more context and maybe get a sense of how money is viewed by Quigley.

                “The different stages of capitalism have sought to win profits by different kinds of economic activities.  The original stage, which we call commercial capitalism, sought profits by moving goods from one place to another.  In this effort, goods went from places where they were less valuable to places where they were more valuable, while money, doing the same thing, moved in the opposite direction.  This valuation, which determined the movement both of goods and of money and which made them move in opposite directions, was measured by the relationship between these two things.  Thus the value of goods was expressed in money, and the value of money was expressed in goods.  Goods moved from low-price areas, because goods were more valuable where prices were high and money was more valuable where prices were low.

                “Thus, clearly, money and goods are not the same thing but are, on the contrary, exactly opposite things.  Most confusion in economic thinking arises from failure to recognize this fact.  Goods are wealth which you have, while money is a claim on wealth which you do not have.  Thus goods are an asset; money is a debt.  If goods are wealth; money is not-wealth or negative wealth, or even anti-wealth.  They always behave in opposite ways, just as they usually move in opposite directions.  If the value of one goes up, the value of the other goes down, and in the same proportion.  The value of goods, expressed in money, is called “prices,” while the value of money, expressed in goods, is called “value” (Pages 43-44).

                It is necessary to follow Quigley’s train of thought to its logical ends.  If money is anti-wealth, then savings make you poor.  If goods are wealth, and money is anti-wealth, then to be wealthy, it is necessary to be a debtor, who has goods.  In fact, Quigley explains this idea more in depth:

                “These differences between the Soviet and the American economies are:  (1) the latter has built-in, involuntary, institutionalized investment, which the former lacks, and (2) the latter has fiscal restraints at a much lower level of economic activity, which the Soviet system also lacks.  Thus greater activity in defense in the USSR entails real costs since it puts pressure on the ceiling established by limited real resources, while greater activity in the American defense or space effort releases money into the system, which presses upward on the artificial financial ceiling, pressing it upward closer to the real resources ceiling; it not only makes the these unused resources available for the governmental sector of the economy from which the expenditure was directly made but also makes available portions of these released resources for consumption and additional capital investment.  For this reason, government expenditures in the United States for things like defense or space may entail no real costs at all in terms of the economy as a whole.  In fact, if the volume of unused capacity brought into use by expenditure for these things (that is, defense, and so on) is greater than the resources necessary to satisfy the need for which the expenditure was made, the volume of unused resources made available for consumption or investment will be greater than the volume of resources used in the governmental expenditure, and this additional government effort will cost nothing at all in real terms, but will entail negative real costs.  (Our wealth will be increased by making the effort.)

                “The basis for this strange, and virtually unique, situation is to be found in the large amount of unused productive capacity in the United States, even in our most productive years.  In the second quarter of 1962, our productive system was running at a very high level of prosperity, yet it was functioning about 12 percent below capacity, which represented a loss of $73 billion annually.  In this way, in the whole period from the beginning of 1953 to the middle of 1962, our productive system operated at $387 billion below capacity.  Thus, if the system had operated near capacity, our defense effort over the nine years would have cost us almost nothing, in terms of loss of goods or capacity” (Pages 1,214-1,215).

                So, there is such a thing as a free lunch.  In truth, it is important to grasp what Quigley is teaching here, as this is the thought process that has guided our economy since WWII.  To simplify, he says that we have more productive resources than financial resources.  Therefore, to get our production up to capacity, we need to debt spend.  By borrowing money and spending (on Defense or whatever), our production increases, which then counters the debt with real wealth.  This is the thinking behind the idea of spending our way to prosperity.

                Now, it’s time for the counter-idea.  Quigley has tried to tell us that money is debt and goods are wealth and the two are opposite.  I believe he is partially correct.  In understanding how the Federal Reserve works, we must understand that when a bank needs money to loan to someone, they go to the Federal Reserve who creates that money by typing in a few keystrokes.  That money is then loaned to the bank, who may loan it to someone else.  In this way, money is a debt.  All the money in existence is owed to the Federal Reserve because they initially loaned it out.  It was created out of thin air, but they will collect interest on it.

