Eight Days a Week - The Fourth Wave

Eight Days a Week – The Fourth Wave

(A study on the present and previous financial and economic crises,

and how to avoid similar crises in the future)

Written by Geert Callens

You can’t judge a book by looking at the cover (Willy Dixon).

Eight Days A Week – The Fourth Wave Author: Geert Callens

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Once you have read the book, you will understand the cover.

Summary

The problems we are faced with

On Bloody Monday, September 15th 2008, The Down Jones Industrial Average dropped by504 points (4,4%), its largest drop since September 17th 2001, when trading on the New YorkStock Exchange was resumed after the 9/11 attacks.

Since then, most countries in the world are faced with a lot of financial and socioeconomicproblems:

• The most severe financial and economic crisis since the 1930s.

• Lower economic growth.

• Massive layoffs for blue collar and white collar workers alike.

• Budgetary problems for governments in most countries due to the massivefinancial support given to the banks in order to prevent a financial meltdown thatcould have be the result from the run on the banks by the public in order to savetheir savings. Furthermore, governments receive lower income taxes, taxes onprofits of companies and revenues from TVA as private consumption has dropped.

• Problems with financing the social security system and the pension system, due tothe demographic evolution, as the post World War II baby boom generation is nowmassively retiring from active duty and people tend to live longer.

In addition to this, there are also some other urgent problems to tackle:

• Environmental problems, global warming, CO2 emission, more severe storms andinundation’s like in France, Rio de Janeiro and Pakistan in 2010, more subsidencesdue to heavy rainfall and deforestation, more forest-fires due to extreme and longperiods of drought.

• Mobility problems around big agglomerations like Antwerp and Brussels inBelgium and in many other countries, which could be solved by constructing moreroads, viaducts and tunnels. On the other hand, the Belgian government fails toeven maintain the present road infrastructure: due to the mildly severe but longwinter of 2010 the roads in Belgium are currently in a lamentable state. And thegovernment lacks the budgetary means to solve the problem in a fundamental way.

This seems to be a Gordian knot, which could lead to a social Armageddon. In most of thearticles one can read about this matter, economists and politicians say that the necessaryremedies will be painful for the public. But is this really so? Couldn’t it be that they do notunderstand the real cause of financial and economic crises, and thus not the necessaryremedies?


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Furthermore, economists tell diverging things about the way out of this crisis, as mosteconomic theories are just “ideologies in disguise”. And politicians…, well politicians are perdefinition ideological and they seem to know it either.

On the diverging or even conflicting stories economists are telling us about the crisis and theignorance of politicians, I can refer to the following rather funny historical anecdote. EdwinNourse was economic advisor of Harry S. Truman, the 33rd president of the USA from 1945till 1953. Nourse had been fond of saying “on the one hand [statement 1]…, but on the otherhand [the negation of statement 1]…” After some of these “zero-sum-statements”, PresidentTruman’s reaction was: “Can’t somebody bring me a one-handed economist?”

Solutions for every single problem seem to be expensive or even unpayable. They will surelylead to higher taxes and/or inflation, eroding the purchasing power of the people and thus alsothe opportunities for future economic growth. Many of these measures will be a burden on theenvironment (more roads, more industrial zones, less space for nature and leisure-time...) andcreate new problems.

In an interview in January 2010 with a UN diplomat I heard that the UN MillenniumDevelopment Goals set at the start of this millennium to reduce poverty in the Third Worldcountries and the developing countries with 50% by 2015 will not be met, among otherreasons due to the current financial and economic crisis in the western industrializedcountries.

Furthermore, the UN diplomat mentioned that in developing countries with a reasonableeconomic growth the income inequality increases: the rich are getting richer, while the poorare getting poorer. This phenomenon can also be observed in industrialized countries like theUSA, where the purchasing power of the middle class has dropped dramatically andconcentration of wealth has increased since the days of President Nixon.

In a speech given by Mr. Karel De Gucht, at that time Belgian Minister for Foreign Affairs,at the 62nd General Assembly of the United Nations in New York, October 1st 2007, one canread the following:

“We live in an increasingly complex world, facing increasingly diverse challenges.Actions taken in isolation are no longer sufficient.”

This is indeed the case for the list of problems mentioned above. Looking for isolatedsolutions for problems that are interrelated will not work: it is contra-productive andexpensive. On the website of the American activist G. Edward Griffin one can read thefollowing lines: “One of the most profound differences between dogs and cats is that catsfocus on effects while dogs focus on causes. If you toss a pebble at a cat, it will look at thepebble. If you toss it at a dog, it will look at you. In this respect, too many people are like cats.They are preoccupied with the details of their own problems, and they flutter like wing-clipped pigeons, complaining about this and that without knowing why these things arehappening”.

So let us concentrate on the causes and their interrelatedness rather than the individual effects.A comprehensive and holistic approach is needed in order to come to a lasting solution. Inthis study Eight Days a Week – The Fourth Wave, I do not look for isolated solutions forisolated problems. I have included all the socioeconomic problems in an overall picture –even war. By doing so, I have demonstrated that the current financial and economic crisis issystemic. But to my own very surprise, all the problems can be solved in a very elegant and


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human friendly way. We can avoid the social setback that most of the economists andpolitical leaders are advocating.

The approach I have used

Any information processing system, be it automated or not, uses a certain logic on a set ofdata in order to come to a conclusion. Also human beings do this.

The logic that is used can be correct or wrong. Obviously, using the wrong logic will notresult in a correct conclusion. Human beings claim to be rational, especially in the academicworld, and it is rather easy to find the faults in a line of reasoning. But on the other hand wenever seem to agree on main topics in economy – even in the academic world – and politics:everybody claims to be sincere and to tell the correct things.

But ratio is only one part of the picture. Data are as important and – unfortunately – muchmore difficult to control, as it is not just a question of being correct or wrong. This is rathereasy to verify by controlling the facts. Next to correctness, data have another aspect: are thedata complete or not? And is all the information we use in our logic relevant? In other words,is there redundant information in our data set that might confuse us, or others?

In the following table we show what the result is of a perfectly correct logic on a set of data:

Data are → ↓

Incomplete Complete Redundant

Incorrect Wrong conclusion Wrong conclusion Wrong conclusion

Correct Wrong conclusion Correct conclusion Not necessarily thecorrect conclusion, asirrelevant data mighthave obscured thecorrect conclusion.

We will only come to the correct conclusion when we use the correct logic on correct,complete and no redundant data. That is why in court, the witness has to tell the truth, thewhole truth and nothing but the truth.

Furthermore, deliberately telling half of the truth is worse than telling a lie, as the receiver ofthe information can expose a lie by checking the facts, but he will not necessarily search forthe data that were (deliberately) omitted.

And when a problem is correctly and completely formulated, the solution is already half way.That is the reason why I have used in this study a holistic approach rather than anreductionistic one, which is doomed to fail anyhow.

In an article by Raghuram Rajan, Professor at the Booth School of Business in Chicago,written as a reaction of Paul Krugman’s critique on his book “Fault Lines”, one can read thefollowing lines: “First, Krugman starts with a diatribe on why so many economists are ‘askinghow we got into this mess rather than telling us how to get out of it’ Krugman apparentlybelieves that his standard response of more stimuli applies, regardless of the reasons why weare in the economic downturn. Yet it is precisely because I think that the policy response tothe last crisis contributed to getting us into this one that it is worthwhile examining how wegot into this mess, and to resist the unreflective policies that Krugman advocates.”


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Indeed, before one can start to improve things, one should first know what went wrong andwhy it went wrong. A good starting point is to ask the question “Cui bono?”, as in a criminalinvestigation. Who took advantage of the crime?

I think some free market adepts don’t like the idea of a thorough investigation of what reallycaused the financial and economic crisis (as was done in the years after 1929, leading toseveral measures to restrict financial speculations and to avoid speculative bubbles), not onlybecause this would lead to more regulation, or this would demonstrate that they havesupported and advocated a system that is inherently unstable and thus wrong, but ratherbecause some of them are very well aware what went wrong and why, and they don’t like theidea that these mechanisms would become exposed to a broader public. “Cui bono?” Not thepublic in general, but a small élite. The mechanisms that cause the recurrence of financial andeconomic crises are indeed also the cause of the mass atrocities all over the world (wars, civilwars, genocides, famines…).

A lot of people in the rich countries are just NIMBY’s, who are not concerned withgenocides, famines, wars, pollution and global warming, as long as these do not happen intheir back yard and are not too visible on TV. But these same people are also affected by thefinancial and economic crisis.

So, if they could understand the underlying cause of their own material misfortune, thenmaybe they could be willing to show some solidarity with the people in the poor countrieswho are the victims of mass atrocities and the global over-cropping of natural resources.

Reoccurrence of problems and the cause of this

During the course of history, financial and economic problems have reoccurred on manyoccasions: the 1930s, the late 1970s and early 1980s, the early 1990s.

A society functions according to a certain socioeconomic paradigm, which is based on a set ofpremises more or less in accordance with reality. Several social groups in society setobjectives and act toward those objectives according to those premises. If some premises donot agree with reality, but, on the contrary, are based on a wrong understanding orinterpretation of reality or even on ignorance, then the performed actions will not lead to thedesired objective. Instead, one will be faced with unexpected obstacles. This could lead toproblems, frustration, even aggression and crises.

Because one has started from the wrong premises, one wills most likely look for the causes ofthe failure and possible solutions in the wrong directions too. Otherwise one would havestarted in the right direction from the beginning! One will make the wrong diagnosis. One willeven point to a scapegoat as a reason for failure1.

When a society functions according to a paradigm that is not in accordance with reality, andwhen, in spite of the crisis, it still follows the same line through, when it does not learn thenecessary lessons and when it does not adapt its paradigm, then that society will again and

1 As professor Gar Alperovitz writes in the introduction of his book America Beyond Capitalism:

“Moreover, if the system itself is at fault, then self-evidently – indeed, by definition – a solution would ultimatelyrequire the development of a new system… The conventional wisdom, of course, leaves us at a dead end. Theold ways don’t work but no one even imagines the possibility of systemic change.”


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again be faced with the same kind of crises - even with increasing intensity -, it will again andagain go through the same scenario just as the principal character in an ancient Greek drama:“The tragic error in tragic drama is walking in blindness so that the tragic hero who intends toaccomplish a certain result with his actions accomplishes the exact opposite.”2

The cause for recurrence and periodicity in economy can be found in the fact that the currentsocioeconomic paradigm is not in accordance with reality. The ever-repeating cycle ofeconomic crises (and wars) can only be interrupted if we succeed to transcend the limitationsof the present paradigm and if we can expand or even transcend our paradigm, cut the wrongpremises and add new correct premises to it, so it is more in tune with reality.

Does all this implies that events are predetermined and that we have to be theirhelpless victims? Not really! All it means is that things move in terms ofpredictable cycles that keep occurring time after time until their true cause isdiscovered. Once we know their cause, we can stop them. After all, humanityhas broken disastrous cycles in the past and will do so in the future as well.This is how all evolution occurs. We keep enduring recurring problems of onesort or another, until they become intolerable; then someone discovers theirtrue cause and helps us break the cycle. Afterwards a new cycle takes over.

However, in view of the longevity of the patterns described in this work, it isclear that disrupting them will not be easy. Nothing short of fundamentalreforms will work.

Ravi Batra: The Great Depression of 1990, p 94.

At the start of this millennium, United Nations Secretary-General Kofi A. Annan stated this asfollows: “We will have time to reach the Millennium Development Goals – worldwide and inmost, or even all, individual countries – but only if we break with business as usual.”

Muhammad Yunus, Nobel Prize Laureate for peace in 2006 has stated this as follows:,

Unfortunately, media coverage gives the impression that once we fix thiscrisis, all our troubles will be over: The economy will start to grow again, andwe can quickly and comfortably return to “business as usual”.

But even if it was desirable, business as usual is not a viable option. We forgetthat the financial crisis is only one of the several crises threatening humankind.We are also suffering a global food crisis, an energy crisis, an environmentalcrisis, a healthcare crisis, and the continuing social and economic crisis ofmassive worldwide poverty. These crises are as important as the financial one,although they have not received as much attention.

Muhammad Yunus, Building Social Business – The New Kind of Capitalismthat Serves Humanity’s Most Pressing Needs, p xiv

But “braking with business as usual” is very difficult. Change is indeed needed, but in whatdirection and based on what socioeconomic premises? What are the wrong premises? Andwhat are the correct premises we are missing?

2 Claude Steiner, Scripts People Live, p 60-61.


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Some stubborn economic and social misconceptions

In the capitalistic system, one of the most important objectives of private business is to realizeprofit as a reward for the invested capital and for entrepreneurship.

But there is something strange going on with this profit. We will discuss the notion of profitfrom the point of view of the businessmen, the (neo-) classical economists and even (neo-)Marxist economists, and formulate some paradoxes and inconsistencies in the line ofreasoning of all of them.

This will lead us to find the real social origin and the purpose of profit for companies. We willdemonstrate that profit for private companies is a result of the economic growth, which onecould consider as ‘profit-for-society’ as a whole. The way how this economic growth or‘profit-for-society’ is distributed among the several economic and social participantsdetermines future economic growth thus future profits for companies.

However profit, a result of the economic growth and part of the ‘profit-for-society’, hasbecome a goal on itself. This shift in emphasis, together with some other wrong socialpremises that are discussed later on, are the cause of the recurring financial, economic andsocial problems. And even wars!

An injudicious feedback policy of the ‘profit-for-society’ towards the several economic andsocial participants, based on the wrong economic and social premises, leads to the erosion ofthe purchasing power of the “common people”, and thus to a decline of the economic growth.A more judicious feedback policy, on the contrary, based on correct economic and socialpremises, can lead leads to the increase of the purchasing power of the “common people”, andthus to a higher economic growth, more ‘profit-for-society’ and thus higher profit forcompanies, and even to a more peaceful world.

Some stubborn social misconceptions

Some other social misconceptions originated since the days of the British East IndiaCompany, and they are even the motive for some forces in society in order to boycott theMillennium Development Goals:

• John Locke provided an argument that has continued to dominate the modernworldview down to the present. Once we cut through useless custom andsuperstition, argued Locke, we see that society, being made up solely ofindividuals creating their own meaning, has one purpose and one purpose only: toprotect and allow for the increase of the property of its members. Pure self-interestthus becomes, in Locke’s formulation, the sole basis for the establishment of thestate. Society properly becomes materialistic and individualistic because, Lockemaintains, reason leads us to conclude that this is the natural order of things. Bythe law of nature, each individual is called upon to act out his role of social atom,careering through life, attempting to amass personal wealth, even at the expense ofother people. There is no value judgment to be made here: self-interest is simplythe only basis for society3.

• Like Locke, Adam Smith was enamored of the mechanical world view and wasdetermined to formulate a theory of economy that would reflect the universals of

3 J. Rifkin, Entropy, A New World View, pp. 23-30.


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the Newtonian paradigm. In The Wealth of Nations, Smith argues that, just asheavenly bodies in motion conform to certain laws of nature, so too doeseconomics. If these laws are obeyed, economic growth will result. But governmentregulation and control over the economy violated these immutable laws bydirecting economic activity in unnatural ways. Thus markets did not expand asrapidly as they could and production was stifled. In other words, any attempt bysociety to guide “natural” economic forces was inefficient, and for Adam Smith,efficiency in all things was the watchword4.

• Thomas Malthus, who as central information-gathering agent kept statistics for theEast India Company, found that, as population grew with a geometricalprogression while resources only grew with an arithmetic progression, scarcitywould increase. There always would be a fundamental inadequacy of life supporton planet Earth, so only the fittest would survive economically resulting in an “Usor Them” attitude.

In this study we will demonstrate that these three premises are wrong, they aremisconceptions. We will unravel the true purpose of the economic activity and the socialorigin and purpose of profit in a way that is totally different from the point of view ofbusinessmen and economists, whether they are (neo-)classical or (neo-) Marxist.

As pure rationality, based on incomplete or even wrong socioeconomic premises, combinedwith amorality and pure self-interest (read greed) can lead and has led to immorality, thesemisconceptions have led to:

• Social Darwinism, social and economic exclusion of part of the own population(cfr. the books of Charles Dickens).

• Colonialism and imperialism, exploitation of and even genocide on the localpopulation of the conquered territories.

• Concentration of wealth inside countries and among countries.

• The recurrence of economic crises.

• Social turmoil, violent revolutions, civil wars, wars, and most of all war-profiteering and even warmongering.

• The erosion of the real wealth of the “common people” due to the creepinginflation since the introduction of the Federal Reserve System in 1913 and someother mechanisms like “engineered” financial crises and exploding speculativebubbles on the stock market.

• An economic system in which a human being is only economically important intwo ways: as a production factor, generating added value for the employer; and asconsumer, with money to spend. The rest are considered, in the words of HenryKissinger, as “dispensable eaters”.

A feasible and low-cost solution, based on some ‘humane intelligence’

This book Eight Days a Week – The Fourth Wave contains a proposal to change “business asusual”, based on correct social and economic premises. By analyzing and explaining therecurrence of economic crises and some economic entities and the relation with wars and the

4 J. Rifkin, Entropy, A New World View, pp. 23-30.


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activities of some banks, I have found what one could call the “missing link” between micro-and macro-economics: the real socioeconomic origin and purpose of profit for companies.

I also formulate a proposal that “breaks with business as usual” and that could very well leadto a win-win-win-situation for business, governments and private persons alike. My proposalwould solve all of the problems mentioned above at once, and most of all, it would induce thetransition towards a more peaceful world and the abolition of violations of human rights. Itwould furthermore allow meeting the objective to spend 0.7% of the GNP for aid to the ThirdWorld countries5, as well as the Kyoto protocol. The secret power of this proposal lays in thefact that it focuses on man as man, and not as mere production factor or consumer.

My proposal is not at all painful for the public, on the contrary. It could very well be a win-win-win situation for business, government and the public as well. I dare to say that there isno dilemma at all, and a viable alternative road for a social Armageddon is possible, even inthe near future, but only if we start to concentrate on the real purpose of the economy (thefulfillment of the needs of the people) and not on the consequence of quantitative economicgrowth (making a profit and creating money out of nothing).

I sincerely hope that you will pay attention to this book. I know that a book of about 290pages is rather long, but I guarantee you, it explains the economic process in a whole new wayyou have ever read in the mainstream media or heard from economists and politicians. Theyusually give a chronological account of what happened, and pinpoint the problems withLehman Brothers or the mortgages in the USA as the cause of the financial and economiccrisis. These phenomena are not the cause, just some catalysts that triggered the wholeprocess. In this study you will read the real cause of economic crises (and wars) plus somesolutions to avoid similar crises (and wars) in the future.

I would like to finish this summary with the remark that I wrote the first lines of this studyalready in the early 1980s, after reading Buckminster Fuller’s last book Critical Path. Thoseyears were characterized by both a 2-digit inflation and high unemployment, which deludedmost economists, and a lot of financial volatility in the exchange rates of the majorinternational currencies versus the US$, as in 1971 President Nixon had unilaterally decidedto abandon the post World War II Bretton Woods agreement of 1944. Since the 1980s I havebeen updating my study with new information and evidence, both from the years since thenand from the past 400 years of history. I think my book is now ready for publication anddistribution to as many people as possible.

Mortsel, Belgium, November 11th 2010.

5 Do we really need tsunamis, inundations and earthquakes before we can mobilize the conscience of

the political leaders and the public in the rich countries in order to organize massive aid to Third Worldcountries?


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Table of content

1 Introduction ...................................................................................................................... 14

1.1 Purpose of this book................................................................................................. 14

1.2 Cause or catalyst of the present economic crisis? .................................................... 16

2 Some striking economic recurrences................................................................................ 19

2.1 The evolution of the profit-ratio............................................................................... 20

2.2 The evolution of money-growth and inflation ......................................................... 21

2.3 The evolution of unemployment .............................................................................. 25

2.4 Relation between recurrence and paradigm. ............................................................ 27

3 Information in an economic perspective .......................................................................... 29

3.1 Matter ....................................................................................................................... 29

3.2 Energy ...................................................................................................................... 30

3.3 Matter and energy together ...................................................................................... 30

3.4 Information............................................................................................................... 31

3.5 Ratio and information............................................................................................... 34

3.6 Rationality, amorality and immorality ..................................................................... 35

4 Some strong wrong economic premises........................................................................... 37

4.1 Thomas Malthus and social Darwinism................................................................... 37

4.1.1 Malthusianism and colonialism............................................................................ 39

4.1.2 Malthusianism and imperialism ........................................................................... 41

4.1.3 Thomas Malthus was and is wrong. ..................................................................... 57

4.2 Economic misconceptions........................................................................................ 62

4.2.1 Gross National Product per capita........................................................................ 62

4.2.2 Economic growth ................................................................................................. 63

4.2.3 Positive balance of trade ...................................................................................... 64

4.2.4 Profit, the missing link in economics ................................................................... 65

Profit according to the businessman............................................................................. 65

What is profit? What is the origin of profit? ................................................................ 67

Profit according to a neo-Marxian economist .............................................................. 67

First paradox: higher wages for employees, higher profits for the employer .............. 69

Second paradox: is a positive cash flow for one company at the expense of the rest ofthe world?..................................................................................................................... 70

Profit according to (neo-) classical economists............................................................ 71


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4.2.5 Active unproductivity........................................................................................... 72

4.2.6 The economic dogma ........................................................................................... 73

5 Basic Theory on the Origin of Profit................................................................................ 76

5.1 Satisfaction of needs: Driving force of the economic process ................................. 76

5.2 Profit as a consequence of growth............................................................................ 77

5.2.1 ‘Profit for companies’ as part of ‘profit for society’............................................ 77

5.2.2 The social purpose of profit ................................................................................. 79

5.2.3 An idealistic view on economy ............................................................................ 81

5.3 Positive balance of trade .......................................................................................... 81

5.4 Conclusion................................................................................................................ 83

6 Direct consequences of the basic theory on the origin of profit....................................... 84

6.1 Evolution of the profit-ratio ..................................................................................... 84

6.2 Distribution of profit as driving force – or brake on – economic growth ................ 86

6.3 Zero-growth and its consequences ........................................................................... 91

6.4 The consumer society............................................................................................... 96

6.5 Unemployment ......................................................................................................... 99

6.6 Concentration of wealth ......................................................................................... 102

7 On the origin of wars...................................................................................................... 104

7.1 The economic “importance” of wars – Cui bono? ................................................. 104

7.1.1 The story of the pram industry ........................................................................... 104

7.1.2 Illustrations......................................................................................................... 107

Illustration 1: The glory of weapons. ......................................................................... 107

Illustration 2: Keep the fire simmering ...................................................................... 110

7.1.3 Disinvestment goods .......................................................................................... 111

7.2 To be or not to be, that’s the question .................................................................... 113

7.3 Protectionism and its relation with war – An important lesson from history ........ 116

7.4 Inflation and its relation with war – Cui bono?...................................................... 126

7.5 A 1st mechanism to get hold of the wealth of the common people: Inflation. ....... 128

7.5.1 On the origin of paper money – Cui bono?........................................................ 128

7.5.2 On the origin of democracy................................................................................ 129

7.5.3 Motives for war versus forces for peace ............................................................ 133

7.6 A 2nd mechanism to get hold of the wealth of the common people: Income taxes.137

7.7 A 3rd mechanism to get hold of the wealth of the common people: Higher prices foressential commodities. ....................................................................................................... 142

7.8 A 4th mechanism to get hold of the wealth of the common people: Crashes on thestock market. ...................................................................................................................... 144


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7.9 The North-South relationship................................................................................. 146

7.10 The dangers and excesses of the banking industry ................................................ 149

7.11 An alternative banking system that really works ................................................... 152

7.12 “War Against Terror” in order to defend “The Sixth Freedom”............................ 154

7.13 Summary ................................................................................................................ 156

8 Some feasible solutions.................................................................................................. 159

8.1 Boundary conditions .............................................................................................. 159

8.2 Qualitative, sustainable growth .............................................................................. 160

8.3 Fair distribution versus concentration of wealth .................................................... 161

8.4 The dual active-recreational society: “the fourth wave”........................................ 167

8.4.1 He had a dream, that one day…. ........................................................................ 168

8.4.2 A complicated problem ...................................................................................... 170

Mobility...................................................................................................................... 171

Economic efficiency................................................................................................... 171

Personal quality of life ............................................................................................... 172

Public finances ........................................................................................................... 172

8.4.3 A possible solution ............................................................................................. 173

8.4.4 The quaternary sector. ........................................................................................ 180

8.5 Fair collection of taxes ........................................................................................... 180

9 Epilogue ......................................................................................................................... 183

10 Schematic synopsis ........................................................................................................ 189

10.1 Current geo-political and socioeconomic paradigm, based on wrong premises. ... 189

10.2 New Gaia-political and socioeconomic paradigm, based on correct premises. ..... 190

10.3 Some thoughts to brood on..................................................................................... 191

11 Some recommendations: where do we go from here? ................................................... 192

12 Appendix A: Some Notions on Communication Theory ............................................... 196

12.1 The process of communication .............................................................................. 196

12.2 Information............................................................................................................. 197

12.3 Shannon’s Law....................................................................................................... 200

12.4 Signal-spaces and paradigms ................................................................................. 201

12.5 Effective Communication ...................................................................................... 206

12.6 Trade-off between time and energy ....................................................................... 213

12.7 Implications on education and science................................................................... 216

12.7.1 Education........................................................................................................ 216

12.7.2 Science: academic versus scientific ............................................................... 218


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12.8 Conditions for effective communication................................................................ 222

12.8.1 Unambiguous Coding..................................................................................... 222

12.8.2 Time and energy............................................................................................. 223

12.8.3 Signal-space ................................................................................................... 223

12.9 A thought to brood on ............................................................................................ 223

13 Appendix B: Economy and dissipative structures.......................................................... 225

13.1 Energy and entropy ................................................................................................ 225

13.2 Dissipative structures ............................................................................................. 231

13.2.1 The origination of dissipative structures ........................................................ 231

13.2.2 The evolution of dissipative structures........................................................... 233

13.2.3 The relation between the micro and the macro level ..................................... 235

13.2.4 Symbiosis ....................................................................................................... 236

13.3 Socioeconomic systems.......................................................................................... 237

13.4 Dissipative structures, communication and creativity............................................ 243

13.4.1 Extension of Shannon’s communication-model ............................................ 243

13.4.2 Scientific evolution ........................................................................................ 248

13.4.3 Evolution of the brains ................................................................................... 249

14 Appendix C: Economy and Control System Theory...................................................... 252

14.1 An Economic Two-dimensional Flatland .............................................................. 252

14.2 A Multidimensional View on Economy................................................................. 257

15 Some Loose Ends ........................................................................................................... 264

15.1 Justification of the methodology ............................................................................ 264

15.2 Model of social evolution....................................................................................... 267

15.2.1 Evolution of social classes ............................................................................. 269

15.2.2 Evolution of geographical classes .................................................................. 269

15.3 Possible transitions and visions of the future ......................................................... 270

15.4 The “other” alternative ........................................................................................... 275

15.5 The rebirth of humankind....................................................................................... 277

15.6 An additional message to some scientists .............................................................. 280

16 Bibliography................................................................................................................... 288


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1 Introduction

In order to contract a thing, one should surely expand it first.In order to weaken, one will surely strengthen first.In order to overthrow, one will surely exalt first.In order to receive, one will surely give first.This is called subtle wisdom.

Lao Tzu

All work and no play make Jack a dull boy (or was it John?)

An American expression.

We will have time to reach the Millennium Development Goals – worldwideand in most, or even all, individual countries – but only if we break withbusiness as usual.

United Nations Secretary-General Kofi A. Annan.

It is not the strongest that survive, nor the most intelligent, but the ones mostadapted to change.

Charles Darwin, On the Origin of Species.

When profit and human needs conflict, profit generally wins out – whichmeans people lose… Capitalism has created poverty by focusing exclusivelyon profit. It built a fairy tale of prosperity for all – a dream [an Americandream] that was doomed never to become true.

Muhammad Yunus

1.1 Purpose of this book

The financial crisis of 2008, that started in the USA and swept over Europe and otherindustrialized countries, proves that it is really necessary to “break with business as usual”.

Economic activity should be aimed at fulfilling the individual and collective needs of thepeople. Economic growth allows for the fulfilling of more needs of more people. In this book,I clearly demonstrate that profit for private business is a consequence of that economic growthand that a fair distribution of that economic growth leads to more growth and more profit.


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Unfortunately, the economy has gone astray: profit – a consequence – has become a goal onitself. A human being is only economically important in two ways:

• as a production factor, generating added value for the employer;

• and as consumer, with money to spend.

The rest are considered, in the words of Henry Kissinger, as “dispensable eaters”.

The real cause of this misconception is that most people - even economists themselves - areignorant about how the economic process really functions, what the social origin and purposeof profit are. With this book we hope to put an end to this misconception.

In the period after the Second World War, the focus has been on creating ever more newneeds of the same already affluent people. This has resulted in the ever increasing vertical gapbetween the “haves” and the “have-nots”, an over-cropping of natural resources, especially ofnonrenewable fossil energy. And according to Noam Chomsky in his book Failed States, thiscould even lead to a new arms race in space induced by the United States, as “… such forceswill be needed, US intelligence and the Space Command agreed, because globalization of theworld economy will lead to a widening economic divide6 and deepening economic stagnation,political instability, and cultural alienation, thus provoking unrest and violence among the“have-nots”, much of it directed against the United States. The space program fell within theframework of the officially announced Clinton doctrine that the United States is entitled toresort to “unilateral use of military power” to insure “uninhibited access to key markets,energy supplies, and strategic resources”7.

Africa was cut off from the international trade routes once the Suez channel was constructed,South America once the Panama channel was constructed. The majority of the people in thosecountries were thus considered as “dispensable eaters”, without any right to their own naturalresources. Dictators and a rich, greedy élite in those countries, as well as wars, were veryconvenient in order to protect the colonial and postcolonial international world-order.

Now in 2010 we have come to a point in human history which has been predicted by greatminds, such as Buckminster Fuller in his last book Critical Path. The Roman Empiredisintegrated as it had reached the borders of the known world that was in the reach of themeans of transport and communication of that time, and because it failed to establish a newinternal social order. This could very well happen to the industrialized world in these times.

The “United Nations Millennium Development Goals” are a noble initiative to includeunderdeveloped countries as equal partners in the world economy. As I demonstrate in thisbook, this is also in the interest of the industrialized world. Achieving the “United NationsMillennium Development Goals” would surely induce economic growth, and thus profit forprivate business. Unfortunately most industrialized countries are faced with economic,financial and social problems themselves, so their financial support to the Millennium Goalsis insufficient, and I am afraid that 2015 is way too late. The Third World countries suffereven more from the economic crisis in the Western industrialized countries, as they depend onthe export of raw materials and cheaply produced finished goods, while their own populationdoes not have the purchasing power to induce internal economic growth.

In most books on economy, war is considered as an external factor, a seizure in the normalsocioeconomic evolution. In this book we will integrate the phenomenon of war in the

6 Wasn’t globalization “officially” supposed to increase material welfare, also for the people in the

Third World? I think some world leaders have a hidden agenda.7 Noam Chomsky, Failed States, p. 10.


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economic reality. In doing so, we will get a very sharp image of what is really going on. Andthis strategy will allow us to formulate an alternative that, at first glance, might look crazy,but not crazier than the last 400 years of history.

We will formulate a proposal that breaks with business as usual, and that could very well leadto a win-win-win-situation for business, governments and private persons alike. It wouldfurthermore allow meeting the objective to spend 0.7% of the GNP for aid to the Third Worldcountries, as well as the Kyoto protocol. The secret power of this proposal lays in the fact thatit focuses on man as man, and not as mere production factor or consumer.

1.2 Cause or catalyst of the present economic crisis?

In future history books, September 15th 2008 will be noticed as the start of the deepestfinancial and economic crisis since the crash on Wall Street in 1929 and the Great Depressionof the 1930s, which was characterized by a very high level of unemployment. That dramaticcrisis asked for drastic measures: The New Deal of President Roosevelt. But the massiveunemployment during the 1930s only disappeared after the war production was increased,first in order to support England in its war against Nazi Germany, and later as a preparationfor the entry of the United States of America into the Second World War.

Those same history books will probably pinpoint the crisis in the housing market in theUnited States of America or the bankruptcy of Lehman Brothers as the cause of the currentcrisis. Private persons could no longer redeem their loans, which brought a lot of banks introuble. From October 2008 till October 2009 hundred American banks went bankrupt. Topinpoint the crisis in the housing market or the bankruptcy of Lehman Brothers as the cause isnot completely correct: they are not the cause, but merely catalysts that triggered the crisis.As we will demonstrate in this study, the current western capitalistic economic system isfundamentally unstable: the recurrence of financial and thus also economic crises and periodsof high unemployment are inherent to the system.

We all know that water freezes below zero degrees Celsius. It is however possible to cooldown very pure water some degrees below zero degrees Celsius without the water turning intoice: it can remain liquid for even a long time. But a sudden event can instantaneously turn theliquid water into ice. This can be done by touching the recipient, throwing something into theliquid, touching the surface of the liquid, blowing over the surface… These events are not thecause that the liquid water turns into ice: they are just some of the many possible catalysts thatcan trigger the instantaneous transformation of liquid water into solid ice. The real cause isthat the water was well below zero degrees Celsius.

The oil crisis of 1974 is considered to be the cause of the economic crisis of the late 1970sand early 1980s. This is not true. During the late 1960s, the Belgian mathematician andeconomist Jean Pierre Van Rossem developed an econometric model. Based on his model hepredicted that an economic crisis was coming on and that unemployment would increasedramatically, and he did this well before the oil crisis hit the western world. Here too, the oilcrisis was not the cause, but a catalyst that triggered a crisis that would have occurredanyhow, as the recurrence of economic crisis is inherent built into the western capitalisticsystem.

Already in the year 2005 the unemployment in Germany reached a post World War II record:5 million people without a job. In order to guarantee employment and to counter thedelocalization of production facilities towards countries with lower wages, the trade unions


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accepted to increase the working time back to 40 hours for the same level of wages. Franceintroduced the 35-hour workweek years ago, when Francois Mitterand was president, butunder president Nicolas Sarcozy the government has plans to increase the working time andthe retirement age. There are also intentions for cuts in spending on education by increasingthe number of students per class to 35. There is a lot of resistance from the public againstthese plans.

The post World War II baby-boom generation is now massively retiring and people tend tolive longer, which puts pressure on the social security system, expenditures for healthcare andthe systems of pensions. People should work longer in order to increase the level of activity. Itis as if time is turned back in the social and economic world.

In 2005, sixty years after the end of the Second World War, some important historical factswhere remembered and got world-wide coverage in the media. Auschwitz was “liberated”sixty years before. A number of important world leaders, as the American vice-president DickCheney, were at the commemoration service, solemnly declaring that what happened thereshould never happen again. More than one million people were killed in that concentrationcamp. Most people do not know that the concentration camps were not only exterminationcamps, but also suppliers of slave laborers to factories that where controlled by Americancompanies. I.G. Farben was part of the American Standard Oil company, controlled by theRockefellers. It had a plant near Auschwitz and took massively advantage of the cheap slavelaborers supplied by the Nazis. The British and American allied forces knew that there wereconcentration camps and what was going on there, but they never did an attempt to stop thetransport of prisoners by, for example, bombing the railways towards these camps, as they didwith civilian targets is Germany. Also the I.G. Farben plant or other American ownedfactories of General Motors and Ford were never bombed.

At the end of World War II Dresden was destroyed by British and American bombers. Thefire-bombs that were used were designed to produce as many victims as possible among thecivilians. The military and industrial infrastructure, on the other hand, was left intact. Butmost people do not know that the main purpose of this raid was to impress the Soviet soldierswho were advancing from the east towards Berlin and could see the blaze from a distance of100 kilometers. Churchill wanted to give the Soviets an idea of the firing power of theWestern Allied forces. Some political and military leaders of the Western Allies had evenfigured out a plan that, once Nazi Germany would have surrendered, they would enrollGerman divisions into the Allied forces and then attack the communistic Soviet Union, asupposed ally in the war against Nazi-Germany8.

A lot of book has been published on the irrationality and incredible madness of war andgenocide. I can suggest you to read the following very interesting books:

• Friedrich, Jörg, 2002, Der Brand – Deutschland im Bombenkrieg 1940-1945,Propyläen Verlag, München, Germany.

• Pauwels, R. Jacques, 2000, The Myth of the Good War – The USA in World WarII, Lorimer, Halifax, Canada.

These books and a lot of documentaries on TV give a detailed description of the historicalfacts of World War, but mostly they fail to uncover the real causes: why did all of thishappen? What is the historical background of all this suffering and killing? Usually these

8 The Myth of the Good War, J.R. Pauwels, pp. 141-151.


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books and documentaries tell only half of the truth, some events and actions of the victors aredeliberately omitted. In this study we will try to find the historical background of thephenomenon of war and genocide. The reader is warned: it is not a nice story; we are all bothvictims of the situation but also accessory to it, against our own will.

The real cause of the present and previous crises and wars is that most people - eveneconomists themselves - are ignorant about how the economic process really functions andhow war relates with economy. With this study we hope to put an end to this ignorance and tothis madness. This will allow us to formulate an alternative for “The New World Order” thatsome Anglo-American businessmen and political leaders are trying to impose on us.

The alternative consists of three parts

• A plan to come to sustainable growth on global level.

• A plan for a new division of labor, resulting in a spectacular increase ofemployment and in productivity.

• A plan for a better collection of taxes, so the taxes on labor and the cost of laborcan decrease, even the taxes on profit for private companies.

All of this could very well lead to a peaceful world without poverty and hunger, a more stableand inflation-free economy, and more stability on the financial markets.


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2 Some striking economic recurrences

I'm just sitting here watching the wheels go round and round.

John Lennon.

History teaches us that humankind has nothing learned from it.

Anonymous.

Those who do not remember the past are condemned to relive it.

Santayana.

In this study we will formulate several comments on the present and the past economic crises,and we will point at some paradoxes and contradictions between the economic policy and theresults of that policy, indicating the impotence of the political and economic decision makers“to do something about the situation”.

As the Belgian historian Chris Vandenbroeke wrote in the mid 1980s: “The dilemma withregard to the actual problems – the nature and the size of the crisis, the measures andcorrections to take in order to adjust the present economic policy – clearly shows the failureof a short-term vision. Never before have had one heard so many contradictions, resulting in adecreasing credibility in pure scientific economic research. Who is to be believed in this mazeof suggestions and recommendations? How is it possible that adepts of Milton Friedman andthose of Keynes advocate totally opposing measures? Instead of looking for a quick solution,would it not be better to sit back and make a basic analysis of the present social and economicrelations. We should not pay too much attention to new and temporal phenomena, but wehave to look for stable and ever returning patterns in the course of time. Only with thisperspective will it be possible to discover significant factors. In the short term, every eventseems to be of great value to explain the course of things. One has to take a long historicalcontext to look from a distance and to put things in their proper context9.

When looking for material to write this study, I was surprised by the fact that there is so littlestatistical information available describing the evolution over longer periods of time – severalhundred years – of economic entities such as unemployment, inflation, profit-ratio's, industrialproduction, investments, etc. We have found fragments of information for several countries,but unfortunately all from different periods of time or only very short periods of time. This isprobably due to the fact that one has started only recently – from the end of 19th century – tokeep records of these entities in an organized way.

In his book La Figure de Fraser, the French economist Jacques Attali has made an attempt todescribe the dynamics of economic evolution over a longer period of time10, unfortunately

9

C. Vandenbroeke, Purchasing Power in Flanders, pp. 10, 22.10 Jacques Attali, , 1984, La Figure de Fraser, Fayard, Paris.


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without any reference to facts and figures. The Belgian historian Chris Vandenbroeke hascompiled some very useful statistic material over several hundred years, but limited toFlanders, the northern part of Belgium.

Fortunately we have found very valuable and interesting material on the history of the USeconomy in the books of Ravi Batra (The Great Depression of 1990) and Howard Katz (TheWarmongers). My book has been inspired for a great deal by their writing.

It is also very remarkable that most authors of textbooks on the history of the economy of acountry or a group of countries limit their scope to periods in between wars, as though a waris just a fracture in the normal evolution of the socioeconomic process, without being part ofit. For most economists, war is just an exogenous factor.

Nevertheless, we have been able to draw some conclusions out of the scarce historicalmaterial. We will try to construct a picture of the evolution in time of some basic economicentities, based on facts and extrapolation. The resulting picture will then be explained later on,using a model that will be developed in a later chapter.

2.1 The evolution of the profit-ratio

On the subject of the evolution of the profit-ratio of private companies, we refer to the workof the Belgian (neo-) Marxian economist J.P. Van Rossem.

One cannot deny the fact that in the whole western economy the profit-ratio(the ratio between the realized profit and the capital invested in order to realizethat profit) has decreased steadily since World War II. This does not imply thatcompanies make less profit. It only says they have to invest more inmachinery, buildings and energy to realize the same level of profit...

Calculations show that the average profit-ratio in Belgian economy hasdeclined from 15.86% in 1953 to a level of 7.62% in 1977...

Nobody has ever maintained that the profit-ratio should decline, just as a stonedrops when he is released. One can think of measures to increase that profit-ratio. However, when we analyze for example the evolution of the averageprofit-ratio in Germany from 1880 till 1976 (West-Germany after 1954), wecan conclude that the profit-ratio has increased only in two periods of time: thefirst time between 1915 and 1919, the second time between 1941 and 1944. Inother periods of time the profit-ratio has shown a declining trend... In the past,the profit-ratio has increased substantially only during World War I and WorldWar II.

J.P. Van Rossem, Knack, January 1979, p 119.


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Evolution of the profit -ratio

Time

Profit-ratio

Peace Peace Peace

War War

We can represent the evolution in time of the profit margin with a saw-tooth shaped curve:longer periods of decrease are alternating with short periods of fast increase. The period offast increase happens to coincide with the occurrence of a war. Is this pure coincidence or isthere a logical explanation to it?

2.2 The evolution of money-growth and inflation

Inflation is an important indicator for the evolution of the economic process and it is closelyrelated with the rate of money-growth: excessive growth in the money supply leads to a spiralof increasing prices. In the book The Great Depression of 1990, written by Ravi Batra, we canfind several charts and figures describing the evolution of these economic entities for the USeconomy since the 18th century. The figure below is a good résumé.


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Note the increasing trend of the peaks since the 1930s.

1750 1770 1790 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990-45

-30

-15

0

15

30

45

60

75

90

105

120

135

150

165

180

-45

-30

-15

0

15

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75

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105

120

135

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Time

Inflation and money growth per decade (in %)

Inflation

Money-growth

Here we can see that both inflation and money-growth have evolved according to a strictperiodic pattern, which was only disrupted after the Civil War. Every third decade there hasbeen a peak in both the rate of inflation per decade and the rate of money-growth per decade.It is very important to stress the fact that the trend of the peaks is increasing: during the 20thcentury every single peak is higher than the previous one! In systems theory periodicoscillations with increasing amplitude are a clear indication of an unstable process! In thewords of Ravi Batra: “Finally, the money-growth cycle implies that capitalism isfundamentally unstable and that the creation of institutions as the Fed cannot stabilize it. Theyare mere palliatives that in the long run actually destabilize the system. What is needed is nota perfunctory cure, but fundamental economic reforms.”11

Periodic oscillations with increasing amplitude ultimately lead to the breakdown of thesystem. Or the system stops to exist, or it is forced to transform into a system with anotherdynamic.

As with the evolution of the profit-ratio, we also find a striking coincidence between war andpeaks of inflation, or deprecation of the currency. We refer to Howard Katz and PaulSamuelson:

11 Ravi Batra, The Great Depression of 1990, p 93.


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Value of the US. Dollar 1790-1978.

(In terms to buy basic raw materials)Reciprocal of Wholesale Price index, 1910-14 = 100, Logarithmic scale in cent

(The figure is rather obscure, so I suggest you to buy The Warmongers.

One day it will be mandatory reading for students at high school.)

The figure traces the value of the United States dollar since its adoption by theContinental Congress in the 1780s. Study of this chart suggests that every timea sharp depreciation of the currency occurs (e.g.: 1812, 1861, 1917, 1942,1966), we have a war, and every time a major war breaks out, we have asignificant depreciation of the currency.

Howard Katz: The Warmongers, p 3.

It is also important to notice the change in pattern since 1933: prior to that year, thepurchasing power of the dollar restored to the level from before a war; after 1933 therewas a continuous erosion of the purchasing power of the dollar. This is confirmed bythe next chart.


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Inflation in the USA.

Wildest inflation historically comes with periods of war.

1780s: Revolutionary war - War of 1812 - 1860s: Civil War - 1914-18: WWI - 1940-45:WWII - 1950s: Korean War - 1960s: Vietnam War...

After each major war in the country's history, there has been slightly less of a price drop.Indeed, after World War II there was no significant drop. For 80 years the general pricetrend - abroad as well as here - has been upward.

The figure shows the historical ups and downs of wholesale prices. Each war isclearly marked by a peak... As an omen for the future, note one cruciallysignificant fact: after World War II there was no decline in prices at allcomparable with what had followed previous wars...

Paul Samuelson: Economics, p 270-271.


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“Omen to the future…”? To make a mere observation of a trend without looking for anexplanation is rather fatalistic. If one could pinpoint the real cause of this evolution, thenmaybe one could alter the trend. The first approach is typical for academic orientated persons,the latter for scientific orientated persons. In Appendix A we will explain the differencebetween “academic” and “scientific”.

When two phenomena A and B show a correlation, then A could be the consequence of B, orB could be the consequence of A, or both could be the consequence of a third phenomenon C,or A and B could at the same time be each other’s cause and consequence.

Once more we stress the fact that in the period before World War II the dollar returned to its“normal” value after each war, while after World War II the depreciation of the dollar went onat a substantial rate. Both the coincidence with wars as well as the changed pattern of thevalue of the US $ after World War II will be explained in this book.

2.3 The evolution of unemployment

Since the oil crisis in 1974, most industrialized countries in the western world have facedperiods of more or less high levels of unemployment. This recalls older persons of the yearsbefore the Second World War. Also in previous centuries, economic crises were marked byhigh levels of unemployment. Due to the surplus of labor-force, one can assume that realwages and purchasing power will not increase in times of crisis, but rather will keep theirlevel or even decrease. One could take the evolution of real wages as an indication for theevolution of unemployment. In the work of Chris Vandenbroeke12 we find some charts on theevolution of the real purchasing power of wages in Flanders in previous centuries.

12 Chris Vandenbroeke, Purchasing Power in Flanders, p 163.


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Purchasing power in Flanders

Above: Purchasing power of a laborer’s wage expressed in liter wheat (1) and barley (2)Under: Purchasing power of a laborer’s wage expressed in liter rye (1) and buckwheat (2)


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In this figure we can see a fluctuating evolution. Here we also notice a periodicity ofapproximately sixty years in the return of the peaks (1500, 1620, 1680, 1740) and the descents(1590, 1650, 1710). The same holds for the economy of America: “In the US economy therehas been at least one recession every decade, and a great depression every third or sixthdecade in the sense that if the third decade managed to avoid a depression, then the sixthdecade experienced a cumulative effect - an all-out disaster.”13

It is also remarkable that the real purchasing power in Flanders did not start to increasesubstantially with the Industrial Revolution of the 19th century, but only after the First WorldWar, when the principle of one-man-one-vote was introduced in the political system ofBelgium, when labor unions got politically organized and found their way to the parliament.

2.4 Relation between recurrence and paradigm.

A script is essentially the blueprint for a life course...

Their lives are walked in blindness, following someone else's dictates, whichlead them to destruction.

Claude Steiner, Scripts People Live.

Throughout history, human beings have felt the need to construct a frame ofreference for organizing life's activities. The need to establish and to explainthe how’s and why’s of daily existence has been the essential culturalingredient of every society. The most interesting aspect of a society’s worldview is that its individual adherents are, for the most part, unconscious of howit affects the way they do things and how they perceive the reality aroundthem. A worldview is successful to the extent that it is so internalized, fromchildhood on, that it goes unquestioned.

J. Rifkin, Entropy, A New World View, p. 5.

With only scarce information at hand, we still can see that economic entities fluctuateperiodically in time, and that there is a correlation between their evolutions. We also notice arelation with the occurrence of wars. Economic crises and wars seem to be related. In thisstudy on the dynamics and evolution of the economy we will not avoid to include war in ouranalysis. But before we end this section, let us try to understand why recurrence occurs. Indoing so, we will call for a generally known concept: our paradigm. You could read thefollowing paragraphs already in the summary above, but we repeat them here as they are veryimportant.

A society functions according to a certain paradigm, which is based on a set of premises moreor less in accordance with reality. Several social groups in society set objectives and acttoward those objectives according to those premises. If some premises do not agree withreality, but, on the contrary, are based on a wrong understanding or interpretation of reality or

13 Ravi Batra, The Great Depression of 1990, p 118.


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even on ignorance, then the performed actions will not lead to the desired objective. Instead,one will be faced with unexpected obstacles. This could lead to problems, frustration, evenaggression and crisis.

Because one has started from the wrong premises, one will most likely look for the causes ofthe failure and possible solutions in the wrong directions too. Otherwise one would havestarted in the right direction from the beginning! One will make the wrong diagnosis. One willeven point to a scapegoat as a reason for failure.

When a society functions according to a paradigm that is not in accordance with reality, andwhen, in spite of the crisis, it still follows the same line through, when it does not learn thenecessary lessons and when it does not adapt its paradigm, then that society will again andagain be faced with the same kind of crises - even with increasing intensity -, it will again andagain go through the same scenario (scripts in transactional analysis, karma in easternphilosophies), just as the principal character in an ancient Greek drama: “The tragic error intragic drama is walking in blindness so that the tragic hero who intends to accomplish acertain result with his actions accomplishes the exact opposite.”14

The cause for recurrence and periodicity in economy can be found in the fact that the currentsocioeconomic paradigm is not in accordance with reality. The ever-repeating cycle ofeconomic crises and wars can only be interrupted if we succeed to transcend the limitations ofthe present paradigm and if we can expand or even transcend our paradigm, cut the wrongpremises and add new correct premises to it, so it is more in tune with reality.

Does all this implies that events are predetermined and that we have to be theirhelpless victims? Not really! All it means is that things move in terms ofpredictable cycles that keep occurring time after time until their true cause isdiscovered. Once we know their cause, we can stop them. After all, humanityhas broken disastrous cycles in the past and will do so in the future as well.This is how all evolution occurs. We keep enduring recurring problems of onesort or another, until they become intolerable; then someone discovers theirtrue cause and helps us break the cycle. Afterwards a new cycle takes over.

However, in view of the longevity of the patterns described in this work, it isclear that disrupting them will not be easy. Nothing short of fundamentalreforms will work.

Ravi Batra: The Great Depression of 1990, p 94.

And this is what this book is all about. We will evolve a model that will help us to explain therecurrence of economic crises, the relation with war, some economic paradoxes and a lot ofother phenomena. The model will then allow us to formulate an alternative to break therecurrence. So, I think economy really could become a “hard science” after all... once we havereturned to “hard currencies” and “real democracy”.

14 Claude Steiner, Scripts People Live, p 60-61.


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3 Information in an economic perspective

A writer tries to convey a message to the reader by means of his text: he wants tocommunicate, to transfer information. This book does not break with this tradition. As it willprobably be read by people with different backgrounds and education, I will now give a shortdiscussion on the concept of information by positioning it in a larger framework ofsocioeconomic domains and this over a period of several centuries:

• Science

• Economy, the means of production and the question “who is very, very rich?”

• The phenomenon of war, the why of war and the means of warfare

I hope this can enthrall the reader and stimulate him to do some further thinking on his own.

3.1 Matter

Many scientists consider the conservation laws as the most fundamental laws of physics. Inthe 18th century the French chemist Antoine Lavoisier was the first to formulate such a law,the law of conservation of matter or mass, which stated that, in a chemical reaction, the totalamount of matter of the reaction compounds remains constant. This law was expressed in amore general form as follows: the total amount of matter in a closed system remains constant.If you burn a candle, it will get shorter and disappear, but the molecules of which it is madedo not annihilate: they will settle down as dust and smut particles in the room and on yourclothes.

Linking this law of conservation of mass to the historical evolution of the economic system,we can say that in agricultural societies matter, more specific land, was the most importantproduction factor. The first kind of people that where very, very rich were those whopossessed matter in the form of land (aristocracy, owners of plantations in the coloniesoversea....) or were engaged in the transport and the processing of matter (merchants, miningcompanies).

Wars and battles were almost always related to the possession of land, because of what wasgrowing on the land or what was underneath the surface of the land, and to get control of thepeople living on that land as labor-force, very often forced to labor for just peanuts. Just thinkof the many wars on the European continent and the period of colonization of territories onother continents.

These wars were fought with material means: clubs, swords, spears, bows and arrows,battleships powered by galley-slaves, later on came the energy powered means of warfare likefiring weapons, canons, and sailing ships. And this evolution to energy driven means of warbrings us back to science.


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3.2 Energy

In science, the law of conservation of energy was a next milestone. By the beginning of the19th century, scientists had realized that energy occurs in the different forms of kinetic energy,potential energy, and thermal energy (heat), and that energy can be converted from one formto another. As a consequence of this insight the law of conservation of energy was formulatedby the German scientists Hermann von Helmholtz and Julius Robert von Mayer, and theBritish physicist James Prescott Joule. This law, which states that the sum of kinetic energy,potential energy, and thermal energy in a closed system remains constant, is now generallyknown as the first law of thermodynamics.

During the Industrial Revolution energy began to play an important role as means ofproduction. So there came a time that the very, very rich people were those who had controlover the energy resources (Rockefeller, Arab Sheiks...) and the transport and processing ofenergy.

And wars were fought in order to secure this control over the energy resources. The weaponsused in these wars became more and more energy driven: more powerful bombs, canons witha larger range, ships with steam engines or diesel engines, air-planes…

3.3 Matter and energy together

Later Albert Einstein formulated his famous equation E = Mc², where E stands for theamount of energy (expressed in kilogram*meter²/second²), M for the amount of mass (inkilogram) and c the speed of light (in meter/second). The speed of light is seemingly one ofthe basic constants in Nature. This simple equation states the transformability from matter toenergy, and according to recent experiments in a physics laboratory, also vice versa. So thetwo laws were combined in the law of conservation of matter and energy together.

