Today’s posting is the first half of “Central Bank Funding of Economic Growth and Economic Justice Through Expanded Capital Ownership” By Norman A. Bailey, Ph.D., presented at the Capital Ownership Group Conference on Globalization, Four Points Sheraton Hotel, Washington, D.C., October 9-11, 2002.
In 1911 the British author Norman Angell published the book The Great Illusion. This book sold more copies than any work up to that time except the Bible. The author was knighted by the king. The thesis of the book was that the process of globalization, which began in the 1870s and by 1911 was in full swing, had reached such a degree of inter-dependence among the great powers and many of the smaller “civilized” countries that general war among them was unthinkable (i.e., a “great illusion”).
Publication of The Great Illusion was followed three years later by the outbreak of World War I, which involved all of the then seven great powers; by the worldwide depression of the 1930s; by World War II, which involved all of the great powers once again, and finally by the Cold War (effectively World War III), between the two remaining great powers. When the Cold War ended in 1991, eighty years after the appearance of The Great Illusion, three world wars and one universal economic crisis later, tens of millions of people had been slaughtered, often by their own governments, and uncountable quantities of the accumulated wealth of mankind had been destroyed.
Norman Angell
After 1991, only one great power was left, bestriding the world like a huge, clumsy Godzilla, which among many other results, gave rise to the publication of an article entitled “The End of History” by one Francis Fukuyama, then of the Policy Planning Staff of the state department. The thesis of this worthy successor to The Great Illusion was that since history was largely the record of wars and disasters, history had effectively ended with the triumph of democracy and capitalism, embodied in and enforced by the United States of America. Effectively, globalization had made the world so inter-dependent that wars and economic crises were phenomena of the past, except for minor conflicts among third-rate countries in obscure corners of the world.
Eleven years after the end of the Cold War (and “of history”) Godzilla had engaged in numerous military actions with dubious results; had been attacked in its turn by terrorist groups; other countries had participated in full-scale wars (some lasting for years), and there had been a seemingly endless series of economic/financial crises, starting with Mexico in l994/95 and moving on to East Asia in 1997, Russia in 1998, Brazil in 1999 and Argentina in 2001, with more to come. Mr. Fukuyama has not been knighted, but he is now a much-quoted and respected pundit, author of more articles and books, in none of which has he recognized the fact that “The End of History” was ludicrously wrong.
The twentieth century was the bloodiest and most destructive in the history of mankind, and that is saying a great deal. The twenty-first century indeed shows some potential of becoming the end of history, in a somewhat different sense of the phrase. Godzilla is beset on all sides and the triumph of democracy and capitalism is looking rather precarious. The Cold War alliance has broken asunder; weapons of mass destruction proliferate in countries ruled by petty but dangerous tyrants; their activities are eagerly supplied and financed by many of the very practitioners and beneficiaries of capitalism, and the millennial scourges of fanatical religious and ethnic hatred are rampant in huge swaths of the earth’s surface.
Globalization has become a dirty word — a grim joke to hundreds of millions around the world, a web of lies woven to protect and hide those who manipulate the system to their own, or at the very most, to their class’s benefit at the cost of everyone else. This, then, is the twin threat that is at the basis of all the ills; political, social and economic, of the post-Cold War world:
(1) Chattel slavery effectively ended with the abolition of the ownership of human beings in Brazil in 1888 after thousands of years of being accepted as a perfectly normal social arrangement. Wage slavery continues, however, and in many cases the wage slaves are objectively worse off than the chattel slaves used to be. That is, they are free; free to endure endless poverty, ignorance and disease without so much as the (self-interested, to be sure) protection of an owner. All of this because the significance to production of the ownership of labor and capital has been replaced by the ownership of capital alone, at a time (since the industrial revolution of the late eighteenth century) when capital as a factor of production has steadily increased in importance compared to labor, the contribution of which to the total value of production is now minuscule; its remuneration maintained and sometimes increased to provide a market for the goods produced and to avoid a monumental social explosion.
(2) The huge disparities in the ownership of productive capital lead inexorably to derivative imbalances in the international sphere, which in turn result in serial over-indebtedness and mis-allocation of capital investment to areas where the return is often nil or negative or at best below that level which would enable the countries involved to service their debt burden. The result of this is recurring debt/financial/economic crises that are both endemic and resistant to treatment. The measures taken to respond to these crises have often exacerbated the disparities that led to them in the first place, thus completing the vicious circle.
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The second part of this article, “Traditional Solutions to the Twin Threats,” will be posted next week.
Dr. Bailey was Senior Fellow at The Potomac Foundation in McLean, Virginia. He served as Former Special Assistant to the President (Reagan) and Senior Director of International Economic Affairs, The National Security Council (1981-1984).