                In real economy, however, which has existed for a lot longer than banking schemes, money does not represent debt.  Let’s go back to a barter economy.  I have hay and I need a wheelbarrow.  Hay has a low value to me, but a wheelbarrow has a high value to me.  My neighbor is the opposite.  We trade, hay for wheelbarrow.  Because the transaction went opposite directions, is hay the opposite of a wheelbarrow?  Are not both goods?  Money is a medium of trade.  It represents goods.  It came about and became popular because it is not efficient to take my hay all around town looking for whoever has an extra wheelbarrow.  In this sense, both money and goods are representative of wealth.  The other argument against Quigley’s is that he hasn’t discussed the consequences of the borrowing done to push the economy to higher levels than to which it would naturally rise.  The debtor may have a house and a car, but the actual ownership of these goods is the bank who loaned the money to buy them.  The perpetual debtor who consumes more than he has naturally earned, may be rich with goods, but soon will not be able to pay back the debts.  While he may be rich in Quigley’s formulas, he won’t feel very rich when his creditor takes his possessions to pay back the debts.

                This scenario is where we find our nation, whether it is consumer debt or governmental, the laws of economics still apply.  There really is no free lunch.  Now that we understand the thinking that got us here, we need to understand where we are.  We’ll start with Quigley and discuss the movement from monopoly capitalism to the pluralist economy, then cover the pluralist economy in depth.  It will then be necessary to look at these movements from other perspectives, particularly that of F. A. Hayek.  Quigley on monopoly capitalism:

                “…An industry which had hundreds of millions of dollars (or even billions) in equipment and plant, as did the steel industry, automobiles, chemicals, or electrical utilities, had to be able to plan, in advance, the rate and the amount of usage that equipment would receive.  This need led to monopoly, which was, essentially, an effort to control both prices and sales by removing competition from the market.  Once such competition had been removed from the market, or substantially reduced, it became both possible and helpful for labor to be unionized.

                “Unionized labor helped planning by providing fixed wages for a fixed period into the future and by providing a better trained as well as a more highly disciplined labor force.  Moreover, unionized labor helped planning by establishing the same wages, conditions, hours (and thus costs) on an industrywide basis.  In this way unionized labor and monopoly industry ceased to be enemies, and became partners in a planning project centered on a very expensive and complex technological plant.  The class struggle in Marxian terms largely disappeared” (Page 383).

                This portion is included to highlight a common misconception about the economy and politics.  We have an often built-in view that the forces of labor are against the forces of big-business.  This is often reflected in political dialogue.  The reality is that big-labor and big-business are on essentially the same page.  There are some exceptions, but for the most part, Quigley’s observation is very accurate and important.  Now, we’ll look at the pluralist economy.  Quigley claimed we had entered this phase around the time he wrote his book, though the transition was not complete.  We’ll look at his description of the pluralist economy and allow the reader to decide how close it fits:

                “This almost simultaneous failure of laissez faire, of economic Fascism, and of Communism to satisfy the growing popular demand both for rising standards of living and for spiritual liberty has forced the mid-twentieth century to seek some new economic organization.  This demand has been intensified by the arrival on the scene of new peoples, new nations, and new tribes who by their demands for these same goods have shown their growing awareness of the problems, and their determination to do something about them.  As this new group of underdeveloped peoples look about, they have been struck by the conflicting claims of the two great super-Powers, the United States and the Soviet Union.  The former offered the goods the new peoples wanted (rising standards of living and freedom), while the latter seemed to offer methods of getting these goods (by state accumulation of capital, government direction of the utilization of economic resources, and centralized methods of over-all social planning) which might tend to smother these goals.  The net result of all this has been a convergence of all three systems toward a common, if remote, system of the future” (Page 551).