It is important to note that even in ancient times this relation between matter and energy wasvital:

• In the time of the very, very rich landlords energy was also needed in order toproduce the material affluence: solar energy is needed to grow crops, physicallabor is needed to prepare the land, to make irrigation canals, to harvest the fruitsof nature. Next to water, solar energy was the most important ingredient for plantsto grow. Energy was needed to process and transform the matter.

• Similarly, in order to produce, store and distribute energy, matter is essential.Windmills transformed the kinetic energy of the wind to useful mechanicalrotation. Manpower, animal power and wind energy were used to transport thegoods.

• Even in our modern times there is a mutual dependency of matter and energy: youneed drilling equipment and pumps to go after the oil, you need oil barrels andpipe-lines to transport the oil, generators to produce electricity, batteries to store it,copper wires to transport it...


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So clearly, also in an economic perspective, energy and matter are interrelated. The onecannot be processed without the use of the other.

We stress the fact that it took aristocracy ages of warfare in order to get to their level ofextreme wealth. But those who have built their empire on energy succeeded in their endeavorin a period of little more than half a century, a period marked by a number of world conflictsin order to get control over the supplies of fossil energy on this earth.

3.4 Information

Now at the beginning of the 21st century one of the richest men on Earth is neither a landlordnor an oil-baron. Bill Gates has built his fortune in a period of only a few decades and he didthis in the business of information processing. So we could consider information, orknowledge, as a third essential means of production, next to matter and energy.

In this respect it is important to stress the fact that information or knowledge was also veryimportant in the earlier matter or energy based societies.

• People needed the necessary knowledge and skills for an efficient agriculture, toexploit ore and to process it to metals. They had to have the experience oftransforming nature’s energy resource like wind and water and later the fossil fuelsinto useful energy.

• In our present computer controlled society, information needs matter and energy:one need material objects in order to store information, to process it, to visualize itand to broadcast or transmit it: books, CD’s, PC’s, displays, communicationnetworks. And in order to transmit or process information, energy is needed.

Even in the field of warfare information has become an important asset, if not the mostimportant one.

• First of all the public at home has to be brainwashed in a gigantic media and PR-campaign, so they unconditionally accept the war “for the general good” and the“national security”, whatever that might be. The pressing of a certain worldviewupon the people is based on information that is made ready to digest, but veryoften it seems that, when the war is over, this information has no relation withtruth whatsoever: it is rather “misinformation” in order to deceive the ownpopulation of the real reasons of the war. Just remember the imaginary weapons ofmass destruction in Iraq15.

• The “smart weapons” and the cyber-soldiers rely more and more on informationand communication technology. It is no longer a matter of numerical supremacy insoldiers, tanks and ammunition, but to be able to make the right decisions on theright moment in order to make an efficient (first) strike.

15 Noam Chomsky, Failed States, pp.24-27.


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In scientific and economic perspective, information seems to be the third essential factor, nextto matter and energy. But especially in the field of economics information is something veryspecial when you compare it with the other two.

When I sell you a material good, you give me an amount of money in exchange for it. Afterthe economic transaction you have the material good and I have the money. And then I haveto go to work again in order to reproduce more of that material good in order to sell more ofit. When you fill your car with gasoline, the oil company gets some dollars in exchange, butthen that company has to replenish their supply by drilling for more oil, refine it and transportit. In both cases there is an economic exchange of matter or energy for money, and the matterand energy clearly switch owner. You are the owner or I am the owner, but not both of us.

When I sell you a certain quantity of information at a certain price, then after the transactionyou own the information, and I have some more money, but I still have the same amount ofinformation as before the transaction: you own it, but I still own it too. I can sell thatinformation to a third person, a fourth one, etc… I did not lose the information; I can keepgoing on selling it.

In this respect one can say that information is a very special form of commodity: it can besold without the need for replenishment. And even when you ask a relatively modest price forit, you can become a very, very wealthy person like Bill Gates did with his system softwareand office products for PC’s, but also like Umberto Eco or Dan Brown with the books theyare writing, reaching millions of readers.

On the next page you find a schematic overview of this discussion. Based on this overviewone could assume that information is a third essential means of production, next to matter andenergy. So one could ask oneself the question if there exists something like “the law ofconservation of information or knowledge”. You might try to burn all books on mathematicsand science, but after a period of time the laws of mathematics and Nature will berediscovered anyhow.


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Science Economy War

Laws of conservation Means of production Who is rich? Why Means of

Matter Land, serfs Aristocracy,landlords

Territory Clubs, swords, spears, bowsand arrows

Energy Energy sources Oil sheiks,Rockefellers

Control over energyresources

Energy-powered weapons

Time

↓

E=mc²

??? ??? Information

(Knowledge)

Bill Gates Force of a worldviewupon the people

Satellites, “smart” weapons,cyber-soldiers

3.5 Ratio and information

This was already discussed in the summary above, but I repeat it here as it is so important tounderstand the implications of it. People claim to be rational – especially in the academicworld – while on the other hand they deliberately limit their scope of view for whateverreason: academic integrity, “value-free” science, reductionism and simplicity... and thefunding of their “independent academic research”

Any information processing system, be it automated or not, uses a certain logic on a set ofdata in order to come to a conclusion. Also human beings do this.

The logic that is used can be correct or wrong. Obviously, using the wrong logic will notresult in a correct conclusion. Human beings claim to be rational, especially in the academicworld, and it is rather easy to find the faults in a line of reasoning. But on the other hand wenever seem to agree on main topics in economy – even in the academic world – and politics:everybody claims to be sincere and to tell the correct things. Maybe there is more than oneratio?

But ratio is only one part of the picture. Data are as important and – unfortunately – moredifficult to control, as it is not just a question of being correct or wrong. This is rather easy toverify by controlling the facts. Next to correctness, data have another aspect: are the datacomplete or not? And is all the information we use in our logic relevant? In other words, isthere redundant information in our data set that might confuse us?

In the following table we show what the result is of a perfectly correct logic on a set of data:

Data are → ↓

Incomplete Complete Redundant

Incorrect Wrong conclusion Wrong conclusion Wrong conclusion

Correct Wrong conclusion Correct conclusion Not necessarily thecorrect conclusion, asirrelevant data mighthave obscured thecorrect conclusion.

We will only come to the correct conclusion when we use the correct logic on correct andcomplete and not redundant data. That is why in court, the witness has to tell the truth, thewhole truth and nothing but the truth.

Furthermore, deliberately telling half of the truth is worse than telling a lie, as the receivercan expose a lie by checking the facts, but he will not necessarily look for the data that wereomitted.

Written communication is, just as verbal communication, a sequential process: one cannottransfer the meaning of the message at once - as it is with visual communication - but one hasto do it word by word. One has to use a certain sequence in the things one says or writes. Thissequence is of great importance, as it can facilitate or thwart the transfer of the message,depending on how the receiver assimilates the first ideas transferred.

Good communication is not self-evident, but rather a rarity. In Appendix A we will payattention to some basic notions on information theory and the process of communication. In a


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nutshell we will give a description of this process of communication, the conditions that mustbe fulfilled in order to achieve effective transfer of information, and what can happen if theseconditions are not fulfilled. These topics have nothing to do with the real subject of this book,but we advise the reader to pay them some attention, as we will use them quite frequently inthe course of the story.

In that appendix we describe the concept of signal-space: the paradigm or the frame ofreference that determines the way a person perceives the world, what he accepts for real andwhy he sometimes is unable to grasp certain aspects of truth, as they fall outside his signal-space.

3.6 Rationality, amorality and immorality

Exact sciences, however important and admirable they might be, are still aone-sided approach of nature and reality. They focus exclusively on what canbe quantified and expressed in mathematical expressions. On the subject of“values” they have nothing to say at all. But, as a consequence of this sheerquantitative approach, a great part of reality remains hidden for humankind.This one-sidedness can have dramatic consequences, especially in the fields ofeconomy, sociology, psychology, history, study of literature, etc.

M. Wildiers, De Standaard, March 10th 1984.

From the days of Adam Smith and John Locke, economists base their theories on theassumption that the basis of all human activity is material self-interest: let everyone try tomaximize his own material welfare, and the economy will grow smoothly. Smith explicitlyremoved any notion of morality from economics, just as Locke had done with social relations.

Any attempt to impose morality on economy simply leads to violation of the“invisible hand”, which Smith asserted was a natural law that governs theeconomic process, automatically allocating capital investment, jobs, resources,and the production of goods. People could use reason to understand this law,Smith allowed, but just as human beings cannot control gravity, they cannotimprove on the invisible hand... Believing that men and women are basicallyegoists in pursuit of economic gain, Smith’s theories subordinate all humandesires to the quest for material abundance to satisfy physical needs. There areno ethical choices to be made, only utilitarian judgments exercised by eachindividual, pursuing self-interest...

The mechanical world paradigm experienced its greatest triumph in theaftermath of Charles Darwin’s publication On the Origin of Species in 1859.Darwin’s theory of biological evolution was every bit as impressive as thescientific discoveries of Newton in physics. It could well have pushed themechanical worldview off center stage and claimed hegemony for itself as acomplete new organizing principle for society. It never happened. InsteadDarwin’s theories became an appendage to the Newtonian world machine. Thefull implications of Darwin’s discoveries were never really explored. Instead,some of the more superficial trappings of his theory were immediately taken


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hold of and exploited in a way that further legitimized the mechanicalworldview.

Social philosophers like Herbert Spencer seized on Darwin’s theory of theevolution of species as a kind of proof positive of the existence of progress inthe world. Spencer and the so-called Social Darwinists turned the concept ofnatural selection into the concept of survival of the fittest. In doing so, theyprovided further support for the mechanical world view that holds that self-interest leads to increased material wellbeing, which leads to increased order.

J. Rifkin, Entropy, A New World View, pp. 23-30.

As we shall demonstrate on many occasions is this book, rationality combined with amoralityand self-interest leads to immorality. Many persons rationalize their immoral behavior withthe excuse that it is “rational”, although their actions are based on a wrong understanding ofeconomy and on premises that have been proven to be wrong. This will be elaborated in thenext chapter.

Furthermore, Darwin was and is still misunderstood by people who rationalize their immoralbehavior for their own self-interest. Darwin himself summarized his theory not as “survival ofthe fittest”. In Darwin’s own words:

“It is not the strongest that survive, nor the most intelligent, but the ones most adapted tochange”.

And change is what this book is all about, breaking with business as usual.


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4 Some strong wrong economic premises



4.1 Thomas Malthus and social Darwinism

Thomas Malthus worked in London for the central intelligence agency of the East IndiaCompany. The powerful East India Company had been chartered in England in 1600, tomonopolize all trade with the Far East and the Indies16.

Thomas Malthus kept overall figures on the world-wide activities of the company. At thattime one knew already that the Earth was not a flat plane and thus not infinitely large, but aglobe with a finite surface. He found out that while the economic production increased overthe years with an arithmetical progression (1 2 3 4...), the population increased with ageometrical progression (1 2 4 8...). Together with the evolution theory of Darwin this

16 From the daily newsletter of the Ludwig von Mises Institute that advocates the free market ideology.

In that article Murray N. Rothbard defends the practices of the East India Company. A trade monopoly!


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resulted later in the notion of the survival of the fittest and Social Darwinism: there will neverbe enough material wealth for everyone. So who cares about morality?

Malthus's views were largely developed in reaction to the optimistic views of his father andhis associates, notably Rousseau. Malthus's essay was also in response to the views of theMarquis de Condorcet. In An Essay on the Principle of Population, first published in 1798,Malthus made the famous prediction that population would outrun food supply, leading to adecrease in food per person.

He even went so far as to specifically predict that this must occur by the middle of the 19th

century, a prediction which failed for several reasons, including his use of static analysis,taking recent trends and projecting them indefinitely into the future, which often fails forcomplex systems. The advent of industrial chemistry and use of chemical fertilizers did muchto increase crop yields and food availability17.

In Malthus’s own words18:

The power of population is so superior to the power of the earth to producesubsistence for man that premature death must in some shape or other visit thehuman race. The vices of mankind are active and able ministers ofdepopulation. They are the precursors in the great army of destruction, andoften finish the dreadful work themselves. But should they fail in this war ofextermination, sickly seasons, epidemics, pestilence, and plague advance interrific array, and sweep off their thousands and tens of thousands. Shouldsuccess be still incomplete, gigantic inevitable famine stalks in the rear andwith one mighty blow levels the population with the food of the world.

Only natural causes (e.g. accidents and old age), misery (war, pestilence, andabove all famine), moral restraint and vice (which for Malthus includedinfanticide, murder, contraception and homosexuality) could check excessivepopulation growth.

Malthus favored moral restraint (including late marriage and sexualabstinence) as a check on population growth. However, it is worth noting thatMalthus proposed this only for the working and poor classes. Thus, the lowersocial classes took a great deal of responsibility for societal ills, according tohis theory. In his work An Essay on the Principle of Population, he proposedthe gradual abolition of poor laws. Essentially what this resulted in was thepromotion of legislation which degenerated the conditions of the poor inEngland, lowering their population but effectively decreasing poverty.

So according to Malthus, there would always be “haves” and “have-nots”. And according tothe Protestant moral of that time this was God’s will, and the have-nots had only themselvesto blame for their unfortunate situation, the haves were the lucky chosen ones – by GodHimself. Fact is to get complete control over the natural resources on Earth before someoneelse does.

17 From Wikipedia, the free encyclopedia.18 From Wikipedia, the free encyclopedia.


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In On Power and Ideology Noam Chomsky describes this as “The Fifth Freedom”19: thefreedom that some countries grant themselves to get complete control over the naturalresources of minerals and energy supplies of other countries, even with the use of bribing,force and coercion. In this book we will even formulate a “Sixth Freedom”: the freedom thatsome interest groups grant themselves to create money out of nothing in an illegal way inorder to finance this “Fifth Freedom”.

4.1.1 Malthusianism and colonialism

Cover of a book describing the history of the East India Company.

Take notice of the flag!

The English East India Company, founded at the beginning of the 17th century, was one of thefirst multinational companies on Earth. In the beginning, they traded with other countries andcontinents by installing trade-posts along the sailing routes to India and the Far-East. They didnot have enough gold and silver as working capital to finance their trade, so barter was used,or a certain commodity was used as intermediate medium of exchange. Shortly we will returnon this.

19 The American Constitution was designed in order to protect the people of the “new” world against its

own leaders, who might turn into despots as the monarchs of the “old” world. So four important freedoms wereexplicitly stipulated in the Constitution: freedom of speech, freedom of religion, freedom from want, andfreedom from fear.


40

The original purpose of the trade-posts was to be able to take fresh supplies of water and foodduring the long journey to India, and African slaves to the American colonies20. Also thetrading posts had to be supplied with goods for local trade. The space that became availableon the vessels was loaded with locally produced goods and slaves. With the voluntary, bribedor forced co-operation of the local chefs (warlords), plantations were created to producelocally. The estates functioned based on slave-labor and the suppression of the localpopulation or the nearby tribes. A nice example of what the real and ultimate intentions of theEIC were, is the island St Helena in the Atlantic Ocean, where later Napoleon was sent intoexile. On that island, in the 1670s, the total population was forced to work as feudal serfs inthe plantations of the EIC, or they were added as cheap recruits to the EIC’s privategarrisons21.

The local population was thus isolated from their own natural resources, and in some placeseven massacred, as they did not want to co-operate with the system. Rebellion was often theresult, so the East India Company had to impose their law and order by private militias, paidby the Company itself. And the cost of these private militias started to get so high because ofthe local rebellion, that it started to erode the profits of the Company. During the first half ofthe 19th century, the privately-owned East India Company had full control over India and theirprivate militia outnumbered the regular English army.

In 1850 the colony was transferred to the Crown: the East India Company decided to give allthe land they controlled as colonies to the state - the community, the people, however with thetacit assumption that the burdens were for the community, while the profits were still for theCompany. Young men were called in the army, paid by the community, that send them to thecolonies in order to do some “peace-keeping” and fight the local rebels. The Belgian kingLeopold II did a similar thing with Congo, which first was his private owned province. Onlyafter it became a Belgian colony, missionaries were sent. Before that it was not necessary, orthey were not welcome as Nosy Parkers.

Malthus's position as professor at the British East India Company training college, which heheld until his death, gave his theories considerable influence over Britain's administration ofIndia through most of the 19th century, continuing even under the Raj after the company'sdissolution in 185822. Malthusianism was eagerly accepted by the British power élite in orderto justify colonialism, exploitation and even extermination of those “savages”. The mostsignificant result of this influence was that the official response to India’s periodic famines,which had been occurring every decade or two for centuries, became one of not entirelybenign neglect: the famines were regarded as necessary to keep the “excess” population incheck. In some cases even private efforts to transport food into famine-stricken areas wereforbidden.

However, this “Malthusian” policy did not take account of the enormous economic damagedone by such famines through loss of human capital, collapse of credit structures and financialinstitutions, and the destruction of physical capital (especially in the form of livestock), social

20 Most Native American tribes where nomads and hunters. So they were a nuisance to the European

settlers, who did not like their crops to be destroyed by the migration of the Native Americans, who just followedthe migration of the buffaloes. Their life support – the buffaloes – and the native people were exterminated, asthey were not fitted to work as cheap labor on the farms and the buffaloes could not be domesticated. Just see thefilm Dances with Wolves. Cheap labor had to be imported from elsewhere.

21 John Keay, The Honourable company, p. 17922 The East India Company was officially dissolved in 1858, but the people who got rich by it did not

evaporate, nor did their way of thinking or their conduct! They are still the main forces in current geopoliticalaffairs. They just went underground.


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infrastructure and commercial relationships. The presumably unintended consequence wasthat production often did not recover to pre-famine levels in the affected areas for a decade ormore after each disaster, well after the lost population had been regained.

Malthusian theory also influenced British policies in Ireland during the 1840s, in which reliefmeasures during the Irish Potato Famine (1845-1849) were neglected and mass starvation wasseen as a natural and inevitable consequence of the island’s supposed over-population.

Although it is popularly assumed that Malthus’s pessimistic views gave economics thenickname “the Dismal Science”, the phrase was actually coined by the historian ThomasCarlyle in reference to laissez-faire economic theories in general23.

4.1.2 Malthusianism and imperialism

But the East India Company kept one colony for itself, as it seemed feasible to eliminate theoriginal local population completely and definitively: the United States of America. Twosmall anecdotes from Buckminster Fuller’s book Critical Path:

• The American brothers Elihu and Thomas Yale had made their personal fortune asmembers of the East India Company. Elihu donated a large amount of fortune tohis old school, then known as His Majesty’s College of Connecticut. In 1718 thegrateful trustees renamed it Yale College in his honor. Later it became YaleUniversity.

• The American flag is made with the flag of the East India Company in mind. Theflag had thirteen stripes, and the Union Jack was replaced with thirteen stars, theinitial number of states in the confederation.

Flag of the East India Company First flag of the USA, sewn by ElizabethGriscom Ross in 1776 forGeorge Washington

Buckminster Fuller wrote the following interesting lines on this important event in Americanhistory:

George Washington took command of the US. Continental Army under an elmtree in Cambridge, Massachusetts. The flag used for that occasion was the EastIndia Company’s flag, which by pure coincidence had the thirteen red andwhite stripes. Though it was only coincidence, most of those present thoughtthe thirteen red and white stripes did represent the thirteen American colonies -

23 From Wikipedia, the free encyclopedia.


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ergo, was very appropriate - but they complained about the included Britishflag’s superimposed crosses in the blue rectangle in the top corner. GeorgeWashington conferred with Betsy Ross, after which came the thirteen white,five pointed stars in the blue field with the thirteen red and white horizontalstripes. While the British government lost the 1776 war, the East IndiaCompany’s owners who constituted the invisible power structure behind theBritish government not only did not lose [the Independence War] but movedright into the new U.S.A. economy along with the latter’s most powerfullandowners.

By pure chance I happened to uncover this popular unknown episode ofAmerican history. Commissioned in 1970 by the Indian government to designnew airports in Bombay, New Delhi and Madras, I was visiting the grandpalace of the British fortress in Madras, where the English first establishedthemselves in India in 1600. There I saw a picture of Queen Elizabeth I and theflag of the East India Company of 1600 AD with its thirteen red and whitehorizontal stripes and its superimposed crosses in the upper corner. Whatastonished me was that this flag (which seemed to be the American Flag) wasapparently being used in 1600 AD, 175 years before the American Revolution.Displayed on the stairway landing wall together with the portrait of QueenElizabeth I painted on canvas, the flag was painted on the wall itself, as wasthe seal of the East India Company24…

The East India Company, whose flag I have shown to be the origin of ours (theUS flag) was a private [and monopolistic] enterprise chartered by the British.Quite clearly the East India Company didn’t lose the American Revolution.The British government lost the Revolution, and the East India Companyswiftly moved large amounts of its capital into US America.

B. Fuller, Critical Path, pp. 78, xxii-xxiii.

And of course, the Malthusian way of thinking and acting, which has been so successful tobuild the British Empire, was adopted by those in command of the United States. The bigAnglo-Saxon family fortunes in the USA were made in the China-trade. In this trade, opiumwas used as intermediate medium of exchange in order to buy tea and china-ware (porcelain)from China. The fast American clippers sailed first to the countries where poppy wascultivated, like Turkey and India, to collect the raw product or the processed opium, thensailed to China where the opium was discharged and tea and china-ware were loaded, so theycould sail back to the USA with some more respectable goods. Also cheap Chinese labor-forces were transported, as long as they were willing to pay in order to get to the land ofpromise. They were used as cheap labor force during the construction of the Wall Streetfinanced and owned railways. Apparently, trade in human beings, looking for a better way ofliving, is of all times.

The flow of opium into China started to irritate the Emperor of China, who saw his peopleslip away, so he put a ban on the import of opium. According to the original AmericanConstitution, the USA had a militia system, only aimed at self-defense. There was no standingarmy and no Navy for an offensive overseas war. So the Anglo-Saxon élite of the USA then

24 As if the Company was more permanent than the Queen. Popes, queens and kings, presidents and

politicians come and go, but the Company remains the same.


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persuaded their friends in England to start a war against China. British gunboats were sent toShanghai in order to persuade the Chinese to change their mind. The regular army of acountry was used in order to restore the trade in narcotics! The free opium trade was evenratified by the treaty of Nanjing (1842).

Japan is another fascinating example. Just as China and the Islamic world, itwas one of the most isolated societies in the world25. Between 1639 and 1854only one western ship per year was allowed to enter a Japanese harbor. Thenfollowed the famous episode of Commander M.C. Perry, who in 1854, fromthe bridge of his cruiser, forced Japan to open its harbors for western ships.The period after this event resembles the transition the countries of EasternEurope had to go through after the fall of the Berlin Wall. Between 1859 and1865 the prices in Japan rose with a factor 626! The political system wasundermined, the shogun lost his authority, and the emperor took the politicalpower in his own hand. The decision to modernize the country was takenovernight. This shock-therapy was later called the Meiji-revolution of 186827.

Daniel Cohen, Globalization and its Adversaries, p. 107.

At the onset of the 20th century Russia, was to be the new “province” of the international“free”-traders and the “free”-financiers. At that time Russia was one of the major countries inthe world without a central bank28. But the Czar of Russia very well knew what happened inChina, so he said “Njet”. He refused to open his borders for the so-called “free” internationaltrade and to install a private owned national bank.

Two American bankers, George Herbert Walker and Averell Harriman, got the idea to putsome money in the hands of a fellow named Lenin in order to back his Bolshevist revolution.William B. Thompson, director of the Federal Reserve Bank, traveled in December 1917 toRussia to donate a check of one million dollars to the Bolshevistic party! This money wasused by the Bolshevists to buy American Remington weapons. And apparently the ideaseemed to work.

The Romanov’s asked for political asylum with their cousins, the house of Hanover inEngland. But the house of Hanover came into power in England with the aid of the money ofthe Rothschild’s. So they denied their cousins the demand for political asylum. The Czar andhis family were murdered. After the First World War the House of Hanover changed theirname to the House of Windsor, their residence.

The Russian people were promised that, if they worked very hard, Russia would evolve into aheaven on earth for the laborers and the farmers. Maybe they would not see the paradisethemselves, but their children certainly would … or maybe their grandchildren.

25 From the introduction of “free trade” financed by paper money or trade in opium.26 Most likely due to the introduction of paper money.27 See the film The Last Samurai. The main purpose of the USA and European countries was to sell

weapons to Japan, weapons that were used against the Japanese traditional rural population.28 The Great War (WW I) was going on, and in order to finance its war expenditures Germany

borrowed money from the German Rothschild bank, the British borrowed money from the English Rothschildbank, and the French borrowed money from the French Rothschild bank. The Federal Reserve Bank wasestablished in the USA in 1913, just as the federal income tax. Two lobbyists in this endeavor were theEnglishman J.P. Morgan, banker but also sales agent for the weapon industry, and Paul Warburg, both workingon behalf of the Rothschild’s. See :http://www.brasschecktv.com/page/947.html


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In reality the totalitarian communist regime, with one party who controlled the politicalsystem, the economy as well as the labor-unions - striking was not allowed -, terrorized itsown population, millions of “non-adapted” persons and intellectuals were killed. Privateproperty was not allowed. There was no freedom of speech, the media were centralized andcontrolled by the communist party. The people were brainwashed. Dissident opinions orcriticism on the system were not allowed. During the period in between the First and SecondWorld War, American engineers helped the Soviets in order to build up their heavy industryproduction infrastructure, without giving much consideration to human dignity and ecology.Just read George Orwell’s Animal Farm.

But, for those who financed the project, the return was substantial, and the system seemed towork: let the people work hard for little money and promise them that, if they kept on doingthis, they would once have heaven on earth. So they looked for another country where theycould introduce that very same system in another camouflage. After the First World War,Germany was at its last gasp due to the heavy payments it had to make to the allied forceswho won the “Great War’.

A certain Prescott Bush29 - son in law of the already mentioned George Herbert Walker, andfather of. President Sr. Bush and grandfather of President Jr. Bush - together with someAnglo-American bankers, organized financial support to a small political movement inGermany headed by a fellow named Adolf Hitler30.

By the early part of the 20th century, control of the Bank of England hadpassed to Montagu Norman, a somewhat secretive man of right wingsympathies. Norman was an early supporter of the Nazi movement and soonmoved to finance Hitler's rearmament. Eric Butler tells us:

“Le Canard Enchainé” for August 1939 published the following interestingitem: “In 1933 there appeared in Holland a book, written by a certainSidney Warburg, which quickly disappeared from booksellers windows. Init the author stated that in the preceding year, 1932, he had attendedmeetings in the United States of financial gentlemen who were seekingmeans of subsidizing Hitler. It appears that among those present were SirHenry Deterding, representatives of Morgan's bank, Mr. Montagu Norman(governor of the Bank of England), and representatives of the MendelsohnBank.”

Mr. Montagu was openly in favor of supporting the new Hitler movementby 1931. By 1935 the Bank was openly pro-Nazi, as revealed even in the“Financial News” of May 15 of that year.

In “Our Crowd”, Stephen Birmingham tell us that “Sidney Warburg was apseudonym for Max Warburg, a prominent German banker and a close

29 The U.S entered World War I in 1917. In the spring of 1918, Prescott Bush’s father, Samuel P. Bush,

became chief of the Ordnance, Small Arms and Ammunition Section of the War Industries Board. Samuel Bushtook national responsibility for government assistance to and relations with Remington and other weaponscompanies. This was an unusual appointment, as Prescott’s father seemed to have no background in munitions.Samuel Bush had been president of the Buckeye Steel Castings Co. in Columbus, Ohio, makers of railcar parts.His entire career had been in the railroad business, supplying equipment to the Wall Street-owned railroadsystems.

30 See also http://www.guardian.co.uk/world/2004/sep/25/usa.secondworldwar


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friend of Hjalmar Schacht (the head of the German central bank underHitler)”.

Howard Katz, The Warmongers, pp. 77-81.

The book quickly disappeared from booksellers windows once the Nazi’s were in control. Buta copy of the book was recovered in 1982, and the financial support was indeed given toHitler:

Hitler – US-Support?

The publishing company Dormer Knar from Munched in Germany announcedthat they found a book written by the American banker Sidney Warburg. Inthat book he wrote that American bankers have donated millions of US$ toAdolf Hitler as a support for the organization of his Nazi-party. Warburg, whowas co-owner of the bank Kuhn Loeb en Co. from New York, describes thethree meetings he had with Hitler on behalf of American bankers, the Bank ofEngland and oil-companies in order to discuss the ways in which Hitler’spolitical movement could be financed.

Warburg declared that Hitler received via Kuhn Loeb 10 million dollars in1929, another 15 million dollar in 1931 and 7 million dollar when he managedto seize the power in 1933. The book was published in Holland in 1933, justbefore Warburg died, but it disappeared during the war after the translator andthe publisher were killed.

De Standaard, September 25th 1982.

And yes, it seemed to work again. Again a country with a one-party system and people whoworked hard for very little. If they did not want to collaborate, they were interned in a laborcamp or even in an extermination camp. Hadn’t Malthus said there would not be enough foreveryone? American companies made use of the slave-labor that the “prisoners” had to do.They paid a fee to the Nazi-party, who in exchange guaranteed maximum surveillance andminimum nutrition for the laborers. But the biggest part of the income was used by the Nazisfor the further development of their own power-structure and weapon industry. In England,America and other countries many of the economic and financial upper-class admired theeconomic miracle that was going on in Germany. What they did not want to see was thefollowing:


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Map of extermination camps and labor-camps in Nazi-Germany and occupied territories.

Entrance of the concentration camp Auschwitz: “Arbeit Macht Frei31”

31 Right for Labor?


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In 1986, Primo Levi, an Italian Jew and professor in chemistry, who survived exile by theItalian fascists and survived a Nazi concentration camp32, wrote the following appendix in hisbook ‘Se questo è un uomo33?’ (Is this a human being?)

The first rumors in the concentration and destruction appeared in the criticalyear 1942. The rumors were vague, but they all had the same core: they spokeabout murder on such a large scale34, with such a cruelty and such acomplicated plot, that people were inclined not to believe these rumors,because it was unimaginable. And this unimaginability was part of the initialplan of the ones behind it. Many survivors of the camps, among them SimonWiesenthal, in the last pages of his book Murders Among Us, remember thatthe SS officers very sarcastically told their prisoners: “Whatever the outcomeof this war, we have already won the war against you. Nobody of you willsurvive in order to testify, and even if a few of you do, then no one in theworld will believe this. Sure, there will be doubts, there will be investigationsby historians, but there will be no certainty, as we will destroy together withyou all the evidences. And even if somewhere a piece of evidence remains, andeven if some of you survive, still the people will say that the things you tellthem are too monstrous to be believable. They will tell that these areexaggerations from the Allied propaganda. They will believe us, we who willdeny everything, and they will not believe you. The history of theconcentration camps will be written by us”

Very strangely it was the same idea (“even if we tell them, they will notbelieve us”) that gave us (the prisoners) nightmares and fueled our despair.Almost all of the ones who survived tell or write about a dream they had whilebeing in the concentration camps, and which always returned, sometimes withslight differences in details but always with the same core: that they returnedhome and told passionately and liberated about the hardship they had enduredto somebody they loved and cared for, and that they were not believed, yes, noteven heard. In the most typical and cruelest form of the dream the other personsilently turned and walked away35.

32 He was professor in chemistry, and because of that he was allowed to assist German scientists in the

concentration camp by cleaning their experimental equipment.33 Published in English as “Survival in Auschwitz : The Nazi Assault on Humanity”34 Genocide.35 Will you silently turn and walk away?


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Cover of the Dutch version the Primo Levi’s book ‘Se questo è un uomo36?’

(Is this a human being?).

In England, America and other countries many of the economic and financial upper-classadmired the economic miracle that was going on in Nazi-Germany. The “common” people,both within and out of Germany did not know what was really going on:

36 Published in English as “Survival in Auschwitz : The Nazi Assault on Humanity”


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Hitler is the product of a grand experiment which backfired. Powerfulindustrialists37 of Britain, France, and the United States38 conspired to put theindustrial might of Germany into the hands of a “socialist” dictator and thencontrol that dictator39 [and thus the people]. A more fascinating aspect of theirplan was to have workers of Germany joined into an all-inclusive labor unionwhich would be controlled by the same dictator. Hitler, being the leader of theNazi socialist labor party, would have dual control of government policies andthe workers. The big industrialists reasoned that were they then to direct Hitlerto dictate laws conducive to tremendous profits for them, they would havesolved all of management’s biggest problems - especially the demand forhuman dignity made by laborers. The police state tactics of Hitler’s mob makelabor strikes and personal complaints a crime against the state and an affront totheir glorious leader.

Germany was to be an experiment which, if successful, was to be extendedthroughout the world. All of Germany was to be reduced to the status of anindustrial slave camp. Of the several political parties and leaders fomenting inGermany about the time of the depression, Hitler looked like the mostpromising tool to implement their plan, but they did not reckon with Hitler’spersonality. He too could see how well their plan would work, and so hedictated to go it alone for his own glory and Germany’s profit40. Hitler signedGermany’s death warrant when he prohibited the withdrawal of funds fromGermany except in very small annual amounts. This act was tantamount toconfiscation of foreign capital, and the big industrialists moved to retaliate.Now tens of millions of soldiers are trying to eliminate a man who wassupposed to be a puppet of millionaires. Who is to blame for giving power to aman of such monstrous and perverted ideas?

Don’t ever feel secure that the original idea of the big industrialists willever be discarded by future power seekers. Hitler really made the idea work,and the world will be plagued by his imitators for a long time to come. Hismethods of coming into power, his reign of terror, his confiscation of privateproperty, his denial of human rights and justice, and his ruthless consolidationof power and control over the minutiae of daily living will be the world’slegacy from Hitler and his international backers.

Eklal Kueshana, The Ultimate Frontier, p.112.

Indeed, at a certain moment Hitler – who was only chosen as a front-man as long as he wasuseful for the Anglo-Saxon captains of finance and industry – realized that the systemworked, and he decided to go for it on his own and for the glory of Germany. He had signed anon-attack pact with Stalin in order to feel safe on his eastern border. Both very well knew theins and outs of the matter: both communism and Nazism had been financed by the sameAnglo-Saxon bankers and industrialists. After the invasion of Poland, he treacherouslyattacked Russia in order to find even more “lebensraum” for the Germans eastward. And whatwas the strategy of the Anglo-Saxon élite?

37 … and bankers…38 … and not the “common” German people...39 See the film For the Remains of the Day.40 And “Lebensraum” for the German people, the Aryan race.


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In the early stages of the war, Harry Truman’s view was simple: “If we see thatGermany is winning we ought to help Russia and if Russia is winning weought to help Germany and [in] that way let them kill as many people aspossible41”, what political scientist Timothy Crawford calls a “pivotal strategy[to] prolong war”.

Noam Chomsky, Failed States, p. 122.

As already said in the quote from The Ultimate Frontier, Hitler ordained that companies couldexport their financial profits only in small amounts to the home-country - for most of thecompanies this was the USA and England. So Hitler became persona non grata for the Anglo-Saxon captains of industry and finance, he had to be removed. There was a media campaignof gigantic proportions in America in order to change the public sentiment from pro-Germanyto anti-Germany and from anti-war to pro-war. After the Japanese attack on Pearl Harbor –the highest political and military leaders of the USA very well knew in advance when andwhere the attack would take place42 – the American soldiers once more went to a war “forfreedom and democracy”.

Averell Harriman as VS-ambassador in Moscow (1943-46) with “Uncle Joe” Stalin,attending a military parade.

The facial expressions and body language speak for themselves.I wonder… who is most delighted with the state of affairs in Russia at that time…?

It is a remarkable coincidence that Averell Harriman, George Herbert Walker and granddadPrescott Bush all graduated from Yale University, and that they were members of an obscure

41 A dedicated Malthusianist. War is perfect tool to solve the supposed problem of overpopulation and

to get control of the resources of the Earth.42 This will be discussed in more detail later in this book.


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secret society, Skull and Bones43, just as dad George Bush Sr. and his son George Bush Jr.,and many other known persons in the American political and financial upper-class.

In 1903, the Yale Divinity School started a program of schools and hospitals in Shanghai, andyou may guess just once who used to work there as a young fellow. Indeed, Mao Zedong wasamong the staff. Indeed, the very same Mao Zedong, who with his “cultural” revolutionwanted to transform China into a paradise for laborers and farmers according to the well-triedrecipe of a one-party system, no private property, heavy industrialization, the elimination ofthe intelligentsia, a genocide on his own population, and to the total neglect of ecology andhuman dignity.

Picture of Prescott Bush himself and … Richard Nixon.

The facial expressions and body language speak for themselves.

The hierarchy is obvious. I just wonder…

• Who is in control?

• When this picture was made: after some initiation rite? The hat seems to be crucial,even the color seems to matter. The whiter the higher in rank? Nixon lost thepresidential elections from J.F. Kennedy. Kennedy was reluctant to escalate theVietnam war, printed silver backed dollars (more on this later)… and was shot.

43 In the film The Good Shepherd you can see how the CIA was formed out of this secret "club" of

students.


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• Where this picture was made; and who are those two other fellows and who are allthose fellows on the wall?

President Nixon and Henry Kissinger got Mao out of his isolation, and George Bush Sr. wasappointed the first ambassador in China. On the subject of Nixon, I only want to say thefollowing. After the soap-bubble burst on Wall Street in 1929 and the following GreatDepression during the 1930s, Roosevelt tried to put things back to order with his New Deal,and the financial system was strictly controlled by the government.

Investigations during the early 1930s of what had caused the crash on Wall Street in 1929 hadshown that the major financial companies were active not only in saving and loans for thepublic, pension funds, insurances, but also in speculative investments for their own account,using the deposits of their own clients. They perfectly knew the composition and the due datesof the portfolios of their private clients, the pension funds and the insurance contracts. Theyhad foreknowledge of when what contracts would end, when cash could be received and whenpayments had to be done and thus shares had to be sold in order to generate cash. They couldperfectly prepare themselves for fluctuations on the stock exchange market and anticipatethem, so the losses would be for the public and they could even make an extra profit via theirspeculative investments for their own account.

To trade on the stock exchange market with foreknowledge is considered to be illegal. Sothese investigations resulted in the “Glass–Steagall Act” of 1933, also known as the “TheBanking Act”. Due to this legislation, designed to protect the savings of the public, a bankerhad as much decision power as a postmaster over the price of post stamps: he could no longerdecide autonomously on the level of interest for loans or savings. These were dictated by thegovernment. Pension funds, which after the 1929 crash on Wall Street proved to be justhollow vessels, were allowed to invest only in government bonds with a low but securedyield44 and no longer in shares. And there was a strict separation between investment bankingactivities, commercial banking and insurance activities, as during the previous year’s bankshad used their foreknowledge in order to swindle their own clients for their own profit.

During the period of the New Deal in the mid and late 1930s, the mechanism for the creationof money was also strictly controlled: increase in the money supply was supposed to go handin hand with real economic growth. After the Second World War, the value of the majorinternational currencies was linked to the value of gold during the conference of BrettonWoods in 1944, and for many years the dollar had a rather fixed international exchange rate.This was good for international trade, as this gave industrial companies financial security andstability: they were sure what amount of money they would receive or have to pay in theirinternational trade.

Well, that mister Nixon abandoned most of these measures: in 1971 he blew up the BrettonWoods agreement, the value of the dollar was no longer tied to the value of gold. Since 1973the US$ exchange rate compared to other international currencies was no longer fixed and asystem of floating exchange rates was introduced. This has led in the subsequent years tomonetary instability in the international trade, to financial speculation and to the recurrence offinancial and economic crises, which were all fuelled by more financial deregulation underthe false pretext that the “free market is infallible”.

44 But at least the revenues went to the pension funds, the “common” people. Since 2008, the USgovernment bonds are automatically bought by the Federal Reserve, who buys them with fiat money created outof thin air. So the revenues will not go back to the American public, but to the shareholders of the FederalReserve! More on that later.


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The barriers between private banking and insurance activities were also abolished, andpension-funds were again allowed to invest in shares of private companies on the stockmarket.

On top of this, the “Glass–Steagall Act” was greatly redrawn in 1999 by the “Gramm–Leach–Bliley Act” (GLB), also known as the “Financial Services Modernization Act”. On November12th 1999 President Clinton signed this act, which allowed commercial banks, investmentbanks, securities firms and insurance companies again to consolidate, as in the period prior tothe crash on Wall Street in 1929. As you can see on the picture below, many people wereattending the signing of this Act – maybe they didn’t trust Bill and they had a rope with themto lynch him in case that “democratic son of a bitch” would refuse to sign; after all, presidentscan use their veto-right – and they all seem very enthusiastic with this stroke of a pen byPresident Clinton that had a profound impact on the history of the world. As Santayana hasformulated it: “Those who do not remember the past are condemned to relive it”.

President Clinton just signed the Gramm–Leach–Bliley Act.

In the section on The evolution of money growth and inflation, we have shown someinteresting charts concerning the purchasing power of the dollar and the inflation in theUnited States of America: after a period with a rather constant purchasing power of the dollarand zero inflation, except in times of wars, the purchasing power of the dollar has been erodedand there has been a creeping inflation ever since 1913, the year that the Federal Reservecentral banking system was introduced. This evolution was even accelerated since 1933, whenthe USA officially abandoned the gold standard, and even more after the Second World War.

Indeed, after the Second World War, the USA did not return to the militia system, as dictatedby their Constitution, but they started to act as policeman on world-level. Lacking a realenemy to fight, they declared a former ally and product of the Anglo-Saxon financial élite –the USSR – as new enemy, a threat to our freedom, values and democracy. This resulted intothe Cold War and a crazy arms race, financed by a constant erosion of the purchasing powerof the population and sky-high budget deficits in most Western countries.

As the dollar was internationally accepted as legal tender, but as a matter of fact is made bythe Federal Reserve from mere paper and ink, you can see that over the years there has been a


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creeping erosion of the purchasing power of companies and private persons to the advantageof the captains of high finance. You should check the following web-site where you can seethe shareholder structure of the Federal Reserve System.

http://www.save-a-patriot.org/files/view/whofed.html

I let you to be the sole judge of the evolution of your own pension-fund, your saving account,the market value of your home and your portfolio of shares in industrial and financialcompanies.

When George Bush Sr. – former director of the CIA and the first ambassador in China afterthe Ping-Pong diplomacy of Kissinger and Nixon – was president, one of his geopoliticalpartners, with whom he also arranged some lucrative deals, was a certain Saddam Hussein,leader of the Baath party, president of Iraq. Saddam also came to power after a revolution in1963, backed by the CIA under President Kennedy. Again the leader of a unitary state andmurderer of his own people. He was useful for the USA because of his vendetta with Iran.The ayatollahs were sitting on a big arsenal of weapons from the days of the Shah, so a warbetween Iraq and Iran was very convenient to the USA.

Here we also see the mechanism that is used to turn a former ally into an enemy when hedecides to go for it on his own. As a matter of fact, Saddam Hussein was deluded into theFirst Gulf War when he informed the American ambassador in advance that he would annexKuwait – historically a former province of Iraq, but separated from Iraq by the British becauseof its oil reserves – and the American ambassador assured him that the Americans were notinterested in that “local affair” and would not interfere.

But things turned out differently. Iraq was beaten up very badly, and imposed a ban on exportof oil, except for food and medicines. There was enough oil on the world market at that time,the prices were under pressure, so it did not harm to take one of the biggest oil producerstemporarily out off the world-market. Hadn’t the Iron Curtain fallen down and hadn’t Siberianand Caspian oil become available on the world market?

Bush Sr. allowed Saddam to stay in power. After all, he had the perfect regime, a dictatorship.Until Saddam made some errors. Making oil deals with Russia and France was acceptable, butdropping the US$ as means of payment in the oil-trade and switching to the EURO was onestep too far. So he had to be removed from the stage. And he could be removed, as anotherplayer had come on stage in order to play the role of the villain, with the approval of thehawks in the government of Bush Jr.: Osama Bin Laden and his Al Qaeda.


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In the Belgian newspaper De Morgen I once read an article about the former CIA agent GaryBernsten, who was active in Afghanistan during the “liberation” of that country. He haswritten a book about this: Jawbreaker. He writes that the CIA knew that Osama Bin Ladenwas hiding in the mountains of Tora Bora at the time of the American attack against the AlQaeda bastion, but still Osama Bin Laden could (or was allowed?) to escape. It is a knownfact that Bush Jr. did some economic deals with the bin Laden’s before he became presidentof the USA.

I could continue with stories on Mobutu and uranium in Congo, the so-called Marxistrevolution in Ethiopia in order to overthrow the emperor Haile Selassie45, president Kabila Sr.and Jr. and coltan and tin in Eastern Congo, Liberia and oil in West Africa46. But enough onthis: the mechanism is always the same.

• Financial support to a revolutionary movement in order to overthrow a regime thatdoes not agree with the trading rules that the international captains of finance andoil industry are trying to impose.

• The installation of a totalitarian regime, suppression of freedom of speech and theintelligentsia.

• People have to work very hard, but cannot accumulate personal wealth forthemselves.

• Genocide on a part of the population.

• From time to time a former dictator-friend is turned into an enemy, and a war for“freedom and democracy” is fought once more, paid by the creation of fiat moneyon which interest is due to the international captains of finance.

• After the war the borders of the countries are redrawn so that the seeds of newfuture conflicts are already sown.

I would like to remind all aspirant freedom-fighters and revolutionists all over the world alesson some Native Americans, who collaborated with the American “blue shirts” army astracker and interpreter, have learned during the colonization of their land: “White men speakwith double tongue!” They too were interned in the reservations, just as the other survivors ofthe massive genocide on the Native Americans. If you are contacted by someone who saysthat he represents an organization – be it official, secret or private – that is sympathetic toyour case, be very careful. There is no such a thing as a free lunch! You will be presented thebill later on. Just think of the Bolshevik revolutionists accepting one million dollar from thedirector of the American Federal Reserve bank, think of the Taliban in Afghanistan beingsupported by the Americans in their fight against the USSR, think of the shah of Iran anddictator Marcos of The Philippines who both died in an American military hospital when theywere supposed to get a medical treatment. Very often people tend to tell the truth before theydie, as they want to appear before the Final Judgment with a clear conscience.

We can summarize the “theory” of Thomas Malthus and the resulting Social Darwinism asfollows:

45 The revolution was led by Mengistu Haile Mariam, hundred of thousands “opponents” were

eliminated; a “labor” party was installed.46 Very often, geologists precede soldiers in a military conflict, be it an organized popular rising, a

revolution, or a so called war for freedom.


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• Resources increase at an arithmetic rate, population at a geometrical rate. So resourcesper capita decrease.

• Get control of resources of other countries.

• Reduce population.

• Wars, pogroms and genocides (women and children first!) meet both objectivesperfectly:

o Children have more years to live than adults, so they need more resources. Theyounger they die, the more resources are left for others.

o Women can bear children. Men cannot do this, they need women to procreate.

o Men can be used as slaves, cheap labor or cannon fodder.

o No problem if people get killed on both sides: more resources per capita areleft.

There is indeed a complete lack of morality with a small but very powerful part ofhumankind, a minority who organize themselves in all kind of secret societies and three-letter-word organizations, who think of themselves as “Übermenschen”, the “chosen ones”destined to be the shepherds of humankind, and who think of the rest of the world populationas “Untermenschen”, just a flock of sheep who need guidance until they are slaughtered. Overthe centuries, that minority has helped to install dictatorial and totalitarian regimes all over theworld and allows them to organize genocide on a part of their own population, and then turnsthem into their so-called enemy in order to fight a “noble” but very profitable war for valueslike “personal freedom”, “liberty” and “democracy”. And all this in combination with acomplete lack of guts with the “silent NIMBY47-majority” to stand up against all this miseryin the world and the real cause of it, as long as “it does not happen in their backyard”.

In this study we will demonstrate that there is a valid and workable alternative for this cheapand rather boring but also very cruel soap story that history really is, based on the followingwords of wisdom:

When you call yourself an Indian or a Muslim or a Christian or a European, oranything else, you are being violent. Do you see why it is violent? Because youare separating yourself from the rest of mankind. When you separate yourselfby belief, by nationality, by tradition, it breeds violence. So a man who isseeking to understand violence does not belong to any country, to any religion,to any political party or partial system; he is concerned with the totalunderstanding of mankind48.

J. Krishnamurti, Freedom from the Known, pp.51-52

I hope that the reader will bear this in mind when he studies history, reads the newspaper orwatches the news on television. Colonialism, imperialism and wars were all “rationalized”based on Thomas Malthus’s ideas and the resulting Social Darwinism. Based on Malthus’“research” and “ideology”, a human being is considered to be only economically important in

47 Not In My Back Yard.48 A ‘globalist’ in the real sense of the world. Just plain me!


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two ways: as a production factor, generating added value for the employer; and as consumer,with money to spend. The rest are considered, in the words of Henry Kissinger, as“dispensable eaters”.

4.1.3 Thomas Malthus was and is wrong.

Out of his “research” over a limited period in time, Thomas Malthus concluded that as thepopulation grows at a geometrical rate while the resources only grows at an arithmetical rate,resources per capita would decrease and scarcity would increase. There always would be afundamental inadequacy of life support on planet Earth, so only the fittest would surviveeconomically resulting in an “Us or Them” attitude.

But Thomas Malthus was right over only a short time-span. Over a longer period of time, thepopulation growth evolves according to the S-curve elaborated by the Belgian demographerPierre Francois Verhulst49 in 1838: the logistic population growth model.

In poor societies with high death rate for children and no social security or pension system, afamily needs lots of children and grandchildren in order to guarantee a comfortable old age. Inrich societies, with low death rate for children and a social security and pension system, thereis no need for a lot of children, so the birth rate declines, the population levels out, and insome rich countries even declines. Some countries even allow or stimulate immigration inorder to sustain their economic growth. And this is not just a theoretical model!

Studies have shown that with increasing material development of a society the growth-rate ofthe population declines.

Demographers have discovered that the significant pattern is a transitionbetween two levels of stable populations that has been characteristic of allWestern countries. In pre-modern societies birth rates were high, but so were

49 I am pretty sure that his name is not known by people who graduated from Eaton, Oxford,

Cambridge, Yale or WestPoint, but they all know Thomas Malthus.


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death rates, and thus the population size was stable. As living conditionsimproved during the time of the Industrial Revolution, death rates began tofall, and, with birth rates remaining high, populations increased rapidly.However, with continuing improvement of living standards, and with thedecline in death rates continuing, birth rates began to decline as well, thusreducing the rate of the population growth. The reason for this decline has nowbeen observed worldwide.

Through the interplay of social and psychological forces, the quality of life –the fulfillment of material needs, a sense of wellbeing, and confidence in thefuture – becomes a powerful and effective motivation for controllingpopulation growth. There is, in fact, a critical level of wellbeing which hasshown to lead to a rapid reduction in birth rate and an approach to a balancedpopulation. Human societies, then, have developed a self-regulating process,based on social conditions, which results in a demographic transition from abalanced population, with high birth rates and high death rates and a lowstandard of living, to a population with a higher standard of living which islarger but again in balance, and in which both birth and death rates are low.

F. Capra, The Turning Point, pp. 227-228.

Also Malthus’s conclusion that resources grow only at an arithmetic rate is wrong. Modernevolution theory shows that species are dependent on each other for their survival. Foxes eatchickens, but do not raise chickens. So more foxes leads to less chickens. But people eatchickens and raise chickens. So the more people, the more chickens!

Based on these two wrong conclusions of that time, Thomas Malthus predicted increasingtensions in the world. Half a century later, Darwin formulated his On the Origin of Speciestheory. Based on the theories of Malthus and the wrong understanding of Darwin’s theory50,among others, a basic attitude was created in the western world which could be expressed as“you or me, but not both of us together!”

Those in supreme power politically and economically as of 1980 are as yetconvinced that our planet Earth has nowhere nearly enough life support for allhumanity. All books on economy have only one basic tenet - the fundamentalscarcity of life support. The supreme political and economic powers as yetassume that it has to be either you or me. Not enough for both. That is whythose in financial advantage fortify themselves even further, reasoning thatunselfishness is suicidal. That is why the annual military expenditures by theUSSR, representing socialism, and the USA, representing private enterprise,have averaged over $ 200 billion a year for the last thirty years, doubling it lastyear to $ 400 billion - making a thus-far total of six trillion and 400 billiondollars spent in developing the ability to kill ever-more people, at ever-greaterdistances in ever-shorter time.

B. Fuller, Critical Path, pp. xxii-xxiii.

Since the days of Malthus, science and technology have evolved so drastically that with everless energy and materials more and more can be accomplished. Buckminster Fuller has given

50 “It is not the strongest that survive, nor the most intelligent, but the ones most adapted to change”.


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several examples of this evolution from the use of water over the building of houses to theproduction and distribution of electricity on a worldwide scale. He ends his discourse with thefollowing conclusion:

This clearly confirmed the reasonability of my working assumption that theaccelerated ephemeralization of science and technology might somedayaccomplish so much with so little that we could sustainingly take care of allhumanity at a higher standard of living than any ever experienced, whichwould prove the Malthusian “only you or me” doctrine to be completelyfallacious...

Neither the great political and financial structures of the world, nor thespecialization-blinded professionals, nor the population in general realize thatsum-totally the omni-engineering- integrateable, invisible revolution in themetallurgical, chemical, and electronic arts now makes it possible to do somuch more with ever fewer pounds and volumes of material, ergs of energy,and seconds of time per given technical function that it is now highly feasibleto take care of everybody on Earth at a higher standard of living than any haveever known.

In order to realize this, one has only to apply already existing technologies anduse the resources that are now wasted to make weaponry and to realize profit-for-the-few instead of creating high-quality-livingry-for-all.

It no longer has to be you or me. Selfishness is unnecessary and henceforthunrationalizable as mandated by survival. War is obsolete.

B. Fuller, Critical Path, pp. 148-149, xxv.

But still there are people who use the resources of the earth in order to improve their ownalready vast material position at the expenses of others and to strengthen their power. This isdescribed in a very lucid way by Buckminster Fuller in the chapter Legally Pigally of his lastbook Critical Path. He gives a good overview of the origin, the development, and thelegalization of the phenomenon exploitation. On this subject, we can also recommend TheWarmongers by Howard Katz and Intellectuals and the State, On Power and Ideology andFailed States by Noam Chomsky as very sharp analyses of the situation.

