The coming trade war and global depression By Henry C K Liu Many historians have suggested that the 1929 stock market crash was not the cause of the Great Depression. If anything, the 1929 crash was the technical reflection of the inevitable fate of an overblown bubble economy. Yet stock market crashes can recover within a relatively short time with the help of effective government monetary measures, as demonstrated by the crashes of 1987 (23% drop, recovered in nine months), 1998 (36% drop, recovered in three months) and 2002 (37% drop, recovered in two months). There was no quick recovery after the 1929 crash. Structurally, what made the Great Depression last for more than a decade from 1929 until the US entry into World War II in 1941 were the 1930 Smoot-Hawley tariffs, which put world trade into a tailspin from which it did not recover until the war began. While the US economy finally recovered through war mobilization after the Japanese attack on Pearl Harbor, Hawaii, on December 7, 1941, most of the world's market economies sank deeper into war-torn distress and did not fully recover until the Korean War boom in 1951. Barely five years into the 21st century, with a globalized neo-liberal trade regime firmly in place in a world where market economy has become the norm, trade protectionism appears to be fast re-emerging and developing into a new global trade war of complex dimensions. The irony is that this new trade war is being launched not by the poor economies that have been receiving the short end of the trade stick, but by the US, which has been winning more than it has been losing on all counts from globalized neo-liberal trade, with the European Union following suit in lockstep. Japan, of course, has never let up on protectionism and never taken competition policy seriously. The rich nations need to recognize that their efforts to squeeze every last drop of advantage out of already unfair trade will only plunge the world into deep depression. History has shown that while the poor suffer more in economic depressions, the rich, even as they are financially cushioned by their wealth, are hurt by political repercussions in the form of either war or revolution, or both. More
I think those who blamed Smoot-Hawley were promoting a ideology. I blame an extreme business cycle. Loose credit and irrational exuberance led to supply exceeding demand and led to an overinflation of financial assets. In the depression there was an irrational gloom. WW2 brook the country out of it's gloom and sparked demand. The current trade patterns will break down because they are not sustainabale. When the trade patterns break another great deppression will probably happen during the adjustment period to the new reality. In the long run America must sell as much abroad as it buys abroad.
That is an universal agreement. But what? We are losing our young producers who refuse to educate themselves in that production industries because of the outsourcing. If a generation of people move to house building, lawyers and nurses, there would be nothing to export except perhaps big Guns...which is not a ethical proposition. Already, USA is pushing to sell them to India!
I am inclined to agree. Aside from anything else, the US economy was very self-sufficient in 1930. Can someone remind me what proportion of GNP was accounted for then by imports/exports? Very marginal by today's standards I think.
In one expression: Win-Lose mentality. And those that can solve it are very often flooded by technicalities and bureaucracy.... Maybe one of the things that actually caused the Great Depression was a restructuration of the system. For example, the creation of computers made typewriters almost completely useless. The same thing with a Great Depression, but in a greater scale. Basically, what causes a depression is the lack of a certain product or a certain job. It's a break in the natural flow of economics (you know... that little graph that shows the relationship between those who work and those who own businesses...). Oil is the next cause of a big depression. It's obviously becoming more scarce and given the fact that we use it for so many things, it could easily cause a structural depression.
Oil is artificially controlled and hence if a depression comes...we caused it. For a friend of mine, it took 5 months to sell 20 million barrels of crude oil in the spot market...go figure.
PROUT: A Socio-Economic Theory for the New Millennium One of the necessary factors in the development of a healthy society is a proper socio-economic theory. In any age people have to come to grips with the question as to how the resources of the world are to be utilized and allocated. In addition, society needs to arrange a system of government which can meet the needs of all its members. The answers which the society gives to these concerns reflects the socio*economic values which that society follows. Today there are two theories which shape the world's approach to economics and politics. Only a few nations still follow economic and political systems and policies which are based on Marxism, while most others have fashioned systems based on capitalism. What is becoming increasingly clear is that neither Marxism nor capitalism are satisfying the all-around needs of society, and the time is right for the introduction of new socio-economic ideas which can fulfill the demands of humanity. In 1959 in a series of lectures later published as Idea and Ideology, P.R. Sarkar first described a socio-economic theory which he called Progressive Utilization Theory, known by the acronym PROUT). Although it is possible to show that PROUT has similarities with the existing socio-economic philosophies, a deep understanding of Sarkar's ideas shows that PROUT stands alone in the world today, in that it is based on a spiritual rather than materialistic conception of the universe and of humanity. The idea that all animate and inanimate objects are part of one Supreme Consciousness and are to be treated as part of an integrated whole is the base of PROUT. Just as capitalism and Marxism emerged in an era when physicists and philosophers held a materialistic and mechanistic outlook, PROUT is emerging at a time when humanity is beginning to accept a holistic and spiritual view of the universe. This holistic and spiritual base helps to define a new view of economics, history and political leadership and offers the hope that humanity can find a way out of the present socio-economic crisis. One way to understand PROUT is to consider Sarkar's definitions of the words progress, utilization and theory by which he defines this new