                “The ultimate nature of that new system of economic and social life is not yet clear, but we might call it the “pluralist economy,” and characterize its social structure as one which provides prestige, rewards, and power to managerial groups of experts whose contributions to the system are derived from their expertise and “know-how.”  These managers and experts, who clearly are a minority in any society, are recruited from the society as a whole, can be selected only by a process of “careers open to talent” on a trial-and-error basis, and require freedom of assembly, discussion, and decision in order to produce the innovations needed for the future success, or even the survival, of the system in which they function.  Thus the pluralist economy and the managerial society, from the early 1940’s, have forced the growth of a new kind of economic organization which will be totally unlike the four types of pre-1939 (American laissez faire, Stalinist Communism, authoritarian Fascism, and underdeveloped areas)” (Page 551).

He explains the ‘pluralist’ economy in depth:

                “The chief characteristics of the new pluralist managerial system are five in number:

  1.  The central problem of decision-making in the new system will be concerned with the allotment of resources among three claimants:  (a) consumers’ goods to provide rising standards of living; (b) investment in capital goods to provide the equipment to produce consumers’ goods; (c) the public sector covering defense, public order, education, social welfare, and all the central care of administrative activities associated with the young, the old, and public welfare as a whole.
  2. The process of decision-making among these three claimants will take the form of a complex, multilateral struggle among a number of interested groups.  These groups, which differ from one society or area to another, are in constant flux in each society or area.  In general, however, the chief blocs or groups involved will be:  (a) the defense forces, (b) labor, (c) the farmers, (d) heavy industry, (e) light industry, (f) transport and communications groups, (g) finance, fiscal, and banking groups, (h) commercial, real-estate, and construction interests, (i) scientific, educational, and intellectual groups, (j) political party and government workers, and (k) consumers in general.
  3. The process of decision-making operates by the slow and almost imperceptible shifts of the various blocs, one by one, from support to neutralism to opposition toward the existing division of resources among the three claimant sectors by the CENTRAL MANAGERIAL ELITE.  If, for example, there is excess allotment of resources to the defense or governmental sector, the farming groups, consumers, commercial groups, intellectuals, and others will become increasingly dissatisfied with the situation and gradually shift their pressures toward a reduction of the resources for defense and an increase of the resources for the consumer or the capital-investment sectors.  Such shifts are complex, gradual, reversible, and continuous.
  4. The working out of these shifts of resources to achieve the more concrete goals of the diverse interest blocs in the society will be increasingly dominated by rationalist and scientific methods emphasizing analytical and quantitative techniques.  This means that emotional and intuitive forces will play, as always, a considerable role in the shifting of interest blocs which dominate the allotment of resources among the three sectors, but that rational rather than emotional methods, on quantitative rather than qualitative bases, will dominate the utilization of such resources within each sector for more specific objectives.  This will require considerable freedom of discussion in such utilization even where, as in Communist states or in underdeveloped areas, authoritarian and secretive methods are used in reference to the allotments among sectors.  AND, IN GENERAL, THERE WILL BE A VERY CONSIDERABLE MODIFICATION OF THE AREAS AND OBJECTIVES OF FREEDOM IN ALL SOCIETIES OF THE WORLD, WITH GRADUAL REDUCTION OF NUMEROUS PERSONAL FREEDOMS OF THE PAST ACCOMPANIED BY THE GRADUAL INCREASE OF OTHER FUNDAMENTAL FREEDOMS, especially intellectual, which will provide the technical innovations, the clash of ideas, and the release of personal energy necessary for the success or even the survival, of modern state systems.
  5. The details of the operations of this new system will inevitably differ from area to area and even from state to state.  In the Western bloc of states the shifts of public opinion continue to be reflected very largely in shifting political parties.  Within the Communist bloc these shifts will take place, as they have in the past, among a smaller group of insiders and on a much more personal basis, so that shifts of targets and direction of policy will be revealed to the public by shifts of personnel in the state’s bureaucratic structure.  And in the underdeveloped countries, where possession of power is frequently associated with support from the armed forces, the process may be reflected by changes in policy and direction by the existing elite rulers who retain power in spite of changing policies.