The Malthusian vision is assimilated so deeply in our western way of thinking, that scarcityhas been institutionalized so to speak. This is really the greatest obstacle for the “design-revolution” Fuller refers to. Indeed, scarcity means business: one can ask a higher price for ascarce good, while the prices of abundant goods are low. So the myth of scarcity must be kepthigh in order to protect the western capitalistic model. Tons of fruits and vegetables aredestroyed each year in the European common market in order to keep prices at a level. Thesupply of meat, milk, butter and wine is greater than demand, it costs the European tax-payersmillions and millions of whatever currency in order to preserve or even destroy thesesurpluses.

An electricity or oil-company is only interested in forms of energy which reach the consumerthrough a teller and which require an expensive infrastructure. Buckminster Fuller describeshow he holds several patents which could have had significant contributions to the savings ofmaterials and energy. Big business is not interested in developing these patents into products.Instead they have tried to freeze them – i.e. to take them away from all of humanity – bybuying them. The implementation of these patents would be to the advantage of the


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consumers and of humankind as a whole. But natural resources would become less scarce andthus less expensive, so profits would decline in some fields of business. In the same way weobserve that the production of long lasting goods with high quality is something of the past.Because of scarcity? No, on the contrary, because of the abundance! Well, at least in thewestern industrialized countries. The growth of the economic process must be induced in anartificial way.

Scarcity also means struggle for life and thus insecurity, which in turn is used to justify thehighly profitable weapon industry. Security is sold to the tax-payer, whose savings are erodedby inflation and high taxes due to high budget deficits. The financial effort a democracy mustimpose upon itself in order to maintain a substantial army and weapon industry can only be“sold” to the tax-payer if one can point to an external enemy, who is seeking to take away ourfreedom and our material wellbeing51. For this purpose, a former ally is sometimes turned intoan enemy, or an enemy is created out of the blue.

Buckminster Fuller, sometimes called the planet’s friendly genius, has formulated this asfollows.

Assuming that an atomic war would mean that both sides would lose – ergo itwould not occur – the USSR determined to outnumber and thus overpower theUSA in the design and the production of conventional air and sea armamentsand in the training and maintenance of a vastly greater standing army, whereafter they felt they could negotiate constructively for the establishment andmaintenance of peaceful world-around conditions.

It must be remembered that, in their 1920s-formulated, successive-multistagedfive-year industrial planning, the Russians had assumed a World War II tooccur in the early 40s, at which time it would become evident to the private-enterprise world that socialism could be successful – which private enterprisehad always said would be impossible – ergo, the private-enterprise-dominatedcountries would start a war to destroy socialism but would do it in a highlydeceptive manner by having a Nazi propaganda offensive launched against theGerman industrial cartels, which would suddenly be turned against the USSR.This is exactly what happened. The Germans first made the USSR their ally.When well into Poland and at the Russian border, the Nazis turnedtreacherously against the USSR. The entire anti-USSR strategy of the“Cliveden set” miscarried when, soon thereafter, the USSR and the USAbecame allies.

No one in the USA can understand the bitterness as yet existent in the USSRover the million of USSR troops and civilians killed by the Nazis, more than25 million persons52. The USSR could not understand the USA’s rearming ofthe Germans, with whom the USSR was much more concerned as a world WarIII enemy than with the USA as such an enemy.

The Russians had assumed in their five-year planning that when World War IIterminated, they could be able to divert all their high industrial productivitytoward advantaging all their people in order to prove that socialism couldproduce an economically desirable life-style equal to or better than provided by

51 For years, the USA controlled NATO imposed its member states an annual increase in military

expenditure of 3%, leading to higher deficits and higher profits for the military industrial companies and somebanks.

52 Malthusianism.


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capitalism. Again the Russian planning became thwarted when Westerncapitalism, which has been socialized by FDR’s New Deal, realized at thecessation of World War II that it could not carry on without the vastgovernment procurement program which is associated only by war. To copewith this situation the capitalists invented World War III, which they calledThe Cold War. The Russians queried of the US, their supposed ally, “Who areyou going to fight?” and the USA answered, “You”53.

This meant that the USSR would have to focus all its high-science-and-technology on producing armaments for decades of around-the-world coldwarring, in the conduct of which both the Russians and the USA would have toavoid direct, all-out interconfrontation. With the joining of supreme-powerswar by direct military confrontation, neither side could withdraw without all-out surrender. However, all-out intercontinental atomic war would mean theend of human life on Earth. Therefore, the USA and the USSR, in testing theirrespective strengths, would have to operate indirectly against one anotherthrough their respective puppet nations, hopefully intent on drawing forth the“secret weapons” in the other’s arsenal. Thus we have the North versus theSouth Koreans, the Vietnamese versus the Vietcong, the Israeli versus theArabs, etc…

The Russians decided early on that atomic warheads would not be usedbecause the rocket delivery times traveling at 14,000 miles per hour were suchthat with radar traveling at 700,000,000 miles per hour, both sides would knowten minutes before being struck that the enemy had fired their atomic warheads– ergo, both sides would have plenty of time to send off all their atomicwarheads, and both sides would lose. So while deceptively continuing theatomic-warhead race with the USA, the USSR committed itself realistically toproducing the strongest navy in history. The USA politicians kept the USApopulace feeling military secure because they could point out that the USAwas developing far more atomic warheads than the USSR. The USA was doingso because big oil money, which successfully lobbied Washington’s CapitolHill energy policies – knowing that petroleum would ultimately be exhausted –fostered atomic-warhead production in order to build up the atomic technologyindustry (in the development of which the US-people’s government had spentover $ 200 billion) and its nuclear scientist personnel whom they, the world-power-structure organizations, would need to employ in operating the atomic-energy plants and the electrical-distribution network as world petroleumsupplies dwindled. They would need the energy meters in order to continueexploiting the capitalist world’s energy needs.

B. Fuller, Critical Path, pp. 191-192.

53 See also Noam Chomsky, Failed States, pp.123-124: “British intelligence had also found “super-

secret appreciations of the Soviet Union as the next enemy that were circulating in Washington”. In May 1945,as the war against Germany ended, Churchill ordered war plans to be drawn up for “Operation Unthinkable”. Hisstated objective was “the elimination of Russia”, Aldrich writes… A few years after the end of World War II,British assessments began to change. By 1951, the retiring director of navel intelligence, Vice Admiral EricLongley-Cook, informed the “innermost circle [that] the stolid Russians were a force for stability in the worldsystem”, seeking to further their objective by “psychological or economic means but ‘not a general militaryoffence’”. He suggested that the “main threat to strategic stability and indeed the survival of the United Kingdomcame from America”, which is preparing for “a shooting war with the Soviet Union” from which the UnitedStates would be secure, while Britain might be destroyed.


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During the Cold War campaign in the 1950s54, the people in the Western industrializedcountries were deceived in order to justify the enormous weapon industry, which served theinterests of only certain groups in society. But inducing fear for the enemy by misleadingpropaganda was just one of the means to serve these interests. In order to develop anenormous weapon industry and to keep a large army operational one has to spend money,quite a lot of money. In a later section we will see how these “projects” has been financed.

4.2 Economic misconceptions

4.2.1 Gross National Product per capita

Scientists and academic oriented people like to quantify the phenomena they observe andstudy, to express them in numbers. In most economic studies and reports on the economy of acountry, the Gross National Product per capita is considered to be an important yardstick inorder to compare economies of countries and to evaluate their individual progress.

The Gross National Product is calculated as the sum on the annual flow of final goods andservices (prices of oranges * number of oranges) + (prices of apples * number of apples) +(prices of prams * number of prams)…

A quantity qi of a certain good or service is traded at a price pi. Then we can calculate theGNP as the sum of all the mathematical products qi * pi.

GNP = ∑ qi * pi

In order to evaluate and compare the GNP’s of different countries, one divides the total GNPby the number of people living in the country in order to get the GNP per capita. The higherthe GNP per capita, the better off the population in a country is considered. Is this true?

Let us consider two countries with the same currency, the same GNP and the same level ofpopulation. Country A has a GNP composed of high quantities qi at low prices pi and asubstantial middle class, while country B has a GNP composed of low quantities qi at highprices pi and with the wealth concentrated with a small upper class and no middle class.

According to the economic statistics, both countries are at the same economic level. But inwhat country would you like to live? In the country where goods and services are abundant atlow prices, or in the country where goods and services are scarce and expensive? I don’t thinkthe choice is that difficult to make. So what is then the value of the economic yardstick GNPper capita in order to compare the economy of the two countries?

It is also dangerous to evaluate the economic progress of a single country with this “one-dimensional” yardstick. Due to a civil war, a military coup, a natural disaster or some othercalamity, a single country may have evolved from a situation of a GNP with high quantities qi

at low prices pi, to a higher GNP but composed of lower quantities qi at higher prices pi. So

54 The film Atomic Café is a very lucid account of this period in American history!


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clearly in this case the growth of GNP per capita does not reflect the real economic evolution,as people are now worse off.

Also the division of the GNP by the number of people living in the country can obscure thereal economic situation, as it does not take into account the participation level of thepopulation into the economic process or the composition of the population, the populationpyramid. Some countries have a very young population, with relatively few elderly people tosupport; other countries have an aging population with relatively few people who areeconomically active and with relatively many elderly people to support.

I think that the Gini coefficient, a measure of “statistical dispersion” commonly used to definedegrees of inequality within a given population is a more appropriate measure than the GNPper capita in order to assess the health of the economy of a country. It is a measure ofstatistical dispersion developed by the Italian statistician Corrado Gini and published in his1912 paper "Variability and Mutability".

In Appendix C: Economy and Control System Theory we will elaborate a multidimensionalview on economy as an alternative approach to this one-dimensional GNP per capita approachin order to measure the state of the economy of a country.

4.2.2 Economic growth

In most textbooks on economy, economic growth is considered as a necessary condition inorder for the economic process to run smoothly. Growth is supposed to give more people abetter income and standard of living, due to the “trickledown effect”. But the funny and at thesame time sad thing is that the greater the economic growth is, the wider the gap between richand poor people becomes. After centuries of growth, there are still poor people, their numberis growing, their misery also. A report was published in October 2009 by the United Nation’sfood program which stated that 1.02 billion people in the world have not enough food andsuffer from malnutrition, the highest number in 40 years! Even in the industrialized countriesthe number of poor people is growing and the purchasing power of the middle class isdeclining, as the concentration of wealth with a minority of the population increases.

The economic growth was substantial during the Golden Sixties of the 20th century, which areconsidered as a period of an economic boom. As already mentioned, the output of theeconomic process is now higher than during the golden 1960s. One could think that relativegrowth is more important than the absolute level of production in determining the state ofeconomic health of society. But why is economic growth so vital? This question is seldomstated or answered in those textbooks. Economic growth is considered as something self-evident, not to be put to question. The nature of that growth – quality of life versus quantity ofconsumption – has only recently emerged as a topic worth to be discussed.

Indeed one has become aware of the fact that a lot of dangers and inconveniences forhumankind have been created by the interventions in nature by men themselves. As a result ofthe increased technical capabilities of men, actions and reactions which used to spread overhundred or more years are now concentrated in decades. This implies that the effects ofhuman activity on the environment have become more intense: more pollution, CO2 emission,global warming, more intense storms and hurricanes, more inundation’s...

Concepts like the gross national product, used to measure a nation’s wealth, can also be put toquestion, as only economic activities which can be expressed in terms of money are included


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in it: when you hit a tree with your car and you have your car repaired, then this adds up to theGNP. Other activities, like growing your own vegetables, are ignored. Taking care of older orsick persons at home is not an economic activity, while putting them into a hospital or a rest-home increases the GNP.

But if growth is really so vital to the economic process, what options for further growth do wehave? Is uninhibited growth possible, or are there limitations to what can be achieved? Whatis the nature of these limitations? Which groups have the greatest benefits when there issubstantial growth? Is zero-growth a possible option? And what are the economic and socialconsequences of zero-growth?

Moreover, what is the unit of the entity “economic growth”? We can express distance inmeters, miles, yards, inches, etc.; time can be expressed in seconds, hours, days, years, etc.;speed in kilometers per hour or meters per second; weight in kilograms, pounds, etc.;electrical current in ampere... In newspapers and economic studies, economic growth isusually expressed as a percentage. But a percentage is not a unit in itself: it merely indicates arelative change realized over a period of time (a year, a quarter of a year) with respect to theabsolute value of the GNP realized in the previous time period (expressed in currency unit:US $, EURO).

So clearly the unit of economic growth is currency unit per time unit55.

(US $ per year, EURO per year...).

Later on you will understand why I state this so explicitly.

4.2.3 Positive balance of trade

In those same textbooks on economy, a positive balance of trade is considered as favorablefor the economy of a country. Why? If a positive balance of trade is so favorable, it isreasonable to assume that every single country will try to obtain this. But is it possible forevery country to succeed in this endeavor? If not so, does it make sense to put this as anobjective? By the way, what is the meaning of national borders? In the course of history, onecan recognize a trend towards ever-larger economic entities – from the Greek polis towardsthe European Community –, while economic and political borders are pulled down. What isthe explanation for this evolution? And where will it lead us too, as the Earth is a finite globe?

On the other hand, in times of recessions, economic nationalism predominates internationalsolidarity; governments take protective measures – tariffs and quota – in order to protect theirown economy. The economic obstacles from older days are erected again. Is this to protect theemployment in their own country, or are there other motives for this reaction? In a longerperiod of recession, one can also see that nationalistic feelings emerge, making politicalintegration virtual impossible. In extreme cases the evolution towards larger economic andpolitical entities is even reversed: empires disintegrate, like the USSR.

55 In mathematical terms: Growth = d(GNP)/dt.


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Moreover, what is the unit of the entity “balance of trade”? Generally a balance of trade isexpressed in a currency unit, with the tacit assumption that it is over the period of one year.

So clearly the unit of balance of trade is currency unit per time unit, the same unit we useto measure economic growth.


4.2.4 Profit, the missing link in economics

Profit has a very important role in our economic system. In this section we will discuss theorigin of profit. We will also discuss two extreme opinions: that of a businessman and that ofa neo-Marxian economist. And we will find out that even classical economists themselveshave some difficulties with the notion of profit.

Profit according to the businessman

From a businessman’s point of view, we can describe profit as follows:

• A company realizes a turnover by marketing a certain product or service.

• In order to do this, it has fixed and variable costs.

• Turnover minus the variable costs gives us the contribution.

• Contribution minus the fixed costs gives us profit before taxes.

• Profit before taxes minus the taxes results in profit after taxes.

Of course there are a lot of tricks in order to lower the profit before taxes – and thus the taxes– by using different methods of depreciation, making certain costs tax-deductible, etc..., all ina legal way. Sometimes the laws are even adapted for this purpose in order to stimulate theeconomy. In this sense, financial cash flow is a better measure for profit than profit itself. Sowhen you read “profit” in this book think of it as “cash flow”: it is less compressible thanprofit, and it has the same unit, unit of currency per unit of time. And think of cash flow as aflux of money flowing into a company, just as a positive (negative) balance of trade can beconsidered as a flux of money flowing into (out of) the country.

Part of the turnover can be realized in the home market, another part could be realized abroad.So part of the profit can be considered as a result from turnover in the home-market, the otherpart as the result of export activity.

Wages and salaries are part of the fixed and variable costs. The profit of a company is afunction of the wages and salaries it pays. If these are increased, the profit will – apparently –decrease, and vice versa. But is this always true?

During the 1970s and early 1980s, after the Golden 1960s, the economy of most West-European countries was no longer what is used to be: the level of profit was too low, thereturn on investment was not rewarding anymore. The return on investment is the ratio


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between the profit made and the risk bearing capital invested. In particular, the profit-ratio inthose days was lower than the high interest-rate one could get from low-risk investments asgovernment-bonds or saving accounts due to the two-digit inflation of those days. So theincentive for private persons to invest in business was rather low, companies had difficultiesin finding new funds on the money market. They had to go to the bank to negotiate a loan at ahigh interest rate, which had a negative impact on the working accounts of the companies.

Countries like Belgium are dependent on export, as the home market is relatively small and alot of energy and raw materials have to be imported in order to “feed” the economic process.As the wages and salaries at that time (1980s) were too high compared to those of othercountries, it was difficult for companies to be competitive in these export markets. Peoplewere laid off as a result of the decline in turnover and production. With the help ofgovernment regulations and legislation, a policy of moderation and even reduction of wageswas pursued. Wages were no longer automatically increased when the cost of living had goneup. All these measures were aimed to consolidate or strengthen the position of the owneconomy in the international trade scene, so that, in the long run, the profit figure ofcompanies would increase, especially that part of the profit resulting from export activities.This extra profit was then supposed to be an incentive toward new investments, which in turnwould create new jobs. For the same reasons, some countries – like the USA under theReagan and Bush Sr. administration – changed their tax legislation, reducing the maximumlevel of taxation, particularly for the rich, in order to favor private business and rewardsuccessful entrepreneurs. The dilutees of society were supposed to wait until the wealth wouldhave trickled down to their level, of course in diluted form.

But on the other hand we can say that as a result of the national policies of wage control andtax reform, the real purchasing power of the majority of the population decreased while theinequality of the distribution of wealth increased, resulting in a lower level of consumption. Alot of enterprises realized fewer turnovers in their home market, so the part of the profitresulting from that turnover decreased. Facts confirm this statement: in Belgium the turnoverin retail-business for a particular month in the year went down for several years after thegovernment started their policy of wage control in the early 1980s, the real purchasing powerof the population went down with approximately 2% each year. You have to read the tablebelow from left to right in order to account for seasonal influences.

Turnover retail-business in Belgium

(index 100 = 1970)

1982 1983 1984

January 128 123 119

February 127 119 116

March 148 136 129

April 150 131 124

May 140 129 128

June 145 135 130

July 126 117 114


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In order for the economic policy to be effective, the loss in turnover (and profit) resultingfrom the lower purchasing power in the home market had to be compensated by an extraincrease of the export. Indeed, in an article in a newspaper of those days one can read that theeconomic activity, measured by the industrial production and the consumption of electricity,was increasing. But the private consumption was still declining. The economic activity wassupported solely by export and by the increase of stocks of semi-manufactured articles. Atthat time there was no indication of the expected increase in investments and employment.

But what if the extra export of goods and services is not enough to compensate for the loss inturnover in the own country? And what if the other countries are faced with the sameproblems and have decided to apply the same economic policy of moderation? Could it not bethat all employees and enterprises in all those countries suffer from reduced wages andshrinking turnover? What is it good for to try to stimulate extra investments if there is nopurchasing power, neither in the home market nor in foreign markets, to buy the products thatcould be produced with the extra production capacity? And what if there is an excess ofproduction capacity, so companies no longer need to invest?

One was well aware of this problem in most branches of industry. Already in 1978 BobStouthuyzen, former chairman of the Belgian employer’s organization VEV, warned thepoliticians “that it is absolutely necessary for private consumption to increase in order to getout of the economic crisis”. An entrepreneur does not only want to produce, he also wants tosell his products, if not abroad then on the home market.

One could indeed imagine that the economic policy of moderation and reduction of salariesand wages could lead to the crumbling off of the economic process and our materialprosperity. All these phenomena are interrelated and could lead us into a downward spiral:lower wages, lower purchasing power, lower turnover, fewer investments because of theexcess in production capacity, more unemployment, still lower wages... Where does thisprocess stop? Could it not be possible that, in the long run, this economic policy will lead usto a social Armageddon because of its short-sightedness?

What is profit? What is the origin of profit?

There seems to be a problem with profit, the money-maker that makes our capitalistic worldgo round and round. But what is profit, and how is it created? For a lot of people, not the leastfor businessmen, profit exists, has always existed, and will exist forever. To put profit toquestion is the same as putting life to question. It is a fact that we live and that profits aremade. So let us make the best of our lives and of profit. To think about it only leads to aheadache.

In this study, however, we will not be content with this point of view: we will try to find thesocial origin of profit. This will lead us to a deeper insight in the economic process so that wecan grasp the true nature of the economic crisis and thus find a way out of it.

Profit according to a neo-Marxian economist

We have discussed already how a businessman sees the origin of profit as turnover minuscosts and taxes. Even the Belgian neo-Marxian economist J.P. Van Rossem, who coulddiscuss the problem emotionally and intellectually more detached, ascribes a major role toprofit in the economic process, although he gives it another origin.


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If one likes it or not, but also in a so called mixed economy, where there isintervention in the economy by the government, profit is still the driving forceof the economic process. As long as entrepreneurs can make profit, they willcreate jobs for blue- and white-collar workers. By direct taxation of the profitsmade by the companies and the salaries earned by the employees, and byindirect taxes on consumption goods, the government acquires financial meansto run its own affairs... In a mixed economy it is perfectly feasible forcompanies to maximize profit and for government to maximize welfare, but,all things considered, the means the government needs in order to realize itsgoals are dependent on the profit made by the private companies. For thisreason I say that profit is the driving force of the economy...

How does profit occurs, where does it come from? Nobody will deny thatprofit is the difference between turnover, realized by selling products orservices, and the costs made to produce these. But this does not explain thesocial origin of profit. Next to the government, there are two parties withconflicting interests in our economic system. On the one side we find theentrepreneurs, who are the owners of the means of production and who hirelabor-force. On the other side there are the employees and laborers, who do notown any means of production, but who sell their own labor-force. As long asthe businessmen think it will yield profit, they will hire labor-force to producegoods...

There are many ways to calculate the value of the produced goods. Onemethod is to express this value in terms of the energy – mechanical or human –needed to produce these goods efficiently. So the value of a product could beexpressed in kilo-watt-hour. Usually, however, the value is expressed in thelocal currency (EURO, US $,...). The transformation from values expressed inenergy to currency is a rather complicated process56, described in the theory ofenergy-value...

The labor-force the blue- and white-collar workers sell to entrepreneurs and thegovernment is a special kind of commodity: under certain conditions it canyield profit for the one who buys it. Here also, it is possible to express thevalue of this commodity in terms of the energy, efficiently used for thereproduction of labor-force (the value of the goods the laborers and employeesbuy is a measure for the value of their labor-force). It is possible that thereexists a positive difference between the value of the goods the employeesproduce and the value of the labor-force they sell. This difference is what theeconomists call the surplus value, which, if it is realized, will be the profit forthe entrepreneur. This implies that we can divide a working day in two parts:on the one side, the laborer spends part of his energy in the reproduction of hisown labor-force he sells; on the other hand, he spends part of his energy for theproduction of surplus value, to the advantage of the employer. If then theemployer succeeds in selling the products, then he will realize the surplus valueof these products as profit.

J.P. Van Rossem, Knack, January 31 1979

56 If you cannot convince, then confuse.


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In reading this analysis, we can ask ourselves several questions:

• Is it really a fact that employees and employers have conflicting interests at alltimes?

• How is it possible that there exists a positive difference between the value ofgoods workers produce and the value of the labor they sell to the employer?

• What are the conditions in order for the employer to realize the surplus value, i.e.to succeed in selling his products?

• Does this analysis gives us a better explanation for the origin of profit than thebusinessman’s point of view, or does it just shift the problem?

As the following paradoxes illustrate, it is not so unrealistic to ask these questions.

First paradox: higher wages for employees, higher profits for the employer

In the discussion on profit seen with the eyes of a businessman, it seemed that an increase inwages and salaries for the employees would lead to lower profits for the company. Accordingto a neo-Marxian economist, employers and employees have conflicting interests. Are thesestatements correct? Statements on economy are often hypothetical and academic57. Thefollowing story, however, is a historical fact.

In 1953 my friend the late Walter Reuther, then president of the United AutoWorkers, was about to meet with the board of directors of General Motors toform a new and timely post-World-War-II labor pact. At that time the first“new-scientist”-prototyped computers were being assembled, put in runningorder, and fine-tuned by Walter Reuther’s skilled machinists. Walter had all hisfine-tuning machinists put the following problem into their computers: “Inview of the fact that most of General Motors’ workers are also its customers, ifI demand of General Motors that they grant an unheard-of wage advance plusunprecedented vacation, health, and all conceivable lifetime benefits for all ofits workers, amounting sum-totally to so many dollars, which way will GeneralMotors make the most money: by granting or refusing?” All the computerssaid, “General Motors will make the most profit by granting”.

Thus fortified, Walter Reuther made his unprecedented demands on GeneralMotors’ directors, who were elected to their position of authority only by thestockholders and who were naturally concerned only with the welfare of thosestockholders. Reuther said to the assembled General Motors board of directors:“You are going to grant these demands, not because you now favor labor(which, in fact, you consider to be your enemy), but because by so granting,General Motors will make vastly greater profits. If you will put the probleminto your new computers, you will learn that I am right.”

The directors said, “Hah-hah! You obviously have used the wrong computers,or have misstated the problem to the computers.” Soon, however, all their owncomputers told the directors that Walter was right. They granted his demands.Within three years General Motors was the first corporation in history to net a

57 Which is not always the same as scientific! More on this later on in Appendix A.


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billion-dollar profit after paying all government taxes – with their profitsincreasing steadily thereafter for twenty years.

R. Buckminster Fuller, Critical Path, p xxviii.

This may all seem rather unrealistic, but it is a true historical story. What is the underlyingreason for this, at first glance, surprising turn of events? What model was used to program thecomputer? What can a computer do more than an assembled board of directors? Could it bethat something is hidden here that could help us to solve the economic crisis in theindustrialized world? In any case, this story clearly shows us that the interests of employersand employees should not necessarily clash, and that an increase of wages for the employeesdoes not always lead to lower profits for the company.

But it is also dangerous to conclude that a huge increase in salaries for employees inindustrialized countries will rescue the economy. When the socialists gained the elections inFrance in the early 1980s, their economic policy during the first years of legislation was basedon increasing the purchasing power of the lower-end income classes by granting them higherwages and social benefits. But the result was that those people started to buy, among otherthings, video-recorders imported from Japan: the extra purchasing power was spent onproducts imported from abroad, making the trade balance negative and putting pressure on theFrench Franc.

As an intermediate conclusion, we can only state that under certain conditions an increase inwages and salaries can have a positive effect on profit for companies. These conditions willbe discussed in great detail later on in the book.

Second paradox: is a positive cash flow for one company at the expense of the rest of theworld?

The businessman thinks of profit as the difference between the turnover his company realizesand the cost involved in producing and selling products or services. Even neo-Marxianeconomists have their own more complex explanation for the origin of profit. As quotedbefore, they see profit as the result of the realization of the “surplus value”, the differencebetween the value of the products the workers produce and the value of their labor.

But let us imagine the earth we live on – or the whole universe for that matter – as one bigsystem, composed of several interacting smaller subsystems. Suppose a certain company issuch a subsystem. Then we can see the rest of the overall system – the earth or the wholeuniverse minus that one company – as the complementary subsystem. If then that onecompany makes a profit (or a positive cash flow), does this imply that the complementarysubsystem is making a loss (a negative cash flow)? We can ask ourselves the question if profitis made at the expense of others? Or is it possible that in an isolated economic system as theEarth, every single subsystem can make a profit? If so, how is this feasible? Or must we admitthat our ideas about the real origin and nature of profit are wrong? Perhaps the description ofprofit from a businessman’s point of view or even a (neo-) Marxian economist’s point of viewhave led us to the wrong perception of what profit really is and how it originates in aneconomic system larger than just one company or one country.

There are indeed also some flaws hidden in the (neo-) Marxian description of profit as a resultof surplus value. Van Rossem tells us “...a positive difference is possible...”, but how is it thata positive difference is possible after all? Let us, at least in mind, unite all enterprises-


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subsystems of the world in one big subsystem: World-Industries Inc58. On the one hand wecan say that every family man is an employee of this big company: he makes his contributionto the production of goods and services, and in return he receives a salary. On the other hand,he and his family are consumers of products and services marketed by World-Industries Inc.,and they have to pay a price for these.

The amount of money the household can spend, however, cannot be higher than the salary theemployee receives by “selling his labor-force”. OK, they could buy things on credit, but oneday they have to pay back the loan with interest, so in the long run the amount of money theycan spend cannot be greater than the salary they receive. Stated in another way: World-Industries Inc. would realize less turnover than the sum of money they paid as salary to theiremployees. And salary is just one of the cost items in a working account. How could thisWorld-Industries Inc. make a profit? Is profit possible after all? Or does one subsystem-company makes profit at the expenses of another subsystem?

Profit according to (neo-) classical economists

According to the concept of “evenly rotating economy” formulated by the economist MurrayRothbard, when everything is perfectly known by everybody, technology is stabilized, andmanagement is perfect, then the economy evolves to a stationary state and profit tends todecline to zero. Paul Samuelson has expressed the same as follows: “Suppose we lived in adream world of perfect competition, where we could read the future perfectly from the palmof our hands and where no innovations were permitted to disturb the settled routine of things.Then the economist says there would be no profit at all!”59

I do not agree with these statements. Economists try to let us believe that profit is not possiblein the first place. I have never found a positive proof of this statement in all the books andarticles that I have read on economy. So in a way it is an academic dogma, an invalid axiom.But then everybody wants to make a profit. It is like Eros and Thanatos: everybody does it butnobody wants to talk about it. But there is nothing unnatural with sex or dying, neither withprofit: they are all natural, part of life.

The question if profit is possible after all will be answered in the next chapter, where wedescribe our basic theory on the origin of profit. There we will demonstrate that profit isindeed possible without losses for other subsystems, even in a situation of perfect competitionand perfect knowledge and without need for innovations, if certain conditions are met. Wewill describe the real nature and origin of profit in a manner totally different from thebusinessman’s or the neo-Marxian or neo-classical economist’s point of view. In order to dothis, we will introduce an important agent in our description: time. In doing this, our picture ofthe economy will become dynamic instead of static.

Let us return once more to the story of the employee of World-Industries Inc. for an additionalparadox. As a good family man, who works very hard, he is able to put some money aside ona saving account. The bank pays him interest on the amount of money he has saved. Wheredoes that extra money come from? Well, the bank does not just treasure it up, it grants a loanto a person, a company – or even a country – at a higher rate it has to pay to the family father.All right, but that person or company has to pay back the loan, with interest. Where do theyget the extra money? By “making money”, you say. OK, but how is that money made? Statedin another way: how is it possible that the amount of money can increase? And how is this

58 The “nec plus ultra” of globalisation: no more competition!59 P. Samuelson, Economics, p 621.


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decided and by whom? Is it just a matter of printing money? Who is entitled to print money?And what about inflation? These questions, again, will be answered later on.

Moreover, what is the unit of the entity ‘profit’? Profit is generally expressed in a currencyunit, with the tacit assumption that it is over the period of one year.

So clearly the unit of profit is currency unit per time unit, coincidentally the same unit weuse to measure economic growth and balance of trade.


4.2.5 Active unproductivity

To stay competitive and increase the productivity per employee – or decrease the labor costper produced unit – a lot of companies have invested in automation in production and inadministration. On itself, this evolution can only be approved off: clerks and secretaries arerelieved from the burden of dull administrative routine; laborers do not have to work indangerous or unhealthy conditions anymore as robots can do their job.

One could indeed ask the question: which percentage of people working in industry andgovernment is really productive? Imagine how many people are employed in governmentdepartments, institutions and even private companies who make no or very little contributionto the production of goods and services, but who are just physically present at their work,killing time by playing social games. Paul Lafargue described this situation already in 1880very accurately as “active unproductivity”60. Indeed, is this not a form of hiddenunemployment? What is the difference between, on the one hand someone being reallyunemployed and receiving unemployment benefits, and on the other hand the unproductiveemployee receiving a salary? Would it not be better for society as a whole to let those peoplestay at home, and let them enjoy the goods and services without them making a “contribution”to the economic process61? This could result in savings in energy-consumption, transport-costs, mobility problems, cost of medication and health care... This would also lead to extraemployment in the recreation business. It would benefit the trading balance of the country as aresult of less energy consumption.

One could indeed wonder if man is destined to work62! A lot of useful and pleasant thingscould be done with the time that would become available if all companies would be re-engineered with the principles of Dr. Hammer and if robots and computers would beintroduced on a large scale and if hidden unemployment would be dissolved. Are we evolvingas Homo Sapiens from Homo Ardens toward the Homo Ludens after all? Is there a society athand in which a minimum of human effort will be needed in order to produce the necessarygoods and services and where everybody will be entitled to enjoy the abundance?

60 Paul Lafargue, The Right to be Idle.61 You may think this absurd. It is! But later we will work out a feasible alternative when we will

elaborate our Eight Days a Week solution. I am convinced the world is ready for a Fourth Wave.62 “The right for labor” was a Marxist slogan! Do you advocate Marxism?


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On the other hand, a lot of unskilled persons lose their job due to the introduction ofautomation, while there is a great demand for people with technical skills in order to design,produce, maintain, program and operate those robots and computer systems. The productivityper capita of the persons with a job increases, but the productivity of the people who have losttheir job drops to zero. So what is the effect for the society as a whole, what is theproductivity per person, irrespective of the fact that he is employed or not63? And what can wedo about all those people who are unemployed?

Is there a society at hand in which a minimum of human effort will be needed in order toproduce the necessary goods and services and where only a minority will be able to enjoy theabundance – the owners of the means of production and, in second degree, the technicalskilled persons –, while the other ones will live in a situation of permanent poverty becausethey are no longer needed in the production process: a high labor-force reserve – i.e.unemployment – keeps the wages of those who are working low. A society where the outcastwill receive only the basic necessary goods in order not to die from starvation or to start arevolution, and where the established power of the élite will be maintained by a stronginternal military force and by selling or even free distribution of intoxicating drugs64, so thatthe poor can build up their own world of fantasy (panem et circencem)? Haven’t there beenalready civilizations of this kind in the course of time? Doesn’t that make you think of GeorgeOrwell’s 1984 and Aldous Huxley’s Brave New World?

4.2.6 The economic dogma

Economy has been defined as “the social science dealing with the problem of choice in aworld with limited resources”, a world where the “factors” – land, capital, workforce, rawmaterials, energy – are scarce: “Butter or guns”.

Thomas Malthus, who as central information-gathering agent kept statistics for the East IndiaCompany, found that, as population grew with a geometrical progression while resources onlygrew with an arithmetic progression, scarcity would increase. There always would be afundamental inadequacy of life support on planet Earth, so only the fittest would surviveeconomically resulting in an “Us or Them” attitude. To my very surprise this EIC started toplay a very important role when I was compiling my study. I am even pretty sure it still existsas a company in one form or another, as the ideas of Thomas Malthus still dominate currentgeopolitical affairs.

Within this scarcity, the economic agents – individuals, companies, banks... – are supposed toaim for the maximum benefit for themselves, to act out of pure self-interest. Classicaleconomic theory, neo-classical theory, Marxist theory or neo-Marxist theory, they all startfrom these same basic assumptions.

In the classical general equilibrium theory, the law of supply and demand and the “market”take care that the price level for each product and service evolves to its optimum value. Thereis no moral judgment to make on this pure rational and morally impartial “Invisible Hand”.On the contrary, moral considerations could lead to regulations interfering with the marketmechanism and thus to a less than optimal economy.

63 I wonder… if economists have made some research on this.64 At the end of the 19th century, labourers in the textile industry in Flanders where paid part of their

wage in gin, so they could “endure” the 12 to 14 working hours 6 days a week.


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One of the ‘benefits’ in the capitalistic world is profit for the private companies. From abusinessman’s point of view, we can describe profit as follows:

• A company realizes a turnover by marketing certain products or services.

• In order to do this, it has fixed and variable costs.

• Turnover minus the variable costs gives us the contribution.

• Contribution minus the fixed costs gives us profit before taxes.

• Profit before taxes minus the taxes results in profit after taxes.

As already mentioned, there is something very strange with this profit, as according to someprominent economists themselves profit is not possible at all.

So in order to keep on making profit in the capitalistic world, where only the fittest survive,one has to set one of the following mechanisms into action, or a combination of them,resulting in a deviation from the “optimal equilibrium”. The actions are listed as “bullets” inan order that is economically irrelevant, and I am sure you are able to add a few moreyourself. In this book you will find many practical examples of these mechanisms:

• Mechanisms in order to realize the same turnover with less variable costs: increaseproductivity, more automation in order to reduce the direct labor costs and toincrease output per man-hour, layoffs; mechanisms to guarantee cheaper input ofraw materials and energy.

• Mechanisms in order to distribute the fixed costs over a greater turnover byincreasing the scale of production and by acquiring new markets.

• Mechanisms so that customers buy from you and not from your competitor:innovation, product advantage compared to the competition, advertising.

• Mechanism in order to create ever new products or variations on existing productsand to be the first one to skim the market.

• Mechanisms in order to eliminate the competition: mergers and acquisitions,regulations.

• Mechanisms in order to make the customer to buy your product over and overagain: too expensive printing cartridges, built in wear-and-tear, geneticmanipulation of planting seeds.

• Mechanism in order to force the customer to buy the product from you and youalone (monopoly, autarky).

• Mechanisms to pay less tax, or even better none at all.

• Mechanisms in order to divert costs from your account to someone else’s, or evenbetter to many others (pollution).

• Mechanisms in order to divert money from the pockets from the others into yourown pockets.

… and when all of the above mechanisms are no longer effective, in order to save the systemfrom total collapse: mechanisms to start the game all over again from the beginning (same


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players shoot again). It is obviously unnecessary to say that the mechanism that you can setinto motion depends on your “span of control”.

This us-or-them-but-not-both-together-attitude, based on the Malthusian assumptions offundamental ever-increasing scarcity and zero-profit in perfect equilibrium, has resulted in thesocioeconomic world-paradigm as we know it today. Just read the newspaper and watch thenews on television, but don’t you dare to make a moral judgment as “toute est au meilleurdans le meilleur des mondes”, to speak with Voltaire’s optimistic Candide.

Well, both assumptions are wrong. And as the mechanisms described above are based onthese wrong assumptions, they are becoming more and more irrational and immoral as yougo down the list.

If one takes a look at history, economic depressions are a result of an excess in productioncapacity, lack of turnover, lack of consumers, i.e. lack of people with economic needs andwith money to spend. The people with money to spend have already more than they need, andthey can easily reduce their level of consumption. The people with real needs do not have anymoney to spend. So, in a sense, there is scarcity, but only scarcity of consumers, not ofproducts.

Economists try to let us believe that, in the first place, profit is not possible at all without theuse of one or more of the mechanisms described above. I have never found a single positiveproof of this statement in all the books and articles that I have read on economy. So in a wayit is an academic dogma, an invalid axiom, based on the economist’s inability to explain thereal social origin of profit.

The question if profit is possible after all will be answered in this book, where we willdemonstrate that profit is indeed possible without losses for others and without using one ormore of the mechanisms listed above, even in a situation of perfect competition and perfectknowledge and without need for innovations, if certain conditions are met. We will describethe real nature and origin of profit in a totally different manner than the businessman’s or theneo-classical or the neo-Marxian economist’s point of view.

This new insight, which could and will result in a very clear understanding of the economicand political history of the world as well as the present economic, financial and politicalreality, could and will lead to a new world-paradigm. And above all it will lead us to thesolution of economic and political crises, a solution that is rational and moral at the sametime, and permanent. There is another “mechanism” that works.


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5 Basic Theory on the Origin of Profit

How wonderful that we have met with paradox. Now we have some hopeof making progress.

Niels Bohr.

In this section we will evolve a general and coherent model to describe the economic process.This model will be very simple, even suspiciously simple. However, it will allow us to explainthe economic reality in great detail: all questions and paradoxes from the previous chapter canbe answered with this model, the recurrence of economic entities and their correlation withwar will also be explained.

This argues for the validity of the model. According to Fernand Vandamme, former professorat the University of Gent, one should consider the following characteristics in order to make ageneral evaluation of a theory65:

• The systematization of the theory. The level of abstraction and the universality ofthe theory are closely related to this.

• The number of phenomena that can be explained by this theory compared to thecomplexity of the theory.

• Control: diversity of confirmation and falsification.

• Objectivity, i.e. the acceptation of the theory by experts in the field concerned.

5.1 Satisfaction of needs: Driving force of the economic process

To start with, let us consider a society that lives in isolation from other societies. You maythink this is a severe constraint. But remember, think as a cosmopolitan: isn’t the Earth anisolated system without any trade with the extraterrestrial universe? We can think of thissociety as a system, composed of several smaller subsystems interacting with each other:private persons, companies, political and social pressure groups, countries... The people livingin this society have material needs. These needs can be of individual or collective nature. Theeconomic process is supposed to fulfill these needs: raw materials, energy and human effortand creativity are combined in order to produce and distribute goods and services.

As barter proved to be inefficient66, an intermediate medium of exchange is introduced:money. This money can take several forms: pebbles, shells, cattle, metal, gold, jewels... evenpaper! Money does not need to have an intrinsic value to use or to consume it. Money, asmoney rather than a commodity, is wanted not for its own sake but for the things it will buy.

65 Fernand Vandamme, Economy and Philosophy of Science, p 81-8266 Paul Samuelson, Economics, p 274-276, Barter versus the use of money.


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A person accepts money because it is generally accepted in the society he lives in. He acceptsit because he knows – or hopes – that other persons will accept it when, later in time, he wantsto exchange it for real goods or services. It is just a matter of social convention and ofconfidence, more specific confidence in the future value of that money: that other persons stillwill accept it and that it still will have the same value. Later on in this book, we will see thatone could make – and has made – abuse of that confidence.

5.2 Profit as a consequence of growth

A student in economy has to struggle through several courses at university. They can beclassified in two fields:

• Economy, divided in macroeconomics and microeconomics. Productivity is one ofthe key words. Growth of productivity is the objective67.

• Business administration. Profit is one of the key words. Maximization of profit isthe objective.

The relation between these fields and the premises on which these theories are built are rarelydiscussed or questioned at university: how do all these theories on economy fit together, whatlaws are valid on one level but not on another, can one extrapolate from one level toanother...? Students in economy study these courses in the first place in order to be able toreproduce the material the way the professor knows it and to get a degree, not to put things toquestion. If they would do so, they would question the authority of the professor, which mightjeopardize their degree and their academic career.

5.2.1 ‘Profit for companies’ as part of ‘profit for society’

As already promised, we now introduce time in our description of the economic process. Letus assume that in the society we study, the output of the economic process at time t1 has acertain level of production: x bread, y shoes, z prams... Against this level of production, wehave an amount of money in circulation. The ratio of the amount of money in circulation tothe level of production determines the average price-level of the products and, on the otherhand, also the purchasing power of a certain amount of money.

The purchasing power of a subsystem in our society – in particular an individual person – isdetermined by the percentage of the total amount of money in circulation it can accumulate,because this determines the percentage of the total production of goods and services it canacquire.

Let us further assume that in the present stage of economic development there is not enoughproduction to fulfill all material needs. People make an effort to increase production bycombining more time, energy, raw materials and human effort and creativity in the productionof goods and services. At time t2, a period of time dt after t1, the output of the economic

67 I can recommend the article Neo-classical Micro and Macro Economics, Science or Silliness written

by Michael Albert, to be found at http://www.parecon.org/writings/neoclasseco.htm


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process has increased with a certain amount: x+dx bread, y+dy shoes, z+dz prams... areproduced.

If the amount of money in circulation cannot be changed – we almost wrote manipulated –because a certain scarce good is used as money, then the average level of prices must godown. With the same distribution of the amount of money as before, at time t1, this impliesthat at time t2 the purchasing power of every subsystem and every individual has increased:with the same amount of money they can buy more things. In particular, we can say that thepurchasing power of money that was put aside has increased: with the money saved at time t1

one can buy more goods and services at time t2 than at time t1.

If the amount of money could be adjusted, then one could keep the same average price levelby increasing the amount of money in circulation with the same rate as the level of productionhas been increased68: the growth of the economic production is then translated into a growth inthe amount of money in circulation. We can consider this increase in the amount of moneyfrom time t1 to t2 as ‘profit for the society’, realized over the time-interval [t1,t2], and thusexpressed in currency unit per time unit.

The way this increase of the money-supply or ‘profit for society’ is distributed among theseveral subsystems of the society determines the respective changes in purchasing power ofthose subsystems: profit for companies, part paid as dividends for shareholders and part asearnings retained in the business, higher wages and salaries for employees and laborers,increases in pensions, interests on savings accounts... with the restriction that the sum of allincreases in purchasing power is equal to the increase of the amount of money in circulationor the profit for the society as a whole due to increased production. Here we can see the realorigin of profit realized by companies:

Profit realized by companies is part of ‘the profit for society’, theresult of economic growth, and thus is a consequence of the growthof the economic production.

(Remember: profit and growth are both expressed in currency unit pertime unit).

This is a very important conclusion. However it is very difficult to find any trace of it ineconomic textbooks. As already stated, most economists even say that profit is not possible atall: “Suppose we lived in a dream world of perfect competition, where we could read thefuture perfectly from the palm of our hands and where no innovations were permitted todisturb the settled routine of things. Then the economist says, there would be no profit at all!”

Only after an intense research we have found a short comment on the relationship betweenprofit and economic growth in a book written by the Dutch economist J. Pen: “...the socialbenefits are a burden for profits, which are corroded already by the decline in economicgrowth”69. However, this conclusion that profit is a consequence of economic growth will playan important role in this book, especially because it will lead us to the explanation for theparadoxes and questions of the previous chapter and the solution for the economic crisis.

68 See also Ravi Batra, The Great Depression of 1990, p 83.69 J. Pen, Look, Economy, comment with the picture on p 54.


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Next to freezing the amount of money in circulation or keeping the same average level ofprices, there is also a third possibility: the amount of money in circulation could increase at ahigher rate than the economic production. We will postpone the very interesting and revealingdiscussion on this possibility until a later chapter.

5.2.2 The social purpose of profit

In the previous section we have discussed how growth of the output of the economic processleads to ‘profit for society’ as a whole. This ‘profit for society’, expressed in terms of goodsand services or in terms of money, is divided among the different subsystems in society:dividends for shareholders, earnings retained in business, higher wages and pensions, interestson savings accounts.

In periods of considerable economic growth it is very well possible that all private companiesmake a profit, that all employees and laborers receive higher salaries and wages and theretired people higher pensions, that all depositors receive interests on their savings, and thatall banks receive higher interest on loans than they have to pay on deposits. We do not have toassume imperfect competition, imperfect management, non-transparent markets andinnovations in order to justify the existence of profit, as some economists do.

Profit of a company is part of profit of society and is thus to be considered as a consequenceof economic growth. The social goal of profit is twofold:

• In the first place it is a fair reward to entrepreneurship and innovation: companiesand entrepreneurs who combine time, raw materials, energy and human effort andcreativity in an efficient way and who produce goods and services fulfilling realneeds of society and its subsystems, are rewarded with a profit. In this sense, wecan say that profit is a stimulus to avoid injudicious use of time, raw materials andenergy: inefficient companies, with high costs of production, or who are makingproducts not in demand, are punished with a low or even negative profit andeventually will go out of business. Efficient companies, on the other hand, withlow production costs or making a product in great demand, will make more profit.They will stay in business and even be able to expand their activity.

• On the other hand we can see profit as the stimulus for entrepreneurs to design,produce and market products fulfilling real needs in society. To realize this, theyhire people and they pay them a salary for their services. Employees can thenfulfill in their needs and of those depending on them by spending money, buyinggoods produced by the entrepreneurs.

Here we see a mutual dependency between employers and employees. In his last bookCritical Path, the late Buckminster Fuller has described this concept of mutual dependency as“precession”: i.e. the mutual interaction, voluntary or involuntary, among two subsystemsbelonging to a greater overall system of a higher level. B. Fuller has illustrated the conceptwith a simple metaphor: the theory of the rubber cylinder70.

70 B. Fuller, Critical Path, p 141


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Let us consider a cylinder with a rubber middle part, rigid disc ends and filled with water.When we pull the two opposite disc ends away from one another, the middle part of thecylinder contracts in a series of concentric circles of diminishing radius perpendicular to theline of our pulling. This is because the volume of the water cannot change: when the cylinderis made longer, then the middle part must contract. So the middle part and the ends of thecylinder are tied to each other by the medium water. A displacement of one of them (thediscs) results in the displacement of the other (the middle part).

So next to the result that was deliberately achieved (the pulling apart of the discs), a not-intended perpendicular side effect occurs (the contraction of the middle part). One could haveobtained the same result by doing just the opposite: by contracting the middle part, the discswould move further apart. This means that pulling the discs or contracting the middle parthave the same result. In pursuing the result, is it then important, after all, which one of bothactions has been performed: pulling the discs, contracting the middle part, or a combination ofboth?

We also notice that when we would have used a thinner medium – air or some gas – therewould have been less coupling between the displacements of the discs on the one side and thecontraction of the middle part on the other side: part of the interaction is lost in the elasticityof the medium, as air is much more compressible or expandable than water.

The reader may object: “What do cylinders filed with water or some gas have to do witheconomy. Isn’t this just a metaphor71?” Well, let us return to economy. By trying to obtainmore profit (pulling the discs apart), the employer invests and he allows more people to fulfilltheir material needs (contraction of the middle part) as he produces and sells more productsand services and pays more salaries. Could it be possible that the opposite rule is also valid, aswith the rubber cylinder? Will profit increase (discs moving further apart) when more peopleare given the means to fulfill their material needs (contracting the middle part)? I suppose yourecall the paradox from the story of General Motors that realized a higher profit after grantinghigher salaries and all kind of benefits to its employees. From that story one could assume that

71 Metaphors can trigger a metamorphosis.


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the opposite rule is indeed valid. The underlying mechanism will be explained in the nextchapter, based on the basic notion that profit is a consequence of growth, and how thedistribution of the resulting ‘profit for society’ among the several participants determinesfuture growth and thus future profits.

If we follow this line of reasoning, we could ask ourselves the question: what is the mediumin the rubber cylinder that links employers and employees? And what happens if that mediumbecomes “thinner”? Does the mutual interaction still work then? For the first question I wouldsuggest the following answer: needs for goods and services. The employers produce andmarket goods and services fulfilling needs of the society. The employees “sell their labor” tothe employers in order to receive a salary and to be able to fulfill their needs for goods andservices. The second question, on the medium becoming thinner, will be handled in greatdetail in the next chapter.

5.2.3 An idealistic view on economy

We could describe economy as a process in which time, raw materials, energy and humaneffort and creativity are combined for the production of goods and services in order to fulfillcollective and individual needs. In this process, profit is at the same time a consequence of aswell as a stimulus for growth of the economic production.

In this view, fulfillment of needs for goods and services is the driving force of the economicprocess and not profit, as was even stated by a neo-Marxian economist. However, this idealsituation is turned upside down in real life: profit, a consequence, has become a goal on itself.As we shall see later on, this shift in emphasis has caused us a lot of trouble.

5.3 Positive balance of trade

Previously, we made already the assumption of a society living in isolation from othersocieties. You may say this is not very realistic as most countries today are involved in theinternational trade scheme. We also wondered why a positive balance of trade is considered tobe good for the economy of a country. A country has a positive balance of trade when itexports more than it imports, when it produces more than it consumes so the revenues arehigher than the expenditures in its international trade. One could consider a positive balanceof trade as ‘profit for that country’ realized by its trade with other countries over a period oftime, and thus expressed in currency unit per time unit, the same unit as profit and economicgrowth.

This ‘profit for the country’ is also distributed among the country’s different participants inthe international trade, just as ‘profit for society’, as a consequence of economic growth, isdistributed among the different subsystems of society. On the other hand, we can consider anegative balance of trade as a ‘loss for the country’ in its trade with other countries.

This profit or loss for the country, resulting from its trade with other countries, accumulateswith the profit for society resulting from its internal economic growth. When the internaleconomic growth stagnates, because of saturation of the market or because the needs of theinternal subsystems with money-to-buy are saturated and the internal subsystems with real


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needs have no money-to-buy, then companies can still make a profit by exporting theirproducts to other countries.

We can conclude that ‘profit for society’ and thus also ‘profit for a company’ can beconsidered as the consequence of two factors:

• On the one side the internal economic growth and increasing consumption withinthe society.

• On the other side a positive balance of trade in the society’s trade with othercountries.

Here we see the reason why economists attribute such a great importance to a substantialgrowth rate and a positive balance of trade.

When faced with saturation of the internal market, it is obvious that countries will concentrateon the second factor in order to avoid a situation of zero-growth72: they will try to have apositive balance of trade with the other countries. In the assumption that the world is flat, andthus an infinite plane, it is perfectly feasible for every country to have a positive balance oftrade: there is no argument to contradict this. However, since several centuries we know thatthe earth we live on is a globe, and a globe has the annoying feature of being finite! The Earthas a whole is a society living in economic isolation from other societies! The finite number ofcountries on this finite globe can be divided in two classes:

• those with a positive balance of trade

• those with a negative balance of trade

The sum of the surpluses of the positive balances of trade must always be equal to the sum ofthe deficits of the negative ones. This assumes that the balances of trade of all countries arecalculated in the same way. This equilibrium is a direct consequence of the fact that our globeis finite. We stress the fact that the equilibrium between balances of trade is not static, butrather dynamic: the balance of trade of a country can show a surplus at one time and a deficitat another time. But there has to be an equilibrium between the surpluses and the deficits ofall countries at all times. It is also a fact that not all countries can have a positive balance oftrade over the same period of time.

Let us consider ourselves in this study as world citizens, free from any national preference orprejudices. So we can make abstraction of the borders between countries, this means that weconsider the earth as one great economic entity isolated from other societies.

In this view there is no trade with the outside world, so there can be no positive balance oftrade, so ‘profit for society’ and ‘profit for companies’ can only be a result of the growth ofthe world-economy.

72 We will discuss zero-growth and its implications in great detail in a next chapter.


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5.4 Conclusion

In this very important chapter we have unveiled the social origin of profit. We have discussedthat profit for a company as well as profit for society as a whole (a country or the Earth) is tobe considered as a consequence of the growth of the output of the economic process. We havelearned that fulfillment of material needs is the driving force of that economic process. Profitis at the same time the stimulus for enterprises and entrepreneurs to start this process and tokeep it running, as well as the result and the reward of it.

This point of view is quite different from that of a businessman, who thinks of profit as thedifference between turnover and costs, and also different from that of some economists, whosee profit resulting from the realization of a surplus value, in one way or another. Our point ofview, however, is not in contradiction with these two.