theory. According to Sarkar, progress, in its true sense, takes place on the spiritual plane because only there can one move towards a goal without provoking a counter movement. In the physical sphere, on the other hand, there is "development" such as the invention of the automobile, but it is always accompanied by counter*acting trends, such as the pollution of the automobiles and the increased risk of injury and death in accidents. In the mental or psychic sphere there is also develop*ment such as the increase of knowledge amongst the masses in the contemporary era, but once again there are negative results of the development such as the increase of stress, psychic complexes and mental illness which accompanies mental development. The idea of progress defined by Sarkar is for humans to adjust themselves to changing develop*ments in the physical and psychic world while moving towards the spiritual goal. Utilization means that the resources of the universe should be used to promote the good and happiness of all, not just of a few. And utilization of resources also applies to supra*mundane, spiritual and psychic potentials which are commonly neglected in many economic approaches. Some theories are good in the theoretical realm but cannot be materialized in the practical world due to changing circum*stances. A theory which has been developed after observing the economic situation of the 19th century may no longer apply in the 21st century. Some theories have been advanced by hypocrites who never had any intention to materialize their theory, while others were put forward by logicians who are content to live only in an abstract world and thus these theories have no practical utility for society. Sarkar contends that the best kind of theory is one which is based on a careful assessment of events in the world and which also has built within it the capacity to adjust to changing environmental circumstances. The Progressive Utilization Theory is such a theory which is based on an observation of society and also has within it the means to maintain adjustment with changes in the world PROUT incorporates these concepts of progress and of utilization in a theory which is defined in five fundamental principles: 1. "No individual should be allowed to accumulate any physical wealth without the clear permission or approval of the collective body. This principle strikes at the fundamental weakness of capitalism which allows a few individuals to accumulate wealth even if it results in the starvation of millions. It clearly establishes the basis of a collective approach to economic questions. While the principle calls for limitations on the individual possession of physical wealth which is something finite, it does not call for limitations on wealth in the mental and spiritual sphere, because that is an infinite treasure of humanity which should not be restricted. Under the Marxism, this distinction between physical and psychic wealth was not understood, and the severe restrictions placed on freedom of thought and religion led to the downfall of most systems based on this theory. 2. "There should be maximum utilization and rational distribution of all mundane, supramundane and spiritual potentialities of the universe. This principle encourages society to utilize all resources of the universe to satisfy human needs. "Rational distribution", means that the minimum necessities of all should be guaranteed but that individuals who have contributed special services to society should be given special rewards to encourage their work and to encourage others also to contribute more to society. Rational distribution does not mean equal distribution. 3. "There should be maximum utilization and rational distribution of all physical, metaphysical and spiritual potentialities of the unit and collective body of human society. This principle refers to the utilization of human resources, and states that a healthy society must develop the po*tentialities of all people. By denying large segments humanity chances for educational and economic development, the present day society is not correctly utilizing precious human resources. This principle also calls attention to the need to balance collective good with individual good. 4. "There should be a proper adjustment amongst these physical, metaphysical, mundane, supra mundane, and spiritual utilizations." Here Sarkar is saying that society should inspire people to work for the individual and collective good, and thus he urges that provisions will be made so that all can earn their minimum necessities through appropriate work. This principle also calls for society to make proper use of comparatively rare faculties such as spirituality 5. "The method of utilization should vary in accordance with changes in time, space and person, and the utilization should be of a progressive nature." This principle provides society with a means of adapting to changing circumstances and also calls on humans to utilize scientific research guided by Neo-Humanism in order to bring about the welfare of all. Economy of PROUT How the principles of PROUT could be applied in society is for the moment a theoretical question as no country as yet has introduced PROUT. Also the means of implemen*ting PROUT will vary from age to age. However, in Sarkar's writings and in the writings of other PROUTist commentators we can see how the principles of PROUT could be used to bring about an economic system that can best be described as Progressive Socialism: a non-Marxist socialism based on Neo-Humanism. In his writings on industrial and economic policies, Sarkar has stressed the need to prevent economic exploita*tion. Thus he says that the important economic enterprises which supply people with their basic necessities of life should not be placed in the hands of private enterprise. Sarkar was also aware of the failings of central governments to directly control such enterprises. To organise an economy on Proutist lines requires a three-tiered economy. Small enterprises employing few peo*ple and which do not deal with essential goods and services can be managed and owned as private businesses (e.g. a small restaurant). The second tier, which consists of the majority of enterprises, would be set up as cooperatives, owned and managed by the people who work in the industries. The workers would be the stockholders of these businesses and would choose the management just as stockholders do today. The third category consists of the largest enterprises which employ large amounts of people and which have important effects on various parts of the economy - the key industries (such as steel