               “In the most general way, the period since 1947 has shown that the differences between any two of the three blocs are becoming less; the three methods for achieving policy shifts (just mentioned) are becoming increasingly similar in essence and in fact, however different they continue to be in law.  Moreover, in the same years since 1947, the solidarity of both the West and the Communists has become increasingly less, while the unity of outlook, policies, and interests of the uncommitted and underdeveloped peoples of the intermediary zone between the two great Power blocs become increasingly unified.

               “The method of operation of this newly formed pluralist-managerial system may be called “planning,” if it be understood that planning may be both public and private and does not necessarily have to be centralized in either, but is rather concerned with the general method of a scientific and rational utilization of resources, in both time and space, to achieve consciously envisioned future goals” (Pages 552-553, emphasis mine).

               So to sum up some of the main points we might say that:  (1) The pluralist economy  is a mixture of Fascism, Communism, and Laissez Faire.  This includes state run law enforcement, education and welfare.  (Maybe someone could explain to me what “administrative activities associated with the young, the old, and public welfare as a whole” actually means.) (2) There will be central decision making as to the allotment of resources. (3) The dividing of the resources will be decided by the Central Managerial Elite. (4) Scientific and rational methods along with human control and emotion will play into how the shifting ‘blocs’ share the resources in order to achieve their goals. (5) It is a global economy.  (See the reference above about resources being allotted in Communist and Underdeveloped nations.) (6) There will be less personal freedoms (negative liberties) and more “other fundamental freedoms, especially intellectual” (positive liberties).

The Bancor (L) is proposed as a ‘World Currency’

The Fabian stained glass window at the London School of Economics (R)

A study of Fabian Socialism as it relates to Globalism is interesting and informative.

               So, have the elitists been pushing the entire world into this ‘pluralist’ system?  It would seem to fit their agenda, as we have studied thus far.  Quigley also gives us some good evidence as he discusses our dealings with Latin America:

               “In its early announcement, by President Kennedy during his second month in office, the projected Alliance for Progress seemed more hopeful than any earlier United States reaction to Latin America’s problems had been.  IT ACCEPTED THE IDEA OF CENTRAL ECONOMIC PLANNING FOR THE LATIN AMERICAN NATIONS AND THE ROLE OF STATE INTERVENTION IN INVESTMENT AND ECONOMIC LIFE, both of which had been rejected by the Eisenhower Administration.  To these it added two other basic assumptions:  that Latin America be required to take steps to help itself and not merely expect grants from the United States and, also, that SOCIAL IMPROVEMENTS, SUCH AS BETTER HOUSING, INCREASED LITERACY, AND IMPROVED SOCIAL AMENITIES, be regarded as intrinsic parts of, or even prerequisites to, purely economic expansion, and not be considered, as hitherto, to be incidental consequences of such expansion.

“…Its preamble said, in part, “We, the American Republics, hereby proclaim our decision to unite in a common effort to bring our people accelerated economic progress and BROADER SOCIAL JUSTICE within the framework of personal dignity and personal liberty. …For America stands at a turning point in history.  The men and women of our Hemisphere are reaching for the better life which today’s skills have placed within their grasp.  They are determined for themselves and their children to have decent and ever more abundant lives, to gain access to knowledge and equal opportunity for all, to end those conditions which benefit the few at the expense of the needs and dignity of the many.

“…It was, perhaps unrealistically, stated that economic progress should be made “available to all citizens of all economic and social groups THROUGH A MORE EQUITABLE DISTRIBUTION OF NATIONAL INCOME, raising more rapidly the income and standard of living of the needier sectors of the population, at the same time that a higher proportion of the national product is devoted to investment.”  This aim TO REDISTRIBUTE INCOME and achieve simultaneously higher consumption and higher investment is, of course, impossible except in the most advanced industrial societies…” (Pages 1,142-1,143, emphasis mine).