Our point of view embraces the other two and explains that a positive difference can existbetween turnover and costs – even when all companies are united in World Industries Inc. –,that a surplus value can be realized and that interest can be earned on a savings account. Thenecessary condition for all of this is economic growth.


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6 Direct consequences of the basic theory on the origin of profit

6.1 Evolution of the profit-ratio

We have already discussed the periodic evolution of some economic entities. We have seenthat the profit-ratio of enterprises evolves according to a saw-tooth curve: long periods ofslow decline alternate with short periods of substantial increase of the profit-ratio73. To ourregret, we have also noticed a correlation with the occurrence of war. What is the reason forthis evolution and what has war to do with profit? Once more we refer to the work of theBelgian economist Van Rossem. However, we do not agree with everything he says: ourremarks follow after his line of reasoning.

One cannot deny the fact that in the whole western economy the profit-ratio(the ratio between the realized profit and the capital invested in order to realizethat profit) has decreased steadily since World War II. This does not imply thatcompanies make less profit. It only says they have to invest more inmachinery, buildings and energy to realize the same level of profit...

Calculations show that the average profit-ratio in Belgian economy hasdecreased from 15.86% in 1953 to a level of 7.62% in 1977...

Nobody has ever maintained that the profit-ratio should decline, just as a stonedrops when it is released [see comment 1 below]. One can think of measures toincrease that profit-ratio. However, when we analyze for example the evolutionof the average profit-ratio in Germany from 1880 till 1976 (West-Germanyafter 1954), we can conclude that the profit-ratio has increased only in twoperiods of time: the first time between 1915 and 1919, the second timebetween 1941 and 1944. In other periods of time the profit-ratio has shown adeclining trend...

In the past, the profit-ratio has increased substantially only during World War Iand World War II: the enormous destruction of capital goods and infrastructurehad led to a substantial increase of the profit-ratio, as the profit-ratio is the ratiobetween profit and the invested capital [see comment 2 below]. This does notnecessarily imply that war is the only way to increase the profit-ration. Thereare other less cruel measures one can take, but these are nevertheless alsopainful. A severe decrease of wages in combination with a continuedtechnological progress could lead to a substantial increase of the profit-ratio[see comment 3 below].

J.P. Van Rossem, Knack Magazine, January 1979, p 119

73 On the stock market, longer periods of slow increases are alternated with short periods of substantial

decreases. Exact the opposite evolution.


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Comment 1

According to the concept of “evenly rotating economy” formulated by the economist MurrayRothbard, when everything is perfectly known by everybody, technology is stabilized, andmanagement is perfect, then the economy evolves to a stationary state and profit tends todecline to zero. As Van Rossem indicates, the profit-ratio has apparently the tendency todecline in times of peace. Why? The profit-ratio is the ratio between profit and investedcapital. As discussed in our basic theory on the origin of profit, we can see profit realized by acompany as part of the ‘profit for society’, which is a consequence of the growth of the outputof the economic process.

In a stable, industrious and peaceful society ever more material needs can be fulfilled by theeffort of all participants in the economic process. As the economic production grows, the realincome of the population increases and more of their material needs can be satisfied. But thisdoes not mean that the consumption will grow at the same rate as their income: as the incomelevel increases, people tend to save more74 and there is also the law of diminishing returns.

The higher savings allow for more investments. An investment is essentially the abstainingfrom direct consumption in order to provide for more consumption in the future75: money isput aside to spend it on raw materials, energy, human effort and creativity in order to producenew and better capital goods such as machinery and factories, so that productivity can beincreased and more consumption goods can be produced in the future. Increase ofproductivity in order to cut production costs is needed because prices are under pressure asmore material needs are fulfilled and the relative affluence increases, while free competitionin times of peace puts a pressure on the price level, as competitors start to market similar orthe same products at lower prices. So the supply of saved money is accepted eagerly by thebusiness community in order to increase the stock of capital goods.

As material needs become ever more fulfilled, relative growth and thus ‘profit for society’will decline. As ‘profit for society’ and thus ‘profit for private business’ decreases, and thecapital invested increases, then the profit-ratio must go down. However, if the profit-ratio hasthe tendency to decrease, from what level did it originally came from (plus infinite) and howdeep can it fall (till zero or even negative)? As Van Rossem noticed, the profit-ratio decreasesin periods of political and social stability in between wars, while it increases before, during orafter a war. This increase in times of war is explained in the next comment.

Comment 2

In a stable, industrious and peaceful society we can say that the profit-ratio has the tendencyto decrease. In order to change this pattern, we can think of several possible alternatives.

The first alternative is a war. According to Van Rossem, the profit-ratio (profit divided by thecapital invested) increases during and after a war due to the destruction of capital goods. Wethink this is correct, but incomplete. After a war, the society has returned to a high level ofmaterial needs: there is great demand for basic goods like housing, food, clothes, theinfrastructure has to be rebuild,...: there are again opportunities for economic growth withvery little competition! These opportunities for growth and thus higher profit for society leadto higher profits for private companies than during the period before the war. As there is greatdemand for products and low supply, there is no fierce competition so prices are not underpressure. Destruction of capital goods (reduced denominator) as well as the return to a high

74 P. Samuelson, Economics, Chapter on ‘Saving, Consumption and Investment’, p 20975 P. Samuelson, Economics, p 206


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level of material needs for basic products (increased numerator) results in an increase of theprofit-ratio. Unfortunately enough, war seems to be a very efficient tool to obtain this.

There is, however, a second alternative. We will introduce this alternative in comment 3 andelaborate it in the next section.

Comment 3

Van Rossem stated correctly that a world war is not the only way to bring the profit-ratio backto a higher level. But we think he is wrong when he says that other less cruel measures arealso painful and that a substantial cut in wages could result in higher profits. The latterstatement might be valid for one company (according to its working account) or for theeconomy of one country over a short period of time, but on the long run this cannot be truefor the whole world seen as one economic entity. On the contrary! To prove this statement,we repeat some already mentioned paradoxes and misconceptions about what profit really is:

• Profit, the missing link in economics, where we criticized the policy ofmoderation and wage-reductions as a possible solution for the economic crisis inthe western industrialized countries.

• First paradox, where a historical fact proved that a raise in wages for theemployees and labors of a company does not necessarily leads to lower profits forthat company.

• Second paradox, where we criticized some commonly accepted theories on thesocial origin of profit.

In the next section we will combine all these ideas and statements together with our basictheory in one thesis: distribution of profit as driving force of – or brake on – economicgrowth.

Additional remark

You may object that profit ratios in times of peace not always decline, as in the 1990s, whensome companies have published top profit-ratio figures, resulting in tremendous heaps of cashand takeovers of other companies. This is indeed the case if one looks only at individualcompanies. But if one takes into account that the purchasing power of the middle class hasbeen eroded in the last 40 year, while top multinationals manage to pay no taxes at all, we cansay that the profit-ratio of the society as a whole has the tendency to decline. Even with thisdeclining profit ratio, some entities manage to increase their profit ratio at the expense ofother entities. But this was justified based on the dogma that, after all, profit is not possible atall, so somebody has to pay the price for someone else’s profit.

6.2 Distribution of profit as driving force – or brake on – economic growth

Let us again study a particular society. Suppose that the output of the economic process isgrowing: ever more material needs of ever more people in that society are fulfilled. Over aperiod of one year the growth has a certain level: the increase in the volume of goods andservices produced. This increase corresponds with the profit for society or the total increase inpurchasing power.


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This profit for society is divided among the different subsystems in our society: dividends forshare-holders, retained earnings for companies, increased wages for employees, higherpensions and social payments, interests on savings accounts, etc. The several subsystems insociety see their purchasing power increased according to the percentage of the total profit forsociety they are assigned or they can acquire.

An increase in purchasing power of a subsystem whose material needs are already fulfilled tosome degree – compared to other subsystems – will induce only a small or even no increase inconsumption expenditure of that subsystem. On the contrary, that subsystem will save themajor part of the extra purchasing power it has acquired. It will invest the saved money byplacing it on a savings account or by acquiring government bonds – i.e.: low risk investments– or it will invest directly or indirectly in private companies – i.e.: risk-bearing capital.Depending on the level of the expected profit-ratio, which reflects the return on risk-bearingcapital, compared to the interest of the low-risk investments, one will decide to invest inshares or in government bonds. Investments in shares lead to growth in capital goods (officebuildings, factories, machinery,...), while investments in government bonds lead to growth inpublic goods and services (roads, bridges, defense industry,...). Both can give a contributionto future economic growth.

However, if the private consumption does not increase, then the ever increasing stock ofcapital goods will be used far below its maximum capacity, so demand for new capital goodswill also drop and economic growth will slow down. The profit ratio will decrease. Toillustrate this, we refer to an interview with the economist Ernest Mandel, former professor atthe University of Brussels76: “These reasons together indicate how difficult it is to solve theeconomic crisis. Everything one does to expand the market and to increase the purchasingpower of the population undermines the profit of the companies. And everything one tries toimprove the profit-ratio of the companies undermines the purchasing power and thus the salespotential. To solve both problems simultaneously seems to be very difficult and it will take along time.”

We are surely not so pessimistic as professor Mandel when he says that it will be extremelydifficult and will take a long time to solve both problems of over-production and low profit-ratio at the same time. Indeed, an increase of the purchasing power of a subsystem in society,whose basic material needs are far from fulfilled, leads to an immediate increase ofconsumption expenditure: that subsystem will spend the total increase of its purchasing powerto buy goods and services. If this happens in a situation where the production capacity is notused at full capacity, then the output of the economic process can increase without need fornew investments. So it is perfectly feasible that a substantial increase in purchasing power ofa subsystem with great material needs will lead to an increase of turnover and thus to a higherprofit for society and thus to higher profits for private companies in absolute terms. As thelevel of capital goods does not have to increase, this means that the profit-ratio will increase!On the one hand we have stimulated the direct consumption and the economic growth; on theother hand we did not have to do additional investments to increase the production capacity.

Here we have found the explanation for the paradox that higher wages for employees andlaborers not necessarily imply lower profits for employers and companies, but actually canlead to higher profits. The board of directors of General Motors had three alternatives:

• It could divide the total profit of that year among the shareholders as dividend.

76 Interview with E. Mandel in Knack, March 14th 1984.


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• It could decide to pay no dividend but to invest the retained earnings in extraproduction capacity.

• It could grant the demands of the union.

The shareholders already drove a car, and probably would not spend the extra money theyreceived as dividend to buy another car, and surely not a GM car but rather a Bentley or aRolls Royce. An increase of the production capacity did not make sense, as there was alreadycapacity in excess. By granting the demands of the union and because they had set an exampleto other companies in the region of Detroit and all over the USA, GM had created a largemarket in their own country by increasing the purchasing power of the employees and thelaborers. They had induced possibilities for future increase in turnover and profit for the nexttwenty years.

As Lester Thurow says in the foreword to The Great Depression of 1990, written by RaviBatra: “Essentially the economic process is like that of the wolf and the caribou. If the wolveseat all the caribou’s, the wolves also vanish. Conversely, if the wolves vanish, the caribous fora time multiply but eventually their numbers become too great and they die for lack of food.Producers need consumers and if producers deprive workers of their fair share of productionincome they essentially deprive themselves of the affluent consumers they need to make theirfacilities profitable.”

The reader who is familiar with control systems theory will recognize in this discussion theconcept of feedback. By returning the output of a process in one way or another back to theinput of that very same process, one creates a mechanism to control the system. By feedbackof the profit for society – a result or output of the economic process – as changes inpurchasing power to the several subsystems in society, a change in the consumption andspending pattern of society and its subsystems is induced – input of the same economicprocess. This affects the very structure of the economic process itself and the future growthand profit for society. This feedback mechanism has a quantitative effect (the size of thegrowth) as well as a qualitative effect (the nature of the growth: what kind of products andservices will be in greater demand).

Growth is considered by economists to be closely related to the transformation of the structureof the economy: in their view growth only occurs under the impulse of ever new changes inthe structure of the economy, i.e. under the impulse of changes in the consumption pattern ofthe population, changes in the organization of the branches in industry and changes intechnology. On the other hand we can say that this transformation of structure is not anautonomous process and that it is not only determined by technological progress. Wheneconomic growth leads to an increase of the income per capita, then we can see significantshifts in the demand for several kinds of products. When the income increases, the demand forsome products increases more than the demand for other products.

We know from control systems theory that an injudicious feedback policy could make aprocess unstable. This instability is manifested by increasing and, in the long run, excessiveoscillations, which ultimately will lead to the breakdown of the system. If one knows thedynamics of the system by means of its state-variables and systems-equations, then it istheoretically possible for a certain subset of systems to find the best feedback policy in orderto bring and keep the system to a certain state one has set as a goal. If however the dynamicsof the system are not completely known, then one can still use heuristic rules. These are rulesof thumb, not based on a complete and correct understanding of the system, but on partial


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knowledge, experience, common sense, intuition... Under certain circumstances, which areoften not explicitly known, they can lead to a result that is acceptable.

Based on our discussion on the effect of the distribution of profit on future growth, we couldformulate the following two heuristic rules to control the economic process:

• Rule 1: If the stock of capital goods is used at full capacity or close to that, thenwe can induce investments by granting most of the profit for society to companiesand shareholders (E.g. reduced taxes on profit or, even better, financial support forinvestments). The new investments will lead to an increase in production capacityand jobs and, in time, to an increase of the consumption for the whole society. Toinvest is to abstain from immediate consumption in order to be able to consumemore later in time.

• Rule 2: If the stock of capital goods is used at a level substantially below itsmaximum capacity, then we stimulate consumption by granting most of the ‘profitfor society’ to those whose material needs are far from fulfilled. E.g. reduced taxeson lower wages, higher taxes on profit or a higher capital gains tax. The increase inconsumption will lead to economic growth and more profit without having toinvest in additional capital goods. The existing stock of capital goods will be usedmore efficiently and the profit-ratio will increase.

According to the conditions of the time being, we apply Rule 1 or Rule 2. The reader familiarwith economy will recognize great similarities between these rules and the principle ofKeynes, although they are not identical.

Keynes observed that businesses perform a two-pronged function: as producersthey supply goods, but they also pay incomes to households in the form awages, rents, interests, and profits. The households in turn spend money to buygoods from businessmen. There is thus a circular flow, with incomes flowingfrom producers to consumers and then from consumers back to producers. Aslong as businessmen can sell all their goods at a reasonable profit, this circularprocess continues uninterrupted. But several hitches may arise. A part of anindividual’s income is saved and deposited with financial institutions, a part istaken away by government in the form of taxes, and a part spent on foreigngoods in the form of imports. These are what we may call leakages from thetotal expenditure, and they tend to keep aggregate demand for goods short ofthe aggregate supply. Counterbalancing these leakages are the three injectionsto total expenditures – business borrowing for investment, governmentspending, and exports. If the leakages are matched by injections, total spendingmatches the total value of goods produced, and the economy may be said to bein equilibrium, that is, it has no tendency to move up or down. If the leakagesexceed injections, aggregate demand falls short of aggregate supply and somegoods remain unsold, so that businessmen are forced to trim production andhence their employment of labor; in the opposite case of the injectionsexceeding leakages, production and hence employment tend to rise.

This, in simple terms, is the well-known Keynesian process of national incomedetermination. In this system aggregate demand plays an active role andaggregate supply a passive role in the sense that the latter converges to theformer. High national income and hence high employment call for highaggregate demand. The corollary is unmistakably clear: during years of low


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demand, the economy suffers from high unemployment and hence recessionsor depressions. The policy prescription is also unmistakably clear: in order tocure unemployment, the government should step in and raise aggregatespending in the economy by means of fiscal and monetary policies.

Fiscal policies involve the weighing of government expenditure versus taxreceipts. During a depression, fiscal policy calls for a budget deficit, i.e. forgovernment expenditure to exceed tax revenue; but with inflation, the cure laysin a budget surplus.

Monetary policy, by contrast, affects the economy indirectly – through itseffects on business investment. Keynes argued that monetary expansionencourages investments, while a contraction discourages it. Hence during adepression, the monetary policy has to be expansionary, but during inflation,contractional.

Keynesian economics is thus the antithesis of the neoclassical ideology, for thegovernment is now cast in the role of a constant watchdog indispensable tocontinued prosperity. The appeal of Keynesian theory lay in the fact that notonly did it properly diagnose the economic ills, but it also advocated policieswithin the reach of governments.

Ravi Batra, The Great Depression of 1990, p 80-82

Here we also recognize the principle of feedback: the government uses its income (taxes, aresult of the economic process) as input to that same economic process. The rules we havesuggested however are of a more general nature: it is not only the consumption pattern of thegovernment that can influence future economic growth, but of all subsystems in the economicprocess.

The heuristic rules of Keynes have been applied with great success after World War II incountries with a mixed economy. Indeed, the substantial economic growth after the war cannot only be considered as a post-war recovery. Most western countries adapted a system ofmixed economy in which government had an active role and thus created a dynamic growthpattern based on the principles of Keynes. The prime objective of the governments was tocreate full employment and to stimulate material prosperity for all. They installed all kinds ofsystems to redistribute and equalize incomes, they took fiscal and monetary measures tostimulate or slow down the economy in order to level out the normal business cycles ofbooms and recessions. Private business accepted the social policy of redistribution and thelabor unions accepted the policy to invest in new technologies to improve productivity. Theactions of both groups together with government spending converged into the accelerateddynamic growth during the 1950s and especially the 1960s77.

But the government spending had a side effect. If taxes were not sufficient to finance thepublic investments, the social programs and the defense programs, a lot of governmentsstarted deficit-spending: they loaned money on the money market. The banking industry waseager to take these loans at a higher rate than they had to pay their depositors. Politicians werenot thinking further then their next re-election and they liked to play Santa Claus to theirvoters. Banks were making money with these loans, and industry and labor unions were

77 H. Van Der Wee, The Broken Circle of Affluence, p 30-32


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happy with the government spending. So since the 1970s most industrialized countries arefaced with very high accumulated budget deficits.

Since the mid 1970s, the application of the principles of Keynes did not yield the expectedresults anymore78 and the theory of Keynes has been criticized by many distinguishedeconomists. How does it come that these rules, once very effective, no longer seem to work?When using heuristic rules, or when the dynamics of a system are not completely known, oneshould keep in mind that these rules can only be applied successfully within certainboundaries, not necessarily known to us.

In the first place, disturbances affect the normal functioning of a system. The consequences ofthese disturbances are not always predictable. Small disturbances can usually be neglected, astheir impact on the system is much smaller than the control policy applied to the system.Large disturbances, however, could have a severe “corruptive” impact on the dynamics of thesystem.

In the second place, some state variables could undergo such a great change that they go intosaturation, i.e. they reach their limit value. As a consequence of this, the system does nolonger obey to the same rules anymore, its dynamics have changed, non-linearities mightoccur.

In both cases we can say that the application of the known heuristics will not result in theexpected objective, but on the contrary might even lead to an end-result opposite to thedesired result or even worse to the breakdown of the system.

So we only have to find out which “corruptive” disturbances affect the economic system andwhere saturation did occur. This is the subject of a later chapter. But first we will examinesome characteristic features of an economy with zero-growth.

6.3 Zero-growth and its consequences

When we study the evolution of economy in Western Europe, one of the most strikingphenomena is the emergence of industry, which led to the end of the Ancien Régime and thestart of a period of substantial economic growth known as the Industrial Revolution79. Whatwas the cause for this undoubtedly most important caesura in the pattern of social andeconomic development? A lot of books have been written on this subject, with all kinds ofexplanations and causal relations between phenomena. One can easily get lost in this maze ofintellectual effort. A striking evaluation of this plodding in historical research was made byAlvin Toffler in his book The Third Wave: “Now, three hundred years later, historians are stillunable to pinpoint the cause of the Industrial Revolution”. In this section we will make amodest attempt to find a single and simple explanation for the sudden occurrence of economicgrowth after a long period of quasi zero-growth. We will do this with our basic theory on theorigin of profit at hand.

In this basic theory we have given an idealized definition of the economic process: time, rawmaterials, energy and human effort and creativity are combined in order to produce goods andservices in order to fulfill collective and individual needs in society. The satisfaction of needsis the driving force in this process, the “medium in the rubber cylinder”. When the existing

78 R. Batra, The Great Depression of 1990, p 7279 C. Vandenbroeke, Purchasing Power in Flanders, p 56


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needs are satisfied and no longer grow, because of stabilization in the population and becausethe people are satisfied with what they have – saturation of an internal state-variable of thesystem – then we have an economy with zero-growth: the output of the economic processstagnates. This situation can also occur when raw materials, energy or creativity, the means toproduce goods and services, are lacking – saturation of input variables to the system – orwhen the economic process brings so much pollution or social inharmonies with it that furthereconomic growth is undesirable or even impossible – saturation of output variables,disturbances.

Another cause for zero-growth could be oppression and exploitation: oppressed people areless motivated to work harder or to produce more than necessary, as they cannot enjoy thefruits of their own labor. Any surplus they produce is taken away from them by the oppressingclass or system. Civilizations and societies with zero-growth have existed before, e.g. greatparts of Europe during the Middle Ages and the Ancien Régime, and still do exist. Think ofsome “primitive” tribes in Africa, Asia and South-America, whose main objective is topreserve the Earth for future generations.

As we start from the assumption that there is no economic growth, then according to our basictheory there is no profit for society: at a certain moment in time it is not possible to fulfillmore needs than before. A population could adapt this situation by free will – e.g. if theychoose to work for a living and not to live for working – or zero-growth could be imposedupon them in one way or another by the political system. In that society we suppose a systemof trade with money as a medium of interchange. We assume the total amount of money incirculation as fixed, and thus a stable average price-level. When certain people produce morethan necessary to fulfill their own immediate needs they can keep their surplus instead ofconsuming it. They can keep their surplus in the form of goods or money, they save. At a latermoment in time they can consume or exchange the goods they saved or spend their savedmoney. But those saved goods and that saved money have kept the same value as when theywere put aside! In particular we can say that the purchasing value of the saved money has notincreased: in a zero-growth economy money cannot create money! Indeed, during the MiddleAges people secured their money (gold, silver) by depositing it with a goldsmith and they hadto pay for that service: they paid for the security against theft. In our days, we receive intereston our saved money as the banks manage to make money with our money.

Societies who have lived in a state of zero-growth since ancient times and have only recentlycome into contact with the western banking system have great difficulties in understandinghow one can create money with money. Buckminster Fuller has illustrated this as follows:“None of these water-people understand the western world’s banking and credit-financedbusiness. As a consequence four Chinese families run all the banking businesses of Java andSumatra and Indonesia in general. These Southeast Asians say the banker cannot lend themthe wind before the wind blows”80.

In our society with zero-economic-growth, people can provide in their living in several ways:

• By producing themselves everything they need: food, clothes, housing...

• By having a more or less specialized contribution in the economic process andexchanging it for goods produced by others or for money, so they can pay for thespecialized contribution of someone else.

• By receiving money or goods from others if they make no active contribution tothe economic process themselves: others yield part of their income because of

80 B. Fuller, Critical Path, p 13-15.


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solidarity (for the elder, the sick, the handicapped...), because of credulity (for theclergy...) or because they are forced by law or coercion (aristocracy, thieves,taxes...)

A certain subsystem in our society with zero-growth can increase its purchasing power in twopossible ways:

• In a justified way, by making a greater contribution in the total production ofgoods and services.

• In an illegitimate way: by undermining or diverting the purchasing power of othersubsystems. In a later chapter we will discuss in great detail how this can be done,how certain people manage to get hold of the wealth of the “common people”.

As long as it is possible for certain groups in a zero-growth society to acquire morepurchasing power at the expense of others – by abuse of power or by the credulity of thepeople – then there is no stimulus for growth, even if the major part of the population lives inpermanent need for basic goods. Those of the ruling class have enough to fulfill their needsand to secure their privileged position. The oppressed ones have no defense: they can onlyendure the situation submissively. Think of the serfs in the early Middle Ages and the peoplein most of the Third World countries and developing countries now.

However, such a situation cannot last forever; no single group can exercise social supremacyforever. Tensions occur between the different subsystems in society, and these will eventuallylead to a new social order. This transition can evolve peacefully in a controlled way, or takethe form of a violent revolution (installation of parliamentary democracy in England, FrenchRevolution, the Independence War...). After such a social transformation we see that therights of the oppressors are restricted and that those of the oppressed ones are improved: thenew social order is consolidated by means of new regulations and laws (Magna Charta, CodeCivil, the American Constitution ...).

Those who provided in their living by withdrawing purchasing power from other subsystemsare then faced with a difficult choice:

• They can live from their capital, if they still have any left after the period of socialtransition. But this means that, on the long term, they are cutting the branch theyare sitting on.

• They can make their own contribution to the economic process. But how does onespell the word “work” (shiver-shiver)?

• They can try to live from the support given to them voluntarily by others whomake their own contribution to the economic process. But this is a rather uncertainoption considering their way of living in the past.

So, suddenly the situation of zero-growth does no longer seem to be so interesting anymorefor this group of people. But as the society is organized a little bit more righteously and the“poor subsystems” do no longer have to yield so much purchasing power to the “parasiticsubsystems”, a quantitative and qualitative change in consumption pattern occurs resulting ingrowth of the demand: a larger market is created. Initially the economic process is notprepared for this change, but by investments in production means it is possible to adapt the


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system to the new level of demand. Who can provide the means to make these investments?Here lays an opportunity for those who were able to rescue part of their savings and who hateworking themselves. By investing indirectly (lending money to others) or directly (starting abusiness) in means of production and by hiring people to work for them, they stimulate theconsumption and the economic growth, so profit for society and thus profit for enterprisescan be realized.

This profit for society is divided among the different participants in the economic process, sothe “capitalists” can make money out of money and the “proletarians” can acquire the meansto fulfill in more of their material needs. Again we see here the principle of the rubbercylinder: the interests of the former oppressors and oppressed ones are in essence the same,although they are unaware of it.

This process of mutual dependency runs smoothly as long as the economic needs, the mediumthat ties them together, are not satisfied. But what happens if those needs are more and morefulfilled, i.e. the medium in the cylinder becomes thinner, or if those who have still basicneeds are kept out of the economic process and cannot acquire any purchasing power? Willwe then not slip back to a situation of zero-growth with all its consequences for profit? And isit possible to avoid such a regression? These problems will be discussed in great detail in theremainder of this book. We can end this section with a conclusion:

The Industrial Revolution, characterized by its economic growth, and the birth of capitalism,have evolved out of the Ancien Régime as a result of the emerging democracy.

Stated in a more general way: more democracy leads to more material prosperity for morepeople.

Most historians are convinced that economic and social evolution are a consequence ofscientific and technical innovations: the plough and the horse-collar led to the expansion ofagriculture in the Middle Ages, the steam-engine was the basis for the Industrial Revolution.We think, however, that these discoveries and innovations and their practical use on a largerscale are themselves consequences of growing expectations of the people in times of socialand political (r)evolutions. Technological innovation is only an intermediate agent in thisprocess. Necessity is the driving force of creativity.

Some researchers, such as W.W. Rostow81 have stressed the correlation between increasingmaterial prosperity and the establishment of democracy. I agree with this statement, but Iwould even dare to say that more democracy is the cause; more material prosperity for morepeople is the consequence.

Later we will discuss some other interesting results of the emergence of real democracy... andhow certain people have found new ways to bypass democracy in order to divert purchasingpower from other people into their own pockets. It will show to be, in the words ofBuckminster Fuller, “really legally, but very piggily”.

81 W.W. Rostow, Stages of Economic Growth.


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Post Scriptum I.

In his book Globalization and its Adversaries, Daniel Cohen notices in a “rational” and“amoral way” that colonizators who succeeded in exterminating the local population alsosucceeded in creating affluent societies: the USA, Canada, Australia, New Zealand… while inthe colonies where they did not succeed in the complete extermination [sic], the economy hasfailed: South Africa, Congo, India, Indonesia, Latin America…

Mr. Cohen, I do not know if you will ever read this book, but the latter countries didn’t fail tocreate affluent societies because their native population was not completely exterminated, butbecause their native population was never allowed to become an equal partner in theeconomic process, there was no democracy, most of them were considered as dispensableeaters82! They were used as cheap labor force, without any purchasing power, so they couldnot contribute to internal economic growth, only to the export of basic products like cottonand rubber to the rich countries. So ‘profit for society’ and ‘profit for business’ was dependanton the international markets controlled by the “Commonwealth” of the British Empire andlater by the American Empire! Can’t you see this? It is not a matter of completeextermination, but of granting economic and political rights to the local people! Moredemocracy leads to more material prosperity for more people. Using the local people ascheap labor and depriving them from a fair income is, on the long run, contra-productive: thecountry’s economic growth and thus the profit of companies depended solely on the export, asthere was no growth of internal consumption.

Post Scriptum II:

In Noam Chomsky’s book Failed States (p. 215-216) we can read the following lines:“Ferguson and Rogers were describing early effects of the powerful coordinated backlashagainst the “crisis of democracy” of the 1960s that deeply concerned the TrilateralCommission, which coined the phrase. The commission consisted of prominent liberalinternationalists from the three major industrial regions: North America, Europe, and Japan.The general perspective is illustrated by the fact that the Carter administration was mostlydrawn from their ranks. The worrisome crisis under discussion was that the 1960s had givenrise to what they called “an excess of democracy”: normally passive and marginalized sectors– women, youth, elderly, labor, minorities, and other parts of the underlying population –began to enter the political area to press their demands. The “crisis of democracy” wasregarded as even more dangerous by the components of the élite spectrum to the right of thecommission and by the business world in general. The “excess of democracy” threatened tointerfere with the well functioning system of earlier years, when “Truman83 had been able togovern the country with the cooperation of a relatively small number of Wall Street lawyersand bankers.”

After October 2008, we all know the consequences of this “cooperation of a relatively smallnumber of Wall Street lawyers and bankers” to the Bush administration. Wouldn’t it be betterto exterminate “dispensable lawyers, bankers, intellectuals, consultants, economists andpoliticians” for the “general good” of all humankind?

I really think an “an excess of democracy” is vital to the survival of humankind on thisSpaceship Earth.

82 What about dispensable intellectuals and economists?83 A true adherent of Malthusianism.


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6.4 The consumer society

The cause of the present economic crisis lays in the small demand for goodswhich are produced. From every branch in industry one hears that the stocksare piled up, there is no demand, no consumption. So it is not surprising thatprices are declining and unemployment is increasing, which results in lowerwages and salaries... What are the options to solve this problem?... We musturgently seek for new markets in order to sell or exchange our products.

De Lichtstraal84, November 27 1886, Newspaper of the Belgian catholic labororganization at the end of 19th century.

In the two previous sections we have evolved our basic theory and we have discussed someimmediate consequences of it. In this section we will introduce a new agent in the economicprocess: humankind with some of his shortcomings.

In our basic theory on the origin of profit, we have stated that profit for private business ispart of ‘profit for society’, which by itself is a consequence of the growth of the output of theeconomic process.

If the basic needs in society are not yet fulfilled, then justified economic growth is possible,private business can make an honest profit and the people can fulfill ever more needs as theirpurchasing power has increased. The rubber cylinder is filled with water and there is a strongcoupling between the two phenomena. The time, energy, raw materials and human effort andcreativity are well spent. Products are usually of a durable quality and designed to last for along period of use.

When however after a period of continued growth the basic needs of housing, food, clothesetc. are more and more fulfilled and no new needs are created, then the economic growthstagnates: fewer houses are built, people cannot eat more and more... For some products thereis only a substitution market. Due to the free-market competition, prices are under pressure. Inthis situation of slow economic growth or even zero-growth, people could still improveproductivity and technology in order to produce the same amount of products and serviceswith less human effort. The time saved could then be used for more pleasant things than work,like more creative recreation or education.

But in this economic situation profit for society is declining, thus also profit for privatebusiness, in particular the return on invested capital: money creates less money. If there iszero-growth then there cannot be any profit, and money surely cannot create money. As wehave seen in the previous section, not everyone is happy with this new state of affairs, inparticular those people who earned their living from the interest they received on their capital.Very often those people have also direct or indirect control over the economic policy-makingdecision process. Instead of introducing a general reduction of working time and accepting thepresent level of production and consumption, sufficient to fulfill the needs of everyone,economic growth is stimulated by creating new demands. People are talked into buying evernew and more sophisticated products and services they really do not need, all of this under thecloak of improving the quality of life and “keeping up with the Jones”.

84 In English: The Lightbeam.


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In order to be able to buy these new products, people work the same amount of hours as whenthere were still basic needs. It may be noted in passing that marketing – the systematizedresearch, planning and organization of the introduction of a product into the market – hasstarted to play a major role in the economic process of the USA at the end of the 1940s andduring the 1950s, at a time when the basic needs were again fulfilled after a period ofrecession in the 1930s and after the Second World War.

Yet in this short time, marketing has achieved the image of society’s savior, inthe minds of many, and society’s corrupter in the minds of others. Marketing’sgood deeds have been described in various ways:

“Aggressive marketing policies and practices have been largely responsible forthe high material standard of living in America. Today, through mass low-costmarketing, we enjoy products which were once considered luxuries and whichare still so classified in many foreign countries. Advertising nourishes theconsuming power of men. It creates wants for a better standard of living. It setsup before a man the goal of a better home, better clothing, better food85 forhimself and his family. It spurs individual exertion and greater production...This creation and stimulation of desire has put more people to work and, inturn, made their desires possible to fulfill.”

Others take a dimmer view of marketing’s contribution to society:

“For the past 6,000 years the field of marketing has been thought of as madeup for fast-buck artists, con-men, wheeler-dealers, and shoddy-goodsdistributors. Too many of us have been taken by the tout or con-men; and all ofus at times have been prodded into buying all sorts of things we really did notneed and which we found later on we did not even want. Occasional perusal ofcontemporary supermarket shelves reveals unequivocally that manipulation ofpackaging, labeling, and promotional appeals far exceeds product change.”

P. Kotler, Marketing Management, Analysis, Planning and Control, p 4-5

As usual in recent years, the 2004 electoral campaigns were run by the publicrelations industry, which in its regular vocations sells toothpaste, lifestyledrugs, automobiles, and other commodities. Its guiding principle is deceit. Thetask of advertising is to undermine the free markets we are taught to admire:the mythical entities in which informed consumers make rational choices…Furthermore Veblen pointed out long ago, one of the primary tasks of businesspropaganda is the “fabrication of consumers”, a device that helps to induce “allthe classic symptoms of state-based totarialism… The basic observation is asold as Adam Smith, who warned that the interest of merchants andmanufacturers are “to deceive or even to oppress the public” as they have done“on many occasions”.

Noam Chomsky, Failed States, pp. 220-221.

Next to the introduction of marketing techniques in the economic (and political) process, thecreeping inflation since the Second World War had its own contribution towards the

85 Better food? I lived in the USA in the early 1980s. I was surprised by the large number of people whosuffered from obesity. Since then this epidemy has been “exported” to the rest of the world.


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consumer society: as people saw the purchasing power of their money steadily eroded, theywere tempted to spend their money immediately and even to buy on credit. So they boughtthose new products they really did not need. Those nonessential goods are produced. This hastwo immediate consequences.

In the first place this means that part of the labor force is employed in fields of businessproducing and marketing those nonessential products. Instead of being content with the morebasic goods and work fewer hours, both man and wife take a full-time job in order to acquirethese nonessential goods, as they were persuaded that these “will improve the quality andstatus of their lives”. The economy runs smoothly: there is a substantial growth-rate, profitsand return on investment are high, money creates money, wages and salaries can increase.

In the second place, we can say that more raw materials and energy are used than strictlynecessary. To keep the economic process running, goods of less quality are produced: they aredesigned to last for a limited period of time, so they need to be replaced after a while. Basicproducts like food are packed in fancy boxes in order to capture the attention of the consumer.This leads to ever increasing piles of waste and depletion of material and energy resources.Companies spend huge budgets on advertising campaigns in order to convince the consumerto buy their new products, promising them a far better quality of life.

This obsession with growth has also been sold to the public by the political authorities as“economic growth is the only way to insure that material wealth will trickle down to the poor.We do not need political or social reforms for you to enjoy what the rich people have. All weneed is improved productivity and economic growth”. As F. Capra illustrates86 “this trickle-down model of growth has long been shown to be unrealistic”. We can indeed notice a trendto more inequality in the distribution of incomes and wealth between groups and classesinside the industrialized countries, as well as between those industrialized countries and theThird world countries, despite the growth of the economy and the increasing world trade. Onecan even say that the greater the economic growth, the greater the inequality in income, ashigher incomes increase faster than lower incomes87. The generated wealth trickles down tothe level of the dilutees of society only in a diluted form.

We can indeed say that the economy has deteriorated: by creating new and stimulatingexisting needs far beyond what is necessary or even healthy, the economic growth isstimulated in order to make more profit, to make money out of money. Raw materials, energyand human effort are combined in the production of nonessential goods and services, with asside-effects an increasing level of pollution, both material – piles of waste, acid rain, theheating of the atmosphere,... – as well as mental – stress, disturbed social and family relations.

Profit, in essence a consequence of economic growth, has become a goal on its own. And thisis the error which could lead to the destruction of the whole planet88.

We can ask ourselves quite rightly the question if this evolution is fair towards the generationsto come. Due to our artificially stimulated level of consumption, they will be faced with greatdifficulties in order to develop the resources of the earth and they will inherit a more polluted

86 F. Capra, The Turning Point, p 225-22687 B. Fritsch: New means of Power, p 2488 K. Lorenz, Our Last Chance, p 160-161


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world. I can recommend the book Entropy, A New Worldview, by J. Rifkin, and the film TheCorporation, by Mark Achbar and Jennifer Abbott, as interesting discussions of this problem.

And is our conduct fair towards the people of the Third World countries? Instead of using theavailable raw materials, energy and human effort to produce goods in order to fulfill theirbasic needs, we use them to make non-essential products to fulfill created and stimulatedneeds in the rich industrialized countries. In addition we see that the land in those ThirdWorld countries is cultivated mechanically on a large scale, and that the crops are exported tothe rich countries, while the profits go the few rich families in those poor countries89. As theirown natural food is no longer cultivated and because of the mechanization of the agriculture,the rural population migrates towards the cities, hoping to find a job there. This leads to theenormous ghettos in Third World cities and to economic emigration to the rich countries,where these “illegals” are used as cheap labor forces. But as their number keeps growing, theown population starts to support legal actions to send these “illegals” back90.

And above all, is this fair towards ourselves and our children? This policy of stimulatedgrowth based on created needs can continue as long as the people have a blind confidence inthe future. As long as the stimulated needs are not fulfilled or new needs can be created to buynon-essential products, and as long as the material conditions are met to support thiseconomic growth –energy, raw materials, infrastructure, pollution – then indeed one could saythat “the sky is the limit”. In the 1950s and 1960s, based on the expectation of uninterruptedgrowth, entrepreneurs kept a high level of investments, even if there were short declines incertain components of demand. Due to the same expectations of continued growth, the peopleproceeded at the same high level of consumption, even when there were short periods ofreduced income. But what happens if indeed this confidence in growth is blown, e.g. by acrash of the stock market or an international conflict? What if there are problems with thesupply of raw materials and energy? What if the burden of pollution gets too high?

6.5 Unemployment

The 1950s and 1960s in Europe and the USA were characterized by substantial economicgrowth and almost full employment. West European countries had even to attract foreignworkers from southern Europe and Northern Africa to do the dirty and heavy work (coalmines, steel industry,…), as their own people went for better paid and cleaner jobs in thechemical industry and the car assembly. In the 1980s we were faced with the highest level ofunemployment since the crisis that preceded the Second World War. This puzzled economistsand all kind of organizations.

International Labor Organization: Causes for unemployment are not yetclear

The ILO expresses the feeling that the real causes for unemployment are notyet clearly defined and thoroughly examined. According to its director FrancisBlanchard it could well be that the failures in many programs to increase theemployment could be the result of a wrong diagnosis of what is called theeconomic crisis.... In a special report Employment in the world of this UN-

89 Noam Chomsky in On Power and Ideology, where he discusses “The Fifth Freedom”.90 While financial capital is allowed to cross borders without any limitation.


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organization, specialized in problems related to labor and employment, morequestions are left open than answered. Economists tell diverging or evenconflicting stories about the crisis... According to the ILO report the two oilcrises do not completely explain the present economic situation, although theysurely had a negative influence...

De Standaard, February 27 1984.

In this section we will explain the emergence of unemployment with our basic theory at hand.Later on in this text we will also formulate the solution for this problem.

As long as there is confidence in the future, people keep or increase their level ofconsumption, so the output of the economic process can grow year after year if one makes anintelligent use of the economic policy (heuristic rules) on the distribution of profit as drivingforce – or brake on – economic growth. Private business can realize profit, as a result of theeconomic growth. In the beginning the profit margin (profit divided by the invested capital) ishigh, so entrepreneurs are tempted to invest ever more. They are easily granted loans by thebanks. Business runs smoothly not only for consumer goods but also for investment goods.Companies and private persons pay taxes, so the government has sufficient income to developsocial welfare programs and to invest in the construction of roads and other public utilities.Everyone is happy: the governments, the employers, the employees, the unions, those livingfrom social welfare, those living from the money they make out of money, the bankers, theyall share from the profit for society which results out of the economic growth. In a latersection we will extrapolate this situation to the “pram-industry”, so the real impact of itbecomes crystal clear.

However, this confidence in the future can be shocked in several ways. As discussed in aprevious chapter, the profit margin has the tendency to decrease. As a result there is lessmotivation to invest money in risk-bearing activities: there are fewer investments, so theeconomic growth in this field of business will slow down. In the second place a political event(sudden rise of oil-prices, military conflict, elections with an unexpected result…) could resultin a lower confidence in the future, so people return to a lower level of consumption as theystop to buy the most non-essential goods and postpone the purchase of a new car. As peoplein the western industrialized countries have such a high level of consumption compared tothose in the Third World countries, they can easily adapt their consumption patterndownwards: they see that other people come off worse. They stop buying non-essential goodsin order to save something for the rainy days to come.

As the population spends less money, but on the contrary saves more, a great deal of thepurchasing power is not used, so the market for consumer goods stagnates or even shrinks.The extra savings could be used to finance investments, but there is no incentive due to thedecreased level of demand, the excess in production capacity and the lower profit ratio. Whenthe decrease in consumption in the home market is not compensated by other opportunities forturnover (e.g. export to other countries), then a lower level of industrial production will be theresult. When there is no redistribution of the available work, then this will inevitably result inlay-offs or wage-cuts for employees in the field of business which are affected by the reducedlevel of consumption.

Because of the increase of unemployment after a period of full employment, and because ofthe reduced economic growth, people lose their confidence in the future even more... andbefore we realize the scope of the problem, we are faced with a vicious circle, a downwardspiral: again the principle of feedback, but this time destabilizing, as the level of


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unemployment keeps on growing. An economic recession is born, which can turn in a greatdepression when inappropriate measures are taken.

This very same process has been described more than a century ago by Paul Lafargue in hisbook The Right to be Idle which he wrote in 1880 as a reaction to the Marxist slogan Right forLabor (1848).

A disastrous dogma

A strange madness has captured the laboring class in the capitalistic countries.This madness has brought along enormous individual and social sufferingduring the last two centuries. This madness I speak of is the love for labor, thefurious passion to work, even till the exhaustion of vitality of the individualand his descendants...

Deceived by the fallacious theories of economists, the proletariat hassurrendered soul and body to the vice of labor, and in doing so they throwsociety into an industrial crisis of overproduction. Because there is excess ofthings to buy and not enough people to buy these things, mills and factories areclosed and laborers suffer from hunger and cold. The proletariat, drugged bythe dogma of labor, does not understand that the excessive labor they imposedthemselves in times of so called prosperity is the cause of their present misery.

P. Lafargue, The Right to be Idle, pp. 65-66

Since the mid 1990s, there was again a slight economic growth in some European countries,however without substantial increase in employment. This is an indication that the gapbetween the rich and the poor is getting wider. As history teaches us, unemployment in thelower end of social classes is the perfect soil for nationalism, racism, extremism and fascism,and thus also for war. Later in this chapter we will see how this vicious circle of loss inconfidence in the future, decreasing industrial activity and increasing unemployment usuallyhas been broken in the past. Later in this book we will also discuss some feasible alternatives.

From this section we can conclude that an economy based on over-consumption is like asoufflé: as long as all conditions are perfect, as long as there is confidence in the future, it willrise. But as soon as something goes wrong with the external conditions or internal saturationoccurs, the whole thing collapses: the process has become unstable and uncontrollable. Thereason is obvious: the economic process is no longer based on real, incompressible needs ordemands but on cultivated, expanded and thus compressible needs and whims. The rubbercylinder is no longer filled with water, but with air, so the regulating coupling between pullingthe ends (trying to make a profit) and the contraction of the middle part (helping other peoplein fulfilling more of their needs) is lost. And this coupling is lost in both directions!

In terms of system theory, this means that an internal variable of the process – needs – hasgone into saturation. As a result, the dynamics of the system have changed, so the heuristicrules of Keynes no longer work. On the contrary, they have a destabilizing impact on thesystem. We need to adapt our control policy... or we could change the system.

Based on this discussion, we can stress once more the fact that satisfaction of needs is thedriving force of the economic process, and not profit, which is just a consequence!


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6.6 Concentration of wealth

In the previous section we have discussed how a drop in aggregate demand can lead to alower economic growth rate or even a drop in the Gross National Product. When the GNPfails to keep pace with the growth in the labor force, then the level of unemploymentincreases, resulting into a recession or even a depression. But according to the economist RaviBatra a catalyst is needed in order to trigger the deterioration of a recession or a depressioninto a great depression. The following lines are a compilation of his book The GreatDepression of 1990.

Capitalism is defined as a social, economic and political system where themeans of production – industry, banks, natural resources, etc. – are owned byprivate corporations and individuals, where the political system operates in theinterests of such owners, and where the distribution of national income isdetermined by them. It is closely associated with the free enterprise system,which may be defined as one where businessmen, the owners of the means ofproduction, are free to maximize their profit (p. 74).

So, in the capitalistic system, profit for society goes mainly to the entrepreneurs, thebusinessmen, the private companies, the owners of the capitol – whoops, sorry – capital, therich91.

Since the rich have a higher propensity to save than the poor, concentration ofincome in a few hands induces an increase in aggregate savings (p. 132) ...

When wealth becomes concentrated, three effects normally occur.

First the number of persons with few or no assets rises. As a result the demandfor loans increases because the borrowing needs of the poor and middleincome groups far exceed those of the affluent.

Second, since the poor and the middle class, who are in a majority, now havefewer assets, the borrowers in general become less credit-worthy than before.If a bank rejects risky borrowers, its financial structure remains sound. But inan environment where credit-worthiness has generally deteriorated, most bankscannot afford to be choosy, especially when they have to pay interest on theirdeposits. Only a prudent bank then avoids making risky loans. Thus, as theconcentration of wealth rises, the number of banks with relatively shaky loansalso rises. And the higher the concentration, the greater the number of potentialbank failures.

A side effect of the growing wealth disparity is the rise in speculativeinvestments. As a person becomes wealthy, his aversion to risk declines. Aswealth inequality grows, the overall riskiness of investments made by the richalso grows. It essentially reflects the human urge to make a quick profit (pp.135-136)...

91 According to Gar Alperovitz, professor of political economy at the University of Maryland, College

Park, and author of the book America Beyond Capitalism (2004) the top 5% of Americans own just under 70%of all financial wealth, and the top 1% of Americans now claim more income per year than the bottom 100million.


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Under capitalism wealth disparity tends to rise in the long run. A time comeswhen this disparity, and the concomitant number of shaky banks, becomes sogreat, that any recession can cause a collapse of the financial system92. Thebursting of the speculative bubble, another consequence of the inequity, onlyadds fuel to the fire. Money supply, aggregate demand, output, andemployment then move in a downward spiral, and an ordinary recession turnsinto a depression (pp. 138-139)...

Many businesses then vanish, the public loses confidence in the banks, andunemployment climbs to levels unprecedented in recent memory. In otherwords, a onetime drop in demand is not enough to cause the depression (p.134).

Excessive concentration of wealth is a major catalyst in order to turn a recession into adepression.

Since President Nixon allowed pension funds to invest again is shares of companies, the stockmarket went up and up. In order to maximize the yield on their capital, a lot of people withhigher incomes in the US no longer deposited their salaries on a savings account with a fixedbut moderate interest rate – and some insurance of refund in case of bank failure – but theyinvested it directly on an account of one of the many investment funds – without anyguarantee of refund in case of a crash at Wall Street. In order to pay for their living expensesthey then simply sold part of their shares now and then. So the major part of their savings andthus future purchasing power was invested in speculative investments. No wonder the stockmarket increased, as a lot of money was diverted to Wall Street, even without any firmeconomic basis to justify this increase... besides the law of supply and demand of stocks, ofcourse.

92 October 2008! More than 100 banks went bankrupt in the USA in one year since then.


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7 On the origin of wars

7.1 The economic “importance” of wars – Cui bono?

We start this chapter with a story which at first glance seems rather unrealistic and evenridiculous. But it will prove to have a clear link with reality. The story will lead us to thenotion of disinvestment goods.

7.1.1 The story of the pram industry

In this story we imagine ourselves living in a closed community: a small country, with thestrange and unpronounceable name Htrae, completely surrounded by high mountains. There isno contact with the outside world. The society of Htrae has sufficient raw materials, energyand technological know-how in order to fulfill the population’s basic needs for housing,clothes, food... and prams. Thanks to the know-how and creativity of the engineers and thescientists the means of production are well developed, so that very little human effort isneeded in the production process. Men need to work only 20 hours a week while their wives,or vice versa, can stay at home and take care of their family, unless they want to go out workthemselves. There is plenty of leisure time for both sexes. All the needs of everybody areamply fulfilled. The population is stable and we have a situation of zero-growth.

But a group of persons in this small country is not very happy with this state of affairs. Inprevious years, when the needs were not yet fulfilled and the economy was still growing, theyused to earn their living by lending other’s people saving money to other people and receivingan interest on this: they created money out of money. The profit they made was part of theprofit for society which resulted from the economic growth. As there is no longer economicgrowth now, they have no longer an income: money can no longer create money. This impliesthat, in order to provide in their living, they should either spend their own capital or find a joband produce goods or services in demand by others. They could also depend on others fortheir living. However, the laws in this country are very strict but fair: to convert wealth fromothers to one’s own use in an illegitimate way is considered as a crime, and the punishmentsfor violation of this law are very severe.

So this group of persons is faced with a problem. They are well aware of the fact that theincome they had in former days was a consequence of the economic growth. So they decide toinduce economic growth in some way or another. However, the growth potential in the fieldof consumption goods and hence in investment goods is nil. The people of Htrae cannot betempted to consume more than they need. By the way, they all have studied The Right to beIdle by Paul Lafargue at school. So our group of ex-money-makers decides to set up a secretconspiracy against their fellow citizens and they make up a plan to develop the pram industryto gigantic proportions. This is, of course, not an easy thing to do, but they put so manyefforts in implementing and promoting this plan that they indeed succeed.


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Several years later, thousands and thousands of prams leave the assembly line each year. Apram is made of several components (wheels, axles, frame, cover, cushions...), made of allkinds of raw materials (metal, wood, cotton, plastic...). In order to produce the prams as cost-effective as possible new machines are developed and produced. The activities in the pramindustry and the supply industries absorb a lot of resources: energy, raw materials and humaneffort by laborers, engineers and scientists are needed in large quantity. Working time has tobe doubled from 20 to 40 hours a week, so half of the men working in other industries cannow work in the pram business. The slogan The Right to be Idle is now taboo and replaced byRight for Labor.

An organization of women is created, the Ymra. These women have as their only duty to gowalking with the prams. They are even paid for doing this, they are real professionalpromenaders. As there are not enough babies in Htrae compared to the number of prams, theyhave to put a doll in the pram. So the doll industry also knows an unprecedented boom. TheYmra is very well organized; it has a strict hierarchical structure: women with a higher rankwear longer earrings, more bracelets and shoes with higher heels. Those women who do theactual walking, of course, wear flat shoes.

The prams are given a lot of maintenance so they are operational 24 hours a day. At regularintervals in time they are replaced with new and better models, even before they are worn out.The people in the pram industry are very good in lobbying, one even gossips that they paybribe to the politicians, but this has never been proved by facts. Of course there is a Secretaryof State responsible for spending taxpayers’ money as rationally as possible in order to buythe best prams available and to keep the Ymra operational. Production is running at fullcapacity, industrial output grows year after year, and profits, as part of profit for society, aresubstantial.

As a matter of fact, we are faced with a situation which is the logical extension – by way ofspeaking – of the consumer society and which makes even less sense. Energy, raw materialsand human effort are wasted in the production of a good (prams) and a service (walking withthese prams) which are absolutely not needed and which fulfill not even a cultivated need. Iam sure the reader doesn’t need a Ph.D. in economics in order to realize that this situation isabsurd, and that our little country Htrae better should get rid of the excessive pram productionand the Ymra, return to a 20 hours working week and fall back to the production of usefulgoods and services, a production which is sufficient in order to fulfill the needs of all, eventhe women in the Ymra, the men working in the pram industry and those who are earningtheir living by making money out of money and are reluctant to work themselves. By doingthis, they would save raw materials and energy for later generations and they would save timefor themselves, time they could spend on more interesting and rewarding activities.

However, the situation changes drastically when a pass through the mountains is discoveredand contact is made with other societies. The economic system of Htrae no longer is a closedone: trade with the outer world becomes possible. In addition, the people of Htrae have foundout that some of those other societies dislike each other and that they manifest their feelings ina rather peculiar way: they run into each other with prams until those prams are destroyed. So,suddenly the people of Htrae have found a substantial new market for their pram industry: thedemand for prams from these outside societies is so great – they no longer have to make theprams themselves so then can concentrate on riding them into destruction, what a saving intime! – and those other societies are always eager for the newest models. They are willing to


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sacrifice a lot for these prams: energy, raw materials and goods are withdrawn from their ownpopulation in order to pay for the prams93.