production, energy, transport, etc). These should be managed by either autonomous public boards or by local governments, but not by central governments. This category would run on a no-profit, no-loss system. Such a system would also follow the principle of economic decentralization and this could be accomplished by re-organizing the economy on the basis of self-sufficient economic zones in which there would be balanced agricultural, industrial, and service sectors of the economy. The idea of the Proutist economy is to provide a good standard of living to all people and to see that economic power is not concentrated in the hands of a few. Theorv of history and Government To bring such a system into being requires new governmental arrangements. Various socialistic experiments of the 19th and 20th Century ended up in failure, disappointment and much worse. How this can be avoided in the future is best understood by examining P.R Sarkar's new interpretation of history which he delineates in the book Human Society. Sarkar says that history can be understood as the cyclical dominance of the different classes of society. His con*cept of class is however far different from previous, materialistic ideas of class. Sarkar defines class by mental characteristics rather than physical or materialistic concerns. He says that at the dawn of humanity the dominant mentality or class was that of the Shudras - people in whom matter is dominant over mind. These people were primarily concerned with the struggle to survive. Throughout history the toiling people concerned with physical survival belong to this class of Shudras or workers. Sarkar notes that leadership of society then passed into the hands of people with another mentality. The class of Ksattriyas (warriors) developed the mentality that "with my physical force I will overcome the world (matter)". From the times of the Neolithic period and throughout the period known as "ancient history," this class ruled society. The chronicles of wars fought by the great civilizations of the Middle East are an example of this age of warriors. With the further evolution of society another class rose to predominance. The Vipras or intellectuals had a different approach to the conquest of the world. They thought, "With my mental force I will overcome the world." Thus in the Middle Ages, ministers, advisors or priests (popes, Imams, etc.) held the real power of society even though warrior-kings were often the nominal rulers. This intellectual class brought about psychic and sometimes new spiritual ideas, but they also exploited society and are responsible for the religious wars of that time. The cycle of society is always moving. The intellectuals ceded their authority to a class of Vaeshyas or capitalists who created the industrial and commercial revolutions that ushered in the modern age. The mentality of this class is to use mental strength to accumulate wealth. Just as the warrior age had a particular type of government, monarchy, and the intellectual age had its variation of monarchy which Sarkar calls Ministocracy, the age of capitalism saw the rise of democracy. Currently most countries of the world are in the capitalist era. According to Sarkar this Vaeshyan era is near its end and it will finish with social revolution of economically, politically and psychologically oppressed masses. Following revolution, the age of warriors will come again. But is the future of civilization so dim that we can only expect revolution and military dictatorship in the future? Sarkar's theory holds forth another possibility. He says that the best arrangement is for the evolution of a declassed human whom he calls the Sadvipra. The Sadvipra is a spiritually and morally based revolutionary who works against the exploitation of any particular class. The problem with most social changes in the past is that inevitably the class which initiated the change eventually ended up exploiting the other segments of society. The only way to avoid this is to create Sadvipras who will work for the rights of all. The political concept of PROUT is based on establishing an electorate composed of spiritually developed people. Democracy of the present day will have to be reformed. Today democracy, although better than any other system yet introduced, has a number of weaknesses. First of all there is no provision for the economic rights of the people and democracy has even been the preferred government of powerful economic interests who can easily buy their way into influence and power. In addition there are three basic qualities often lacking in the electorate which insures that a very poor standard of leaders are elected year after year. The three qualities are as follows: Education: where many illiterate or uneducated people vote then unscrupulous politicians take advantage and get votes easily through dishonest practices. This is particularly prevalent in the less developed countries. Morality is another quality that is missing. If more than 51 per cent of people are dishonest, then dishonest people can be elected. Another missing ingredient is Socio*economic-political consciousness. Mere education is not enough. Those voting must know what they are voting for or else they will easily be misled by opportunistic politicians. Thus, Sarkar says that the standard of education, morality and socio-economic consciousness must be raised and from amongst such a public, real leaders with the spirit of social service (the Sadvipra) can then emerge and serve society. With such universalistic leadership, humanity can reverse the weaknesses of the present period and will be able to set up a social and economic system which is rational, just and truly progressive. For more information about the Progressive Utilization Theory, visit the following websites: http://www.prout.org http://www.proutworld.org http://www.ru.org
That is where the problem lies. For starters, this becomes a bull-shit theory because a collective body is like too many cooks that trip over each other to make any decisions. Unless the collective body is all-knowing, all-seeing, it has no freaking idea what a particular policy would do 30 years hence. And since you can not collect wealth, why bother....this goes against the human nature. After that everything is downhill. Society can not live in Buddhism, Communism, Capitalism or any -ism 100%. That is against nature itself. Mutations are part of nature, otherwise this planet would have only one kind of life....variety is life.
I agree. Hard to lose whey you give IOUs and green pieces of paper for real goods, but how long will the foreingers remain stupid?