               Once again, some perspective from Cleon Skousen’s book The Naked Capitalist will support the idea and add some light:

               “A couple of years later, while visiting Central and South America, I noticed that certain will-known American banks were extremely powerful in controlling the politics and economic affairs of many Latin American countries.  But what was baffling about it was the fact that the political regimes which these American banks supported were often virtual dictators who promoted socialism and engaged in the confiscation of privately-owned industries, including American industries.  Many of these bank-sponsored regimes were also openly pro-Communist.

               “While visiting Paraguay, I asked a man I had known for several years and who was manager of the principal American bank in Paraguay, why his bank supported a dictatorship.  “Stability,” he replied.  “These developing countries need stability.”  Yet I noticed that this dictator was wiping out wealth-producing industries operating under private enterprise and placing everything under government ownership or tight socialist control” (Page 3).

               If the world is looked at, not focusing on details, but in general, every country has followed this basic pattern of the redistributive welfare state.  The United States and China lag behind in social services, though in the U. S. we have Social Security, Medicaid, Medicare, and many welfare services.  China has fewer services, but the government has control (total if desired) of the economy.  Hong Kong is perhaps the one exception, having virtually no social programs.  So where are we, as far as this ‘pluralist’ economic development is concerned?  We’ll analyze this according to the six criteria we cited above.

               (1)The vast majority of world economies are a mixture of Capitalist, Communist, and Fascist theories.  While there is some free market in them (more in the U. S., less in most other countries), there are also huge amounts of social and welfare services.  As with Fascism, there is also an alliance between government and monopoly business which distorts the free market.  (This is seen in the U.S. as subsidies for many products from cars to large farms, huge government contracts—especially in the defense department, and bailouts even to direct ownership of large companies from banks and insurance to car companies.)  (2) Central decision making as to the allotment of resources needs to be a two-fold question.  (a) Nationally, most countries have huge amounts of control over their large industries, including, and increasingly in the United States.  ‘Big Business’ often looks to government to pass laws, regulations, or just buy stuff to help their bottom line. (b) As we have determined the ‘pluralist’ economy to be global, we need to also ask if there is global resource control.  It would seem that the United Nations has some control over resources (the IMF is an example), but would like a lot more (think of the earlier discussed documents).  Global Cap-And-Trade policies would not only give resource control to the U. N., but also to the (3) Elitists (Central Managerial Elite?) who, to a large amount control the U. N., and stand to profit off the system (a study of the Chicago Climate Exchange is recommended by this reviewer).  (4) Such a system would definitely use rational and scientific methods to distribute resources.  (5) The economy is definitely global.  This part has been fully achieved.  (6) How is freedom doing?  World-wide, there are certainly less personal freedoms.  The U. S. is about the last country with the right to bear arms.  Regulations (including those from the EPA and FCC) by definition infringe on freedom.  Perhaps the greatest infringements on freedom come in the economic arena.  In Europe the welfare and entitlement state has caused too much cost associated with hiring for small business to expand.  Small business is generally limited to a family business, while ‘big business’ and government run most of the economy.  This, coupled with high taxes, mean that the average person has little chance to improve economically.  The U. S. is headed toward this same path.  Privacy rights have been attacked with the Patriot Act and similar measures in other countries.  On the flip side, the world is generally very free to move and worship as it pleases.  Free speech is still a right, though political correctness threatens the use.