So our little society in the mountains continues with the excessive production of prams asthere is great demand for them. The inhabitants (and taxpayers) of Htrae no longer criticizethe pram-industry and the Ymra, they work 40 hours per week, they earn a good wage and canafford to buy things imported from those other countries. Their material wellbeing hasincreased substantially. The professional promenaders in the Ymra are also satisfied: theyhave an occupation, they are paid for it and they can afford themselves fancy clothes andluxury goods. The Secretary of State keeps his job. The economy keeps growing, so thepeople earning their living by making money out of money are also happy. The pram-industryseems to be the driving force of the economy, the source of all material abundance. Itprovides jobs to a major part of the population and by exporting the prams our little countrycan import goods, raw materials and energy from other countries. There is a generalconsensus among the government, the labor unions, the industry, the banks and the women inthe Ymra (see illustration 1 below).

There is of course the risk that those other societies might resolve their dispute, so they wouldno longer need so many prams. The economy in our little country is indeed very vulnerable.No need to worry: special emissaries are sent to those other countries in order “to talk aboutpeace” (see illustration 2 below). They even allow price increases for the products importedfrom those other societies so that they can sell ever more prams. As a consequence theimported products become more expensive for the people of Htrae, who see their purchasingpower eroded. They blame the other countries for this; they are even willing to attack themwith their own Ymra.

By the way, a similar evolution could have been possible even if the pass across themountains would not have been discovered. By dividing the society of Htrae in two or moregroups and setting them up against each other so that they would go to the battlefield withprams94, the demand for those prams would be induced, so the economic growth could havebeen stimulated artificially, and it would still be possible to create money out of money. Theraw materials, energy and human effort in order to produce those prams and keep the Ymraoperational would then be taken away from the population of Htrae itself. But due to theinternal struggle, one could say that there is no longer one single society surrounded bymountains, but two, three... so the stupidity of the situation is not so obvious.

So far for this rather strange story of the pram-industry on Htrae. We remember that it is fairlyeasy to show that such an out-of-proportion pram industry is useless in a closed economicsystem, but that it is also rather easy to defend the usefulness of it in an open economicsystem. One only does have to make appeal on a few manifestations of human weakness: lustfor power, greed, ambition... Assuming that the Earth is flat and thus infinite, then noeconomic system could be closed: for every finite society there exists an infinite outer worldwith whom energy and raw materials and goods can be exchanged. But as already stated, weknow that the Earth is a globe and is thus finite. Let us think of ourselves as world citizens.When we see the Earth as one closed economic system – one little country surrounded byhigh mountains of infinite space –, then we can understand that it is indeed irresponsible forourselves and for future generations to spend so much energy, raw materials and human effortin order to make so many useless prams, which are only used to make parades and to ride

93 See the film The Last Samurai.94 Civil War.


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them into destruction. Still those silly things do happen on earth! Why? And how is thispossible?

7.1.2 Illustrations

In this section we will give some examples which clearly show that the story of the pram-industry we invented is surprisingly close to reality. The following pages are borrowed fromThe Challenge written by the former French politician and writer J.J. Servan-Schreiber. Hepublished his book in 1981 during the economic crisis that followed the oil crisis of 1974. Somaybe these lines could teach us something of things that may happen in the near future, aswere are now, since 2008, once more faced with a financial crisis, and most likely a long anddeep economic depression.

Illustration 1: The glory of weapons95.

The Third World is corroded by its hunger for weapons. The enormous homicidal machineryis in full expansion. There seems to be no way back. As oil prices are increasing, theindustrialized countries need more export in order to pay for their import of energy. One ofthe easiest ways is to sell ever more weapons to ever more countries96.

90% of the French and British production of weapons is intended for export to Third Worldcountries. During the last 10 years the growth figures of the export of weapons by France wastwice that of any other commodity. In 1978 the international trade of weapons showed thefollowing figures:

Billion $ %

USA 12 48.0

USSR 7 26.9

France 3 11.2

Italy 1.2 3.9

UK 1 3.7

All industrialized countries fight for new markets and contracts, brokers make fortunes innegotiating secret deals97. The most tragic thing about this trade is that most western weapons

95 J.J. Servan-Schreiber, The Challenge, pp. 170-175.96 According to the SIRPI Yearbook of 2006, Armaments, Disarmament and International Security,

1,120 billion US$ were spent on arms worldwide, the highest level ever. With 507 billion US$, the USArepresents about 50% of the arms sales.

In 2009, the U.S. government-to-government sales to 208 countries will be $40 billion. Most of thecontracts were signed when Bush Jr. was still in office. In 2006 and 2007 more than half of the top 25 U.S. armspurchasers in the developing world are “undemocratic governments or regimes that are engaged in major humanright abuses”, according to a report of The New America Foundation. According to that organization, there is a92% correlation between rising oil prices and rising U.S. arm sales. From an article of Jim Wolf, Reuters.

97 See the film Lord of War.


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are sold to countries which are already in great debt, countries who are unable to feed theirown population and who undermine their own economic development98.

With the money paid for one tank, about 400,000 $, one could build modern silos to preserve100,000 tons of rice, which would allow for extra saving in rice of about 4,000 ton each year.One pound of rice is enough for the daily food of a person. The price of one war airplane isenough to invest in 40,000 small pharmacies in Third World villages. Indeed one can say thatthose countries buying the weapons are on the wrong way, but meanwhile western industrymakes the profits. The industrialized countries deliver machine guns, planes and tanks oncommand, and in doing so they let other pay for their military defense. The French generalCauchie expressed this with the following words during a congress on European pram –whoops, excuse me for this slip of the pen – weapon-industry: “Not only does the totalcapacity of the European weapon industry far exceeds the potential European market, it alsocan no longer exist if European governments do not increase their budgets for militaryexpenditures... So in order to keep military industry running, Europe has to find other buyers,it is forced to export weapons.”

The foreign currencies a country receives is just one of the consequences of exportingweapons. By making larger series of the same type of weapon, the own defense becomescheaper as development costs and investments can be spread over more units. Without exportof weapons (82 billion FF. in 1980), the French defense budget would have to be increasedwith 20 to 25 billion French francs...

Thirty countries of the Third World spend more than 30% of their GNP on defense, this ismore than Europe; in 1960 this figure was “only” 13%. Egypt had the world record in 1974with 40% of its GNP.

Third world countries even started their own weapon-industry: combat-planes are now built inArgentina, Indonesia, Pakistan, Chili, North- and South-Korea, the Philippines, Taiwan,Vietnam, Colombia, Thailand, India and Brazil...

Most of these countries have gained their independence by the use of weapons. To them, thepossession of and the control over weapons is a symbol of new pride and self-esteem in frontof the rest of the world. Every day one can hear voices in the western countries saying that the“independence” of a country is closely related to its “safety”, thus to its weapons. How couldone then prevent the leaders of the Third World countries to take care of their independence inthe same way? On the contrary, they are even encouraged, as the weapon-trade does not knowany political borders and yields such a high profit. The discrepancy between the militaryexpenditures of the Third World and their level of development can only lead to self-destruction for those countries, as the need for new and better high tech weaponry keeps ongrowing. If they buy their weapons or they make them themselves, in either case this policyerodes the economy of the country, because a lot of financial resources and human effort andcreativity are wasted instead of being used in the development of an economy to fulfill thebasic needs of the population.

In India, for example, the national economy is restrained by the lack of telephone lines. Theweapon industry, on the other hand, has its own communication and transport system. In 1980Indira Gandhi made the following statement concerning nuclear weapons: “If necessary forthe general good of India, we must be able to control the most modern techniques. We cannotafford our country to be unprepared”. But at the same time she asked herself this question: “Injoining this race for weapons, does India increase or destroy its security?”

98 Malthusianism in the purest sense.


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The answer to this question for her and the whole world was given by the self-destruction ofthe Iranian empire of the Shah. The growth of the military budget under the reign of the Shahwas impressive: 241 million $ in 1964, 4 billion $ in 1974 and 10 billion $ in 1977!

But why? The Shah explained to Anthony Sampson: “I hope that our American and Europeanfriends will understand that there is no longer a difference between Iran and France, Britain orGermany. It is considered as normal that France spends so much for its defense, so why notIran too? Our power in the Persian Gulf is now ten times stronger than the one of the Britishever has been.”

In 1978 the army of Iran was twice that of the British. It had almost 3,000 tanks (France hadabout 1,000 tanks at that time). Their navy had the largest fleet of Hovercrafts. Their air-forcewas the fourth in size of all countries, in 1976 it had a budget of 12 billion $. Only the mostsophisticated equipment was enough for the Shah. At the end of his reign he ordered 290Phantom bombers, 33 light F-5 interception planes, 80 F-14 supersonic combat-planes and160 F-16 planes. Often the weapons were already outdated by the time of delivery. Iran thensold them to Pakistan and ordered new ones.

The Shah had made up his mind to install the world’s most modern army in his country withthe help of his military advisers of the American weapon industry. He succeeded in thisproject. Nixon and Kissinger had decided to give the Shah everything he asked for (see alsoillustration 2 below).

But what is an army without technical and logistic support? In order to provide these the Shahstarted a program for the installation of seven air-force bases and six marine bases for thenavy. The sophisticated weaponry also demanded for highly trained personnel. Next to two tothree pilots a supersonic combat-plane demands about 30 technically trained persons formaintenance. A country like Iran, with more than half of its population being poor farmers, isnot able to deliver the necessary pilots, navigators and technicians in a short period of time.The whole supply of trained personnel was absorbed by the army, leaving the industry andagriculture with the untrained ones.

During that period some businessmen made fortunes – 45 families controlled 85% of theIranian industry and business – and corruption was present in all layers of society. Contractswere always accompanied with commissions or bribes to be paid to intermediate persons andofficials. At the start of the military program in Iran, senator William Dulbright made thefollowing comment after a visit to the country in 1976: “I have been in Iran and I saw a verypoor country. There are a few rich, but most of the people only believe in the revolution. Ithink we do not serve this country by selling weapons to it.” A few years later senator EdwardKennedy made a similar statement after a visit to the region: “Teheran has started to changeits economic potential into a military one”. He also urged the American government to reviewits policy in the Gulf, which was based on the excessive military power of the Shah. RichardHelme, the American ambassador in Teheran, expressed his concern on the growing presenceof American military advisers and agents of the weapon-industry.

During this one-sided development, the agriculture of the country was neglected, althoughmore than 75% of the population were farmers. People without land and without an incomeleft the countryside and went to the cities, hoping to find a job. Instead they formed the basisfor the revolution which was preached to them by Ayatollah Khomeini.

It is interesting to note that this enormous military force has served nobody, not the Shah, notthe American public, only the American weapon industry. The only result was that this one-sided development has eroded the regime of the Shah and that the western influence in this


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part of the world was no longer welcome. But if one studies the order-book of the westernweapon-industry today, one sees that the western world has learned nothing out of this story.

Illustration 2: Keep the fire simmering99

Kissinger has kept Metternich’s secret in mind. His example and inspirator had indeed apeculiar way of handling diplomatic affairs: he told one thing to the Russian Czar, another tothe king of Prussia, and still another to the king of France. He knew that each one of themwould keep the secret to him and that years could pass before they would find out what he hadsaid to the others. So in the mean time...

Kissinger has applied the same formula: one truth for Sadat in Egypt, one for Assad in Syria,another for Feisal in Saudi-Arabia – and the real confidentiality’s were for the Shah in Iran.Kissinger was sure that they did not trust each other so they would not exchange their secrets.So he would remain the master of the game, at least for some time.

And so it happened. When two of the rulers in the Gulf area did talk to each other and foundout that Kissinger had told them different stories, then this situation was resolved by simplysaying that they must have misunderstood him. But after a few rounds of this merry-go-round,the indiscretions on the Kissinger-talks accumulated, so they created more distrust thanconfidence in the American policy.

The secretary [Kissinger], however, has never hidden his real intentions. He was not reallyinterested in a deal on the price of oil. His real concern was to develop a strong military forcein Iran against the Soviet Union, in order to protect the Arabian oil fields and to secure thetransport of oil to the west.

As the Iranian income from oil increased year after year, the Shah’s hunger for more andbetter weapons kept growing. The price was even irrelevant. The Pentagon was ordered togive him everything he asked for. But after some time Iran could no longer pay the bill. In1974 Kissinger and the Shah found a simple solution to this problem: the price per barrel wasincreased. In this way Iran’s income from oil was increased, so it could order more weapons,while Kissinger promised that America would have no objections when the Shah imposed oneprice increase after the other. In 1974 50% of the American export of weapons went to Iran....while people in America, Europe and all over the world had to pay more and more for theirenergy, money which was used to buy weapons (prams) which had no use at all100, moneywhich ultimately was diverted to the weapon-industry as profits.

I hope that these two historical analyses have illustrated the story of the pram-industry andthat the reader now has a full understanding of who is interested in the excessive developmentof the pram-industry. In the next section we will return to our basic economic model in orderto explain this situation.

99 J.J. Servan-Schreiber, The Challenge, pp. 79-80.100 Except for the war between Iran and Iraq. Have you ever understood the reason why they were

fighting? Saddam Hussein came to power after a coup with the support of the CIA and was backed-up by theUSA government at that time. Divide et impera?


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7.1.3 Disinvestment goods

In a normal economic system one can divide the civil production, the goods and serviceswhich are produced, in two categories:

• Consumption goods: these are intended to be consumed or used by you and me.They satisfy a real or a cultivated need of humankind.

• Investment goods: these are not consumed by you and me, but they are useful ornecessary in the production and distribution of consumption goods or otherinvestment goods (machinery, office buildings, communication and transportinfrastructure...)

In the initial phase of the evolution of an economic system, both categories contribute to theeconomic growth and thus to profits. They allow to make money out of money. When needsare not yet fulfilled, the category of consumption goods can grow, and this growth in turnstimulates the growth in the field of investment goods, as long as the material conditions ofenergy and raw material allow further growth. As long as the growth rate and the return oninvestment are sufficient, there is no problem.

We have already discussed the consequences of a lower growth rate due to the saturation ofthe market, free competition and of the accumulation of capital goods: profits are eroded, thereturn on investment is lower, unemployment increases. Initially this can be solved bystimulating the economic growth: the government can start programs to build new roads, newneeds can be cultivated, etc. But these measures have their limits. As we have alreadydiscussed, the growth rate and the profit ratio has the tendency to decline in times of peace inbetween wars.

Let us forget for a moment that we are world citizens and place ourselves in the position of aperson who earns his living by making money out of money. We are faced with the followingproblems: the return on investment of our capital is too low, so some people are forced to usetheir saved money in order to live instead of making more money out of them. We will nowoutline a possible solution to this unfavorable situation, a measure which has been the solutionto an economic crisis on several occasions in the course of history. But we will also argue thatthis kind of solution has become obsolete. Instead we will outline an alternative later in thisbook, an alternative which is feasible... and which is probably the only possible solution.

The profit ratio is equal to the profit (numerator) divided by the invested capital (divisor).Profit is too low due to the slow economic growth, due to overproduction and freecompetition. The invested capital is too high due to the accumulation of ever more machineryand industry buildings. So the solution of the economic crisis seems to be obvious: we shouldreturn to a situation where there are again real opportunities for growth so the numerator canincrease, and where the level of invested capital is reduced so the divisor is smaller. Thequestion remains: how do we get to this situation?

Well, we could start with the development of a third category of goods in our economicsystem, next to consumption goods and investment goods: the category of disinvestmentgoods. Initially, this new category would give us the opportunity to stimulate the economicgrowth in an artificial way by producing and marketing these disinvestment goods, and then,when this field of business is sufficiently developed and starts to show signs of saturationitself, to use these goods for two purposes:


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• Primo: to return society into a situation where there are again real needs and thuspotential for growth, so that money can again create money.

• Secundo: to destroy the excessive supply of investment goods, i.e. to disinvest on alarge scale, the larger the better.

The profit ratio would increase at once! The reader has probably already figured out what ismeant here with the term disinvestment goods: the goods produced by the weapon industryand the services taken care of by the army, goods and services which are not really needed insuch a massive quantity and could be compared with the pram-industry and the Ymra in ourstory of Htrae. But these disinvestment goods are very useful in stimulating the economywhen consumption goods and investment goods are in a period of zero-growth, they createjobs, so the problem of unemployment can be handled in an artificial way for some time, and,on the long run, they can solve the economic crisis as described above: war, massivedestruction.

As Konrad Lorenz has stated already in 1984: “It is a mistake to think that the world is ruledby politicians. Behind them stand the true and only rulers of the world: big business. The armsrace ever continues on both sides of the Iron Curtain, despite all conferences and disarmamenttalks, not because the Russians and the Americans are afraid of each other, but because theindustry earns a lot of money out of it101.” And for Malthusiantistic reasons, of course.

At this point we can again formulate the following conclusion: the arms raceand wars are used (fomented) to preserve the mechanism of creating moneyout of nothing from total collapse.

You might make the following objection: if capital goods are destructed, then we all becomepoorer. Yes indeed, but the question is who is “we all”? In a peaceful growing economy,people can afford to save, to put some money aside in for example a pension fund, on a savingaccount, in government bonds. It is striking that after a financial crisis like the GreatDepression pension funds were just hollow vessels. So for many years they were restricted inthe way they could invest the money of the millions of people: they could only make verysecure investments in real estate or government bonds. But then comes a time – people tend toforget – that these pension funds are allowed once more to invest in risk-bearing stocks. Asthe good money of millions of people is diverted to the stock exchange, and because of thelaw of supply and demand, the stock market becomes a bull market, it goes up and up, andsecure money is diverted to insecure investments. People start to follow the market and putalso other savings in the stock market, and even a major part of their monthly income goes tothe stock market. And the people who sell the stocks receive a lot of good money. So if thereis a major destruction of capital goods, which then is the big looser?

In order to justify that the tax-payers money is “invested” in the field of disinvestment goods,one has used arguments as employment, security and the threat of the communist world or

101 K. Lorenz, Our Last Chance, p. 119.


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terrorists102. It is a dangerous evolution that, in spite of more economic uncertainty, there isone branch in industry which is not affected: the military industry. Per definition, there can beno overproduction in this field, as one is sure to find a buyer for the goods produced: thegovernment. Under President Reagan the defense budget of the USA has increased year afteryear, while the NATO has imposed a yearly increase of 3% on its member states. And thedeeper the economic crisis in civil production, the greater the pressure on politicians toincrease military expenditures in order to “create jobs”. This resulted in an acceleration of thearms race, which increased the risk for war, as these weapons were sold to all kinds ofunstable regimes all over the world. And this also resulted in higher budget deficits, sogovernments had to loan more money, and certain groups in society earned quite a lot ofmoney by “selling loans”. In the summer of 2007, Bush Jr. proposed to increase the export ofweapons to the neighboring countries of Iran in order to “increase the safety in the region”.And very coincidentally shortly thereafter there was a crash on the stock-markets.

I hope I have enfeebled the argument of employment by showing the stupidity of it in thestory on the pram-industry.

7.2 To be or not to be, that’s the question

The armament race since the Second World War, induced by the weapon industry, had ofcourse another direct consequence: ever more raw materials and energy are used in theproduction of ever more “prams” or disinvestment-goods. The growth in this category ofbusiness provided profits and jobs to a lot of people, who otherwise would be forced to findanother, maybe less paid job to earn their living. But the goods that these people need for theirliving are now also available, even with all the energy, raw materials and human effort wastedin the production of these prams. If one would reduce the production of these prams, therewould be more resources available to fulfill more needs of more people, while those workingin the branch of the disinvestment-goods even would not have to work at all! One should evengive them more for working not at all than for working in the pram-business! Why don’tpeople see through this situation? Or are they still deluded by the ideas of Thomas Malthus?

However, since the days of Malthus science and technology have evolved so drastically that,with ever less energy and materials, more and more can be accomplished. Buckminster Fullerhas given several examples of this evolution from the use of water over the building of housesto the production and distribution of electricity on a world scale. He ends his discourse withthe following conclusion:


Neither the great political and financial structures of the world, nor thespecialization-blinded professionals, nor the population in general realize thatsum-totally the omni-engineering- integratable, invisible revolution in themetallurgical, chemical, and electronic arts now makes it possible to do so

102 Enemies which have been created by the financial élite themselves!


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much more with ever fewer pounds and volumes of material, ergs of energy,and seconds of time per given technical function that it is now highly feasibleto take care of everybody on Earth at a higher standard of living than any haveever known.

In order to realize this, one has only to apply already existing technologies anduse the resources that are now wasted to make weaponry and to realize profit-for-the-few instead of creating high-quality-livingry-for-all.

It no longer has to be you or me. Selfishness is unnecessary and henceforthunrationalizable as mandated by survival. War is obsolete.


But still there are people in high positions who abuse the resources of the earth in order toimprove their own already vast material position at the expenses of others and to strengthentheir power. This is described in a very lucid way by B. Fuller in the chapter Legally Piggilyof his book Critical Path. He gives a good overview of the origin, the development and thelegalization of the phenomenon exploitation of the major part of the population by a small butpowerful élite. On this subject, we can also recommend The Warmongers by Howard Katzand Intellectuals and the State, On Power and Ideology and Failed States by Noam Chomskyas very sharp analyses of the situation.

Next to the scientific and technological evolution described by Fuller, we can also stress thefact that demographic evolution has changed since the days of Malthus. Studies have shownthat with increasing material development of a society the growth-rate of the populationdeclines. As already discussed, Thomas Malthus was right over only a short time-span. Over alonger period of time, the population growth evolves according to the S-curve, elaborated bythe Belgian demographer Pierre Francois Verhulst already in 1838: the logistic populationgrowth model103.

103 I am pretty sure that most students in economics or politics have learned about Thomas Malthus at

university, but that they were never instructed about the logistic population growth model of Pierre FrancoisVerhulst. Economic science is an ideology in disguise!


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The Malthusian vision is assimilated so deeply in our western way of thinking, that scarcityhas been institutionalized so to speak. This is really the greatest obstacle for the “design-revolution” Fuller refers to. Indeed, scarcity means business: one can ask a higher price for ascarce good, while the prices of abundant goods are low. So the myth of scarcity must be kepthigh in order to protect the western capitalistic model. Tons of fruits and vegetables aredestroyed each year in the European common market in order to keep prices at a level. Thesupply of meat, milk, butter and wine is greater than demand, it costs the European tax-payersmillions and millions of whatever currency in order to preserve or even destroy thesesurpluses.

An electricity or oil-company is only interested in forms of energy which reach the consumerthrough a teller and which require an expensive infrastructure. Buckminster Fuller describeshow he holds several patents which could have had significant contributions to the savings ofmaterials and energy. Big business is not interested in developing these patents into products;instead they have tried to freeze them – i.e. to take them away from all of humanity – bytrying to buy them. The implementation of these patents would be to the advantage of theconsumers and of humanity as a whole. But natural resources would become less scarce andthus less expensive, so profits would decline in some fields of business. In the same way weobserve that the production of long lasting goods with high quality is something of the past.Because of scarcity? No, on the contrary, because of the abundance! Well, at least in thewestern industrialized countries. The growth of the economic process must be induced in anartificial way.

Scarcity also means struggle for life and thus insecurity, which in turn is used to justify thehighly profitable pram industry. Security is sold to the tax-payer, whose savings are eroded byinflation and high taxes due to high budget deficits. The financial effort a democracy mustimpose upon itself in order to maintain a substantial army and weapon industry can only be“sold” to the tax-payer if one can point to an external enemy, who is seeking to take away ourfreedom and our material wellbeing. For this purpose, a former ally is sometimes turned intoan enemy, or an enemy is created out of the blue.

By the Cold War campaign in the 1950s104, the people in the Western industrialized countrieswere deceived in order to justify the enormous pram-industry, which served the interests ofcertain interest groups in society. But inducing fear for the enemy by misleading propagandawas just one of the means to serve these interests. In order to extend an enormous weaponindustry and to keep a large army operational one has to spend money, quite a lot of money.In a later section we will see by what means these “projects” has been financed, how certaingroups in society have elaborated mechanisms in order to get hold of the wealth of thecommon people.

104 The film Atomic Café is a very lucid account of this period in American history!


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7.3 Protectionism and its relation with war – An important lesson from history


Santayana.

We have asked ourselves already the question why a positive balance of trade is considered tobe good for the economy of a country. We found the answer to this question in our basictheory on the origin of profit: the surplus of a positive balance of trade is to be considered asprofit for the country, which accumulates with the profit for society resulting from internaleconomic growth.

When internal growth stagnates because of saturation of the home market or because of lackof purchasing power with major groups of the population, then business can still make a profitby exporting their products to other countries. In order to do this, they have to be competitivewith the industry from other countries. But what happens when these foreign markets alsobecome saturated, so that prices are under pressure as a result of the fierce competition? Inorder to keep their market share in the foreign markets, companies can try to lower their laborcost, sometimes with the help of the wage control policy of the government. But this willresult in lower purchasing power and less turnover at the home market, so the internal growthwill slow down even more. The loss in profit as a result of the lower internal economicgrowth must then be compensated by more export in order to increase the surplus in thebalance of trade.

Another popular measure countries often adapt is to devaluate their currency in order to maketheir own products cheaper compared to those of other countries, so that export will increaseand import will decrease, with a more positive balance of trade as end-result. But then theimport of raw materials and energy becomes more expensive, which results in higherproduction costs: a devaluation of the currency must then be accompanied with a strict wagecontrol policy, indeed resulting in lower purchasing power, etceteras, etceteras, etceteras...

If a country’s foreign trade is focused on other industrialized countries that are themselvesfaced with the same economic problems (stagnation of the internal consumption) andapplying the same economic policy, then this policy will not result into a lasting solution ofthe problem, on the contrary! Let us imagine all those countries as being part of one economicsystem. Then it is obvious that the whole system (i.e. all countries) will be subject to aneconomic crash as described in the section on the consumer society (the soufflé). The internaldemand of the whole system is undermined and cannot be compensated by extra export ofgoods as the outside world of the industrialized world (the Third World countries) does nothave the purchasing power to buy those products, which are not even adapted to their basicneeds.

No need to worry: countries or a group of countries return to the protectionism of formerdays. Products from abroad are subject to import tariffs and quota or severe technicalspecifications. Some of the western countries are very ingenious in finding new measures todiscourage the import of foreign products. Those countries argue that those protectionisticmeasures are taken for “the general good” and to protect the employment in their owncountries. But is this really the reason? Does protectionism hurts only the other countries,their industry and their employees? For a thorough analysis of protectionism we refer toHoward Katz. During his argumentation he often refers to the relation between protectionism


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and war. Sorry for the rather long analysis that will follow, but it rather crucial in order tounderstand the relation between war and economy. Those who do not remember the past arecondemned to relive it!

Autarky is economic isolation, the sealing off of a group of people from anytrade or economic relationship with others. Like war, paper money andprescription105, it benefits one part of society at the expenses of everyone else,yet is defended by appeals to sacrifice for the good of the whole.

If we will keep firmly in mind that the whole has no existence apart from theindividual people who make it up, then we can understand that such calls forsacrifice are simply demands that one person sacrifices himself to another. Oneman must spend his time in the army, while another gets rich on governmentcontracts; one man must suffer the depreciation of the currency on a fixedincome while another gets rich by paying off his debts in dollars of less value;one man must risk his life while another sits behind a desk in Washington.

Of course, during such periods of sacrifice there is a great pretense that thesacrifices are to be fair. But the sacrifices are never fair. Indeed, since thewhole point of the war is for the power structure to exploit the people, thesacrifices are not intended to be fair. If it were not for the unfairness and thebenefits flowing to certain powerful persons thereby the war could not beworth it to anyone and would probably not occur. As professor Charles A.Beard pointed out: “Of course it may be shown that the “general good” is theostensible object of any particular act; but the general good is a passive force,and unless we know who are the several individuals that benefit in its name, ithas no meaning. When it is analyzed, immediate and remote beneficiaries arediscovered; and the former are usually found to have been the dynamicelement in securing the legislation106.”

This general rule applies accurately to tariffs, quotas, commodity agreementsand other assorted paraphernalia which serve to intervene in the free flow oftrade across national borders. We repeatedly hear the cry of the labor unions(in rare agreement with management and stockholders) urging to “buyAmerican107”. The argument is that, if we buy American-made goods inpreference to foreign, it will increase the number of jobs in America, raise ourstandard of living and benefit the whole country.

The error in this can be seen most easily if we go back to the time when tariffsand quotas were applied, not only between countries, but between differentparts of the same country. It was only in the 19th century that the Zollverein, orcustom union, was adopted in Germany so that goods could exchange betweenany two parts of the country without interference. Similarly, the USConstitution prohibited states from putting tariffs on goods from other states.

If it is beneficial to America to wall herself off economically from the rest ofthe world, then it must be beneficial to New York State to isolate herself

105 Forced “service” in the army.106 The offices of the Carlyle Group are on Pennsylvania Avenue in Washington DC, midway between

the White House and the Capitol building, and within a stone’s throw of the headquarters of the FBI andnumerous government departments.

107 On Labor Day 2010, President Obama repeated this appeal to the American public.


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economically from the rest of America. Similarly, it would be even better ifNew York City cut off all trade with the outside. If this idea is correct, theheight of prosperity could be achieved if the island of Manhattan would refuseto trade with anyone else in the world.

If we carry an idea to its logical extension we can often see a fallacy in itwhich would otherwise escape us. If Manhattan were to isolate itself, it wouldstarve within a few weeks. There would be a mass exodus (or starvation) andwhen the smoke had cleared several decades later, all that would be left wouldbe a handful of farmers scratching out a bare living from the rocky soil.

The general principle is that trade is good. It must be good because it occursvoluntarily; if it did not benefit both parties, it would not take place. Thus, themore trade the better. When someone interferes with our trade, we becomepoorer. The special interests who advocate autarky in our society today onlypropose minor interferences with trade, with the effect that the resulting lossesare not noticed (as the isolation of Manhattan would be).

When Americans buy Japanese goods, it does not throw American workers outof a job any more than New Yorkers’ purchases of Californian goods throwsNew York workers out of jobs...

If a Japanese firm (or the American firm across the street for that matter) offersthe same product that you are producing at a lower cost, it is true that, in theshort run, this may put you out of a job. This is part of the incentive whichconsumers use on producers to induce them to move into the areas appropriateto their special skills, thus getting the maximum advantage from the division oflabor. If a group of Japanese can produce color television sets more efficientlythan you, then it is better that they be producing television sets and that you bedoing something else. In general terms, it is better that those people who cangrow oranges best grow oranges, those who can build TV sets best build TVsets and those who can operate computers best do so, etc.

The irony is that, if a social planner were trying to design an economic systemwhereby each person worked in the area best suited to his special skills, hewould probably design a militaristic-authoritarian system with a centralauthority testing everyone and ordering them into appropriate jobs. Yet thesimple measure of leaving people free in their economic choices accomplishesthis goal far more effectively than an authoritarian system ever has and does sowithout the use of coercion.

What the autarkists are proposing is that they have the right to make televisionsets (and be paid for this), even when the consumer does not want thosetelevision sets (and similarly for other goods). If this proposal were appliedgenerally, it would lead to a situation where those better at growing orangesare fixing high tension wires and those better at writing music are plantingcorn. Our response to those people should be to say: “You have no right toforce us to pay more for television sets just because you want to receive ahigher wage. If you can’t make television sets more efficiently than theJapanese, the fault is with you; you do not deserve (and will not long retain)your higher standard of living. If you want to earn more than the Japanese, findsomething you can do better than they can.”


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So there is no benefit to America from tariffs or quotas or other aspects ofautarky, rather the reverse. And there is a clear loss to the American consumerwho intends to purchase a restricted good. Americans who want to buy colorTV sets in 1979 will find prices generally higher because of the 40% quotarecently pressed upon Japan.

The advocates of tariffs, etc. will usually concede these principles in the longrun, but argue for a tariff to counter the short-run effects of a fluctuation intrade. One might think from this that the country is free of tariffs and quotasmost of the time and that most of those which are put on have provisionscausing them to expire within a few months. But this is not the case. Once thetariff advocates have pressured Congress into adopting one of their measures,they never advocate its repeal. Actually, the long run is composed of asuccession of short runs. Just as the people who pledge themselves to abalanced budget over the long term but a deficit for this year run a perpetualdeficit, so the people who advocates tariffs as a short-term measure keepperpetual tariffs. Man always lives in the present, and if he decides onsomething for the present, he will have it all the time.

Neither is it true that free trade costs jobs in the short run. A fluctuation in theconditions of trade may throw some people out of work, but for thegovernment to respond by autarky causes the loss of more jobs. When trade isfree, decisions are made by thousands, perhaps millions, of consumers. Sincepeople change their buying patterns slowly, any shift in jobs which results willbe gradual, and the industry will have time to adapt. But a tariff is put on by asingle body108 (the government) and is not gradual. Thus the shift in economicbehavior, and hence in jobs, is sudden. If Holland retaliates for our tariffs onher steel by putting tariffs on our glass products, then the loss of jobs in the USglass industry is sharp and sudden. There is no time to adjust.

The assumptions of the autarkist are arrogant and immoral. When a mandecides to make his living by offering a product on the free market, he iscompeting for our favor. He has no right to compel us to buy his product,which is what is happening when compulsion is used to add a tariff to hiscompetitor’s product. He only has the option to make a good enough productthat we will find it to our interest to buy it at his price. His employment in thisline of work is conditional upon our consent. He only has a right to work inthat field, if we choose to buy his product. He has no right to make a productand demand that people buy it or force them to buy it.

Yet that is what tariffs are. They constitute a demand by the producer of thegood that he has a right to be employed in that line. If people prefer anotherproduct, he will interfere with their freedom by taxing (a tariff) or banning (aquota) that product. People who infringe on the freedom of others have nomoral claim to it themselves109.

108 ...which can be more easily infiltrated and manipulated than thousands and thousands of producers

and customers...109 Pure self-interest thus becomes, in Locke’s formulation, the sole basis for the establishment of the

state. Society properly becomes materialistic and individualistic because, Locke maintains, reason leads us toconclude that this is the natural order of things. By the law of nature, each individual is called upon to act out hisrole of social atom, careering through life, attempting to amass personal wealth, even at the expense of otherpeople. There is no moral judgment to be made here: self-interest is simply the only basis for society.


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When the US Government imposes a tariff on Japanese goods, it is hurtingAmerican consumers of those goods in order to benefit the Americanproducers. Modern liberals often talk about autarky as though it were aproblem of international relations and as though each nation gained a benefit atthe other’s expense when it imposes restraint on trade. But the example aboveof the completely isolated Manhattan shows that this reasoning is in error.When America imposes a tariff on Japan, it is sacrificing the large majority ofAmerican consumers to the minority or American producers; when Japanretaliates with a tariff, it is sacrificing its Japanese consumers to the Japaneseproducers. Two nations erecting tariff barriers against each other are eachcutting off its nose to spite its face.

Tariffs began when a criminal gang acquired additional power and became afeudal dukedom and then realized that, rather than rob the merchants whopassed by all at once, it was better to rob a fixed percentage each time andleave the merchant enough to stay in business and come back next year. Tariffsare a complete triumph of might over right - totally unjustifiable, but a tributeto the stubborn conservatism with which the human race clings to any and allinstitutions. Modern autarky is another proof that patriotism is the last refugeof a scoundrel. When these people urge us to buy American, they are claimingboth our wealth and our freedom as a sacrifice to their interests.

H. Katz: The Warmongers, Appendix I (Autarky versus free trade) pp. 249-254.

Besides, when all countries start to take protective measures, then this will result in economicwarfare, which could even escalate into a real military war.

Moving ahead to consider World War II, it appears at first glance that therewere real reasons for fighting, unrelated to paper money. Hitler was an evilman with aggressive designs. He had to be stopped. But a close look will showus a more complex situation; first consider the Pacific theater.

The US-Japanese sector of World War II was caused by a third110 aspect ofpaper money, relating to international trade. Governments can force their owncitizens to accept paper as a legal tender, but they are not able to forceforeigners to accept it. This creates a problem; when I sell something to acitizen of another country, what should I ask from him in payment?

If both countries are on a gold standard, the problem is solved. For example, ifthe US $ is 25.8 grains of gold and the French franc is 5.16 grains of gold,clearly five franc equal a dollar. If I sell something to a Frenchman, then I mustask five times as many francs from him as I would ask dollars.

But if the countries are not on the gold standard, the problem is more complex.The franc will still have value to some Americans – those who wish to importfrom or travel in France – and I can sell the francs to those Americans, but it isnot clear what they will pay me. What they will pay depends very much onhow badly they want the French goods. In this case there will be a marketwhere people exchange foreign money, and the number of francs which are

110 The first and second aspect will be discussed in a later section of this chapter.


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equal to one dollar will vary from day to day according to supply and demand(depending on how many people want to buy French goods and what Frenchprices are doing relative to American prices). On one day a franc mightexchange for 19 cent, on another day for 18 cent, or again for 20 cent.

Because the rate of exchange varies from day-to-day this is called a system offloating exchange rates, as opposed to a gold standard where the exchange rateis fixed.

The system of floating exchange rates brings extensive vested interests intoplay as follows. Suppose I am an American steel producer selling steel topeople in California for $300 per ton. Suppose a Japanese steel producer canmake and ship steel to California, allowing himself a reasonable profit, for100,000 yen a ton. If the exchange rate between dollars and yen is 500 yenequals one dollar, then the Japanese firm can charge 200 dollars a ton andundersell me in the California market. He will get the business, and I will not.On the other hand, if the exchange rate is 200 yen equals one dollar, he willhave to charge 500 dollars per ton to make the same profit. Thus I canundersell him and get the business. The same reasoning applies to many otherproducts. Clearly it can be very important to businessmen in both countries justwhat the exchange rate is, and when the rate is fluctuating every day, itdrastically affects their profits.

When a business suffers a disadvantage because of fluctuation in the foreignexchange rate, it is likely to run to the government to ask for a special favor tooffset the disadvantage. In the example above, where the exchange rate wasdisadvantageous to the Japanese firm, their government gave them specialsubsidies (taken from the rest of the Japanese people) to enable them to sellsteel at competitive price in America. When the exchange rate is in the otherdirection, the American firm is likely to ask that a special tax be put on allgoods coming from out of the country – a tariff – or ask that the quantity ofgoods coming from outside be limited by law – a quota. It does not matter thattariffs and quotas injure the American consumer by forcing him either to paymore for foreign goods or to buy higher priced American goods. Even thoughmany more consumers are injured by tariff and quota legislation thanproducers are helped by it, Congress rarely fails to put the special interests of aparticular industry above the interests of the American people in this regard.Under a system of floating exchange rates, international trade becomes a cut-throat business. First the exchange rate moves; then injured businessmen inone country demand a subsidy to compensate. Elements in the other countryretaliate with a quota. Then the rate moves back, but the producers do not wantto give up their subsidy. People yell “unfair competition”. There is a generalrising of tempers as these groups discover that their basic interests are inconflict.

The raising of tempers does nothing to aid international harmony, but there is aworse effect. In a period of floating exchange rates and increasing tariffs andquotas, nations which are self-sufficient may suffer a reduction in theirstandard of living. But nations which are not self-sufficient are put in animpossible bind. A country that cannot produce enough food for its people,like Japan or England, must sell manufactured goods abroad in order to pay forthe goods it imports. If foreign countries prevent this by a barrier of tariffs or


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quotas, the country will starve. In that case it may resort to war to conqueragricultural areas so that it will be assured of a food supply.

Cordell Hull, Secretary of State under F.D. Roosevelt, was well aware of thisphenomenon as he stated: “Unhampered trade dovetailed with peace; hightariffs, trade barriers, and unfair competition with war. Though realizing thatmany other factors were involved, I reasoned that, if we could get a freer flowof trade – freer in the sense of fewer discrimination and obstructions – so thatone country would not be deadly jealous of another and the living standards ofall countries might rise, thereby eliminating the economic dissatisfaction thatbreeds war, we might have a reasonable chance of lasting peace.”

Richard Gardner tells us: “He [Hull] had written to Secretary of State Lansingthat the chief underlying cause of the conflict which began in 1914 could befound in the strenuous trade conquests and bitter trade rivalry being conductedprior to the outbreak of the war”.

H. Katz, The Warmongers, pp. 69-71.

Howard Katz illustrates the relation between economic rivalry and war as follows:

This factor was a contributing cause of World War I, which we did notexamine as it did not relate to American entry. Let us now consider it inrelation to World War II. When a country isolates itself economically bytariffs, quotas and the like, it is in a condition called autarky. In the Dark Agesevery village or castle lived in autarky; that is, they had no economicintercourse with their neighbors.

Japan is an industrial nation which does not grow enough food for its people. Itmust sell its products abroad in order to pay for food and raw materials. In theearly 1930s the western nations abandoned the gold standard (England in 1931,the USA in 1933, France in 1935); there followed a period of floatingexchange rates and increasing autarky. As Noam Chomsky points out:“Western economic policies of the 1930s made an intolerable situation stillworse, as was reported regularly in the conferences of the Institute of PacificRelations (IPR). The report of the Banff conference of August 1933 noted that“the Indian government111, in an attempt to foster its own cotton industry,imposed an almost prohibitive tariff on imported cotton goods, the effects ofwhich were of course felt chiefly by Japanese traders, whose markets in Indiahad been growing rapidly.... Japan, which is a rapidly growing industrialnation, has a special need for mineral resources and is faced with a seriousshortage of iron, steel, oil, and a number of important industrial minerals underher domestic control, while on the other hand, the greater part of the suppliesof tin and rubber, not only of the Pacific area but for the whole world, are, byhistorical accident, largely under the control of Great Britain and theNetherlands”. The same was true of iron and oil, of course. In 1932, Japaneseexports of cotton piece-goods for the first time exceeded those of Great Britain.The Indian tariff, mentioned above, was 75 percent on Japanese cotton goodsand 25 percent on Britain goods. The Ottawa conference of 1932 effectively

111 Still a British colony at that time!


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blocked Japanese trade with the Commonwealth, including India. As the IPRconference report noted, Ottawa had dealt a blow to Japanese liberalism.

Japan did not have the resiliency to absorb such a serious shock to itseconomy. The textile industry, which was hit most severely by thediscriminatory policies of the major imperialist powers, produced nearly halfof the value of manufactured goods and about two thirds of the value ofJapanese exports, and employed about half of the factory workers... It was inno position to tolerate a situation in which India, Malaya, Indochina and thePhilippines erected tariff barriers favoring the mother country, and could notsurvive the deterioration in its very substantial trade with the United States andthe sharp decline in the China trade. It was, in fact, being suffocated by theAmerican and British and other Western imperial systems, which quicklyabandoned their lofty liberal rhetoric as soon as the shoe began to pinch.

England, like Japan, is an industrial nation, which cannot grow enough foodfor her people and must sell manufactured goods in order to buy food fromabroad. England dealt with the problem of autarky by a policy of imperialism –conquering weaker countries around the world and using them as sources offood. This provides a convenient excuse for war, which in turn will create aneed for paper money. It is not surprising that 20th century Japan adopted thepolicy of 18th and 19th century England – securing trading areas by militaryconquest of weaker countries. Americans have been taught that Japan was theaggressor in World War II; this is true, but the US did not exactly lure her tothe side of peace. William L. Neumann points out:

“When an effort to set a quota on imports of bleached and colored cottoncloths failed, President Roosevelt finally took direct action. In May of 1936 heinvoked the flexible provision of the tariff law and ordered an average increaseof 42 percent in the duty on these categories of imports. By this date Japan’scotton goods had begun to suffer from other restrictive measures taken bymore than half of their other markets. Japanese xenophobia was furtherstimulated as tariff barriers rose against Japanese goods, like earlier barriersagainst Japanese immigrants, and presented a convincing picture of westernencirclement. The most secure markets were those which Japan could controlpolitically; an argument for further political expansion.”

Japan conceived the idea of the Greater East Asia Co-prosperity Sphere, a freetrade zone in eastern Asia wherein Japan would provide the manufacturedgoods and several other countries would provide the food and raw material –under Japanese domination of course. Royama, a leading Japanese liberal ofthe time, wrote that his country’s aim was: “... not to conquer China, or to takeany territory from her, but instead to create jointly with China and Manchukuoa new order comprising the three independent states. In accordance with thisprogram, East Asia is to become a vast self-sustaining region where Japan willacquire economic security and immunity from such trade boycotts as she hasbeen experiencing at the hands of the Western powers.”

We begin to see that the Pacific theater of World War II might have beenavoided had the Western powers, including the US, not imposed traderestrictions, including the closing of the Californian market, on Japan. Politicalpressure to close this market stemmed directly (in the manner described above)from the abolition of the gold standard in 1933.


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In fact, we can go further and state that Japan not only could have dissuadedfrom making war on America: she positively had to be dragged kicking andscreaming into the attack on Pearl Harbor. Many Americans wondered at thattime (and subsequently) whether Japan was crazy? How would she hope todefeat the USA? Japan was not crazy. Here is the story112.

Japanese expansion was blocked by what she called the ABCD countries -America, Britain, China and the Dutch – three of which were enemies ofGermany; so Japan allied with Germany on the principle that the enemy of myenemy is my friend. Meanwhile investigations by the Nye and PujoCommittees here in the US brought out many facts surrounding the US entryinto World War I. This created a large isolationist sentiment, a group ofAmericans who would no longer believe their government and who wereviolently opposed to any American involvement in a European war.

As Roosevelt began to realize the importance of stopping Hitler113, he wasfaced with the fact that a substantial body of opinion would simply not believehim. And we can be sure that this isolationist sentiment (which had a goodhistorical foundation in America’s traditions) was encouraged by Nazisympathizers. Although this was not a majority, Roosevelt knew enough not totry to take a divided country into war with Germany – exactly the policy whichhad been such a disaster two decades before.

It would be nice to say that FDR heroically rose to the challenge and rationallypersuaded the American people of the evil of Hitler and of the essentialsdifference between World War I and World War II. But this is not the case.Roosevelt chose to get into a war with Germany through their alliance withJapan.

By one restrictive action after another, he began to block Japanese plans forexpansion in the Far East, confronting them with the alternative: make war onAmerica or give up the entire plan for the Greater East Asia Co-ProsperitySphere. At the same time he left Pearl Harbor unprotected as an inviting target– hoping that the Japanese would take the bait and pull a sneak attack as theyhad done to initiate the Russian-Japanese war. Three days before Pearl Harborthe New York Times commented editorially:

“Japan is facing international economic siege and she is very vulnerable...Scarcely able to sustain herself in foodstuffs, she is heavily dependent uponimports of other raw materials. For such industrial and military necessities aspetroleum, iron, steel, aluminum, lead, zinc, copper, tin, machine tools, wooland cotton she relied chiefly upon the United States, the British Empire and theNetherlands’s Indies, nations which are now enforcing against her a rigideconomic blockade.”

112 See also http://www.geocities.com/Pentagon/6315/pearl.html and Noam Chomsky, Failed States, p.

84, where he describes that by November 1940, more than one year before Pearl Harbor, the USA had alreadymade plans to bomb Tokyo and other big cities in Japan – cities made of rice-paper and wood – with fire-bombs,and “that there would be no hesitation about bombing civilians”.

113 Hitler signed Germany’s death warrant when he prohibited the withdrawal of funds from Germanyexcept in very small annual amounts. This act was tantamount to confiscation of foreign capital, and the bigindustrialists moved to retaliate.


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Admiral Theobald, in his book The Final Secret of Pearl Harbor, explains thatthe US Intelligence had cracked the Japanese code prior to World War II. Aselect number of machines had been built (the Purple machines) to decode theJapanese messages. The messages sent from Tokyo to the Japanese embassy inWashington in November and early December 1941 – all available toRoosevelt – leave no doubt in the mind of any reasonable person that an attackwas planned. Yet Pearl Harbor, a point of obvious vulnerability, was notwarned and was not even given a Purple machine.

The commander of Pearl Harbor would have done better to have read the NewYork Times than to have waited for orders from Washington. Interviewing anAmerican diplomat involved in the Japanese negotiations in his column forDecember 4 1941, Arthur Krock asked: “How would you state the prospectsnow?” and received the answer: “It is conceivable that the Japanese will moveaggressively at any time.” The Times of Sunday morning, December 7th, wouldhave told him that civilians were being evacuated from Manila (like Honolulu,then the capital city of an American territory) and the paper of December 1st

would have brought him the opinion of the First Lord of the British Admiraltythat there existed “very grave danger that the war at sea may extend to the FarEast... if Japan breaks with and attacks the United States...”

If the American people did not know Roosevelt’s intentions, the Japaneseleaders did. They must have reasoned as follows: Roosevelt wants to fightGermany. If we strike first and deal a knockout blow to the US Pacific Forces,Roosevelt will have his German war. Then he will be anxious to make peacewith us so he can concentrate on Europe. We can negotiate favorable termswith America which allows us the flow of raw materials we need to continueour Asia Wars. Dangerous? Yes, but there was little alternative. Roosevelt hadjust cut off Japan’s source of scrap steel; she had only 15 months supply. Oilwas crucial. While the business or labor elements which had originallysupported the Greater East Asia Co-Prosperity Sphere might have been willingto abandon it had they known that it would involve war with the United States,control had passed to dedicated militarists who were not willing to make such adecision. This is the reason America fought the Pacific theater of World WarII.

Unfortunately, these facts, well known to serious students of the subject, arenot taught in our schools. Too many people are unwilling to believe that theirhero, Franklin D. Roosevelt, deliberately let thousands of American soldiersdie in a surprise attack, of which he had advance knowledge. Those whopurposely close their eyes to reality are like sheep, destined to die for someoneelse’s end. Americans who would not face the truth about World War I diedunnecessarily in the Pacific theater of World War II and in Vietnam114.

And if we of the present generation are not ready to face the truth as it is(rather than as we wish it to be), in a few years we will again be dying in anunnecessary war to further the goals of someone who wants to take away ourfreedom.


114 Afghanistan, Iraq…


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Or as Santayana has said: “Those who do not remember the past are condemned to relive it”.In the next section we will explain how a war can be “financed”.

7.4 Inflation and its relation with war – Cui bono?

We have discussed already the “why” of war based on our economic model and theMalthusian world view. When needs for products and services reach a certain level ofsaturation so that people no longer buy more and more, or people still in need do not have thepurchasing power, then economic growth will stagnate, so money can no longer createmoney. In that situation, a war can be used in order to reduce, next to the level of population(Malthusianism), also the level of capital invested (destruction = disinvestment) and, at thesame time, to return the society to a level where there again are basic needs and thus potentialfor growth: the profit-ratio will increase and money can once more create money. By theintroduction of protectionistic measures like tariffs and quota, governments try to protect theown already saturated market for the benefit of the own producers. Countries depending onthe export of manufactured goods in order to pay for their import of energy, raw materials andfood are cut from their markets. They are then faced with the choice of internal socialconflicts, which can jeopardize their internal power structure, or an external conflict, in whichthe aggression is ventilated toward the outside world.

We have already a presumption of who will benefit from a war in the first place. But how dothese people succeed in leading a society into such an adventure? One instrument is of coursewar propaganda and the manipulation of the media in order to deceive the people about thereal nature of the war. Indeed, economic recession and unemployment are the perfect soil fornationalism, racism, extremism and fascism. It is rather easy to point to an external enemy asa scapegoat.

… and in all times. May the lights in the land of plenty shine on the truth some day…


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The psychological base of war115.

There is a belief – widespread in our society – that feeling any emotion ofhostility is a wrong or immoral thing. People who accept this belief do not liketo admit their hostile emotional states, even to themselves. Such a person will,of course, feel anger and hate. Human emotions are automatic responses to theoutside world. If a man perceives something which is evil and a threat to hisvalues, hostility (and often fear) is automatic. It is part of his make-up as ahuman being.

Such responses are not in themselves bad. In a good person the hate will bedirected at the evil and will act as a psychological motive for him to fight theevil and preserve his values. But when people deny their hate, pretending tothemselves that it does not exist, then the hate ceases to be under rationalcontrol.

The most familiar example of this is the man who grovels before his superiorsand takes out his aggression on his subordinates or his wife and children.Instead of feeling hate for the person who has caused his frustration, he simplyhates the weakest available party116. This is not in accord with justice. It is not arational policy; and it will do nothing to deter future frustration. But this mancannot subject his hate to a rational process because he will not even admit thatit exists. One may see many examples of this type in the Armed Forces.Another example may be found in certain members of minority groups who areservile to those who have the power in our society and take out their hostilityin criminal acts against random passers-by. Again this does nothing to deter theinjustice to which these groups are often subject.

The result of this is that a huge number of people are walking around withirrational hostility – a free-floating hate caused by events in their personal livesbut not directed at the rational object of their frustration. If a politician canreach out and channel that hate, he will strike a deep public chord and win a lotof support.

The following method for channeling hatred has a long and successful history:“Look out there”, the politician says, “There is The Enemy. He is not like us.He harbors vicious and aggressive designs against us. He is evil.”

If one studies history, one is struck by the number of times that this syndromedominated countries so that each of them became the Enemy to the other. Eachelement in the syndrome has a function:

115 Howard Katz, The Warmongers, pp. 114-115.116 Immigrants, people with another skin color, another religion…


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The enemy is outside: This allows the politician to unite all elements of thesociety. There is no one to fight back.

He hates us: This alleviates the guilt which people feel becausethe truth is the opposite, and the essence of this kindof personality is the belief that any hatred is immoral.

He is different: Thus easier to hate. Again one is struck by thefrequency with which countries fight those who aresimilar to themselves. The Germanic tribes ofWestern Europe, all basically similar in culture, whohave bitterly fought each other since they overran theRoman Empire are one example. The Greek city-states are another.

He is evil: Thus worthy of hate.


But in order to convince the own population that the enemy is outside, that he hates us, that heis different and that he is evil is one thing. To finance a war is quite another thing.

7.5 A 1st mechanism to get hold of the wealth of the common people:

Inflation.

7.5.1 On the origin of paper money – Cui bono?

During the Middle Ages gold and silver coins where used as means of exchange in theeconomic system. The very rich people did not keep their money at home, but with agoldsmith. For the rent of space in a safe they paid a fee to the goldsmith. In return theyreceived a certificate on their name, which they could use as proof of their credit-worthinessin an economic transaction. They also had to pay a fee for every deposit or withdrawal theymade on their account.

But in order to complete an economic transaction, the gold and silver had still to be physicallytransported from the goldsmith of the buyer to the goldsmith of the seller. And then therewhere people like Robin Hood, who robbed the money transports.

The goldsmiths got the idea to issue certificates on bearer. This dramatically reduced thephysical transport of gold and silver, as the people started to use those certificates instead ofthe real money as means of payment. They did this in the knowledge that they could alwaysexchange the certificates for real money – gold and silver – with the goldsmith who hadissued them.