               Overall, we appear to be moving in the direction Quigley predicted, though we have not arrived.  We must also remember that Quigley’s book was written in 1965.  Have the goals changed?  What is the modern interpretation?  A somewhat similar plan is found on the Club of Rome website:

http://www.clubofrome.org/eng/new_path/

               The Club of Rome talks a lot about the major problem that the new ‘pluralist’ economy has—sustainability.  Before moving on to the sustainability issue, it is important to understand these economic changes from the view of F. A. Hayek.  First, a look at what Hayek tells us about monopoly capitalism (from The Road to Serfdom):

“… It is important to be quite clear about this:  the modern movement for planning is a movement against competition as such, a new flag under which all the old enemies of competition have rallied.  And although all sorts of interests are now trying to reestablish under this flag privileges which the liberal era swept away, it is socialist propaganda for planning which has restored to respectability among liberal-minded people opposition to competition and which has effectively lulled the healthy suspicion which any attempt to smother competition used to arouse.  What in effect unites the socialists of the Left and the Right [Communists and Nazis in Europe] is this common hostility to competition and their common desire to replace it by a directed economy.  Though the terms “capitalism” and “socialism” are still generally used to describe the past and the future forms of society, they conceal rather than elucidate the nature of the transition through which we are passing.

               “Yet, though all the changes we are observing tend in the direction of a comprehensive central direction of economic activity, the universal struggle against competition promises to produce in the first instance something in many respects even worse, a state of affairs which can satisfy neither planners nor liberals: a sort of syndicalist or “corporative” organization of industry, in which competition is more or less suppressed but planning is left in the hands of the independent monopolies of the separate industries.  This is the inevitable first result of a situation in which the people are united in their hostility to competition but agree on little else.  By destroying competition in industry after industry, this policy puts the consumer at the mercy of the joint monopolist action of capitalists and workers in the best organized industries.  Yet, although this is a state of affairs which in wide fields has already existed for some time, and although much of the muddled (and most of the interested) agitation for planning aims at it, it is not a state which is likely to persist or can be rationally justified.  Such independent planning by industrial monopolies would, in fact, produce effects opposite to those at which the argument for planning aims.  Once this stage is reached, the only alternative to a return to competition is the control of the monopolies by the state—a control which, if it is to be made effective, must become progressively more complete and more detailed.  It is this stage we are rapidly approaching.  When, shortly before the war, a weekly magazine pointed out that there were many signs that British leaders, at least, were growing accustomed to thinking in terms of national development by controlled monopolies, this was probably a true estimate of the position as it then existed.  Since then this process has been greatly accelerated by the war, and its grave defects and dangers will become increasingly obvious as time goes on.

               “The idea of complete centralization of the direction of economic activity still appalls most people, not only because of the stupendous difficulty of the task, but even more because of the horror inspired by the idea of everything being directed from a single center.  If we are, nevertheless, rapidly moving toward such a state, this is largely because most people still believe that it must be possible to find some middle way between “atomistic” competition and central direction.  Nothing, indeed, seems at first more plausible, or is more likely to appeal to reasonable people, than the idea that our goal must be neither the extreme decentralization of free competition nor the complete centralization of a single plan but some judicious mixture of the two methods.  Yet mere common sense proves a treacherous guide in this field.  Although competition can bear some admixture of regulation, it cannot be combined with planning to any extent we like without ceasing to operate as an effective guide to production.  Nor is “planning” a medicine which, taken in small doses, can produce the effects for which one might hope from its thoroughgoing application.  Both competition and central direction become poor and inefficient tools if they are incomplete; they are alternative principles used to solve the same problem, and a mixture of the two means that neither will really work and that the result will be worse than if either system had been consistently relied upon.  Or, to express it differently, planning and competition can be combined only by planning for competition but not by planning against competition” (Pages 88-90).

               So Hayek makes the case that monopoly capitalism leads to a mix of state and monopoly control, and eventually leads to total state control.  He also makes the case that monopoly capitalism was born, not of naturally evolving economics, but also of state preference.  He has a whole chapter on it.  For the sake of length, we will look at one simple paragraph:

               “An investigation in England would lead to very similar results.  Anyone who has observed how aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective can have little doubt that there is nothing inevitable about this development” (Page 93).

               Now, we will look at history to see if Hayek has been correct.  Both he and Quigley, as well as many other authors we have looked at, agree that financial capitalism gave way to monopoly capitalism.  Monopoly capitalism has, according to Quigley already passed to the ‘pluralist’ or mixed economy.  Hayek also claimed that it was close at hand (his book was written in 1944).  Hayek argued that the mixed (Quigley’s ‘pluralist’) economy wouldn’t work and ultimately we would have to give all control to the state, or return to competition (see above text).

               Has the ‘pluralist’ economy worked?  We have had many years of unprecedented wealth since World War II.  In spite of this, the governments have consistently gained more control over economies.  The free market and the socialist aspects of the economy are against each other, but we have smoothed out the differences with one great solution—debt.  Since Quigley and Hayek wrote their books, we have continued to spend in ever greater amounts on social programs, while yet trying to keep taxes low enough that the free market could prop itself up.  At the same time we have had the government making big deals with big industry (such as with Fascism), creating huge profits without competition.  We have grown all types of economy.  Instead of planning ruining the free market, we have simply spent money we didn’t have so that all types of the economy could grow.  Now we come to the current situation, we are running out of borrowing room.  See the following article:

http://online.wsj.com/article/SB10001424052748703583404576079311379009904.html?mod=WSJ_hp_LEFTWhatsNewsCollection

               The debt spiral is a mathematical reality.  It is known.  It works very simply.  When debts get too large to pay, the credit rating of the company (or country) is downgraded.  When the debt is downgraded, more interest is required to attract investors.  With higher interest, the debt is more unsustainable, causing further downgrades.  This situation has played out many times in history, most recently in Greece, followed by some other Euro-zone countries.  A bailout by the IMF (partly U. S. funded) and the E. U. have prevented the worst case scenarios, but there are riots in the streets simply over the austerity measures needed to get closer to a balanced budget.  (The problem hasn’t even been solved.)  The worst case scenario played out in Yugoslavia in the 1990’s where, unable to sell debt, they tried to print money to solve their needs.  The resulting hyper-inflation wiped out the entire economy.  There were people starving and refugees fleeing.  Civil war broke out.  So a financial meltdown is the event that we know must come to the U. S., but how many people know this, and have they planned for it?

               Carroll Quigley knew that the U. S. economy would crash:

               “The mass production of this new industrial system was able to continue and to accelerate to the fantastic rate of the twentieth century because Western man placed no limits on his ambition to create a secularized earthly paradise.  Today the average middle-class family of suburbia has a schedule of future material demands which is limitless:  a second car is essential, often followed by a third; an elaborate reconstruction of the basement provides a recreation room, which must be followed in short order by an elaborate patio with outdoor cooking equipment and a swimming pool; almost immediately comes the need for an outboard motorboat and trailer to carry it, followed by the need for a summer residence by the water and a larger boat.  And so it goes, in an endless expansion of insatiable demands spurred on by skilled advertising, the whole keeping the wheels of industry turning, and the purchasing power of the community racing around in an accelerating cycle.

               “Without these two psychological assumptions, the Western economy would break down or would never have started.  At present, future preference may be breaking down, and infinitely expanding material demand may soon follow it in the weakening process.  If so, the American economy will collapse, unless it finds new psychological foundations” (Pages 1,184-1,185).

“…In the twentieth century, however, the people of our culture have been living under expansive conditions for generations.  Their minds are psychologically adjusted to expansion, and they feel deeply frustrated unless they are better off each year than they were the preceding year.  The economic system itself has become organized for expansion, and if it does not expand it tends to collapse” (Page 497).

               “Since 1947 the Cold War and the space program have allowed the same situation to continue, so that even today prosperity is not the result of a properly organized economic system but of government spending, and any drastic reduction in such spending would give rise to an acute depression” (Page 535).