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The goldsmiths noticed that the people did not bother to collect the gold and silver anymore,and that their income on deposits and withdrawals had declined drastically. So they got theidea to issue more certificates than they had coverage in precious metals. They could not usethese extra certificates themselves; this would be a too obvious fraud. And there were alwayspeople who collected part of their real money in deposit. No, the goldsmiths printed 5 timesmore certificates than they had coverage117, and lent these at a certain interest to people inneed of money. So they earned money on something they did not own. One can raisequestions on the morality of this practice, but the system seemed to have a positive effect onthe economy, as it induced economic growth. This mechanism is probably one of the triggersfor the Industrial Revolution, next to the following topic.

7.5.2 On the origin of democracy

In those days the aristocracy was the power-structure in society. The king or the localaristocracy autonomously decided on the level of taxes the people had to pay. Very often theyused the technique of re-minting: gold and silver coins collected as taxes were melted, a lessprecious metal was added and new coins were stamped. So they could spend more moneythan they had collected as taxes. Inflation was created. They did this in order to increase theirbudgetary capacity, e.g. in order to finance a war against another king, the payment of theadministrative, juridical and military apparatus needed in order to guarantee that thepopulation paid the taxes to the aristocracy.

In England something happened which could very well have reshaped the course of history ina dramatic way. The people revolted against King Charles I, who was decapitated (1642), andthey installed a republic with an elected parliament. During this republican period underCromwell there was a real tyranny, very much similar to the period of Robespierre in Franceafter the French Revolution. People were induced to spy on each other, and a lot of innocentpeople were executed. After some time, the people of England decided to return to themonarchy, but under the condition that the new king would accept the Bill of Rights. This Billstipulated that the power of the king should be subordinate to the authority of the Parliament,chosen by and representing the people – well, part of the people as only the well-off citizenscould vote.

This king William started – as was the tradition in those days – a new war with France. Butthe war was dragging along and cost a lot of money. At a certain moment William was shortof money, so he asked the Parliament for a tax increase. The people grumbled and were morethan sick of the never-ending war, so the elected members of Parliament were only willing tovote a tax-increase of three million pounds. The king was still in need of two million poundmore. He tried to borrow the remaining sum, but could only raise half of the amount, forcingthe interest rates to very high levels.

So King William was faced with a big problem. In 1691 a certain William Paterson got thebrilliant idea to start with a central bank in order to manage the monetary affairs of the king.A starting capital of 72,000 pounds in gold and silver was collected, and then the bank printed162/3 times more paper certificates than they had coverage, for an amount of 1,200,000 pound.That money was lent to the king at an interest of 81/3%. The yearly interest, 100,000 pound,was thus greater than the originally invested capital!

117 This was the start of the fractional reserve banking system which is still “common practice” in these

days, and the cause of a lot of calamities in the financial world, especially for the public who has a blind faith inwhat the banks are advising them.


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The king could continue his war with France by spending the lent money on warships,weapons, ammunition, horses, paying the soldiers, food for the horses and the soldiers. Butagainst this sudden influx of money in the economic system, there was no similar increase ofeconomic production, and according to the law of supply and demand prices started to soarup, so also the cost of living of the common people. There was a hyperinflation.

The population recognized that they could buy less with that paper-money. They lost theirconfidence in those certificates. So they went to the goldsmiths – who in the mean time hadbecome bankers – in order to exchange the certificates for real gold and silver. The ones whocame first were lucky, and then there was no more gold and silver in the safes of the bankers,so the banks went bankrupt. The first central Bank of England also crashed.

You see, hardworking people who produced real economic value, who provided jobs toothers, who paid taxes and then also tried to save some money for their old age, well thesepeople were taken in. Just as in 1929 and 2008. What is the difference between a hedge fund,that loans money in order to speculate on the stock market, and a bank that issues more loansthan it has deposits?

Morality of the story so far: when people can decide in a rational way to go to war or not, andwhen they are directly confronted a priori with the real cost of a war, then people are morepeace-likely, just for economical reasons. But since those times, wars have always beenindirectly financed by the creation of paper money out of nothing, and lending this money tothose in authority. The creators of the money earned a lot, so those in authority, whosupported this mechanism, could also have some part of it in order to finance their (re-)election campaign. The common people where confronted with inflation, their savings wereeroded. They paid for the war in an indirect way during the war and long after the war wasover, as their money lost its original value.

In England and the USA, the Bank of England118 and the Federal Reserve are private banks,with a private shareholder structure. In other countries, fortunately, the central bank is underpolitical and social control, and the creation of money follows more or less the real economicevolution.

Only two presidents of the USA have ever tried to stop this mechanism of creating money outof nothing, by pulling the authority of issuing money to the government, away from theprivate central bank, as is even stipulated in the 16th amendment of The AmericanConstitution: Abraham Lincoln and J.F. Kennedy. You know what happened to both of them.

Under the British mercantile system, the colonies were supposed to supply raw materials likecotton, which were then processed in the English mills into fabrics, which where thenexported, so the British Isles could pay for the import of their food and other necessities.Control over cotton in those days was considered just as crucial as control over oil in thesedays119.

118 The Bank of England was nationalized in 1946, but since then dividends were still paid to private

shareholders. The nationalization could go along as in 1944 the International Monetary Fund and the Bank forInternational Settlements were established during the conference of Bretton Woods: the mechanism of creationmoney out of nothing was lifted to a global level.

On the website http://www.prosperityuk.com/prosperity/articles/kerby.html you find the story of a billproposed by Captain Henry Kerby in the British House of Commons on December 22nd 1964 in order towithdraw the power to issue money from the Bank of England and to bring this under the authority of thegovernment.

119 Noam Chomsky, Failed States, P. 93.


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One of the first things President Lincoln did after he came to office, was to close the USAborders from free trade in order to stimulate the domestic industrial production120, against theeconomic and financial interests of the British mercantilists. In that time money was issued byprivate banks in the United States. Lincoln decided that money should be issued by thegovernment: the famous greenback notes. The two measures resulted in his death. He wasshot by John Wilkins Booth. What was the motive for this murder and who was behindBooth? On the website http://home.att.net/~rjnorton/Lincoln74.html six theories areformulated, and it is very well possible that the truth is a combination of two or more of thesetheories.

The fourth theory is rather interesting:

Lincoln’s assassination was the result of a conspiracy of powerful internationalbankers.

This theory is that Abraham Lincoln was killed as a result of his monetarypolicies. John Wilkes Booth would be seen as a “hired gun”. In its simplestterms, the theory is that Lincoln needed money to finance the Civil War. Hewas offered loans at high interest rates by bankers in Europe led by theRothschilds. Rather than accept the loans, Lincoln found other means to fundthe war effort.

More importantly, the British bankers opposed Lincoln’s protectionist policies.Some Englishmen in the 1860s believed that “British free trade, industrialmonopoly121 and human slavery travel together.”

Lincoln’s policies after the Civil War would have destroyed the Rothschilds’commodity speculations. After the war, Lincoln planned a mild Reconstructionpolicy which would have enabled a resumption of agriculture production. TheRothschilds were betting the other way on high prices caused by a toughreconstruction policy toward the South.

Lincoln was viewed as a threat to the established order of things, and he wasassassinated as a result. The goal was to weaken the United States so theRothschilds could take over its economy. An article titled “The Rothschilds’International Plot to Kill Lincoln” was published October 29, 1976, in NewSolidarity.

120 In India Mahatma Ghandi introduced the spinning wheel in every household and stimulated local salt

production from sea water. He was shot too.121 As advocated by the British East India Company.


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In the early 1960s President J.F. Kennedy was reluctant to send more ground troops toVietnam. He also took the decision that the government should issue the money, backed bythe value of silver122. He was shot too by…, well yes, by whom? According to the RollingStones in their song Sympathy for the Devil: “After all, who shot the Kennedy’s, it was youand me”. Actually the system you and me have been born in, living in, the system that wehave to endure.

On the website http://www.john-f-kennedy.net/thefederalreserve.htm you can find an articlewritten by Anthony Wayne on this matter. Here are some highlights.

On June 4, 1963, a virtually unknown Presidential decree, Executive Order11110, was signed with the authority to basically strip the Federal ReserveBank of its power to loan money to the United States Federal Government atinterest. With the stroke of a pen, President Kennedy declared that theprivately owned Federal Reserve Bank would soon be out of business. TheChristian Law Fellowship has exhaustively researched this matter through theFederal Register and Library of Congress. We can now safely conclude thatthis Executive Order has never been repealed, amended, or superseded by anysubsequent Executive Order. In simple terms, it is still valid…. “United StatesNotes” were issued as an interest-free and debt-free currency backed by silverreserves in the U.S. Treasury.

Source:http://usrarecurrency.com/1963$5UnitedStatesLegalTenderNoteSnA51298086A.htm

122 http://www.john-f-kennedy.net/thefederalreserve.htm


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1963 $5 United States Legal Tender Note FR-1536 (front and back)

The silver-backed dollar notes were characterized by the red serial number.

President Kennedy was assassinated on November 22nd 1963, and the United States Notes hehad issued were immediately taken out of circulation. Since then the Federal Reserve Notescontinued to serve as the only legal currency of the nation. According to the United StatesSecret Service, 99% of all U.S. paper “currency” circulating in 1999 are Federal ReserveNotes.

7.5.3 Motives for war versus forces for peace

Let us return to the England of the 17th century. Once the king could no longer determine thelevel of taxation, but this was decided by an elected parliament, the common people refused topay higher taxes in order to finance a war.

At this point we can begin to see the operation of an important social force.When democracy entered the history of a major European power – mostparticularly establishing the principle that the people could only be taxedthrough their elected representatives – it acted as a force for peace. It did notdo this for any idealistic reasons. There is no evidence that the 17th centuryEnglish were less warlike than other peoples. They loved the bands and theparades and the uniforms of war; they hated the outsider; they erased from


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their minds the suffering of their countrymen and glorified the killing of theenemy – just like all other people of that time and this.

Where democracy acted as a force for peace was not in regard to any spiritualmotives, but in the very practical motive of cost. War is expensive. War, ineffect, is mass destruction. Every war must be paid for, and it must be paid forby the people of the country doing the fighting (wars financed by loot andbooty being a figment of some militarist’s imagination). Under a monarchy ordictatorship the people have no say over expenditures. Taxes are seized fromthem against their will. But in a democracy they vote (or chooserepresentatives who vote) their level of taxation.

The people’s seizure of political power coupled with the average person’sunwillingness to pay the cost of war showed itself in 1693 to be an importantnew political force – a force for peace. It could have brought a new era toworld history. But a method was found to circumvent this force...

The British Parliament of 1693 was up against a new political force. Politicianshad discovered the people’s unwillingness to pay for war. The solution was todeceive them about the costs...

At this point a new motive for war has been created. The government isdesperate for funds and is willing to resort to unsound financial methods –methods which could not be tolerated in peace. The banker creates money outof nothing, lends it to the government and profits from the interest. War is ofgreat financial interest to the bankers.

The perceptive reader may raise an objection: “I see how the king got themoney he needed. But after all, war is not fought with money. What are neededare real goods: horses, arms, foods, transportation, etc. If we could create realgoods by simply printing paper notes, then, in war or peace, why shouldanyone bother to work? Paterson provided the paper notes for the war, but whoprovided the real goods?”

The answer is that the English people of the time provided them: the samepeople, who through their elected representatives had refused to provide thegoods via taxes, wound up providing them through the paper money.

When the king spent William Paterson’s Bank of England notes, using them toacquire real wealth, then that much wealth was taken from the people ofEngland. When they went to their markets, they found that a given amount ofmoney would buy less. In short, there was a deprecation of their currency.

Here we have a second motive for war, or more precisely, the removal of whatwould otherwise be a motive for peace. Bank issues of paper money hide thecost from the people. In the final analysis the people must pay for the war123;there is no one else who can manage such sums. When the war is financedthrough taxation, the cost is presented to each person in advance, and he is ableto make a rational decision: is this war, and the benefits to be gained from it,worth the additional burden?

But when the war is financed by depreciating the currency via paper money,the true cost is hidden from the people and becomes apparent only afterward.

123 And the financial and economic crises.


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In this case, the costs are not judged according to a rational standard; ratherpeople act on the basis of emotions and mystical notions of power and glory.

Thus, paper money provides a motive for war in two ways124:

• The true cost of the war is hidden from the people so that they cannot make arational decision whether or not to bear it.

• Through the operations of paper money the bankers make huge profits. Since verylarge paper issues are only associated with war, then if the banker can foment awar, he can enjoy these profits.

The principle of 1693 was continuously repeated. In the history of nation afternation, subsequent to the attainment of democracy, the people nevershouldered the costs of a war in the direct and rational form of taxation. It wasalways imposed on them by deception via paper money.

Thus there is a close correlation between paper money and war...

H. Katz: The Warmongers, pp. 14-21.

So far Howard Katz in his revealing book The Warmongers125. In this book he gives acomplete overview of the wars in which the United States of America were involved untilVietnam. He reveals for each of these wars who has had the most financial advantage and atwhose expenses. He also analyzes the Cold War politics and clearly shows who is really incontrol behind the curtains. At the end of his book he gives a very interesting discussion onthe American Constitution, how it was carefully designed in order to avoid all the abuses ofpower by the aristocracy in medieval Europe, where people were exploited by their ownrulers, and how the Constitution was violated each time America was involved in a war, underthe pretext that it was necessary to sacrifice individual freedom for the general good, toprotect the free world against foreign aggressors.

In America there are two kinds of law. There is the ordinary law, made by thegovernment and acting as a constraint on the people, telling us that we must dothis or that and threatening us with penalties if we do not comply. But there isanother law, the people’s law which operates on the government, that is, theConstitution: the people made the Constitution to act as a constraint on thegovernment, telling it what it may do and threatening its officials withpenalties126 if they do not comply.

In addition to providing the moral basis for government, the process of framingprinciples in a constitution and leaving the application of those principles to acontinuing body has a further advantage. It allows the question of governmentto be considered in the manner conducive to the most effective use of thehuman mind – the framing of abstract principles according to rationalconsiderations and the deduction from those principles of specific applicationto meet specific circumstances. Perhaps this is why, when we look at the

124 The third one has already been discussed: autarky, combined with floating exchange rates of

currencies whose value is no longer related to the gold standard.125 See also Batra, The Great Depression of 1990, pp. 14-20126 Impeachment.


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provisions of the US Constitution, we are struck by their genius, and when welook at the times in history when we have deviated from the Constitution, weare ashamed and apologetic. Most particularly, war is a time when the humanmind is at its worst. Every war generates a wave of emotion which blots outrational action. This is relevant to an anti-war movement because theConstitution contains a number of provisions designed to guide the nation towar in the most rational way, provisions which are routinely flouted in a warmanufactured by the banker-conspiracy to help subordinate us. These are:

1. the prohibition of paper money;

2. the requirement that Congress declare war127;

3. the absence of any Federal conscription power;

4. the militia system.

H. Katz, The Warmongers, p. 228-229.

By the way, would it not be possible to finance our pram-industry in the same way as the kingof England financed his war? Buckminster Fuller claims that the Cold War was invented andfomented after the Second World War in order to justify the very expensive nuclear researchand the arms race – both very profitable for certain groups in society – in the eyes of thepeople in the western world. It was indeed after the Second World War that the United Statesabandoned their traditional policy of isolation and neutrality – as stipulated in theirConstitution. At that time they did not disbanded their army as they have done after previouswars. Now we can fully understand the evolution of the purchasing power of the Americandollar:

• The large deprecations are the result of manipulation of the dollar by using papermoney in order to hide the cost of war from the people and at the same time towithdraw purchasing power – real wealth – from them to finance the war. Beforethe Second World War America has disbanded its army after every war and hasreturned to the militia system and to the gold standard, so the purchasing power ofthe dollar was restored at the same level as before the war.

• The continuous erosion of the purchasing power of the dollar since the 1930s isdue to the manipulation of the dollar, not only to hide the cost of several wars tothe tax-payer, but also to finance the Cold War arms race and to hide the cost ofkeeping an enormous army and secret service operational worldwide. Not only theAmerican people have paid for the arms race, but the whole western world, as thedollar is generally accepted in international trade (for how long?).

From this discussion we have learned that inflation is a perfect instrument in order to siphonoff purchasing power from one subsystem in society to another. In a situation of low or zeroeconomic growth, where there is no profit for society and thus no increase of purchasingpower for the society as a whole, and money can no longer create money, certain groups canstill acquire more purchasing power at the expense of others. They even succeed in creatingmoney out of nothing. These tactics are not so visible and violent as the one used in the old

127 ... and not the president or the government.


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days, when people were forced by their oppressors-rulers to finance the war and the army, butthey yield the same result: it still remains exploitation of one group in society by another.

Interestingly, two years after the establishment of the Bank of England the oldpractice of coin clipping and alloying base metals with the gold – which hadgone one since virtually the invention of money – was ended by a reminting ofthe debased coinage. With the new methods of exploitation in place, there wasno need for the old. Power to debase the currency thus passed from the king,representing the old aristocracy, to the banker, representing the covertaristocracy, and there it remains to this day.

H. Katz: The Warmongers, p. 41.

At this point we can once again formulate a conclusion: More democracy leadsto more peace. Reduction of democratic rights carries the seeds of war.

7.6 A 2nd mechanism to get hold of the wealth of the common people: Income

taxes.

Inflation is one method to get hold of the wealth of the common people in order to pay for thewar. But there are really no limits to the imagination of those in real control of geopoliticalaffairs. Here is a second method: the introduction of income tax in the USA prior to the FirstWorld War. Buckminster Fuller has described this in great detail in his book Critical Path.

The supreme leaders of the American Revolution were of the southern type –George Washington and Thomas Jefferson. Both were great landowners withdirect royal grants for their lands, in contradiction to the relatively meagerindividual landholdings of the northern Puritan colonists.

With the revolution over, we have Alexander Hamilton arguing before theCongress that it was not the intention of the signers of the Declaration ofIndependence that the nation so formed should have any wealth. Wealth,Hamilton argued – as supported by Adam Smith – is the land, which issomething that belonged entirely to private individuals, preponderantly thegreat landowners with king-granted deeds to hundreds and sometimesthousands of square miles, as contrasted to the ordinary colonists’ fewhundreds of acres of homestead farms128.

Hamilton went on to argue that the United States government so formedwould, of course, need money from time to time and must borrow that moneyfrom the rich landowners’ banks and must pay the banks back with interest.Assuming that the people would be benefited by what their representativegovernment did with the money it borrowed, the people gladly would be taxedin order to pay the money back to the landowners with interest. This is where acentury-and-a-half-long game of “wealth”-poker began – with the cards dealtonly to the great landowners by the world power structure.

128 Try to understand the American Civil War with this in mind.


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Obviously, very powerful people had their land given to them by the king andnot by God, but the king, with the church’s approbation, asserted it was withGod’s blessing. This deed-processing produced a vast number of courtdecisions and legal precedent based on centuries and centuries of deedinheritances. Thus, landlord’s deed evolved from deeds originally dispensedfrom deeds of war. Then the great landlords loaned parcels of their lands tosharecropping farmers, who had to pay the landlords a tithe, or rent, and“interest” out of the wealth produced by nature within the confines of thedeeded land. The landlord had his “tithing” barn within which to store thegrains collected in the baskets (fiscus is Latin for “basket”; thus the fiscal yearis that which winds up within the basketed measuring of the net grainsharvested). The real payoff, of course, was in regenerative metabolicincrements of the botanical photosynthetic impoundment of Sun radiation andhydrocarbon molecules’ structuring and proliferation through other hydrogenicand biological interaccommodations129. Obviously none of this natural wealth-regenerating and -multiplying was accreditable to the landlords.

When I was young, there were people whom everybody knew to be very“wealthy”. Nobody had the slightest idea of what that “wealth” consisted, otherthan the visible land and the complex of buildings, in which the wealthy lived,plus their horses, carriages and yachts. The only thing that counted was thatthey were “known to be” enormously wealthy. The wealthy could doapproximately anything they wanted to do. Many owned cargo ships.However, the richest were often too prone to live in very unostentatious ways.

Of course, money was coined and the paper equivalents of metallic coinagewere issued by the officers of banks of variously ventured private-capital-banking-type land systems. Enterprises were underwritten by wealthylandowners, to whom shares in the enterprises were issued and, whenfortunate, dividends were paid. “Rich” people sometimes had their own privatebanks – as, for instance J.P. Morgan and Company. Ordinary people rushed todeposit their earnings in the wealthy people’s banks.

For all the foregoing reasons nobody knew of what the wealth of the wealthyreally consisted, nor how much there was of it. There were no income taxesuntil after World War I130. But the income tax did not disclose capital wealth. Itdisclosed only the declared income of the wealthy. The banks were capitalizedin various substantial amounts considered obviously adequate to cover any andall deposits by other than the bankers involved in proclaiming the capitalvalues. These capital values were agreed upon privately between greatlandowners based on equities well within the marketable values of smallfractions of their vast king-deeded landholdings.

“The rich get richer and the poor get children” was a popular song of the early1920s131. Wages were incredibly low, and the rich could get their buildingsbuilt for a song and people them with as many servants for another song. But,

129 What Bucky is telling: added value is produced on Earth by the Sun in a pure natural way, something

no person or corporation ever can accomplish.130 This may surprise you, but later on you will read the reason for this.131 A contemporary version goes like this: “The poor stay poor, the rich get rich. That’s how it goes.

Everybody knows that the boat is leaking and that the captains lied.”


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as with uncalled poker hands, nobody ever knew what the “wealthy” reallyhad. I was a boy in a “comfortable off” family, not a “wealthy” family – notwealthy enough to buy and own horses and carriages. To me the wealthyseemed to be just “fantastically so”.

This brings us to World War I. Why is it called the First World War? All warsuntil this time had been fought in the era when land was the primary wealth.The land was the wealth because it produces the food essential to life. In theland-wealth era of warring the opposing forces took the farmers from the landand made soldiers of them. They exhausted the farm-produced food suppliesand trampled down the farms. War was local.

In 1810, only five years after Malthus’s pronouncement of the fundamentalinadequacy of life support on planet Earth, the telegraph was invented. It usedcopper wires to carry its messages. This was the beginning of a new age ofadvancing technology. The applied findings of sciences brought about an era inwhich there was a great increase of metals being interalloyed or interemployedmechanically, chemically, and electrolytically. Metals greatly increased theeffectiveness of the land produced foods. The development of non-rusting,hermetically sealed tin cans made possible preservation and distribution offoods to all inhabited portions of our planet Earth. All the new technology ofall the advancing industry, which was inaugurated by the production of steel inthe mid-nineteenth century, required the use of all the known primary metallicelements in various intercomplementary alloyings. For instance tin cansinvolved tin from the Malay straits, iron from West Virginia mines, andmanganese from Southern Russia.

The metals were rarely found under the farmlands or in the lands that belongedto the old lords of the food-productive lands. Metals were found often, but notalways, in mountains all around the world, in lands of countries remote fromone another. Mine ownerships were granted by governments to the first to fileclaims.

It was the high seas, intercontinental, international trafficking in these metalsthat made possible the life-support effectiveness of both farming and fishing.The high-seas trafficking was mastered by the world around line-of-supplycontrollers – the venturers and pirates known collectively as the BritishEmpire. This world-around traffic was in turn financed, accounted, andmaximally profited in by international bankers and their letter of credit, bills ofexchange, and similar pieces of paper. International banking greatly reducedthe necessity for businessmen to travel with their exported goods to collect atthe importers’ end. Because the world-around-occurring metals were at theheart of this advance in standard of living for increasing numbers of humans allaround the world, the struggle for mastery of this trade by the invisible,behind-the-scenes-contending world power structures ultimately brought aboutthe breakout of the visible, international World War I.

The war was the consequence of the world-power-structure “outs” becomingrealistically ambitious to take away from the British “ins” the control of theworld’s high-seas lines of supply. The “outs” saw that the British Navy wasguarding only the surface of the sea and that there were proven new inventions– the submarine, which could go under water, and the airplane, which could flyabove water – so the behind-the-scenes world-power-structure “outs” adopted


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their multidimensional offensive strategy against the two-dimensional world-power-structure “ins”. The invisible-power-structure “outs” puppeted theGermans and their allies. The invisible-power-structure “ins” puppeted GreatBritain and her allies. With their underwater strategies the “outs” did severelybreak down the “ins” line of supply.

J.P. Morgan was the visible fiscal agent for the “in” power structure, operatingthrough Great Britain and her allies. The 1914 industrial productivity inAmerica was enormous, with an even more enormous amount of untapped USmetallic resources, particularly of iron and copper, as backup.

Throughout the nineteenth century all the contending invisible world powerstructures invested heavily in U.S.A.-enterprise equities132. Throughout thatnineteenth century, the vast resources of the U.S.A. plus the new array ofimported European industrial tooling, the North American economyestablished productivity. The U.S.A. economy took all machinery that hadbeen invented in England, Germany, France, and Europe in general andreproduced it in America with obvious experience suggested improvements.

In 1914 World War I started in the Balkans and was “joined” in Belgium andFrance on the European continent. The British Isles represented the“unsinkable flagship” of the high-seas navy of the masters of the world oceans’lines of supply. The “unsinkable flagship” commended the harbors of theEuropean customers of the high-seas-line-of-supply control. If the line ofsupply that kept the war joined on the European continent broke downcompletely, then the “outs” would be able to take the British Isles themselves,which, as the “flagship” of the “ins” would mean the latter’s defeat.

In 1914, three years before the U.S.A. entered the war, J.P. Morgan, as the“Allies” fiscal agent, began to buy in the U.S.A. to offset the line-of-supplylosses accomplished by the enemy submarines. Morgan kept buying andbuying, but finally, on the basis of sound world-banking finance, which waspredicated on the available gold reserve, came the point at which Morgan hadbought for the British and their allies an amount of goods from the U.S.A.equaling all the monetary bullion gold in the world available to the “ins” powerstructure. Despite this historically unprecedented magnitude of the Alliedpurchasing it had only fractionally tapped the productivity of the U.S.A. SoMorgan, buying on behalf of England and her allies, exercised their borrowing“credit” to an extent that bought a total of goods worth twice the amount ofgold and silver in the world available to the “ins”. As yet the potentialproductivity of the U.S.A. was but fractionally articulated. Because the “abilityto pay later” credit of the Allied nations could not be stretched any further, theonly way to keep the U.S.A. productivity flowing and increasing was to get theU.S.A. itself into the war on the “ins” side, so that it would buy its ownproductivity in support of its own war effort as well as that of its allies.

By skillful psychology and propaganda the “ins” persuaded America that theywere fighting “to save democracy”. I recall, as one of the youth of those times,how enthusiastic everyone became about “saving democracy”. Immediately theU.S.A. government asked the British and their allies, “What do you need over

132 Remember Great Britain loosing the American Independence war but the East India Company

swiftly moving its interests to the U.S.A.


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there?” The “ins” replied, “A million trained and armed men, and the ships tocarry them to France, and many, many new ships to replace the ships that havebeen sunk by submarines. We need them desperately to keep carrying the tanksand airplanes, weapons, and munitions to France”. The “ins” also urgentlyrequested that the U.S. Navy be increased in strength to equal the strength ofthe British Navy and therewith to cope with the German submarines, “whileour British Navy keeps the German high-see fleet bottled up. We want all ofthis from America”.

America went to work, took over and newly implemented many of the U.S.industries, such as the telephone, telegraph, and power companies, andproduced all that was wanted. For the first time in history, from 1914 to 1918,humanity entered upon a comprehensive program of industrial transformationand went from wire to wireless communication; from tracked to tracklesstransportation; from two-dimensional transport to four-dimensional133; fromvisible structuring and mechanical techniques to invisible – atomic andmolecular – structuring mechanics.

Within one year the million armed and trained U.S.A. soldiers were safelytransported to France without the loss of one soldier to the submarines134.Arrived in France, they entered the line of battle. With the line of supply oncemore powerfully re-established by the U.S. Navy and its merchant fleet, itbecame clear that the “ins” were soon going to win.

J.P. Morgan, now representing the “allied” power structures’ capitalistsystem’s banks as well as serving as the Allies’ purchasing agent, said to theAmerican Congress, “How are you going to pay for it all?” The AmericanCongress said, “What do you mean, pay for it? This is our own wealth. This isour war to save democracy. We will win the war and then stop the armamentsproduction”. Morgan said, “You have forgotten Alexander Hamilton. The U.S.government doesn’t have any money. You’re going to pay for it all right, butsince you don’t have any money, you’re going to have to borrow it all from thebanks. You’re going to borrow from me, Mr. Morgan, in order to pay thesevast war bills. Then you must raise the money by taxes to pay me back”135.

To finance these enormous payments Mr. Morgan and his army of lawyersinvented – for the U.S. government – the Liberty Loans and Victory Loans.Then the Congress invented the income tax.

With the U.S. Congress’s formulating of the legislation that set up the schemeof the annual income tax, “we the people” had, for the first time, a little peekinto the poker hands of the wealthy. But only into the amount of their taxableincome, not into the principal wealth cards of their poker game.

133 Yes, four, two dimensional on the surface of the oceans, one under water and one in the air.134 They were scheduled to die in the fields of Flanders, not to die a useless death at sea.135 You might think there is one step too much: why a loan from Mr. Morgan’s bank? Wouldn’t it be

cheaper and more rational if taxes were raised so the government could then pay directly for the warfare withoutfirst lending money from the bank, so Mr. Morgan could not make a profit on his loan? But as already stated, thecost of the war is never presented a priori to the people in a direct, rational way – taxes directly related to the war– but the cost is a posteriori presented in an indirect way: the first introduction of income taxes in Americanhistory and the depreciation of the currency when the newly established Federal Reserve Bank started to spendthe money created out of nothing.


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During World War I, U.S. industrial production has gone to $178 billion. Withonly $30 billion of monetary gold in the world, this monetary magnitudegreatly exceeded any previously experienced controllability of the behind-the-scenes finance power structure of the European “Allies”.

World War I over, won by the Allies, all the countries on both sides of thewarring countries are deeply in debt to America. Because the debt to theU.S.A. was twice that of all the gold in the “ins” world, all the countriesinvolved in World War I paid all their gold to the U.S.A. Despite thoseenormous payments in gold all the countries were as yet deeply in debt to theU.S.A. Thereafter all those countries went of the gold standard.

B. Fuller, Critical Path, pp. 78, xxii-xxiii

7.7 A 3rd mechanism to get hold of the wealth of the common people: Higher

prices for essential commodities.

In the early 1970s, the shah of Iran was allowed to continue his excessive military spendingby increasing the price of oil, with the consent of the Nixon and Kissinger: purchasing powerof all the people all over the world was diverted into the pockets of the American weaponindustry. As oil is one of the main energy resources in the economic production process, thishas lead to a world-wide double digit inflation that lasted for about a decade, so the erosion ofpurchasing power was even enforced.

After the disintegration of the USSR in the early 1990s, the southern former USSR statesaround the Caspian seas got their independence from Russia. The Americans swiftly tookinterest in the vast supplies of oil and natural gas in that region: American oil companiesmoved in and American military bases were installed in those countries.

A plan of European companies to build a oil-pipeline from the Caspian sea through formerYugoslavia to the Adriatic sea was thwarted by the war in the Balkans in the mid 1990s, inwhich three ethnic groups – who had lived peacefully together for 50 years after WWII -were set up against each other: Muslims, Orthodox Christians and Roman Catholic Christians.As Julius Caesar said: “Divide et Impera”.

After September 11th 2001, Afghanistan was attacked under the pretence that Bush wanted toget hold of Osama Bin Laden and that the Taliban – a former USA ally at the time the USSRwas in Afghanistan – should be defeated. The Americans never got hold of Osama, but thewar was very convenient in order to get control of the region and to build a pipeline from theCaspian Sea to the Indian Ocean.

After the first war against Iraq, that country was allowed to export only a limited amount ofoil, just enough to be able to pay for the import of food and medicines. After the second waragainst Iraq, the Americans got full control over the oil-supplies of Iraq.

Now the USA controls the major supplies of oil on Earth… and the price of oil is soaring tounprecedented heights, so the price of electricity and natural gas will follow this trend. All thepeople of the world have to pay more for their transport and their heating or air-conditioning,the cost of production will increase: we are facing once more a period of hyperinflation. This


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is completely in line with what Ravi Batra has predicted in his book The Great Depression of1990136.

Note the increasing trend of the peaks.

1750 1770 1790 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990-45

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I’m just sitting here watching the wheelsgo round and round.

(John Lennon)

History teaches us that humankindhas nothing learned from it.

(Anonymous)


(Santayana)

We are once more paying the bill of the war a posteriori, while some companies likeHalliburton (Dick Cheney) and The Carlyle Group (Bush Sr.) are making a huge profit out ofthis.

136 In the beginning of the 1990s, there was indeed an economic dip, but not as great as Ravi Batra had

expected. But then there was the First Golf War. The high expenditure in the category of desinvestments goodswas very convenient in order to avoid a great depression.


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7.8 A 4th mechanism to get hold of the wealth of the common people:

Crashes on the stock market.

And Jesus went into the temple of God, and cast out all them that sold andbought in the temple, and overthrew the tables of the moneychangers137,and the seats of them that sold doves138,And said unto them, “It is written, My house shall be called the house ofprayer; but ye have made it a den of thieves”.

St. Matthew 21-12,13.

We have seen that the evolution in time of the profit margin of companies follows a saw-toothshaped curve: longer periods of decrease in between wars are alternating with short periods offast increase during the war. The stock exchange has the inverse evolution: long periods ofslow increase alternate with short periods of sharp decrease.

After the soap-bubble burst on Wall Street in 1929 and the following Great Depression duringthe 1930s, Roosevelt tried to put things back to order with his New Deal, and the financialsystem was strictly controlled by the government. A banker had as much decision power overinterest rates as a postmaster over the price of post stamps; he could not decide autonomouslyon the level of interest for loans or savings. These were dictated by the government. A strictdivision between save and loan banks and investment banks was imposed, just as a strictdivision between banks and insurance companies. Pension funds were allowed to invest onlyin government bonds with a low but secured yield. The mechanism for the creation of moneywas strictly controlled: increase in the money supply should go hand in hand with realeconomic growth. After the Second World War, the major international currencies werelinked to the value of gold at the conference of Bretton Woods in 1944, and for years thedollar had a rather fixed international exchange rate compared to other currencies. This wasgood for international trade, as this gave industrial companies financial security and stability:there was no or little uncertainty on the prices of import and export products and services.

In 1973 President Nixon abandoned most of these measures: the value of the dollar was nolonger tied to the value of gold and pension-funds were again allowed to invest in shares ofprivate companies. The division between banks and insurance companies was abandoned.And in 1999, with one stroke of a pen, President Clinton abandoned the strict divisionbetween save and loan banks and investment banks.

The story goes that there was a very big party on Wall Street that day: the money of the“common people” could again be used for more speculative investments. Capitol Hill housesdemocratic and republican senators and representatives. But the capital controls the Capitol,and even the White House.

137 At that time, every city in Palestine had its own coins. In Jerusalem, pilgrims for Eastern had to

exchange their coins in order to be able to buy a dove. In was the tradition to release a pigeon, just as the RomanCatholic pope is still doing at Eastern Sunday.

138 The doves were domestic ones: once they were released by the pilgrims who bought them, they flewback to their dovecote where they got some food. And then they were transferred once more to the temple foranother flight. Making money out of the credulity of common people is of all times and can take many forms!


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When a lot of private people and employers pump money into the stock market each year, fortheir private pension-fund or a collective pension-fund for the employees, then the stockmarket must go up. The value of shares increases beyond a level that is normally consideredas healthy, based on the yearly dividend they pay or the ratio of the profit per share versus thevalue of the shares on the stock market. And as the value of the shares goes up, more andmore people are willing to divert part of their real savings towards the stock market. Theydivert savings from their saving account, with a low but rather secure interest rate just abovethe inflation rate, towards the volatile stock market, in the hope to have a higher return. Thismeans that banks have to pay less interest on saving accounts to the public, while they cancharge a fee on every transaction the public makes on their portfolio of shares and investmentfunds. The risk is thus completely shifted from the bank towards the public, while the banksincrease their income free from any risk.

Now most of the post the WWII baby-boom generation is retiring and they are collecting theirprivate and collective pension-funds. This means that the funds have to sell part of theirshares in order to have cash money. Inside traders know when this is going to happen andon what funds and shares this will happen!

The common belief of financial “experts” and even economists is that, when a majorcorrection occurs on the stock-market and the value of the shares sharply drops, wealth hasbeen destroyed. This is pure nonsense. Real wealth is determined by economic production,not by the value of some piece of paper. The purchasing power of those who lost a major partof their fortune or their pension-fund in the crash on the stock market has indeed been eroded.But they themselves have voluntarily diverted their real purchasing power during many yearstowards those who sold their shares “just-in-time”, cashing their profit!

If a private person or a pension-fund is eager to buy shares on the stock market at any price,then there must be someone else willing to sell them, as he is satisfied with the profit he canrealize, or companies can issue new shares in order to increase their working capital in orderto invest in capital goods or to finance acquisitions. There is a continual transfer of real wealthtowards the persons who cash their shares and take their profit, and towards companies whoissue new shares. So, over a period of many years, the real wealth of common people has beendiverted to a system that is nothing else than a pyramid game, a Ponzi scheme, in which mostof the participants act as lemmings, while inside traders take their profit “just-in-time” andstock brokers and banks charge a fee for every exchange on the stock market. And then oneday the whole pyramid collapses, the end of the Ponzi scheme.

Who do you think buys the shares after a major drop in value? Very often companies buytheir own shares, so they have to pay fewer dividends to “outsiders”. And more often the“insiders” with foreknowledge, who are sitting on a heap of cash given to them by thecommon people, buy the same shares they had sold just before the crash. Same players on thefinancial pinball-machine get a bonus and can shoot again.


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7.9 The North-South relationship

The previous sections dealt with the phenomenon of war as an offshoot of an economic crisis:the saturation of the market, overproduction, high unemployment, the accumulation of toomany capital goods, the introduction of protectionist measures and the high profitability of the“pram-industry”, financed by taking away purchasing power from the people through thecreation of fiat money and inflation. All these ingredients constitute a perfect soil for theseeds of war.

During the Cold War period, we usually thought of the tensed relations between NATO (morespecific the USA) and the Warsaw-pact (more specific the USSR) as a possible cause for war.But this was just propaganda in order to justify the enormous military expenditures by theNATO allies, not a real threat. The relation between the rich Northern hemisphere and theunderdeveloped South, however, is much more explosive than the East-West contrasts of thattime and could lead us to a real global conflict.

In 1972 Robert McNamara published his first historical message: “There isnow an economic burst between the North and the South. This flaw constitutesa very deep cleavage in the sociological crust. It will result in tremendousstorms and earth quakes. If the Northern part of the world will not tryeverything in order to narrow the gap between the very successful North andthe very poor Southern part of the world, then at the end of the road nobodywill be secure anymore, regardless the size of our arsenals and troops”...

In his introduction to a study made by specialists of different nationalitiesWilly Brandt has written the following: “Our commission was unanimous inits conclusion that a revision of the relations between the two parts of theworld is very urgent. The economic system that has been operational since theSecond World War has now led to a situation where it holds moredisadvantages for the Third World countries than advantages. A complete newequilibrium must be found, a new international economic order. This is ahistorical mission”...

In 1960 Franz Fanon wrote already: “We must continue to convince thecapitalistic world that the basic problem of this time is not to be found in thestruggle between communism and capitalism. The Cold War, the conventionaland nuclear arms race must stop at once. One should on the contrary invest allthe resources, which are now wasted on the arms race, in the underdevelopedcountries and give them technological and financial help. The destiny of thewhole world is dependent on this.”

J.J. Servan-Schreiber, The Challenge, pp. 156, 301, 135-136.

The situation between the Northern and Southern hemisphere is now indeed very tense, evenexplosive, especially with this “created” War Against Terror which is aimed at Islamicpeople, and not in the least because of the enormous evolution in communication technology.Due to the fast and easy transfer of and access to information, the earth we live on seems toget smaller, more compact, than it used to be. We could compare this situation of the worldnow with that of most European countries in the 19th century.


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In those days European countries had a small élite of very rich people with under them a massof poor illiterate people without any possessions or political power139. There was no middleclass as we have now. The poor people had little knowledge of the mechanisms by which therich secured the extreme wealth they lived in. But because of the industrialization it wasnecessary to give the laborers a minimum of education in order to read and understand writtenorders and instructions. In doing so, the poor were given access to a new form of information:they could read books and papers. Those books usually dealt with life in the upper classes, asthere was little literature about the lower classes. So through these books the lower classes gotan insight in the world of the rich, they became aware of another world and they started toquestion the situation: “Why do we have nothing and they have everything? Why don’t wehave the right for some material wellbeing? After all, it is we who do the work and they enjoythe fruits of our labor!” Social reformers started to write books on this matter and throughpamphlets this emerging consciousness started to find its way to the lower classes in society,who started to organize themselves in unions and political parties. This new evolvingconsciousness has led to the class-struggle, which in some countries has led to violentrevolutions and drastic political reforms, while other countries diverted the aggression to othercountries by waging war.

Most West-European countries have been able to avoid such revolutions by administering bydriblets more democratic rights and material welfare to the lower classes. As discussed insection on distribution of profit as driving force of economic growth, this transfer ofpurchasing power to the people most in need of material goods has resulted in an enormousstimulus for the economic growth – and even in more profit for the upper classes! We couldsay that Marx and Keynes go hand in hand in this matter. Because of the gradual distributionof economic welfare among all social classes, one has been able to control the social tensions,for the better of all classes in society.

Nowadays we have a similar situation worldwide with tensions between the richindustrialized world and the poor Third World countries. In the underdeveloped anddeveloping countries the majority of the population lives in extreme poverty and in need ofthe basic goods and utilities to survive. In the ghettos of the large cities in Asia, Africa, South-and Central-America, millions of people live in permanent need for food and medical care.But due to the fast evolution of the technical communication media, especially television,films and the Internet, those people are informed about the situation in the rich countries. InMexico City for example, families with seven or more children live in sheds built of trash andcorrugated asbestos, girls of fourteen years old have to sell their body – the only thing theyhave – on the street because their father does not earn enough money to support his family.But very often those families have bought a second hand television set. And then they watchAmerican soap operas like Dallas and Dynasty and they see the extreme luxury someAmericans live in. Not every person in the USA lives like JR. Ewing, but on their televisionset the poor family in Mexico City does not see the unemployed workers in Detroit and otherindustrial centers, they do not see the tramps living on the streets of Philadelphia and lookingfor food in the trash cans, there are no or very few series on television about these people andthey are surely not broadcasted in the Third World countries. There people do not know thatsince the beginning of the Reagan administration in the early 1980s the minimum wages inthe USA have fallen by one third in real terms, and that the increasing concentration of wealthhas destroyed the American middleclass, the basis of civil production.

So a new consciousness is emerging in the Third World countries: “How does it come thatpeople in the North enjoy such material wealth while we can’t even find enough food and

139 Read the books of Charles Dickens, Victor Hugo and others.


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clothes and proper housing? Don’t we have a right for these basic goods?” This insight iseven sharpened because most of these people are well aware of the fact that the industrialprocess in the North is based on import of cheap energy, raw materials and manufacturedarticles from the Third World countries and export of expensive finished goods, investmentand disinvestment goods towards the underdeveloped countries. And who has control overthese prices? Besides, only a small portion of the population in the Third World countriestakes advantage of this worldwide over-cropping. The majority of the people in theunderdeveloped countries are not able to buy the products they produce themselves. Intropical countries where Nature is abundant people didn’t had to work very hard. But then thecolonists came, who took possession of their land and started mono-culture agriculture onlarge scale aimed at export to the rich countries at very low prices. The local people were cutfrom their own natural resources, so they were forced to work for the landlords at minimumwages, too low to live, too high to die. So, in a way, the Middle Ages were exported to thecolonies. This situation is similar to the one of most European countries in the 19th century.

Deceived by the false theories of economists, the proletarians have surrenderedtheir body and soul to the curse of labor, and in doing so, they have led societyinto an industrial crisis of overproduction. Because there is excess of supply ofgoods and shortage of people able to buy, factories and mills are closed andlaborers suffer from hunger and cold. The proletarians, drugged by the dogmaof labor and not knowing that their excessive labor in times of so-calledprosperity is the cause of the crisis and their own misery, they should run to thegranary and shout: “We are hungry, we want food. Although we have nomoney and are beggars now, it is we who have harvested the grain and selectedthe grapes.”

They should attack the warehouses of monsieur Bonnet in Jujurieux, theinventor of the “industrial convents” and yell at him: “Monsieur Bonnet, hereare your clear-starchers, your silk-throwsters, your spinners, your weavers”.They shiver in their patched cotton clothes, although they have made the silkclothes that you have sold to the whores of Christianity. The poor girls workedthirteen hours a day so they had no time to dress up. Now they are unemployedand have the time, but they cannot afford the silk clothes they have made forothers. As soon as they had lost their milk-teeth, they have dedicated their livesto your fortune, while living in poverty themselves140.

P. Lafargue, The Right to be Idle, pp. 65-66.

A small minority in the underdeveloped countries is able to live in extreme wealth, while atthe same time they have the money to acquire the political and military means in order tosuppress their own population. This situation holds two dangers. First, think of what couldhappen if the suppressed population manages to overrule the possessing opposing class andacquires control over that military apparatus, as actually happened in Iran? A former ally ofthe western industrialized countries can turn into an opponent. Secondly, think of what couldhappen if the rulers in those countries become aware of the aggressive feelings of their ownpopulation toward the rich and try to secure their own position by diverting the aggressiontowards another country, against the rich Northern part of the world141? What if those

140 See the film The Corporation, in which the situation of female laborers in Third World countries,

working for Western multinationals, is described.141 Al Qaeda, the Taliban...


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countries cut off the supply or increase prices of energy and raw materials vital to theeconomic process of the industrialized countries? Is there really no other way besides militaryaction and suppression in order to resolve this explosive situation?

Once more we end this section with a conclusion: Democratization of information can lead tomore equality and more prosperity for more people.

7.10 The dangers and excesses of the banking industry

The smarting imbalance between the saturation in the rich northern part of the world on oneside and the extreme poverty in the southern part on the other side not only carries the dangerfor a global war. It could also result in severe difficulties for the capitalistic banking system,as they have granted excessive loans to Third World Countries in order to financemegalomaniac projects, project which are not in the interest of the local population, but whichyield profit for western companies like Halliburton. The book Confessions of an EconomicHitman, written by John Perkins, is a very good analysis of this policy: poor countries aretalked into and “sold” big infrastructure projects in order to bring them to a debt level thatthey will never be able to pay back. So they become puppet states of the USA’s industrial andfinancial élite as they have lost their financial, political and thus economic independence. Thefollowing facts from the 1980s illustrate the scope of the problem and also its evolution intime:

The four largest American banks have granted loans to Brazil for an amountthat is more than their own capital. Other international banks have alsoengaged in this adventure. Brazil has a debt of 57 billion dollar and has to paya yearly interest of 13 billion dollar. Demands for new loans are rejected, asthey would only serve to pay the interests. So Brazil has suddenly become“unhealthy” for foreign capital. It still has a dangerous weapon: blackmail.Think of what would happen to the western banking system if a country likeBrazil would refuse to pay back its debts. In 1980 the total debt of the ThirdWorld countries had reached the astronomic figure of 350 billion dollar. Until1974 these countries paid back their loans on a regular basis, but not anymore.

J.J. Servan-Schreiber, The Challenge, p. 160.

We are facing a disorder in the international monetary and banking system.Because of the immense debts of the Third World countries (650 billion dollaralready in 1984) a lot of financial analysts fear for a disaster, as those countrieswill not be able to pay their debts. Some have even stopped paying interests onloans! Besides, in order to pay back their debts, those countries would have tohave such excessive surpluses on their balance of trade for longer periods oftime that this would result in a structural imbalance in the world economy.

Interview with professor E. Mandel in Knack, March 14 1984.


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The ten largest banks have more than 50 billion dollar on loan to developingcountries. This sum amounts to roughly 100% of their shareholders equity; ifall the loans went into default, the banks’ capital would be wiped out.

Time, August 29 1988.

But there is a second phenomenon, less known to the public but even more threatening to thebanking system. Due to the saturation of the markets and the resulting pressure on prices,companies that want to stay in business are forced to invest ever more in order to improvetheir productivity and to make acquisitions in order to increase the scale they are working onand to gain market-share. Not all of these investments and acquisitions can be financed byusing retained earnings or by attracting new risk-bearing capital from stock-holders. Socompanies are forced to take loans from commercial banks. And these banks are eager to “sellloans”, to make money out of money in order to be able to pay back the interest to theirdepositors. These banks often neglect to do a thorough risk analysis. But when the expectedeconomic growth does not come and turnover is not what it ought to be, then these companiesare in trouble to fulfill their financial obligations toward the banks. This in turn results into adifficult time for these banks, as they have used the money of other people, their depositors, to“make these loans”.

In the USA one can see thousands of cases which remind us of the early 1930s,farmers who can no longer pay their mortgage and so lose their land andequipment, resulting in an endless loop for the local economy: loss ofpurchasing power, other businesses going down, less tax-revenues for localcommunities...

But these are the small farmers. Think of the level of debts the largemultinationals are living with, billions and billions of dollars... This makes thebanking system very vulnerable, here lays the real danger. I would not predicta total collapse of the financial system. But surely we will see an evolution tomore regulation and more financial support from the government, paid for bythe tax-payer, in order to divert the financial crisis. The American governmentcannot afford to let the Chase-Manhattan bank to go down the drain, for theChase-Manhattan bank is the American government. So the crisis of theprivate banking world will be reshaped into a larger public deficit, paid for byevery American.

Interview with professor E. Mandel in Knack, March 14 1984.

Almost 1,500, or roughly 11% of the 13,700 commercial banks in the US arestill on the Federal Deposit Insurance Corporation list of troubled institutions.Many of these banks are already doomed, and hundreds of others could besunk by a continued rise in interest rates, which means that they would have topay more to depositors.

Time, August 29 1988.

The severity of the situation at that time was well understood by the US government. FatherGeorge Bush, who inherited the problem from Ronald Reagan, made up a plan to set aside285 billion dollar to rescue the “savings and loans industry”, whereof 157 billion dollar will


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come from tax-payers’ money. And in 2008, Bush Jr. asked for 700 billion dollar from thetax-payers! Remember, from October 2008 till October 2009 hundred American banks wentbankrupt!

This whole evolution can easily be understood in terms of our basic theory. As the economicsystem in the western world suffers from saturation and fierce competition, while at the sametime the Third World countries and the former Comecon countries do not have the purchasingpower to buy the surpluses of the rich countries, the world economy stagnates. In a zero-growth economy, one can no longer create money out of money, so banks can no longer makea profit: it is impossible for them to receive a higher interest on the loans they make than theinterests they have to pay on the deposits they have collected. What could cause such apositive difference? If the banking world keeps to such a difference between interests on loansand interests on deposits in times of zero-growth, then this can only be accomplished byextracting purchasing power from other socioeconomic entities, such as companies, privatefamilies – the “common people” –, other industrialized countries or Third World countries.

The multilateral agencies have become net takers of money from LatinAmerica. Commercial banks lent 6 billion dollar of new money to thecontinent last year. But they extracted more in interest – around 26 billiondollar...

Both this hemorrhage of cash, and the inability of most governments to taketough economic measures, has squeezed the continent’s growth. Only Chileand Columbia have grown by more than 3% in each of the past three years. Itis no coincidence that those two countries now spend the lowest proportion oftheir export earnings on debt-service.

The Economist, February 11th 1989, p. 83.

This clearly illustrates that in a situation of low or zero economic growth, the banks with theirmoney-making mechanisms have a destabilizing influence on the economic process: theeconomic crisis is sharpened, which can result in negative growth, and this is in nobody’sinterests, not even the banks’!

On the excesses of the banking industry, we can refer to the book La Trahison de la Finance[The Betrayal of the Financial World] written by the investment banker Georges Ugeux. Inthis book he gives an in depth analysis of the financial crisis of 2008 from within the veryheart of the financial world. He also formulates some necessary measures that should be takenon national and international level in order to avoid similar crises in the future.

In his book he gives a good description of all kind of financial constructions the financialwhiz kids of the investment banks and other banks have engineered in order to create themaximum of profit out of money of others (their depositors, their own clients and even theirown shareholders) and to shift the risk as much as possible to other parties, very often theirown clients or other financial institutions. Warren Buffet once labeled these “derivates” asfinancial weapons of mass destruction: credit default swaps, short selling, collateralized debtobligations, private equity funds, leverage funds, hedge funds, the use of equity capital forproprietary trading, trading for own account against the own clients. Mr. Ugeux explicitlystates that this kind of financial practices and non-transparency are bosom-friends. This non-transparency made that, during the crisis of 2008, the banks no longer trusted each other and


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refused loans to other banks, while they still expected that the public would have confidencein them.

Central banks and governments in several countries had to intervene on a never seen scale,using taxpayer’s money in order to counter a run on the banks and to restore the confidence ofthe public and the enterprises in the whole financial system. And some of these banks (likeGoldman Sachs) even dared to use the total amount of financial support they received fromthe US government in order to pay excessive bonuses to their traders (“trade sharks” in thewords of Mr. Ugeux) and high dividends to their shareholders (financial institutions areresponsible for 10% of the employment, but they pay 25% of the salaries!)

Therefore Mr. Ugeux advocates simpler financial techniques and products, so that the size ofthe investment, the possible risks and opportunities become more transparent and easier toassess. He also calls for a better capitalization of the banks, more international control onbanks in a financial world that has become more and more transnational, and more honestywithin the financial world and better communication toward their clients and shareholders.The financial institutions should also reconsider their prime raison d’être and socioeconomicmission: provide an intermediate financial service to enterprises and the public in general byproviding credit for purposeful projects and a fair compensation for those who provide themoney. The long term economic and social role should prevail over the urge to make a quickbuck. A possible approach is outlined in the next section.

7.11 An alternative banking system that really works

Mr. Muhammad Yunus, a former professor in economics in Bangladesh, was granted theNobel Prize of Peace in 2006 for his Grameen Bank project of microcredit: a bank that lendsmoney in small amounts to the poorest people, even to beggars, and is making a profit indoing so. In his own words:

The financial crisis has shown us more clearly than ever where capitalism fails.Originally the credit market was designed to serve people’s needs. It wasdesigned to provide businessmen with capital to found or expand companies.Thanks to home mortgages, people were able to buy homes and pay the costsover a long period of time. Student loans funded education for millions. Banksthat provided the credit earned a reasonable profit. Everyone benefited.

But traditional capitalism demands ever-increasing profits, and it createspowerful incentives for smart people who used their creativity to make thatpossible. Over time, competing financial institutions aimed for higher andhigher profits in the credit market using clever feats of financial engineering.They repacked mortgages and other loans into sophisticated instruments whoserisk level and other characteristics were hidden or disguised. Then they soldand resold these instruments, earning a slice of profit on every transaction. Allthe while, investors eagerly bid up the prices, scrambling for unsustainablegrowth. Blinded by these unrealistically high rates of return, they never madean effort to question the risks hidden inside those financial instruments. Theygambled that the system’s underlying weakness would never come to light.

But it did. With the collapse of the housing market in the United States, thewhole house of cards tumbled down with such momentum it surprised eventhose of us who had been skeptical about the financial system all along.


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Millions of people around the world who did nothing wrong are suffering. Asalways, the ones who are hit the hardest are the poor – especially the “bottom 3billion,” who were already living at a bare subsistence level. They are being hithard by the combined effects of the food crisis, the environmental crisis, andthe financial crisis. It its current, incomplete form, capitalism has badly failedits social responsibility.

So far, governments struggling to alleviate the combined crises of 2008-2010have kept themselves busy coming up with super-sized bail-out packages forthe institutions responsible for creating the financial crisis. Unfortunately, nobail-out package of any size has even been discussed for the victims of thecrisis: the bottom 3 billion and the planet itself.

Today’s crisis has been a valuable reminder that all people around the worldare undeniably connected. The fate of Lehman Brothers and that of the poorwomen working in a garment factory in Bangladesh are linked. Therefore, Ihave repeatedly urged that this mega-crisis be taken as an opportunity toredesign the existing economic and financial system. This is the time to bringthe world together and to change our economic architecture so that this type ofcrisis never occurs again. Social business can be a key element of this change.

Muhammad Yunus, Building Social Business – The New Kind of Capitalismthat Serves Humanity’s Most Pressing Needs, pp. 198-199.

The more time you spend among poor people, the more you become convincedthat poverty is not the result of any incapacity on the part of the poor. Povertyis not created by poor people. It is created by the system we have built, theinstitutions we have designed, and the concepts we have formulated.

Poverty is created by deficiencies in the institutions we have built – forexample financial institutions. These banks refuse to provide financial servicesto nearly two-thirds of the world’s population. For generations they claimed itcould not be done, and everybody accepted that explanation. This allowed loansharks to thrive all over the world. Grameen Bank questioned this assumptionand demonstrated that lending money to the poorest is not only possible butprofitable.

During the global financial crisis that began in 2008, the falsity of the oldassumptions became even more visible. While big conventional banks with alltheir collateral were collapsing, around the world microcredit programs, whichdo not depend on collateral, continued to be as strong as ever. Will thisdemonstration make the mainstream financial institutions change their mindsabout their traditional definition of creditworthiness? Will they finally opentheir doors to the poor?

I am quite serious about this question (although I know all too well what thelikely answer is). When a crisis is at its deepest, it can offer a hugeopportunity. When things fall apart, we can redesign, recast, and rebuild. Weshould not miss this opportunity to convert our financial institutions intoinclusive institutions. Nobody should be refused access to financial services.Because these services are so vital for people’s self-realization, I strongly feelthat credit should be given the status of a human right.


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Muhammad Yunus, Building Social Business – The New Kind of Capitalismthat Serves Humanity’s Most Pressing Needs, pp. xii-xiii.

We can create a poverty-free world if we redesign our system to take out itsgross flaws which create poverty. We can create a world in which the onlyplace you would be able to see poverty is in poverty museums [like Holocaustmuseums]. Someday, schoolchildren will be taken to visit these povertymuseums. They will be horrified to see the misery and indignity thatinnumerable people had to go through for no fault of their own. They willblame their ancestors for tolerating this inhuman condition for so long – andrightly so.

Muhammad Yunus, Building Social Business – The New Kind of Capitalismthat Serves Humanity’s Most Pressing Needs, pp. xiii.

I don’t have anything to add to this, or maybe yes, I do have.

7.12 “War Against Terror” in order to defend “The Sixth Freedom”

After the disintegration of the Communist East block and the end of the Cold War, the USAwas suddenly faced with a problem: the military industry, responsible for a great part ofscientific research and employment in the USA, had lost their raison d’être. And what to dowith the CIA and the NSA?

So a new enemy had to be created

The achievements of Bush administration planners in inspiring Islamicradicalism and terror are impressive. The senior CIA analyst responsible fortracking Osama bin Laden from 1996, Michael Scheur, writes that “bin Ladenhas been precise in telling America the reasons he is waging war on us. Noneof the reasons have anything to do with our freedom, liberty, and democracy,but have everything to do with US policies and actions in the Muslim world”.Scheur notes that “US forces and policies are completing the radicalization ofthe Islamic world, something Osama bin Laden has been trying to do withsubstantial but incomplete success since the early 1990s. As a result it is fair toconclude that the United States of America remains bin Laden’s onlyindispensable ally142”. From his detailed study of Al Qaeda, Jason Burke drawsa similar conclusion. “Every use of force is another small victory for binLaden”, he writes, creating “a whole new cadre of terrorists” for a “cosmicstruggle between good and evil”, the vision shared by bin Laden and Bush.

Noam Chomsky, Failed States, p. 23.

142 And vice versa.


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In On Power and Ideology Noam Chomsky defines “The Fifth Freedom” as the freedom thatsome countries grant themselves to get complete control over the natural resources ofminerals and energy supplies of other countries143, even by war. We could even define a“Sixth Freedom”: the freedom that some interest groups grant themselves to create money outof nothing in an illegal way in order to finance this “Fifth Freedom”.

The solution they have engineered in order to defend this “Sixth Freedom” is phenomenal, asthey succeeded to hit three targets in one stroke.

• The Islamic Taliban in Afghanistan, former “freedom fighters” in the war againstthe USSR occupation and secretly supported by the USA, were redesigned into aninternational, invisible and elusive enemy, so the new “War Against Terror” cango on indefinitely. Osama Bin Laden and Saddam Hussein, two former businesspartners of Bush Sr. en Bush Jr. were promoted to the enemies No 1 and 2 (inwhatever order you want) of the four American Freedoms (freedom of speech,freedom of religion, freedom from want, freedom from fear).

• The wars in Afghanistan and Iraq “against terrorism and for democracy” were veryconvenient to get absolute control over the world supplies of fossil fuels (the FifthFreedom) and even opium. Osama Bin Laden is still not found, neither are theweapons of mass destruction in Iraq.

• And once the fundamentalist Islam will be defeated, a new area of profit will becreated for the “Sixth Freedom”, the freedom that some people impute themselvesin order to create money out of nothing144.

In order to clarify the last “target”, let us elaborate on the Islamic religion. In the Islam it isconsidered to be a sin against the will of Allah to live from the interests of money (usury).Only saved money, not the interest, and the proceeds of own labor are allowed as means forsubsistence. So, in most Islamic countries, this religious prescription has prevented thedevelopment of a banking system as we know it in the western world: the very religiouspeople kept their money at home. Because of this, a new form of banking system wasdeveloped in some Arabic countries.

In keeping with the Koran’s ban on usury, Islamic bankers have devised anunorthodox “interest-free” system. It is not only gaining acceptance at home,but is forcing conventional Western banks eager for Muslim [petrol] dollars toadapt some of their own entrenched rules...

The institutions in all these countries share a common guiding principle.Instead of receiving a fixed return in the form of interest, depositors share therisk of investment with the bank and split the resulting profits – or bear part ofthe losses. To apply that principle, however, Muslim bankers have been forcedto devise a bewildering array of investment plans. Under “mudaraba”, bankslend money, and clients provide management expertise for a project: the two“partners” then split any profits on a pre-agreed basis, but losses are born bythe bank alone145. “Murabaka” enables banks to buy commodities and resell

143 According to their Malthusian paradigm.144 I once read a report that stated that 30% of the Gross National Product of the United Kingdom comes

from financial transactions in The City.145 Really, can you imagine your bank doing this?


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them to borrowers at a higher price. Under “Musharaka” banks and clientsjointly contribute capital to a project, and share either the rewards or the losses.In all of these arrangements, as Indian economist Mohammed Nejatullah Sidiqiputs it, “the banks cease to be lenders and become partners in enterprise146”.

Newsweek, May 7th 1984.

Hence, in this system interests on savings are not paid automatically: money does not createmoney out of nothing. Interest on money, i.e. increase of the amount of money, is balanced byreal economic production: the successful completion of a project, the creation of added value,economic growth. In the western banking system, on the contrary, money itself has become acommodity with a price: the interest one receives for a deposit or pays for a loan. In thatsystem there can be creation of money without real economic added value. This may lead usto inflation, so purchasing power is diverted in a very sly way from one group in society toanother. As we have discussed in great detail in the section on the motives for war versusforces for peace, together with Howard Katz, our banking system holds a real danger for war.

• On the one hand people are not directly confronted with the cost of the arms raceand of warfare when governments finance military expenditures with the creationof money of the blue instead of raising taxes.

• On the other hand certain groups in society can earn a lot of money, if theysucceed to stimulate the arms race, by selling weapons as well as loans to thegovernment. It is an interesting and revealing exercise to unravel the clew ofinterests of arm producers, the banking world and politics147.

“The War Against Terror” was invented in order to defend the “Sixth Freedom” and the“Fifth Freedom”.

7.13 Summary

We now end this rather long analysis – I hope you have enjoyed yourselves – of the presenteconomic situation with a résumé of the most important topics and relations discussed.

In the industrialized countries there is at the same time material abundance and saturation ofthe markets, unemployment, a growing inequality in income and wealth: this results into astagnation of the economic growth. Together with the enormous accumulation of capitalgoods over the years, this leads to lower profit ratios. In former times, war was very often the“offspring” of such an economic depression in the capitalistic world. After a war, due to themassive destruction with the aid of disinvestment goods, the society returned to a state ofgreater needs for material goods and a lower level of capital goods, so the profit ratio couldjump to a substantial higher level.

Inflation, one of the symptoms of an economic crisis, increases the danger for war in twoways. On the one side, the real cost of the arms race is kept secret for the tax-payer. On the

146 The beginning of the end of “active unproductivity”.147 The Englishman J.P Morgan was at the same time arms trader and agent of the Rothschild’s in the

USA.


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other hand, certain groups in society can make huge profits by creating money out of nothingand lending it to the government, who need the money for their military expenditures. Asthese groups usually have rather close connections with the producers of these weapons, theyhave a double interest in this affair. There is indeed a strong coupling between the financialworld, the weapon industry and the political power, as President Eisenhower once said148.

Due to the increased protectionism there are ever more economic tensions amongindustrialized countries themselves and with the developing countries. And last but not leastwe have the ever growing gap between the industrialized and developing countries and theThird World Countries.

Taking all this into consideration, we can conclude that something has to be done about thesituation. War as a solution to an economic crisis is no longer possible. In the good old days,wars were fought with conventional weapons, so the destruction – the disinvestment – waslimited in space and in time. After such a conflict, those who survived could start to rebuildthe economic system. Nowadays, a lot of countries have nuclear weapons or have theknowledge to produce them. The destructive power of these weapons is not limited in spaceand in time. Larger parts of the world would become inhabitable for longer periods of timedue to radioactive fallout and nuclear winter. There would be many more victims in anextreme short period of time, which increases the risk for epidemics. After a nuclear conflict itwould take a very long time for the economy to regain a moderate level of production. By theway, for whom would the economic system be rebuilt? And who would do it? Withconventional wars, the persons who took advantage of the situation kept far away from thebattlefields, they even did business with both fighting parties. But could they survive anuclear war now? And if they could, who would provide them with the abundance they nowlive in?

So, to be effective “in solving the economic crisis”, is must be a conventional war. But withthe spread of nuclear know-how and material all over the world, who can guarantee this? Dueto the increased effectiveness and precision of cruise missiles and other assorted weaponry,there is an increased probability that nuclear weapons will be used in case a country tends tolose a conventional war. Is there really no other way out of this MADness149?

In the next chapter we will argue that there is indeed an alternative for war and militaryadventures (the capitalist way) or for violent revolution (the communist way): there is aanother way to get out of this mess. The economic crisis can be solved in a very simple,elegant and human-friendly way. The solution that will be outlined will result in newopportunities for economic growth for the industrialized countries and at the same timedissolves the tensed situation among industrialized countries and the smarting imbalancebetween North and South. It’s so easy you know.

People asking questions lost in confusionWell I tell them there’s no problem, only solutionsWell they shake their heads and look at me as if I lost my mindI tell them there’s no hurry...I’m just sitting here doing time

I’m just sitting here watching the wheels go round and roundI really love to watch them roll

148 Halliburton, Carlyle Group…149 MAD: Mutually Assured Destruction.


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No longer riding on the merry-go-roundI just had to let it go

John Lennon, Watching the Wheels.

We will indeed once more fool around with time in a very surprising manner that will meetthe aspirations of a great deal of people.


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8 Some feasible solutions

You may say I’m a dreamerBut I’m not the only one...

John Lennon, Imagine

8.1 Boundary conditions

In the previous chapters, we have seen that an economic crisis in the western industrializedcountries with all its symptoms of the consumer society, unemployment, erosion of thepurchasing power, arms race, risk for war etc. is caused, as a matter of fact, by the materialabundance we live in – at least most of us. As our needs are relatively well satisfied,compared to other parts of the world population, we can easily reduce our level ofconsumption when our faith in the future is shaken by some event like an oil crisis, a crash inthe financial world, a military conflict, a preprogrammed terrorist attack... But this reaction,which is normal and even sound at the individual level, causes a reduction of turnover andemployment for the economy as a whole. Besides, due to the excessive use and abuse of rawmaterials and energy in our consumer society, these production factors are becoming moreand more scarce, and we are left with a more and more polluted environment. This saturationof internal state variables (needs), input variables (raw materials and energy) and outputvariables (goods, pollution) results into a change in the dynamics of the economic system,characterized by a decline of the economic growth.

We have argued that, in theory, a society with zero economic growth is possible. On a smallerscale it is even feasible in practice: “primitive” tribes in Africa and South-America, andreligious communities in the USA like the Amish have this kind of society, with as mostimportant features lack of aggression internally or towards the others, cooperation with oneanother, sharing with each other and the subjection of personal ambition to the objectives andthe ideals of the group. To apply this system with its features in our patriarchal andindividualistic western world, characterized by competition and aggression, would ask for adrastic change in our mentality: now most people work for themselves or for the small groupthey are related to, if necessary against other groups and individuals. Some people even liveoff the labor of others; and in times of crisis we look for a scapegoat to blame and to whomwe can direct our aggression.

We have to be realistic in this matter: it is not possible to impose a drastic change in attitudeand paradigm on people overnight, it is a process that takes generations. A society with zeroeconomic growth, where there is no exploitation and where the technological attainments arenot used to increase consumption, but instead to reduce working time, so people have moretime for creative leisure time, such a society is not yet at hand in the near future – although,the solution I will formulate might appeal to a lot of people.

So, in formulating our alternative, we will have to take the present stage in the evolution ofhumankind into account as a boundary condition. Therefore, let us examine if there are any


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possibilities to stimulate the economic growth in a positive and justified way. In doing this, wemight find an alternative to war – the capitalistic way out of an economic crisis for the lastfour centuries – or revolution – the communist way-out of a socioeconomic crisis during thelast centuries.

From our Basic Theory we know that ‘profit for companies’ is part of ‘profit for society’,which is a consequence of economic growth. The absolute level of economic production is inthis respect irrelevant: in a country where everyone is a billionaire and where nobody isspending any money but everybody is hoarding it up, the economy will go through a recessionor even a depression.

In the rest of this study we will elaborate some alternatives in order to stimulate economicgrowth in a justified way:

• qualitative growth instead of quantitative growth

• give people with real needs more purchasing power

• give people who’s needs are amply fulfilled more time in order to consume more,not necessarily more goods, but rather more services.

We will end this chapter with a naughty addendum in order to come to a more fair collectionof taxes.

8.2 Qualitative, sustainable growth

In the first place we can say that even in the industrialized countries there are still possibilitiesfor justified economic growth, at least if we divert the nature of the economic growth.

In the previous decades, the focus was on quantitative economic growth: ever more cars onever more highways, ever more electrical gadgets in the households, ever more “prams”. Dueto the fierce competition – in itself a result of the excessive consumption and the saturation ofthe market – those products are made as cheap as possible, they are designed to last for apreprogrammed amount of time, they are outdated in no time, and they end their life on top ofever increasing piles of waste..., all this in order to create a substitution market so theeconomic process can keep on going and growing.

An alternative to this quantitative growth is qualitative growth: better cars that last longer, aresafer and consume less fuel, more durable clothes, better housing, healthier food, a cleanerenvironment, a better health care... The higher quality of these goods and services, rightlyexpressed in higher prices, can also result in an increase of the output of the economicprocess. So this implies profit for society and thus profit for private business. The profit is inthe better quality, not in the higher quantity. With qualitative growth, based on more durableproducts, less raw materials and energy are used in the production process; less waste isproduced as the products can be used longer. So, from an ecological point of view, qualitativegrowth makes sense. This new orientation of economic growth demands a change in thepurchasing pattern of the “Jones”, of you and me. Instead of buying ever more products we donot really need, tempted as we are by advertising, we should adopt a more critical point ofview toward producers and demand products of a higher quality. The increasing influence ofconsumer organizations is in this respect an interesting evolution. A lot of companies havebecome quality minded, as they have become aware of the fact that better quality and safety


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adds value to the product and that the consumers are willing to pay a higher price for it.Everyone can stimulate this evolution by purchasing products of higher quality that lastlonger: then the producers will have to follow the market. This goes for shoes, for cars, forclothes... The satisfaction one has from quality products is much higher than from their cheapcounterparts, and in the long run they are more economical and ecological as they last longer.

But before people are willing to make this change in purchasing pattern, they first have toregain their faith in the future, which is now shaken due to the economic crisis, the highunemployment and the increased political insecurity. In the previous chapter, when wediscussed the consumer society and unemployment, we have seen that faith in the future isessential in order for the economy to run smoothly in a society where the basic needs of food,clothes and housing are fulfilled for the majority of the people. The economic crisis we face isnot a good soil to restore this faith in the future. As long as people are worried about thefuture, they will economize on their spending; they will buy cheaper products of poor quality,so producers will make these products.

Because of the saturation of the markets in the western world, the lack of faith in the futureand the ecological considerations, quantitative growth is no longer possible or desirable.Qualitative growth is an alternative in the long run, but not immediately feasible. What otherpossibilities for economic growth do we have besides the branch of the disinvestment-goods?

8.3 Fair distribution versus concentration of wealth

Do you remember the story we described about General Motors, which has led us to “thetheory of the rubber cylinder”? If not, we suggest that you read once more the section “FirstParadox: higher wages for employees, higher profits for the employer” in chapter 4 and thesection on “Distribution of Profit as Driving Force of Economic Growth” in chapter 6. Inthose sections we have already formulated the solution to the economic world crisis: allelements for our alternative have already been discussed. In this rather short chapter we willonly recapitulate already known concepts and relate them into an overall picture.

Some interest groups in society cannot live in a situation of zero-growth, as they can nolonger create money out of money. They get wicked: they use inflation, floating currencyexchange rates and high budget deficits in order to divert purchasing power from other groupsin society toward their own pockets, they stimulate the growth of the “pram-industry” in orderto sell security against the enemy – real or even imaginary –, they even dare to manipulate thepublic opinion in order to start a real war and to bring the society back into a situation wherethere are again real opportunities for growth.

Okay, let us accept this as an additional boundary condition to our solution, a fact that isbeyond our control but has to be taken into account. In the section “An idealistic view oneconomy” in chapter 5 we stated that satisfaction of needs is or ought to be the basis of theeconomic process. Satisfaction of needs is the goal. Satisfaction of ever more needs of evermore people leads to economic growth, which means profit for society. This can then bedistributed over the several socioeconomic groups in society: among others profit forcompanies and interest on invested capital. Profit is at the same time consequence of as wellas driving force towards more economic growth, i.e. more satisfaction of needs.

After Second World War, the emphasis was primarily on ever more created needs of the sameamount of already affluent people in western countries. But let us, on the contrary, focus onever more people! What had caused the increased growth in turnover and profit for GM in the


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1950s and 1960s? What had caused the substantial economic growth in Europe and the USAafter the Second World War? As discussed these were induced by the diversion of purchasingpower to the people in real need. Those people did not hoard the money, but spent itimmediately, and in doing so, they made economic growth and more profit for businesspossible. On several occasions in the course of history this principle has given a justifiedimpulse to the economic system and the profit ratios of the private companies. If we look atthe world as it is today, can’t we find people in need of basic products so that we can pullonce more the card of the rubber cylinder?

On a world population of 6.4 billion people, 1.3 billion people million people live in“extreme” poverty on an income of less than 1 US$ a day, 2.7 billion live in “absolute”poverty on an income of less than 2 US$ a day. Each day a lot of people, especially children,are starving to death or are dying from lack of basic health care.

1979 was the UN year of the child. As a matter of fact, of the dead child. 30million children younger than 5 died from starvation in that year. The others,who survived, suffer from eye-diseases and affections of the nervous system,caused by lack of proteins in their “diet”. 80% of all children in the worldsuffer from this. 500 million Asians, 140 million Africans, 90 million people inLatin America have not enough drinking water. Two thirds of humanity suffersfrom time to time from diseases caused by drinking polluted water.

J.J. Servan-Schreiber: The Challenge, p. 128.

In 1974 the leaders of the rich western countries made a commitment to eliminate povertycompletely in the world by the year 2000. They promised to spend 0.7% of their GDP todevelopment aid to the Third World countries. At a UN conference in Copenhagen in 1995they had to admit that no much progress was made, but they reaffirmed their 0.7% pledge andtheir aim to eliminate poverty in the world. At a UN conference in New York they had toadmit that only 0.2% of their GDP was spent on aid to the Third World countries. At thatmillennium conference they solemnly signed the Millennium Development goals to reducethe number of people living in “extreme” poverty with 50% by the year 2015. At a UNconference in Monterey in 2002, the rich countries said it was impossible to eliminate povertycompletely, but they engaged themselves to bring the level of aid to 0.4% of their GDP by theyear 2006. At a UN conference in 2005 they admitted that even this 0.4% was not feasible150.Promises, promises… promises that were never kept; objectives that were never met. Becauseof the prevailing Malthusianism with some political leaders in the rich countries, it has neverbeen the intention to meet the objectives.

But a substantial and direct diversion of purchasing power from the saturated industrializedcountries and the very few rich in the Third World countries toward these “extreme” and“absolute” poor people can at the same time save the western economy from a total collapse,and help those people in the Third World to fulfill the basic needs of drinking water, food andhealth care. This would also reduce the tensions between North and South, as well as betweenthe competing industrialized countries who skim each other markets. And above all, it wouldtake the wind out of the sails of those who are convinced that only a jolly good war can solvethe economic crisis. The level of security in the world would increase and there would nolonger be need for an excessive pram-industry in order to stimulate economic growth.

150 Ricardo Petrella, Pour une Novelle Narration du Monde, p. 78-79.


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So what we need is a worldwide Marshall-plan, in which the industrialized countries wouldgive substantial financial, technical and logistic support to the Third World countries, supplythem with the means and the know-how in order to satisfy the basic needs of their population,and treat them as equal partners in the international trade by giving them fair prices for theirraw materials, manufactured products and their energy resources. No need to say that it isessential that the financial help should not disappear to the Swiss bank accounts of corruptpoliticians and officials of those countries, but really must reach the people in need. This callsfor more democratic rights and installation of unions in the Third World countries in order toprevent the rich getting richer and to allow the poor to acquire some purchasing power.

What America was for the destroyed economies of Europe and Japanimmediately after the war, that is what the industrialized countries mean to theThird World today. The ideas of the Marshall-plan were at the same timesimple and ingenious. After the war, America could have let Europe and Japanin a state of destruction and take advantage from its strong economical andtechnical lead in order to increase its supremacy. But in doing so, Americawould have weakened itself. In a world half destroyed, America’s productioncapacity would have been of no use at all. Europe was in no way an equalpartner. In economical terms, America would have become an island,surrounded by a sea of misery and poverty. It would have forgotten the mistakeof 1919, which lead to the great depression, to fascism and finally a new war.

The team that outlined the Marshall-plan was well aware of the priorities forAmerica: to help other countries in order to help itself. When America suppliedmeans for recovery and development to Europe and Japan, it derived profitfrom this help to the same amount or even more than those who received thathelp. The world had discovered a new law of survival, development andinterdependence in the international scene.

Nowadays there exists the same interdependence between the industrializedcountries and the Third World. But the application of the principle must bedifferent, as times and nations have changed since then.

In the years after the war, the Marshall-plan has given financial help tocountries who had the technical know-how and the basic infrastructure torebuild their industries. Provided with the means, they were able to do the jobthemselves... America saw how these countries regained their strength andagain became active partners in the international trade scene.

From then on began a period of permanent economic growth and expansion asnever before in history. This period lasted for 30 years, and due to the effect ofthe positive feedback of the affluent society, the financial help of the Marshall-plan was paid back a hundred-fold to the USA. The established rules of theeternal game in international trade were overthrown: it was no longer a gameof give and take, but one had applied a higher system, in which both the giverand the receiver gained at the same time. The development of one party had apositive influence on the development of the other. This was an economicprinciple of a higher order, from which all parties involved could benefit.

All? Well, at least those in a certain closed group of countries. The rest of theworld did not seem to exist, was neglected. And that part of the world had nomeans to speak for themselves or to stand up for their rights.


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Today, we can say that the western world will not regain its economic growthby itself; it will suffocate, its internal social order will disintegrate if it does notchange its point of view towards the Third World and if it fails to guide thesecountries on the way of development. This is the only way in which theindustrialized world can regain its former dynamic. The new law of survivaland interdependence has spread all over the world.

J.J. Servan-Schreiber, The Challenge, pp. 317-318.

In the Third World lays hidden an enormous potential for economic growth on a global scale.The potential, if realized, can result in profit for humanity as a whole and, in particular, for theindustrialized countries and those who love to see their capital breeding like rabbits withoutworking themselves. Their interests, our interests and the interests of the people who now livein poverty and starve to death are one and the same!

A worldwide Marshall-plan to speed up the development of the Third World countries willalso result in a much more stable world-economy. The different countries will have a morebalanced level of welfare, so there will be less risk for a sudden collapse of the consumptionlevel in the rich countries: there will be less saturation in one country and shortages in anotherone at the same time. A general increase of the standard of living in the developing countrieswill also solve the problem of excessive growth of the population on earth. For this, we referonce more to Fritjof Capra.

Demographers have discovered that the significant pattern is a transitionbetween two levels of stable populations that has been characteristic of allWestern countries151. In pre-modern societies birth rates were high, but so weredeath rates, and thus the population size was stable. As living conditionsimproved during the time of the Industrial Revolution, death rates began tofall, and, with birth rates remaining high, populations increased rapidly.However, with continuing improvement of living standards, and with thedecline in death rates continuing, birth rates began to decline as well, thusreducing the rate of the population growth. The reason for this decline has nowbeen observed worldwide.

Through the interplay of social and psychological forces, the quality of life – -the fulfillment of material needs, a sense of wellbeing, and confidence in thefuture – becomes a powerful and effective motivation for controllingpopulation growth. There is, in fact, a critical level of wellbeing which hasshown to lead to a rapid reduction in birth rate and an approach to a balancedpopulation. Human societies, then, have developed a self-regulating process,based on social conditions, which results in a demographic transition from abalanced population, with high birth rates and high death rates and a lowstandard of living, to population with a higher standard of living which islarger but again in balance, and in which both birth and death rates are low.

The present global population crisis is due to the rapid increase of populationin the Third World, and the considerations outlined above show clearly thatthis increase continues because the conditions for the second phase of thedemographic transition have not been met. During their colonial past the ThirdWorld countries experienced an improvement in living conditions that was

151 Pierre Francois Verhulst.


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sufficient to reduce death rates and thus initiated population growth. But therise of the living standards did not continue, because the wealth generated inthe colonies was diverted to the developed countries, where it helped theirpopulation to become balanced. This process continues today, as many ThirdWorld countries remain colonized in the economic sense. The exploitationcontinues to increase the affluence of the colonizers and prevents the ThirdWorld population from reaching the standard of living conducive to areduction of their rate of growth.

The world population crisis, then, is an unanticipated effect of internationalexploitation, a consequence of the fundamental interrelatedness of the globalecosystem, in which every exploitation eventually comes back to haunt theexploiters. From this point of view it becomes quite apparent that ecologicalbalance also requires social justice. The most effective way to controlpopulation growth will be to help the people in the Third World achieve a levelof wellbeing that will induce them to limit their fertility voluntary. This willrequire a global redistribution of wealth in which some of the world’s wealth isreturned to the countries that have played a major role in producing it.

An important aspect of the population problem, which is generally known, isthat the cost of bringing the standard of living of poor countries to a level thatappears to convince people that they should not have excessive numbers ofchildren is very small compared to the wealth of the developed countries. Thatis to say, there is enough wealth to support the entire world at a level that leadsto a balanced population. The problem is that this wealth is unevenlydistributed, and much of it is wasted.


The primary goal of this book is to show to a broader audience that it is of the utmostimportance for the rich industrialized countries to divert part of their welfare to the people inthe developing countries, both to solve the economic crisis in the capitalistic world as well asto reduce the economic and political tensions in the world and to avoid the possible outburstof a war. For a description of a blueprint for a worldwide Marshall-plan, we gladly refer toAlvin Toffler, J.J. Servan-Schreiber and Muhammad Yunus. We will just give a short outlineof the basics of such a plan.

First of all, we emphasize that massive help for the development of those countries does notmean the implementation of heavy centralized industries, which are characteristic of thesecond wave in Europe, to speak with Toffler. The examples we have seen in the 1960s andthe 1970s clearly show that such a policy leads to a greater dependence for the Third World,more exploitation, to greater internal contrasts in those countries, to excessive growth of citiesand ghettos, and to the disruption of their social, economic, agricultural and demographicstructures. The developing countries have suffered from political colonialism until after theSecond World War. Those who have tried to imitate the western world in their developmentsince their political independence, are now faced with a new form of economic colonialism,as they are dependent of the economic situation in the industrialized countries for the pricesthey receive for their raw materials, energy and products. A worldwide adoption of thewestern economic model based on excessive consumption would also stress the possibilitiesof the ecosystem to its limits and certainly lead to an ecological disaster, as we can seealready in several countries.


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The financial and economic help should rather be characterized by decentralization andconsist of small-scale level projects. First of all there is great need for education in the ThirdWorld – especially for girls and women –, focused on the direct needs of the population, inorder to impart the elementary principles of hygiene, health care and birth control, taking intoaccount local customs. At the same time agriculture must be developed, not in the direction ofmono-culture for export, but to supply the local people with sufficient and diversified food, sothat the migration to the cities and the development of ghettos can be stopped. We do notpreach the return to a strict agrarian society as in former centuries. Modern tools andtechniques should be applied such as

• irrigation

• bio-engineering in order to reduce the use of pesticides and chemical fertilizers

• fermentation of bio-mass and use of solar energy in order to supply in the localenergy needs

• ecological integrated industries where as little waste as possible is produced, andwhere waste is recycled

• application of computer- and communication technology in order to spread know-how to remote places

Professor Rudy Rabbinge, a Dutch agronomist, claims that the Earth can produce food for 40billion persons when state-of-the-art techniques would be used worldwide! As A. Toffler andJ.J. Servan-Schreiber clearly demonstrate, these agrarian societies are very well suited toimplement these technological attainments, so they do not need to go through the process ofheavy industrialization. To speak with Toffler: they can skip the second wave and evolve tothe third wave in a very short time, if given the proper help and education to the local people.

Of course, fair prices for the products coming from the developing countries is a mandatorycondition in order to stop the economic colonialism, characteristic for the second half of the20th century. But there also must be a reduction of the internal imbalance in the distribution ofwealth in the developing countries themselves: human rights and working conditions must beimproved, the organization of the people in labor unions must be allowed, there must be aredistribution of the property of land...

And what about the funding and organization of such an immense project?

At this moment the immense budgets for defense obstruct the realization ofsuch a plan. In 1987 the worldwide spending on defense and war havesurpassed one thousand billion dollar: more than the annual income of the onebillion poorest people on earth. Three quarter of this spending is done by theindustrialized countries. To these facts one has to add the enormous intellectualcapital that is wasted in this business. Half a million researchers with auniversity degree work full-time on the development of new weaponrysystems152. They could use their talents for other purposes. With the money theworld spends on defense on one day, one could establish an effective programagainst the expansion of the deserts. The expenditures of ten days would

152 The USA is complaining of their trade deficit with Japan. In Japan they make consumer products and

investment goods in demand all over the world, while the USA has concentrated its efforts on the perfection ofdisinvestment goods nobody needs any longer. So who’s to blame? Or are they doing once more an effort tocreate new markets for these disinvestment goods?


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suffice to supply all slumps in the Third World cities with drinking water,sewerage and sanitary. Half a day would be enough to restore the tropicalwoods, to fight erosion, to save vital water supplies and to purify severelypolluted underground water layers. Where else should one look for thefunding?

Interview with the French agronomist René Dumont in Knack, September 6th

1989.

Well... we might even allow for some little inflation in the industrialized countries, as aninvestment!

And who would have to supervise the design and implementation of such a plan? Asdiscussed by B. Fuller in Critical Path and The Group of Lisbon in their report Limits toCompetition, big business and big banking have become supra-national, while the politicaldecision making is still done in the old-fashioned way by several hundred local pseudo-democratic and even totalitarian governments. Indeed, in order to implement an economydesigned to satisfy the real needs of humanity it is time to install a world parliament andgovernment based on real democracy, with real decision-making power and no veto-right forsome privileged countries.

8.4 The dual active-recreational society: “the fourth wave”

Daniel Bell, who used the term for the first time, saw the post-industrialsociety as a knowledge based society. This term is useful to describe whatcould be a “third” area in economic history. After the agricultural era, withland as most important means of production, came the industrial era, withhuman labor as most important source of economic activity, an era that Marxlabeled the era of added value. We now live in a time in which knowledge isthe most important means of production. This view has the merit that it givesthe post-industrial society a historical dimension, which is not far from theequivalent of the “end of history153”, as it is difficult for us to imagine what afourth era of human society might be.

Daniel Cohen, Globalization and its adversaries, p. 60.

A few critical remarks on this view:

• The description of economic eras that we have given at the beginning of this bookseems more appropriate than the one of Mr. Cohen. In the agricultural era humanlabor was very important, even more important than during the industrial era withits energy driven machines.

• Concerning the “end of history”, let us try to look further than our economic noseis long, and focus on man as man, and not as as means of production or asconsumer. And it is really not that difficult for us to imagine what a fourth era ofhuman society might be: we will propose a “fourth era” in human civilization, the

153 Like in Francis Fukuyama’s The End Of History.


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beginning of a totally New World Order, but then an order which is advantageousto all of humankind, and not only the ones who assign themselves the “Fifth andSixth Freedom”.

I can accept that most people will find it difficult to yield part of their wealth or purchasingpower toward the Third World countries or low-wage countries. But this process is alreadygoing on anyhow: a lot of industrial companies and service companies like call-centers andsoftware development have moved to lower-wage countries, where now a middle class isdeveloping, while most of the western countries are faced with a too low level of activity inorder to guarantee the pensions and social security system for the post World War II baby-boom generation that is now massively retiring. But according to my humble opinionsomething can be done about this. And the proposed solution is very agreeable to us all: wejust give the people more time to consume, especially in the recreational area, while at thesame time we increase the economic growth and the profit-ratio of the companies.



Impossible to break with business as usual? Just proceed with reading!

8.4.1 He had a dream, that one day….

Modern Times

At the end of the 19th century, in most countries “common” people, men and women alike,had to work six days a week, with 12 to 14 working-hours per day, even children had to work.Only the Sunday was reserved for Our Lord. The majority of the population was consideredas mere production factors, and thus a cost. The laborers did not have the time nor the moneyto consume the things they were producing themselves. This can be read in the novels of


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Charles Dickens and Victor Hugo, and also in the book The Right to be Idle, written by PaulLafargue in 1880.

In this small book, which he wrote as a reaction to the Marxist slogan Right for Labor (1848),Paul Lafargue argued that too much labor and not enough consumers leads to overproduction,as the “poor bourgeoisie” very well had the purchasing power, but their needs were alreadyamply fulfilled, so there was no or little increase in consumption. The laborers, on the otherhand, were in no position to “absorb” the excessive production, so economic crises andunemployment were inevitable. According to Paul Lafargue “right for labor” without “rightfor consumption” was the cause of economic crises and unemployment.

A disastrous dogma

A strange madness has captured the laboring class in the capitalistic countries.This madness has brought along enormous individual and social sufferingduring the last two centuries. This madness I speak of is the love for labor, thefurious passion to work, even till the exhaustion of vitality of the individualand his descendants...

Deceived by the false theories of economists, the proletarians have surrenderedtheir body and soul to the curse of labor, and, in doing so, they have led societyinto an industrial crisis of overproduction. Because there is excess of supply ofgoods and shortage of people able to buy, factories and mills are closed andlaborers suffer from hunger and cold. The proletarians, drugged by the dogmaof labor and not knowing that their excessive labor in times of so-calledprosperity is the cause of the crisis and their own misery, they should run to thegranary and shout: “We are hungry, we want food. Although we have nomoney and are beggars now, it is we who have harvested the grain and selectedthe grapes.”

They should attack the warehouses of monsieur Bonnet in Jujurieux, theinventor of the “industrial convents154” and yell at him: “Monsieur Bonnet,here are your clear-starchers, your silk-throwsters, your spinners, yourweavers”. They shiver in their patched cotton clothes, although they have madethe silk clothes that you have sold to the whores of Christianity. The poor girlsworked thirteen hours a day so they had no time to dress up. Now they areunemployed and have the time, but they cannot afford the silk clothes theyhave made for others. As soon as they had lost their milk-teeth, they havededicated their lives to your fortune, while living in poverty themselves155.

P. Lafargue, The Right to be Idle, pp. 65-66.

As the increasing use of machines destroyed jobs for laborers on a large scale, the proletariatconsidered these machines as their enemy: laborers threw their lumps (in French: sabot) intothe spinning machines and the weaving-looms in order to sabotage them. Paul Lafargue, onthe other hand, favored the use of new technology, machinery and automation in as manyprocesses in agriculture and industrial production as possible. This would indeed decrease theneed for human labor and destroy jobs. But his thesis was that humankind was not destined to

154 Textile mills, where women and children had to work in miserable conditions.155 See the film The Corporation, in which the situation of female laborers and children in third world

countries, working for Western multinationals, is described.


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live to work alone, but to work just enough to have a comfortable life and have some time leftfor other, more pleasant activities156. He advocated a substantial use of machinery in order toincrease productivity, but also combined with a decrease of working hours per day and a fairdistribution of the material wealth towards the laborers that would be the result of theeconomic growth. So one could say that already in 1880 Paul Lafargue had a visionary dreamthat one day people would have to work only 8 hours per day and that they would have 2days off during the weekend, and that this would lead to more material welfare for all, eventhe bourgeoisie, the “capitalists” and the industrialists.

At the end of the 19th century the world was not yet ready for his “Rerum Novarum” ideas.Marxists, socialists, economists, industrialists and politicians all rejected his visionary ideas,each for their own narrow-minded reasons. Paul Lafargue, who was the son in law of KarlMarx, committed suicide157 in 1911 together with his wife Laura Marx, disillusioned as theywere with the state of world affairs in their time. They lived through a period of socialstruggle and turmoil, while they knew that another world was possible, to the advantage of allof humankind. Then followed a period with violent revolutions in some countries like Russia,The Great War, the Great Depression, and finally the Second World War. After that, a newarea in history finally arrived in most industrialized countries, with the general right to voteand organized labor unions, a workweek of 5 days and 8 working hours per day, whichresulted in an unprecedented economic growth in these industrialized countries. Paul Lafarguenever got the credits for it.

8.4.2 A complicated problem

For the majority of the world-population the division of the week now consists of 5 working-days of 8 hours plus, for many of them, 2 extra hours for commuting from and to the working-place. And then there are the 2 weekend-days.

156 All work and no play makes Jack a dull boy.157 Other people who said they “had a dream, that one day…” are usually shot or crucified: Christ,

Mahatma Ghandi, Malcom X, King, , bishop Romero…


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Day 1 till 5 Day 6 till 7

Population Active

(panem)

Off

(circencem)

This arrangement has some disadvantages on several domains.

Mobility

In many countries you can see every morning and evening of a working day the structuraltraffic jams of people commuting in their private cars in and around the big agglomerationswhere work is concentrated. Also public transport is overloaded and people are literallysqueezed into the wagons of trains and metro-cars and in busses. To avoid that in the nearfuture we will all stand still in our cars or suffocate in the train-wagons or busses, heavyinvestments are needed in the sectors of public transport and the construction of new roads. Insome countries highways are constructed on a dual level or under the ground. Some countriesinvest heavily in fast trains. Both measures need rather expensive investments. Due to thepresent world-wide economic situation most governments do not have the budgetary capacityto take adequate measures. In some countries they barely succeed in maintaining the presentinfrastructure. Higher taxes have a negative influence on private consumption, and thus on theeconomic growth. During the rush-hours the mobility infrastructure is overloaded, but for therest of the day it is used to a much lower degree. Part of the trains and busses is then not usedat all. Therefore further investments seem to be foolish.

From Friday-evening on you can see then the migration to the holiday-resorts and weekend-houses in the countryside, on the coastlines or in the mountains. Roads are again overloadedwith people leaving the cities for the weekend. This problem of mobility causes a lot of dailystress for most of the people during working-days as well as during the weekend. It lowers thequality of life and has a very negative influence on the productivity of the transport of goodsand the economy as a whole. It is a waste of time and money for private persons andprofessionals alike. And cars in a traffic-jam pollute more than cars that can drive along.

Economic efficiency

There is also a structural imbalance for the efficiency and the useful load of the productioninfrastructure, the public infrastructure and the recreational infrastructure. The means ofproduction like factories and office-buildings are used only 5 days a week and during the 2days of the weekend they are idle, not productive, empty. On the other hand there is in manyregions a need for new industrial areas, to create new jobs. But this means less space forhousing, land for agriculture, recreational areas and natural parks. In some branches of theeconomy with continual production, like the petrochemical industry or the ports, there isactivity seven days a week, at the cost of higher wages for the weekend-work.

The infrastructure of schools and universities is also not used to its full capacity as they areempty during the weekend. Shopping centers are overcrowded on Saturday with people andtheir cars, but during working days they are often an oasis of peace and rest, unless they arelocated near offices, where they are frequented only during lunch hours or after the workinghours. In some countries shops are already open around the clock and in other countries thebig commercial companies demand the governments to legalize flexible working hours so


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they do not have to pay extra for weekend work and evening-work. This at the expense of thequality of life of the employees, who have to work out solutions for practical problems suchas babysitter, transport of children to and from school, and also at the expense of the smallindependent shopkeepers who have to adapt their business-hours if they do not want to losetheir customers. Sport infrastructure and cultural infrastructure is used only during theevening hours on working-days and of course during the weekend.

Personal quality of life

This division of time has also some disadvantages on the personal level.

When you buy furniture or a washing-machine, these are usually delivered at your homeduring working hours on a working day, so you have to take a day off from work. When thereis some work to be done at your home by a plumber or electrician, some roofing or paintinghas to done, then the professionals come to your house during the normal working hours andyou have to sacrifice holidays for these practical matters. There is also a problem with theaccessibility of public and private services like the townhouse, the post-office, the bank, thesocial security office, the dentist, the doctor,... whose opening-hours synchronize with yournormal working hours. So another day off is sacrificed. Some of these services have opening-hours till 7.00 PM or on Saturday morning, but this means extra costs and a burden for theemployees and their children.

In this stressful society a lot of people want more quality of life, are fed up with the rush-rushway of life. They want a better balance between time for commuting and actual working time;they want more time for recreation and their family.

Public finances

Most governments have financial problems due to the situation of the world-economy and thedemographic evolution. Their budgetary capacity is dependent on economic growth and thelevel of activity or the unemployment of their population.

The economic growth of a country is supported by two components: internal economicgrowth and the surplus of their trading balance as a result of export to other countries.Countries are dependent on the economic situation of their trading partners for their export-level, and for most countries the situation is not so good. In order to be competitive the cost ofproduction and the wages should be lowered, but this erodes the purchasing power of the ownpopulation and thus the internal economic growth.

The post World War II baby-boom generation is getting older and life expectancy hasincreased considerably in recent years, so in most countries the public and private systems ofretirement-pensions will be under great pressure. In some countries people are already warnedthat they will have to work longer in order to increase the level of activity in order to keep thepublic and private pension-systems viable. On the other hand it is difficult for older people toget a well-paid job in this fast evolving technological society.


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8.4.3 A possible solution

This seems to be a Gordian knot. Solutions seem to be expensive or even unpayable, they willlead to higher taxes or inflation, and they will never be acceptable for everyone in society.Many of these measures will be a burden on the environment (more roads, more industrialzones, less space for nature and leisure-time...) and create new problems.

And then you have the blissful optimist who once sang “There are no problems, onlysolutions” and “People say I’m crazy doing what I’m doing”, you know, the guy who sent theimmortal song “Imagine” into the world.

Before his successful solo-career John Lennon was member of the Beatles, a band whichcompiled an impressive series of 27 N° 1 hits.

In their songs you can discover a lot a social, personal and spiritual wisdom, (Let It Be, TheLong and Winding Road... ), and one of these songs might well enter the history as the “Odean die Freude” of this century:

Eight Days a Week

Ooh I need your love babe,Guess you know it’s true.Hope you need my love babe,Just like I need you.Hold me, love me, hold me, love me.Ain’t got nothin’ but love babe,Eight days a week.

Love you ev’ry day girl,Always on my mind.One thing I can say girl,Love you all the time.Hold me, love me, hold me, love me.Ain’t got nothin’ but love babe,Eight days a week.

Eight days a weekI love you.


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Eight days a weekIs not enough to show 1 care,

Ooh I need your love babe,

Eight days a week ...

Love you ev’ry ...

Eight days a week. Eight days a week. Eight days a week.

Let us indeed try to manage our time in a more creative way. How could we organize aneight-day-week? Maybe we could arrive to what I would call the “dual active-recreationalsociety”.

Well, imagine(!) that one part of the active population and the kids at school and students atuniversity are active the first 4 days, and that they are off the next 4 days, and the other part isoff the first 4 days and active the next 4 days.

Day 1 till 4 Day 5 till 8

50% of the population Active

(panem)

Off

(circencem)

50% of the population Off

(circencem)

Active

(panem)

As a matter of fact, every “physical” socioeconomic entity would be divided into two“logical” entities that are alternating active and idle, so the “physical” entity would be used atfull capacity. This would indeed result into a dual society, but not a vertical one with peoplewith a job and people without a job, “haves” versus “have-nots”, but rather into a sorthorizontal timesharing system across the whole of society of “actives” and “not-actives”, andwith less “have-nots”.

Imagine all the peopleSharing all the world...

John Lennon, Imagine

And what is left of our Gordian knot?

• Structural traffic jams in the morning and the evening would be considerablyreduced without need for huge investments in roads and public transport. Theyboth would be used in a more optimal way every day of the week and every hourof the day.


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• Transport of goods would be leveled out in time and would be more productive asthere would be less traffic-jams. Professional, recreational and private transportwould be more leveled out in time

• Air-pollution and CO2 emission could be reduced due to better transport efficiency

• Factories, offices, public services, schools, hospitals, recreational facilities wouldbe used at full capacity. This means a higher productivity, a higher profit-ratio(profit/invested capital)

• The level of activity would increase considerably, also for the older but stillyoung-of-heart part of the population that still can make a valuable contribution toa productive society. Their experience can be indeed of great value for the youngerones.

• This would introduce a system in which there is a backup for every job, which isadvantageous for companies. Nobody is indispensable and there would be a bettertransfer of knowledge and skills.

• Public and private services would always be accessible during normal business-hours for part of the population. No need to sacrifice days off, or for overwork inthe evening or work on Saturday.

• People would be able to spend more quality time with their family, for recreationand sports. This proposal meets the demand for less working-time and moreleisure-time that lives among most of the people. People with a holiday resort or asailing-boat would be able to make more use of it.

• Absenteeism from work due to sickness or burnout syndromes would be reduced,with as consequence a positive effect on the cost of labor and cost of the socialsecurity and health care systems.

• For a lot of people it offers the opportunity to combine work with study, withouthaving to go to evening-school after a hard day of work. Or to start their ownbusiness.

• Unemployment would decrease and taxes could be lowered.

• There is no need for expensive investments in new infrastructure to implementthis. On the contrary, the infrastructure of roads, offices, factories, schools, trains,busses, leisure-time infrastructure is already available but not used at full capacity.

• As the infrastructure could be used at full capacity, the production of goods couldbe increased without need for investments. The new division of working timewould result in more consumption, but not necessarily of products but rather ofservices, especially in the recreational business. This means that the GNP of acountry, the employment and the export could increase, resulting in a betterbalance of trade and lower budget deficits.

And what would be the cost of all of this? “Nothing” is maybe too optimistic, but we mightend up with a better utilization of all kinds of infrastructure without having to do largeinvestments and without need to increase taxes. It is more a matter of organization than ofinfrastructure, a different way of organizing our life.


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Of course it is necessary to do further investigations on the social and economic benefits ofthis proposal. This should be done in a social debate, coordinated by a team of not onlyeconomists and managers, but also sociologists, engineers, labor unions, organizationsrepresenting small entrepreneurs, pedagogues, youth-organizations, political parties,governmental services, and this in co-operation with international organizations like the UNO,ILO, UNCTAD, IMF...

Many questions remain to be answered.

• Is it possible that one country could implements this alone, or should it be done ona continental level or on global level? I don’t think it matters. The “shop” of thecountry would be permanently open for business, and even now countries aresituated in different time-zones on the globe and some of them are islands. Soevery country can make its own arrangements, even region by region.

• What is the influence on wages, on the one side what employers have to pay andon the other side what employees can earn?

• What is the influence on energy consumption and pollution? Surely the electricityconsumption would be more equalized over the week, so the consumption peaksand dips would be leveled out. The total production of electricity could beincreased, while investments in higher production capacity or in the distributionnetwork could be postponed. Immediately a higher profit-ratio for electricitycompanies! Or lower prices?

• Maybe a working-day of 9 hours is socially acceptable if there is less traffic-jamand a “weekend” counts 4 days? So every day of the present seven-day-calendarhalf of the population would work 9 hours a day. For the employees this means areduction in working time of 21%, while the useful load of factories and officeswould increase with 57%! (see the simulation at the end of the section.)

• Unemployment would evaporate instantly. In the future one could use the numberof working hours per day in order to “fine-tune” the economy. Imagine, time asmeans of investment. Indeed, isn’t time money, as they say in English?

• What would be the effect on drug abuse, crime figures and violence in society,when more people would be able to find a job and have enough leisure time? Whatwould be the effect on absenteeism from work and on the cost of healthcare?

• Is there a need for a new calendar system or is it feasible with the present “sevendays a week calendar”? According to me the present calendar system is just fine; itis just a matter of organization, of time management. On a certain week part of thepopulation would start their work-period on a Monday and work till Thursday, theother part of the population would then work from Friday till Monday, so the firstgroup would then take over on the next Tuesday, etc. The start of a work-periodfor a person would shove up one day each week. This becomes clear when youlook at the simulation at the end of this section.

• How does this proposal fit in the trend towards globalization and with the transferof production facilities and services, like call-centers and software-production, tothe lower-wage-countries?

• When can it be introduced? Very often social changes of this magnitude have beenintroduced after a major war (5 days working week, the general right to vote...).More on that subject later on, but I don’t think we have to wait for such an event.


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We better do it at the beginning of a school-year. The family-unit should indeed bethe central focus-point in this social (r)evolution.

And another N° 1 of the Beatles is “We can work it out”!

This proposal might induce some resistance from religious factions. But which one? For theMuslims Friday is the day of prayer, for the Jews the Saturday is the Sabbath, for theChristians Sunday is the day reserved for the Lord... It is difficult to satisfy everyone with thatmany religions...

On the other hand every day in the week could be a day for prayer, contemplation ormeditation for part of the population... Isn’t religion a private matter between an individualperson and his Creator? And the self-employed people, well they can decide themselves howthey will arrange their time.

I have discussed this idea already with a lot of people, and I found out that once they realizethat time is just a convention, they understand the scope of the idea and what the impact couldbe on society and their personal life. Most of them said they wished this regime was alreadyimplemented, but at the same time they were very skeptical about the willingness of politicalleaders to do something about it, or of other people to accept this new way of living.

The greatest single obstacle to the resolution of great problems in the past wasthinking they could not be solved – a conviction based on mutual distrust.Psychologists and sociologists have found that most of us are more highlymotivated than we think each other to be! For instance, most Americans polledfavor gun control but believe themselves in the minority. We are like DavidRiesman’s college students, who all said they did not believe advertising butthought everyone else did. Research has shown that most people believethemselves more high-minded than “most people”. Others are presumed to be


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less open and concerned, less willing to sacrifice, more rigid. Here is thesupreme irony: our misreading of each other158.

M. Ferguson, The Aquarian Conspiracy, pp. 447-448.

Or as John Lennon has formulated in his song Imagine:

You may say I’m a dreamerBut I’m not the only oneI hope someday you’ll join usAnd the world will be as one

One world? Well, rather a dual society, but then not a vertical one with “haves” at the top and“have-nots” at the bottom, but a horizontal one in which the burden for making the “panem”and enjoying the “circencem” are evenly distributed. Indeed a New World Order, but then tothe advantage of everybody.

158 Induced by the mass media, as very clearly illustrated by Noam Chomsky in Failed States, in the

section Public Opinion and Public Policy, pp. 228-236.


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Simulation: The least common multiple of 7 and 8 is 56. So let us consider a 56 day period.