               Quigley’s words may not mean so much if they were not coming true as we watch.  Brian Williams (CBS News anchor) went on the David Letterman Show (Season 17, Episode 3304) and explained the stock market crash of May 6, 2010 with this sum up:  “The dirty little secret is:  the world has no money and the emperor has no clothes.”  See the video clip here:

http://www.youtube.com/watch?v=SRNrl-858qA

See also: http://www.cnbc.com/id/42209447, and http://money.msn.com/investment-advice/is-america-the-new-greece-mirhaydari.aspx , June 2011 update on Greece: http://www.bloomberg.com/news/2011-06-22/papandreou-budget-hole-threatens-to-swallow-europe-defies-debt-crisis-fix.html 

                Since May 6, 2010, Portugal has followed Greece (as predicted by Brian Williams) into Euro-bailout bankruptcy.  Ireland and Italy are quickly joining.  Riots are common in the streets.  Bailouts have possibly taken an edge off these things, but they have simply passed the problems on to broader shoulders—Germany and the U. S. A.  How long before we are the next Greece?  Who will bail us out?  Have the Elites come up with a plan?

From a tax return envelope.  Do we really want to learn money management from here?

                I believe the Elites do have a plan.  If it was skipped in the last chapter, take another look at Damon Vickers CNBC interview.  http://www.cnbc.com/id/15840232/?video=1320898674&play=1

               Mr. Vickers, simply from watching the markets believes that they will solve the problem by moving to a global currency.  This would, when applied with what Quigley writes about the Central Managerial Elite, seem to complete their vision for the global economy.  This is exactly what is being planned.  A place to start studying is to do a search on the Bancor.  Don’t discount the central management of energy (through carbon trading) for which they are also trying.  I would also suggest that the problem which brings us to this point is sustainability.  Whether it is exploiting resources or debt spending or whatever unsustainable practice, the result will be the meltdown.  Logically, it would follow that we need the Central Managerial Elite to make sure that everything we do is sustainable; spending, energy use, production, population, etc.  I believe the Club of Rome website explains their view quite well.  This also explains very well the statement of Quigley (referenced above):  “And, in General there will be a very considerable modification of the areas and objectives of freedom in all societies of the world, with gradual reduction of numerous personal freedoms of the past accompanied by the gradual increase of other fundamental freedoms…”

               Negative Liberties (Founding Fathers and Constitution style) will slowly disappear.  Positive Liberties will replace them as we depend on government for our subsistence.  I won’t dwell on this picture any more except to emphasize one point—slowly.  Many people who, at one time, understood much of this, have stopped thinking about it because the events (even the meltdown) generally happen over a long period of time.  This is why, I believe, it is important to study the Founding Fathers and the Constitution.  To come to a knowledge of what true freedom is before we trade it for the security that the Elitist schemes seem to offer.  They will offer a way out of our well-earned crash, a global solution.  Just remember that they are the ones who led us here in the first place.  They profited off our parents materialism and debt.  They will profit in power and money from our trying to dodge the consequences.

               Finally, contrary to how it may feel to learn of these things in the first place, I see great reason to be totally optimistic for the future.  I will end this review with my reasons for optimism, but first it will be necessary to endure one more chapter covering the political observations of Quigley.

“[Satan] plans to destroy liberty and freedom…and to set up in place thereof the greatest, most widespread, and most complete tyranny that has ever oppressed men.  He is working under such perfect disguise that many do not recognize either him or his methods.”                    -Heber J. Grant, (General Conference, October 1942)

“We are on the verge of a Global transformation.  All we need is the right major crisis…”                              

                -David Rockefeller

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  1. Brinton

     /  June 2, 2011

    A quick article I read today (2 June 2011) covering the state of the economy: http://www.cnbc.com/id/43236764
    See also:
    http://money.msn.com/investing/debt-ceiling-onward-and-upward-fleckenstein.aspx

    Reply

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