Present situation Future situation

Week Day

Hoursfacilities are used

Working-hours/person

Hoursfacilities are used


group 1


group 21 Week 1 Monday 8 8 9 9

2 Tuesday 8 8 9 9

3 Wednesday 8 8 9 9

4 Thursday 8 8 9 9

5 Friday 8 8 9 9

6 Saturday 9 9

7 Sunday 9 9

8 Week 2 Monday 8 8 9 9

9 Tuesday 8 8 9 9

10 Wednesday 8 8 9 9

11 Thursday 8 8 9 9

12 Friday 8 8 9 9

13 Saturday 9 9

14 Sunday 9 9


16 Tuesday 8 8 9 9


18 Thursday 8 8 9 9

19 Friday 8 8 9 9

20 Saturday 9 9

21 Sunday 9 9


23 Tuesday 8 8 9 9


25 Thursday 8 8 9 9

26 Friday 8 8 9 9

27 Saturday 9 9

28 Sunday 9 9


30 Tuesday 8 8 9 9


32 Thursday 8 8 9 9

33 Friday 8 8 9 9

34 Saturday 9 9

35 Sunday 9 9


37 Tuesday 8 8 9 9


39 Thursday 8 8 9 9

40 Friday 8 8 9 9

41 Saturday 9 9

42 Sunday 9 9


44 Tuesday 8 8 9 9


46 Thursday 8 8 9 9

47 Friday 8 8 9 9

48 Saturday 9 9

49 Sunday 9 9


51 Tuesday 8 8 9 9


53 Thursday 8 8 9 9

54 Friday 8 8 9 9

55 Saturday 9 9

56 Sunday 9 9

Total hours (sum) 320 320 504 252 252

Reduction of working hours per person: 21,25 %Increase in hours facilities are used: 57,50 %

Intermediate conclusion: Short of labor forceEconomic efficiency would increase considerably

Final conclusion: Some fine-tuning is needed, but looks very promising


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8.4.4 The quaternary sector.

During the course of history, the economic and social landscape went through an enormousevolution. Until the early Middle Ages, the major part of the population was working on thefields as serfs, later came the mediaeval towns with the craft-guilds and the commercialguilds, which took care of the “industrial” production and the trade.

Due to the advancing mechanization since the Industrial Revolution, less and less peopleneeded to work in the agricultural sector (the primary sector), and more people wereemployed in the industry (the secondary sector). By the use of automation like the assembly-belt, less people were needed in the industry and employment in the secondary sectordecreased, while more and more people worked in the service industries (the tertiary sector).

So far the classical division of employment which is used by economists: people areemployed in the primary, the secondary or the tertiary sector. But this point of view lags farbehind reality, primarily because this vision fails to focus on man as man; it just considerspeople as a means of production.

It is my solemn conviction that man is not created only to work. All work and no play makesJack a dull boy. Most people do not go to work because they like it, but in order to make aliving in order to fulfill their needs. And once they make enough money, they spend asubstantial part of it on things and activities they really like: a good dinner in a restaurant,going to the movies, listen to music, do some sport, a visit to the sauna, a trip to an exoticisland,… in brief: they want to enjoy themselves during their leisure time.

And this brings us to the “quaternary sector” (I admit, not directly an original name): the setof human activities that involves leisure time in the widest sense of the word: the hotel andcatering industry, the cultural sector, the film and music industry, tourism, sport,… Thissector already exists159, its turnover and employment are even gigantic in these days, andfortunes are made by entertainers and sportsmen. And when the eight days a week regimewould be introduced, the economic importance of this quaternary sector could increaseconsiderably, and become more important than the other three sectors combined. It couldgenerate a substantial economic growth and thus also profit for society and for companies, sothere would be no need any more for the sector of disinvestment goods and wars in order topull the profit ratio to a substantial higher level.

8.5 Fair collection of taxes

On the international financial markets, 180 dollar is daily traded per man,woman or child, and this with a world population of 5.6 billion people. Theworld trade in commodities is about 4,000 billion dollar per year. One does notneed a computer to calculate that only 1% of the exchange in foreigncurrencies has something to do with the international trade in commodities.The rest is pure trading, with as sole purpose portfolio management and thesatisfaction of a gambling instinct.

Armand Van Dormael, The Power behind Money, p. 7.

159 I even think that this sector is historically the oldest sector.


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One of the measures proposed by NGO’s in order to accelerate the development of the ThirdWorld countries is the introduction of a Tobin-tax: a very small tax on large internationalfinancial transactions, with two purposes:

• to create more stability on the financial markets, which would ultimately lead toless fluctuating currencies and more economic stability;

• to raise funds for the development of the Third World countries.

History teaches us that it is very difficult to organize a tax-system that is fair and has noloopholes, and that fiscal engineers always find cracks in it, so that the people who can affordto pay these fiscal whiz-kids pay less taxes than the other people. A world-wide controlorganism would have to be created in order to monitor that the Tobin-tax is paid correctly.And this creates once more what P. Lafargue has described as “active unproductivity”: a lot ofpeople who cost a lot of money, but who have no active contribution whatsoever to theproduction of real goods and services. Therefore I propose the following alternative for theTobin-tax.

On one of the UNCTAD conferences I heard former vice-president of the United States AlGore suggest to introduce the United States Generally Accepted Accounting Principles forcompanies all over the world, so it would be easier to make a clear assessment of the health ofcompanies. There was at that time a lot of protest from the part of the NGO’s, as they saw thisproposal to be too much in line with the trend of globalization of the world-trade and theworld-economy: it would be easier for American companies to decide which foreigncompanies to acquire, in which countries to invest, etc.

I think however this is not a bad idea, at least when it is linked to the following simple rule:all companies in the world should use the same start-date/time and end-date/time for theirfinancial year. And with “time” we do not mean local time, but Greenwich Meridian Time(GMT).

The argument for this is as follows: now multinationals set up constructions in which most oftheir subsidiary companies (Ci), located over many countries and continents, or even withinthe same country, have financial years with different start-date and end-date.

Calendar year X Calendar year X + 1

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 Quarter 4

C1 Financial year C1




• In the 4th quarter of calendar year X the company C1 buys for a great amount parts,semi-manufactured goods or end-products from its sister-company C2. In doing so,the profit of company C1 goes down, and it will pay less taxes.


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• In the 1st quarter of calendar year X + 1 the company C2 buys for a great amountparts, semi-manufactured goods or end-products from its sister-company C3. Indoing so, the profit of company C2 goes down, and it will pay less taxes.

• In the 2nd quarter of calendar year X + 1 the company C3 buys for a great amountparts, semi-manufactured goods or end-products from its sister-company C4. Indoing so, the profit of company C3 goes down, and it will pay less taxes.

• In the 3rd quarter of calendar year X + 1 the company C4 buys for a great amountparts, semi-manufactured goods or end-products from its sister-company C1. Indoing so, the profit of company C4 goes down, and it will pay less taxes. Etc.

As a result of this carrousel, multinationals manage to pay lower taxes or even no taxes at all:the generated cash-flow is transferred from company to company and goes around the world,without ever resulting in a profit that can be taxed. And this holds a double unfairness:

• In most countries nowadays, the tax-burden is carried by the working-class people,there is very little tax-contribution from the part of the companies, especially themultinationals, and there are very little or even no taxes on big fortunes.

• And due to lower declared profits, a lower dividend is paid to the many smallshareholders, while CEO’s and members of the board of these multinationalsassign themselves gigantic remuneration’s and stock options.

And the funny thing is that in some countries, like Belgium, the co-ordination centers of themultinationals, which optimize this system of tax-evasion, receive even extra fiscaladvantages compared to other companies who pay their fair share of taxes.

I am convinced that the proposal to “synchronize” the financial years of all companies all overthe world would result in enough fair taxes so that:

• the already long-time proposed target to spend 0.7% of the GNP in aid to the ThirdWorld countries could be met quite easily;

• the taxes for individuals could be lowered, especially the taxes on wages andsalaries;

• … and that even the taxes for companies could be lowered.

On the other hand, this proposal will lower the costs of the tax-controlling systems and of theorganizations trying to detect fiscal fraud, as the system of “transfer pricing” and invoicecarrousels will no longer yield the same result anymore. It would even be totally impossible.

Some bookkeepers, accountants and fiscal consultants will get the cold shivers while readingthis proposal, but you have to agree with me: on the long term, honesty is the best policy!


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9 Epilogue

In all times and all cultures, among all races and all religions there have always been peoplewho considered themselves as “Übermenschen” and the others as “Untermenschen”, whomthey could exploit as slaves, serfs, cheap labor-force and as cannon-fodder, destined to die forthe interests of the power élite. Even people of their own creed, race and country weresacrificed. This has resulted in the society as we know it today: a dual society with “haves”and “have-nots”, among countries as well as within countries.

In this book we have tried to prove that there is an alternative point of view: there are only“Nebenmenschen”. And we also propose a dual society, but then not a vertical dual society,but rather a horizontal dual society in which everybody makes a productive contribution in thegeneration of wealth, but is also entitled to enjoy the fruits of his own labor: the burden andthe delights are shared more equally. And this is to the advantage of both “Übermenschen”and “Untermenschen”. We refer once more to the work Howard Katz.

War and the covert aristocracy.

In the Dark Ages, when feudal lords kept the vast majority of people inserfdom, war was a necessary institution to preserve the structure of society.This is because in that type of society the people suffered such incrediblehardships and injustices at the hand of the nobility that, despite the extent towhich they were bound down by fear of authority and by superstition, therewas always a severe danger that the people would rise up and destroy theirfeudal lords.

To prevent the hostility of the people from being turned against the nobility(who were the source of their suffering), the nobles constantly fomented wars.This directed hostility outward against an outsider (whom it was safe to hate)and prevented rebellion against the lord. Thus, two feudal lords at war witheach other were, in fact, both maintaining their domination of the respectivepeasants.

Our society does not have feudal lords, but similar principles apply. We madea valiant attempt in the 17th and 18th century to get rid of the aristocracy. Wesucceeded only in part. In The Paper Aristocracy160, an aristocracy was definedas a “small élite who, through control of the government, have obtained specialprivileges in law and are thus enabled to live as parasites on the labor ofothers” and who “by means of this exploitation... amass large amounts ofunearned wealth”.

The desire for unearned wealth is very old. While it would be undulypessimistic to say that it is inherent in human nature, it is certainly true that it isvery widespread among the population - especially among the practicallyoriented, worldly type of person. The lowest expression of this desire is thecommon criminal, whose range of thought only extends to a few months andyears.

160 Another book written by Howard Katz.


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But the same desire actuated by more powerful minds has given rise to socialsystems where robbery and exploitation are systematized and legalized andwhere resistance to the robber is a crime. Such was the social system of theDark and the Middle Ages where a tiny minority exercised complete materialdomination over the population. They bound the men to the land in order tosteal the product of their labor; they raped the women; they administrated the“law” which they had instituted. In this society the practice of torture wascommonplace, and the life of a peasant was cheap.

The proclamation of the rights of man by the English Parliament of 1688 andthe French assembly of 1789 did not fully end this unhappy state of affairs.The aristocracy could no longer openly assert its special privileges, but thedesire for unearned wealth and accompanying benefits did not die so easily.When the old feudal aristocracy was destroyed, another group of men set aboutto achieve its goals by different means.

While the principle of the feudal aristocracy was open and explicit, theprinciple of the new aristocracy is hidden. It is a covert aristocracy, and in thisregard we may divide human history into three periods:

1. Open Aristocracy. Exploitation by the aristocracy was publicly affirmedand defended. This period ended in the 17th century in the Anglo-Saxoncountries (one may take 1642 or 1688 as the date) and later in the otherEuropean countries.

2. Covert Aristocracy. The exploitation had to go underground and operateby deceit161. This is the stage of most countries in the world today.

3. The Society Based on Justice. This third period is still in the future162

when exploitation will cease and when each man will receive the productof his own labor163.

The bankers164 are the main (but not the only) element in our covertaristocracy. Using many of the tried and true principles of the aristocracy(authoritarianism, statism and the use of an intellectual priesthood to deceivethe public) they have created a system whereby they live off the labor of thevast majority.

In 1688, when the old aristocracy was toppled in England, the new aristocracywas on hand. We have seen how democracy is inherently a force for peace. Butwar, the standby of the old aristocracy, became an important device for thenew. Through the creation of the Bank of England, war and paper moneybecame inextricable mixed in a way which allowed the bankers – and theirother associated vested interests – to seize the wealth of the people. In this

161 This covert aristocracy also managed to topple down some of the old open aristocracy, like the

Romanoff’s in Russia, or they replaced them with a new more “manageable” open aristocracy, like the House ofHanover in England. The Romanoff’s were related to the House of Hanover, so they asked their “cousins” forpolitical exile in England. The cousins said “No”. The Romanoff’s where killed, probably with Remingtonweapons. After WWI the House of Hanover changed its name to the House of Windsor.

162 Eight Days a Week – The Fourth Wave!

163 Millions of workers, working for nothing. You better give ‘em what they really own (John Lennon,Working Class Hero).

164 Fortunately not all bankers, but rather a small élite who for centuries has made kings and presidents.


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sense there is a ruling group in America – and in every other country in theworld – today.

We can now, perhaps, better understand how men foment war for economicmotives. The covert aristocracy continues many of the traditions of the oldmedieval aristocracy. Wealth may not be its only goal, but it always requiresan economic base. It would not be an aristocracy if it did not live in greatwealth without working. Wealth and power are inextricably mixed for thisclass, which cannot lose one of these elements without losing the other.

It is hard to conceive of a man who will cold bloodedly send another humanbeing (let alone thousands or millions) to die only for his material self interest;few could do this if they understood the situation in those terms. But when themotive is strong, most men’s capacity for self-delusion is infinite. By whateverprocess, they come to believe that the war which advances their wealth andpower is absolutely essential for the salvation of mankind. It is true that J.P.Morgan and Company dishonestly maneuvered the United States into a warwhich greatly swelled their pocketbooks, but it is also true that they believedthat the extension (and preservation) of the Anglo-Saxon way of life hung inthe balance. Once a man’s self-interest is involved, he can usually find some“ideal” in terms of which to justify his actions.

We can also see how men who might be deterred from war by an increase intaxes are not deterred by the loss of life and liberty. In time of war a hysteriagrips the nation. The public debate is governed primarily by emotion with verylittle space left for reason. The average man is propagandized with songs,slogans and heroic statements. In this frame of mind, even human life itselfbecomes cheap.

But the issue of a tax increase to finance the war – although far less threateningman’s values than the loss of life – shifts the debate to a far different level. Inour society, we are used to treating economics as a rational subject. While menmay be highly irrational in other areas, they pride themselves on theircalculated rationalism in the field of economics. Shift the subject to the cost ofthe war, and suddenly the average man is no longer swept away by heroicsongs or eloquent speeches. He cannot calculate the value of a human life, buthe can calculate the value of the tax increase you are passing along to him.And as small as this value is in the scheme of things, he sees that the war is notworth it.

Interestingly, two years after the establishment of the Bank of England, the oldpractice of coin clipping and alloying base metals with the gold – which hadgone on since virtually the invention of money – was ended by a reminting ofthe debased coinage. With the new method of exploitation in place, there wasno need for the old. Power to debase the currency thus passed from the king(representing the old aristocracy) to the banker (representing the covertaristocracy), and there it remained to this day.

Furthermore, this explains why there is a great deal of injustice directed inwardduring wartime and why in many respects the society returns to a conditionapproximating that of the Middle Ages. It explains why freedom of speech isoften violated in time of war, why forced labor is introduced (especially for themilitary), why dissent is not tolerated and why unsound financial policies are


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followed. These things are not means to win the war; in fact they operate toweaken the society and make for a less efficient war potential. For the rulinggroup which desires the war, they are the end itself, and the war is the means tobring them into being.

H. Katz, The Warmongers, pp. 39-42.

Fortunately, in all times and all cultures, among all races and all religions there has alwaysbeen people who considered themselves and all other people as ‘Nebenmenschen’. They havetried to express this in all kind of manners: rational and scientific, but also in all kind of arts:novels, poetry, paintings, sculptures, music, films… As examples we quote two masterpieces.John Lennon’s Mind Games seems to be a modern version of Ode an die Freude, written byFriedrich von Schiller and put on music by Ludwig von Beethoven in his 9th symphony.

We’re playing those mind games togetherPushing the barriers planting seedsPlaying the mind guerrillaChanting the mantra peace on earthWe all been playing those mind games foreverSome kinda druid lifting the veilDoing the mind guerrillaSome call it magic the search for the grail

Love is the answer and you know that for sureLove is a flower you got to let it, you got to let it grow

So keep on playing those mind games togetherFaith in the future outta the nowYou just can’t beat on those mind guerrillasAbsolute elsewhere in the stone of your mindYeah we’re playing those mind games foreverProjecting our images in space and in time

Yes is the answer and you know that for sureYes is surrender you got to let it, you got to let it go

So keep on playing those mind games togetherDoing the ritual dance in the sunMillions of mind guerrillasPutting their soul power to the Karmic wheelKeep on playing those mind games foreverRaising the spirit of peace and love(I want you to make love, not war,I know you’ve heard it before)

John Lennon, Mind Games


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German EnglishO Freunde, nicht diese Töne! Oh friends, not these tones!Sondern lasst uns angenehmere Let us raise our voices in moreanstimmen, und freudenvollere! Pleasing and more joyful sounds!

Freude, Schöner Götterfunken, Joy, fair spark of the gods,Tochter aus Elysium, Daughter of Elysium,Wir betreten feuer-trunken, Drunk with fiery rapture, Goddess,Himmlische, dein Heiligtum! We approach thy shrine!Deine Zauber binden wieder, Thy magic reunites thoseWas die Mode streng geteilt; Whom stern custom has parted;Alle Menschen werden Brüder, All men will become brothersWo dein sanfter Flügel weilt. Under thy gentle wing.

Wem der grosse Wurf gelungen, May he who has had the fortuneEines Freundes Freund zu sein, To gain a true friendWer ein holdes Weib errungen, And he who has won a noble wifeMische seinen Jubel ein! Join in our jubilation!Ja, wer auch nur eine Seele Yes, even if he calls but one soulSein nennt auf dem Erdenrund! His own in all the world.Und wer’s nie gekonnt, der stehle But he who has failed in thisWeinend sich aus diesem Bund! Must steal away alone and in tears.

Freude trinken alle Wesen All the world’s creaturesAn den Brüsten der Natur; Draw joy from nature’s breast;Alle Guten, alle Bösen Both the good and the evilFolgen ihrer Rosenspur. Follow her rose-strewn path.Küsse gab sie uns und Reben, She gave us kisses and wineEinen Freund, geprüft im Tod; And a friend loyal unto death;Wollust ward dem Wurm gegeben, She gave lust for life to the lowliest,Und der Cherub steht vor Gott. And the Cherub stands before God.

Froh, wie seine Sonnen fliegen Joyously, as his suns speedDurch des Himmels prächt’gen Plan, Through Heaven’s glorious order,Laufet, Bruder, eure Bahn, Hasten, Brothers, on your way,Freudig, wie ein Held zum Siegen. Exulting as a knight in victory.

Seid umschlungen, Millionen! Be embraced, Millions!Diesen Kuss der ganzen Welt! Take this kiss for all the world!Brüder überm Sternenzelt Brothers, surely a loving FatherMuss ein lieber Vater wohnen. Dwells above the canopy of stars.Ihr stürzt nieder, Millionen? Do you sink before him, Millions?Ahnest du den Schöpfer, Welt? World, do you sense your Creator?Such’ihn über’m Sternenzelt! Seek him then beyond the stars!Über Sternen muss er wohnen. He must dwell beyond the stars.


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Unfortunately, in all times and all cultures, among all races and all religions there has alwaysbeen people whom we could describe as NIMBY’s (Not In My Back Yard): people who arenot concerned about what happens to their fellow human beings (war, genocide, poverty,pollution), as long as it does not occur in their back yard165.

Eight Days a Week – The Fourth Wave could well be the start of a new phase in humanevolution, towards a society based on justice. In this book we have pushed some barriers andhopefully we succeeded in planting some seeds into the mind of the reader.

• Next to consumption goods and investment goods we have introduced the notionof disinvestment goods in order to incorporate the occurrence of war in thedescription of the economic process.

• Next to the four fundamental freedoms described in the American constitution(freedom of speech, freedom of religion, freedom from want, freedom from fear)and the Fifth Freedom described by Noam Chomsky (the freedom that somecountries grant themselves to get complete control over the natural resources ofminerals and energy supplies of other countries, even with the use of force andcoercion), we have introduced the Sixth Freedom: the freedom that some interestgroups grant themselves to create money out of nothing in an illegal way in orderto finance the Fifth Freedom.

• Next to the classical division of economic sectors (agriculture, industry, services),we have added a fourth sector, the leisure time industry, which could well becomethe most important one in our 4+4 days a week regime.

I hope this has expanded your vision of the world, your paradigm, and that you now can seecurrent world-affairs in a wider context. In appendix A we will elaborate this concept ofparadigm, and describe how paradigms originate and evolve. In the other appendices we willuse this to knowledge to describe the evolution of the socioeconomic paradigm in relation tothe evolution of other hard and soft sciences. And this should stimulate the reader to changehis thinking from geopolitical terms into more Gaia-political terms.

165 Keep this in mind the next or first time you read The Book of Job in the Bible. This is also related to

the concept of (instant) karma in eastern religions.


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10 Schematic synopsis

10.1 Current geo-political and socioeconomic paradigm, based on wrong premises.

• Consider things in a rational way, no moral considerations are needed. After all, amoral is not the sameas immoral.

• Thomas Malthus:o Resources increase at an arithmetic rate, population at a geometrical rate. So resources per

capita decrease.o Get control of resources of other countries.o Reduce population.o Wars, pogroms and genocides (women and children first) meet both objectives perfectly:

Children have more years to live than adults, so they need more resources. Theyounger they die, the more resources are left for others.

Women can bear children. Men cannot do this, they need women to procreate. Men can be used as slaves, cheap labor or cannon fodder. No problem if people are killed on both sides: more resources per capita are left.

• Social Darwinists:o Survival of the fittest.

• Profit is not possible according to economists:o Evolution of profit ratio: declining in times of peace due to free competition and accumulation

of capital goods.o Actions to increase profit ratio:

Consumer society: induce demand for non-essential products and services. Disinvestment goods (armament industry):

• When not used:o To stimulate growth (they contribute to the GNP, just as

consumption goods and investment goods, or a broken window).• Once used:

o To reduce the level of invested capital (lower denominator of theprofit ratio).

o To increase the demand for goods during and after the massivedestruction (higher numerator of the profit ratio).

o To reduce the level of population.• Joseph Schumpeter: creative destruction (Capitalism, Socialism and Democracy, 1942).

o In his mind: creative innovation destroys old techniques and businesses (CD replaces LP andaudio tape, MP3 and iPod make CD obsolete).

o According to others: destroy in order to recreate and rebuild (Halliburton and The CarlyleGroup).

• “All men are equal, but some are more equal than others”, so there are always winners and losers, it is“us or them”.

• Rationally and amorally spoken, war meets all requirements perfectly! So this cannot be immoral. It isfor the good of “us” against “them”!

• So let us start first, a preemptive strike is better than no strike, even if there is no real reason for it. Onecould always provoke a reason.

• Furthermore, financing a war by fiat money is very lucrative for some people, while the silent majoritydoes not realize that inflation and higher taxes erodes their incomes, accumulated savings and pensions.

• Multinationals pay very few taxes due to system of transfer pricing.

Just study the past, look at the newspapers and the news on TV, makes you wanna cry. Whish your heart was made of stone.


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10.2 New Gaia-political and socioeconomic paradigm, based on correct premises.

• Consider things in a rational way and moral way. Rationality combined with amorality and pure self-interest leads to immorality.

• Thomas Malthus was right for only a short time-span. Over a longer period of time Pierre FrancoisVerhulst is right, with his well known S-curve (the logistic population growth model, 1838).

o In poor societies with high death rate for children and no social security or pension system, afamily needs lots of children and grandchildren in order to guarantee a comfortable old age.

o In rich societies, with low death rate for children and a social security and pension system,there is no longer need for a lot of children, so the birth rate declines, the population levels out,and in some rich countries even declines.

• Modern evolution theory: species are dependent on each other for their survival.o Foxes eat chickens, but do not raise chickens. More foxes lead to fewer chickens.o People eat chickens and raise chickens. The more people, the more chickens!

• Profit for companies is part of the ‘profit for society’, which is the result of economic growth.o Distribution of the ‘profit for society’ over the socioeconomic participants determines future

growth: Socioeconomic participants whose needs are amply fulfilled will not necessarily

consume more and will not necessarily induce future growth and future profit. Socioeconomic participants with still needs to fulfill will consume and induce future

growth and thus future profit.• Sustainable growth in a compassionate society for all instead of consumer society for the happy few.• “All men are equal”. And it is “us and them together”.

o 4 + 4 = 8 days a week: 4 days work for half of the population. 4 days leisure time for the other half of the population. Alternating, so infrastructure is used completely 8 days a week. No need for

investments in order to boost the profit ratio. No unemployment, less crime.

• Peaceful world society.• Inflation free world society.• Fair tax collection when all companies all over the world use same fiscal year in their accounting

system (in Greenwich time, not local time), so transfer pricing and tax-evasion are no longer possible.

Heaven is here on Earth, if you want it.


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10.3 Some thoughts to brood on.

An old Jewish story goes like this. A man dies. In the world beyond he is allowed to choosehimself between heaven and hell166, which is, indeed, rather exceptional. The man does notlike to take the risk to buy a pig in a poke, so he asks for a short visit to both places beforemaking a decision.

First he is shown hell: a beautiful decorated room with long tables dressed with the mostdelicious food and drinks. Then a door is opened and the guests of Beelzebub enter the room,all dressed in magnificent clothes. But all persons seem to have the same handicap: both theirarms are stiff, they cannot bend them, so they cannot reach to their mouth. From the momentthey see the food, they rush toward the tables. In doing so they push each other aside with onearm and try to grab everything they can with the other, much more than they can eat. But thenthey fail to bring the delicious food to their mouth, and out of anger and despair, they start tohit each other with the duck à l’orange, the lobsters and that sort of things. As Jean-PaulSartre would say : “L’Enfer, c’est les autres”.

After this visit to hell, the man is given a glimpse of heaven: exactly the same scene. Thesame beautiful room with the same tables full of delicacies. Again the guests enter the room,dressed in exquisite clothes and again with two stiff arms. Each soul calmly walks towards thetable, they all carefully select a piece of food... and reach it to the mouth of the person next tothem. All this happens in a serene atmosphere. They all enjoy the delicious banquet. So herewe could say: “Le ciel, c’est les autres.”

What alternative would you choose to spend the rest of your days?

166 Heaven is where the policemen are British, the cooks are French, the mechanics German, the lovers

Italian and everything is organized by the Swiss. Hell is where the cooks are British, the mechanics are French,the lovers Swiss, the policemen German, and everything is organized by the Italians.


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11 Some recommendations: where do we go from here?

No socioeconomic system can last long unless it rests on an appealingideological structure. In this regard, capitalism is no exception. And as withevery elitist system, its ideological thread is sound in theory, but tenuous inreality....

We have already seen that in an acquisitive era intellectuals come forward tooffer theories justifying the supremacy of the acquisitors. To manyintellectuals, it seems to matter little how specious their justification is, as longas it serves their purpose167.

Ravi Batra, The Great Depression of 1990, pp. 74, 75.

There is nothing wrong with being wrong because one uses the wrong premises. Nobody isprefect, everyone makes mistakes. So a reconciliation commission like in South Africa afterthe Apartheid regime could be a good step.

But deliberately keep on doing wrong, when knowing one is wrong and knowing what thecorrect premises are, is a criminal offense.

So, let us inform all the people all over the world what the correct premises are that could andshould lead to a new Gaia-political and socioeconomic paradigm, and an Alternative NewWorld Order favorable for all of humankind. Students in economy, engineering, businessadministration, politics and sociology should be informed with the correct socioeconomicpremises: it is not “us or them”, but “all of us together”.

And most of all, let us elect politicians and presidents who support this new world view.

But in the bubble168 of the White House, sometimes you learn the wronglessons of history and fail to recognize this reality. You become so focused onprotecting the president, you don’t realize you’re rolling the dice and losingcontrol of the problem (p. 229)…

The national media can help change our political culture as well. There ismuch they do right, but it is often overshadowed by what they do wrong.

Network news has been losing viewers in recent times. There are manyreasons, including the proliferation of news sources, many now tailored towardspecific audience interests. But one important reason, I believe, is that thenetworks are stuck in the past. Their national news desks remain focused oncovering the horse race of the permanent campaign, not only during electionyears but continually, emphasizing controversy, and talking about who’swinning and losing in Washington rather than really digging into the big issuesAmericans care about – the economy, health care, education, crime, war, andpeace.

167 Economy, an ideology in disguise.168 In Appendix A we will elaborate on the concept of “bubble”.


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To break out of their slow ratings decline and their creative rut, the news medianeed to learn to think in new ways. The American public hungers for truth169 –not just as it relates to petty partisan squabbles and the controversy of the day,but larger truth, including the hard truths we too rarely hear emphasized ontelevision or see written prominently about in our major newspapers andmagazines. The network that can find a way to shift from exclusivelyemphasizing controversy, the conventional horse race and image-drivencoverage to give a greater emphasis to who is right and who is wrong, who istelling the truth and who is not, and the larger truths about our society and ourworld might achieve some amazing results in out fast-changing mediaenvironment. I’ll bet I’m not the only viewer who would be energized byprogramming like this. The political drama is entertaining for me, as for mostpoliticos, but Americans would be better served and more responsive to newsthat focuses more on the larger truth (p. 321).

The Bush administration will soon recede into history. Future historians willdebate the long-term consequences of the fateful decisions made by PresidentBush and his chief advisors for years to come. But I hope all Americans willparticipate in the conversation about what we can learn in regard to the rightand wrong ways to govern from the last eight years of our shared history. Itcan be difficult, even painful, to look on our own mistakes. Its tempting tofocus on the obvious triumphs or ignore the history altogether in our constantquest for a better tomorrow. But I’m convinced there’s much to be gained fromthoughtful, candid, and probing self-examination… and that requires an honestlook at what happened (p. 323).

Scott McClellan, What Happened, Inside the Bush White House andWashington’s Culture of Deception.

Indeed, we urgently need to redefine our system of values on the level of society, but perhapseven more on our own individual level. This is also one of the conclusions of Herman VanDer Wee, professor in the history of economy at the University of Louvain, at the end of hisbook The Broken Circle of Affluence.

The establishment of a new international economic order is not limited to theproblem of fulfillment of material needs only. Other aspirations of man mustbe met. Fr. Hirsch has drawn our attention to the ever-increasing tensions thatexist between the material and social effects of the affluent society. As materialneeds are ever more fulfilled, there seems to be a growing number of socialneeds and social tensions. A new kind of social competition has arisen: peoplewant to take a better position on the social ladder in order to “stay ahead of thecrowd”. But in essence this results in an enormous waste of energy andresources: the infrastructure in order to meet this new demand for socialupgrading and differentiation demands a permanent and ever increasinginvestment in the production of goods and services that are not essential. Thisalso leads to the consolidation of inequality. The solution can only be found inthe transcending of material aspirations by humankind. A spiritual dimension,an existential “Weltanschauung” must be added to the material craving...

169 “May the lights in The Land of Plenty shine on the truth some day”, Leonard Cohen, Ten New

Songs.


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Social systems that are focused only at the optimization of economic growthand neglect the spiritual and existential aspirations of individuals will never beable to bring complete satisfaction... The solution to these tensions cannot befound on the level of society only. A new world is not only created byrevolutions and the establishment of new social systems, but essentially in theheart of each individual... A new internal revolution is needed, a new ideologyin order to stimulate the development of society and the world. The Westerncountries have, in this regard, the material and spiritual170 possibilities to beinnovative, to open new horizons for a better world where rationality,creativity and equality can be combined in a new harmony. This is the ultimatechallenge of this crisis.

H. Van Der Wee, The Broken Circle of Affluence, pp. 400-401.

I hope this book has contributed to a better tomorrow, as it is an honest look at whathappened. But now it’s up to you, yeah you, the individual! Share this book with all thepeople you care for, don’t leave it on the bookshelf as “The history book on the shelf is justrepeating itself”, as in the song Waterloo of ABBA.

In the preface of his book Failed States, Noam Chomsky refers to the book America BeyondCapitalism written by Gar Alperovitz:

The selection of issues that should rank high on the agenda of concern forhuman welfare and rights is, naturally, a subjective matter. But there are a fewchoices that seem unavoidable, because they bear so directly on the prospectsfor a decent survival. Among them are at least these three: nuclear war,environmental disaster, and the fact that the government of the world’s leadingpower is acting in ways that increase the likelihood of these catastrophes171. Itis important to stress the government, because the population, not surprisingly,does not agree. That brings up a fourth issue that should deeply concernAmericans, and the world: the sharp divide between public opinion and publicpolicy, one of the reasons for the fear, which cannot casually be put aside, that“the American system” as a whole is in real trouble – that it is heading in adirection that spells the end of its historical values [of] equality, liberty, andmeaningful democracy…

The will of the public is banned from the political arena.

Noam Chomsky, Failed States, p.1, 225.

If you don’t have any idea for a birthday or a Christmas present, just give this book as a gift.If you reach just 2 other persons and they also reach 2 persons and so on… well, after 20iterations you can reach out to 220 = 1,048,576 persons. And if you start with 3 persons, andthey also reach 3 other persons and so on, well, after 20 iterations you can reach out to 320 =3.486.784.401 persons, half of the world population! Don’t leave the initiative to thegovernment or the politicians alone; don’t wait for their solution, as it will cost you a lot of

170 Personally, I found my inspiration in the East. I can recommend the films Seven Years in Tibet, The

Last Samurai and Memories of a Geisha. And the practise of Yoga or Tai Chi.171 I would like to add the financial and economic meltdown of 2008 to this list.


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money. And this will lead to the end of your welfare. But Eight Days a Week – The FourthWave could very well be the solution to your problems. Just give it a fair chance.


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12 Appendix A: Some Notions on Communication Theory

Watch your thoughts, they become your words.Watch your words, they become your actions.Watch your actions, they become your habits.Watch your habits, they become your character.Watch your character, it becomes your destiny.

12.1 The process of communication

Communication is the process of transfer of information from one point in space and in time –the source – to one or more other points – the destination(s).

This process of transfer of information takes place within a communication system. Theelements of a communication system are represented in the following figure.

The elements of a communication system

The source produces the information in a certain way: the message. This message can be asequence of signs (characters, symbols...). This message is transferred to one or moredestinations via the communication channel, which bridges the distance in space and in timebetween source and destinations.

Very often the message in its original form is not suited for immediate transmission over thechannel. An intermediate process is needed to match the physical outlook of the message tothe characteristics of the channel, and this, of course, without altering the information contentof the message. This intermediate process can consist of coding and modulation. With codingall the elements of the original message are replaced on a one to one basis with elements ofanother set of signs. In the modulation process, one or more characteristics of a carrier, suitedfor transmission over the channel, are altered according to the values of the signs in themessage. The resulting signal is then transferred over the communication channel. At thedestination side, the reverse process takes place: the received signal is demodulated anddecoded before the message can be presented to the destination(s).

To illustrate this, we can describe verbal or written communication between two persons interms of this model. The sender wants to transfer some idea or some notions to the receiver.As telepathy is the exception rather than the rule, the sender has to use coding and

SourceCoding

ModulationChannel

DemodulationDecoding

Destination


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modulation: he expresses his thoughts in words and sentences (coding), which he can thenpronounce (modulation of a stream of air during exhalation, which produces variations inpressure in the air) or write down (modulation of a blank piece of paper). When the variationsin pressure in the air reach the ear of the destination or the piece of paper is handed over to thedestination, that person hears or reads the words (demodulation) and makes a deduction ofwhat the other person wanted to say (decoding).

We emphasize that the transformation from a concept into a word or a sentence – and viceversa – is not always unique: a concept can be described in several ways and words orsentences can be interpreted in several ways. This is the first problem that can arise during thecommunication process: sender and receiver use different coding/decoding rules. Theinformation is mutilated: the message arrives incorrectly, misunderstood.

12.2 Information

In the previous section we used the word information without giving much thought to theconcept behind that word. Indeed, information has become an ordinary word in our world oftelevisions, satellites, internet and computers. But what does it stand for? Few people askthemselves: “What is information?” Obviously, information is something immaterial, acreation of the mind: we cannot touch it, it does not smell, we cannot eat it... How can wedefine it – qualify it? And how can we measure it – quantify it? Let us consult some experts inthis field. The following discussion is based on the book Communication Systems, written byProfessor B. Carlson.

The concept information can be defined and treated in a pure mathematical way. This is donein what is called information theory, a scientific discipline that originated in the 1940s thanksto pioneering work by C.E. Shannon.

In the previous section we have described information as that which is produced by the sourcein order to be transferred to the destination. This implies that, before the transfer was done,the information was not available to the destination. Otherwise the transfer of informationwould be of no value to the destination. Let us proceed with this line of thought and take thefollowing example. A man has planned a trip from San Diego to Chicago by plane the nextday. In order to know what clothes he has to take with on his journey, he calls the weatherbureau in Chicago. Suppose he gets one of the following weather forecasts:

• The sun will rise.

• It will rain.

• There will be a tornado.

The information the person receives is obviously different in the three cases. The firstmessage has no information content at all, as we are pretty sure that the sun will rise the nextday, even without that forecast. As it does not rain every day in Chicago, the weather forecastfor rain gives some more information to the man, information he did not have before he madethe phone call to the weather bureau. The third message gives him even more information, astornadoes are rather unusual for the region.

We notice that the messages are listed in order of decreasing likelihood and increasinginformation content. The more unlikely a message is, the more information it contains. So we


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could say that information has something to do with uncertainty, more specific: theuncertainty for the destination of what the message will tell him.

Let us now take a look at the other end of the communication process. For the sender, theinformation content is a measure for freedom of choice among many possible messages. If thesender has a great freedom of choice among many possible messages, then there is a greatdeal of uncertainty with the destination as for what message will be sent. If on the other handthere is only one possible message and thus no freedom of choice for the sender, then there isno uncertainty with the destination and there is no information transferred in the message.

If we consider information from the viewpoint of freedom of choice for the source, or, on theother side of the channel, as uncertainty for the destination, it is clear that the value ofinformation is related to probability (likelihood). Messages with a high probability, indicatinglittle choice for the sender and little uncertainty for the receiver, contain a small amount ofinformation; on the other hand, messages with a low probability contain a lot of information.

Based on these considerations, one can formulate the concept of information mathematicallyas follows. Consider a source that can produce several messages. Let A be one of thosemessages and Pa the probability that A will be selected for transmission (with Pa somewhere

between 0 and 1). Consistent with our discussion above, we can write the information contentassociated with the message A as a function of its probability Pa:

Ia = f(Pa)

where the function f(.) is to be determined.

As a first step toward finding the function f(.), intuitive reasoning suggests that theinformation content should be a positive quantity:

Ia = f(Pa) > 0 for Pa between 0 and 1 (1)

Secondly, the information content of a message, which is almost certain to be selected, is verysmall:

lim f(Pa) = 0 (2)

Pa → 1

I.e.: when Pa approaches 1, f(Pa) becomes infinitesimally small.

Furthermore, if we consider two messages A and B with different probabilities to be selected,the one with the lowest probability has the largest information content:

f(Pa) > f(Pb) when Pa < Pb (3)

These conditions we impose on the function f(.) are a direct consequence of our discussionabove. There are many functions fulfilling the requirements (1), (2) and (3). However, weimpose a fourth condition. Let us consider the transmission of two messages which arestatistically independent. When a message A is transmitted an information content Ia is


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delivered to the destination. When a second, independent message B is transmitted with aninformation content Ib, then the total information content received by the destination is likely

to be the sum of the two information contents of the two messages: Ia + Ib. To understand

this, one can imagine the two messages A and B to being produced by a different source.

Suppose that the two messages came from the same source, then we can define the compoundmessage C = AB. If A and B are statistically independent, then

Pc = Pa.Pb (. stands for product or multiplication)

so

f(Pc ) = f(Pa.Pb )

and because

Ic = Ia + Ib

we can say that

f(Pa. Pb) = f(Pa) + f(Pb) (4)

It is mathematically proven that there is one and only one function, which satisfies all fourconditions, namely:

Ia = logb (1/Pa)

(Logarithm with base b of the inverse of the probability)

To refresh your memory of mathematics:

n = logb N is equivalent to bn = N

n = log10 N is equivalent to 10n = N

As an example we can say that log10

100 = 2 because 102 = 100.

The base of the logarithm determines the unit in which the information content is expressed.When we take b = 2, then the unit is the bit (binary digit). As an example we consider asource which can produce only two messages A and B with the same probability ofoccurrence Pa = Pb = ½. In this case:

Ia = Ib = log2(1/½ ) = log

2(2) = 1 bit.

Each message of that source gives us one bit of information. Tossing head or tail with a coinor throwing odd eyes with a dice gives us exactly one bit of information.

We stress the fact that the probability to throw head or tail with a coin or odd eyes with a diceis ½ under the assumption that the coin or dice is not loaded. The probability of a message isalways conditional, and so is its information content. The destination must have someknowledge in advance of the fact that it is an honest coin or dice. This knowledge determines


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the probability of occurrence that the destination will give to the different messages and thusthe information content of those messages.

What we have to remember from the discussion above is:

• The information content of a message is function of its probability.

• An unusual message – one with a low probability – contains a lot of information.

• The information content of a message is relative in the sense that it is conditionalon the foreknowledge of the destination: the theory of relativity contains a lot moreinformation (news) for a high school student than for a university student inphysics, as their foreknowledge is different.

12.3 Shannon’s Law

An important law in information and communication theory is the law of Shannon, namedafter C. E. Shannon. In the previous section we have defined the information content of amessage as a function of its probability. The source wants to transmit a message with a certaininformation content. We can ask ourselves the question if this can be done instantly, or isthere a limit on the speed at which information can be transmitted?

Communication and information theory teaches us that a communication channel has alimited capacity C to transmit information. This capacity is an upper limit for the rate R atwhich an information content I can be transmitted without errors. The rate R, defined as theinformation content I (expressed in bits) divided by the time T needed for transmission(expressed in seconds), cannot be greater than the capacity C:

R = I / T < C (bits / second)

This expression is known as Shannon’s law. As a consequence, we can state that a minimumamount of time is required to transmit a certain information content I over a channel withcapacity C:

T > Tmin = I / C (seconds)

The greater the information content we want to transmit, the greater the amount of time wewill need to do so: the source needs more time to transmit; the destination needs more time toreceive and to “digest” the information. As the information content is a function of theprobability of the message, we can say that it will take more time to transmit an unusual orunlikely message than to convey something that is self-evident in the eyes (or ears) of thereceiver.

As the probability of a message and its information content are conditional with respect to theforeknowledge of the destination, we can conclude that it will take more time to transmit thesame message to one destination than to another, one with more foreknowledge. It will takemore time to explain the theory of relativity to a high school student than to a student inphysics at university: as the university student has a broader view on physics andmathematics, his channel to receive is wider and the information can be transmitted in a morecompact form (see also next section).


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We remember a very important rule: the time needed to transmit information is greater whenthe message is less likely to the receiver of it, and thus dependent on the foreknowledge of thereceiver.

12.4 Signal-spaces and paradigms

In the previous section, the reader might have been a little overwhelmed by the use ofmathematical formulas. It was really not essential for the understanding of this book to go insuch a detail. But we have a very good reason for doing so, as we will explain later in thisappendix. In this section we will again use mathematics, not with formulas but with abstractconcepts such as multi-dimensional spaces.

The reader surely has heard or read about Pulse Code Modulation (PCM) and digital storageand transmission of data. As an example we can think of a compact disc, on which music isnot stored as an analog or continuous signal – as it used to be on the vinyl rock ‘n roll recordswe bought years ago – but in the form of a sequence of discrete (separate) “ones” and “zeros”,the famous bits. The key to this technical achievement is the fact that a continuous signal (asmusic or speech) can be represented or coded by a finite number of discrete values, can bestored and transmitted in that form, and that out of that coded form the original continuoussignal can be reproduced.

This phenomenon was described mathematically by H. Nyquist, who proved the followingtheorem:

A continuous signal s(t) with bandwidth B can be represented unambiguouslyby sampling it uniformly at a rate which is greater than or equal to twice thebandwidth of the signal. The sampling gives us a string of values, whichrepresent the signal unambiguously.

The bandwidth of a signal is a measure for the rate at which the signal changes in the courseof time, and is expressed in Hertz (Hertz = 1/second). A signal, which changes faster in time,has a greater bandwidth. We can grasp this Nyquist theorem intuitively as follows: consider acontinuous signal s(t), with bandwidth B Hertz (see figure below.).


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Sampling of a continuous signal.

We sample this signal s(t) periodically, i.e. we register the values of that signal at regularintervals every P seconds in time: s1, s2, s3... The string of values s1, s2, s3 ... we get fromsampling gives us some information concerning the signal s(t), but does not necessarilyidentifies that signal unambiguously. Sampling of other signals might also result in the samestring of values. In the figure, for example, the same string of values represents also the signalr(t). So there is uncertainty as to which signal we have sampled.

But when we increase our sampling rate – let’s say double it, as in the figure below – oursampling points are doubled over a period of time: our string of values becomes denser (morevalues per second), and it gives us more information on the signal. The uncertainty on whichsignal the string represents gets smaller, because this string can represent fewer signals. In thefigure below one can see that the signal r(t) is no longer represented by the string of values s1,s2, s3...

s1 s2 s3 s4 s5 s7

Time

Value

s(t)

r(t)

P: sampling period

s6


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Sampling of a continuous signal at the double rate.

If we increase our sampling rate to twice the bandwidth of the signal, i.e. 2B, then the signals(t) is the only signal with bandwidth less than or equal to B which can be represented by thestring of values s1, s2, s3 ... which contains 2B values per second. There is no longeruncertainty about the signal. The minimum sampling rate 2B is called the “Nyquist rate”.

Another way to grasp this theorem is to recall the last time you went into a discotheque. Veryoften one uses stroboscopes in order to create a psychedelic atmosphere. A stroboscopeproduces a “chopped” beam of light, a sequence of short flashes of light. So all the bodiesdancing on the tunes of Jumpin’ Jack Flash seem to move in a hacked way, as the continuousmovement is sampled by the chopped light-beam, and it is difficult to see who is who andwhere. But when the frequency of the stroboscope is increased to a certain level, themovement of the bodies becomes smooth: the sampling rate is then higher than the thresholdvalue.

Let us now consider a source of information that produces signals having a bandwidth notgreater than B Hertz. Suppose we monitor this source for a period of time T. Any signal s(t)produced in that time can be represented by 2B values per second. During the whole time-interval T the signal is then unambiguously represented by D = 2BT values s1, s2,... sD. Thishas led the people involved in information and communication theory to introduce the conceptof signal-space. The signal s(t) can be represented by a vector S in the multi-dimensionalspace with D = 2BT dimensions. In this signal-space, one can define an orthogonal base ofunity vectors, an orthonormal grid. The vector S is uniquely represented in this grid by its Dco-ordinates s1, s2,... sD . We can represent all signals with bandwidth B or less and a durationtime no longer than T seconds by a vector in that multi-dimensional signal-space. This signal-space can be seen as the abstract representation of the actual source of information. Eachsignal the source can produce is represented as a vector (an arrow) in this signal-space. Thissounds all rather abstract. Let us try to give an example with D = 2 and D = 3

s1 s2 s3 s4 s5 s7

Time

Value

s(t)

r(t)

P: sampling period

s6


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Signal spaces with dimensions 2 and 3.

In the case D = 2 the signal-space is a plane with as grid (x1, x2). A signal is represented by avector with co-ordinates (s1,s2). It is also possible to give a picture of a three-dimensionalsignal-space, but beyond that... It is rather difficult to visualize a space with four or moredimensions, although this is mathematically perfectly feasible.

We can summarize as follows: our source with bandwidth B Hertz produces in a time-intervalof T seconds a signal s(t) which can be represented as a vector S in a multi-dimensional spacewith dimension D = 2BT and orthogonal grid (x1, x2... xD). The vector S can be decomposedin his components according to the unity vectors:

S = s1.x

1 + s

2.x

2 + ... + sD.x

D

Let us now consider the side of the receiver. Here we can define the signal-space of thereceiver in an analog manner. The receiver is able to receive signals with bandwidth B’ Hertz.Signals that last T seconds can be represented in a multi-dimensional signal-space withdimension D’ = 2B’T.

The signal-space of the sender (receiver) determines which messages it can send (receive).For a human sender/receiver one could draw a parallel between the concepts paradigm andour signal-space. A person’s paradigm determines how he perceives the world around himand what messages he is able to formulate or to understand.

We know already that we can consider language as the vehicle of the thoughtprocess, as Wittgenstein has put it. We find this important point of view also inthe work of the linguist Benjamin L. Whorf: “Thinking is done in the languageitself: in English, in German, in Sanskrit, in Chinese, etc. Every language is abig structured system on its own. The expressions of it are culturallypredestined. An individual not only communicates by language, he alsoanalyses nature, observes and relates phenomena, directs the process ofthinking and builds his consciousness with the help of language.”...

s1 X1

X2

s2S

D = 2

X1

s1 X2

s2

X3

s3

S

D = 3


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We have already discussed this relation between thought and speech when wequoted Wittgenstein. We have seen that the process of thinking is canalized fora great deal by language. Whorf speaks of a system of structures, of forms inlanguage determining the way of thinking: our thoughts are molded bylinguistic forms and rules, different from language to language...

Whorf’s teacher and colleague Edward Sapir, another representative of theearly American science of language, said: “People not only live in an objectiveworld, or in a world we call society. They also live in the world of theirparticular language, which became the medium of expression in their society.”

An Eskimo woman will see her world in another way than the physicistWerner Heisenberg will see his. A trained astronomer will look at the sky in adifferent way than a farmer living in the mountains. This is because of thedifferent languages they speak. In reality, a person’s perception of the realworld – his world – is molded unconsciously for a great deal by the languagehe speaks. As Wittgenstein has put it in his book Tractatus Logico-philosophicus: “The borders of my language are also the borders of myworld.”...

Benjamin L. Whorf has expressed the same as follows: “One has discoveredthat the linguistic system of a language, in other words its grammar, not onlyfunctions as a system for reproducing thoughts, but that it plays an active rolein the creation and molding of thoughts, that it is just like a skeleton [a grid]that guides the thought process of an individual. The creation of thoughts is notan independent, rational and objective process, but, on the contrary, isinfluenced for a great deal by the grammar of the language and a person’svocabulary. We see the world according to the rules given to us by our mothertongue. The world presents itself to us as a kaleidoscopic flow of impressions,to be organized and systematized in our mind by means of the linguisticsystem in our mind.”

W. Fuchs, Thinking with Computers, pp. 41-43.

We hope that these considerations on language and communication have helped you tounderstand and accept our parallel between the concepts signal-space, with its orthonormalgrid, and paradigm. When a person receives information, he will always try to relate it withthings he is familiar with, he will decompose the signal s(t) in its elementary components s1.x1

+ s2.x2 + ... + sD.xD according to the orthonormal grid of his (by definition limited) signal-space – or paradigm.


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12.5 Effective Communication

Based on the previous discussion we can define effective communication as follows:communication between sender and receiver is effective if all possible messages the sender isable to produce can also be received correctly by the receiver.

In our representation with the signal-space this implies that the signal-space of the receiver atleast should include the signal-space of the sender. If, for example, the dimension of thesender (suppose D = 3) is greater than that of the receiver (suppose D’ = 2), then effectivecommunication is impossible a priori. The sender could produce a signal S = s1.x1 + s2.x2 +s3.x3, while the receiver could only recognize two components: the third component would beinvisible to him, it would not fit in his signal-space. This problem has been described in a verylucid way by Edwin Abbott Abbott in his story of Flatland in 1884.

In this story a square, trained in mathematics, tells about an experience it had with the thirddimension. Before we let the square tell his story172, we will first give some backgroundinformation. All inhabitants of Flatland are flat; they can perceive only the two dimensions oftheir flat world. They all have geometric shapes. The hero of our story is, as alreadymentioned, a square. His wife is, as all female persons, a thin rectangular. Laborers andsoldiers have the shape of a triangle, office workers are square-shaped and public officers areregular pentagons [sic]. Finally there are the priests who are polygons with so many sides onecan hardly see their corners. They pretend to be circles, which represents the nec plus ultra ofperfection in Flatland.

One day a strange thing happens to our square: a sphere ‘comes out of the blue’, as thiscreature from the world of three dimensions happens to pass the plane of Flatland. This visitoris perceived by the square as a circle, able to make himself smaller or greater.

172 We have based our version of the story on the book Modern Mathematics written by W. Fuchs

Woman Laborer Soldier Public officer

Office worker

Priest


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But let us tell the square its own story:

“I went to the stranger to invite him to take place, but I was struck with amazement by what Isaw. He changed his size in a way I had never seen before. As I wanted to be sure of what Isaw, I ran to him, and started to feel all over his body – very impolite of me, I agree. I couldnot feel any corner. Never in my life had I met a more perfect circle. He did not move while Iturned around him and touched him everywhere I could. Then he started a dialogue, which Iwill try to reconstruct here”.

Stranger: Are you finished?

Me: Forgive me my rudeness, noble sir, I do not want to be impolite, but yourappearance makes me nervous and curious. But could you first tell me, where doyou come from?

Stranger: Well, from space of course, where else should I come from?

Me: I beg your pardon, sir, but aren’t we in space here?

Stranger: My dear, what do you know about space, tell me, what is space to you?

Me: Space is infinite length and width.

Stranger: Ah, there we are! You do not even know what space is. You can only think in twodimensions. But I came to show you the third dimension: there is also height next tolength and width.

Me: You must be joking. We also speak of length and height or width and thickness, andwe give four names to the two dimensions

Stranger: I do not mean three names, but really three dimensions.

Me: Could you show me or explain to me in which direction that third dimension,unfamiliar to me, can be found?


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Stranger: I came from that direction. It is above and underneath us.

Me: You mean north and south, I presume.

Stranger: No, that is not what I meant. I mean a direction in which you cannot see, becauseyou do not have an eye in your side.

Me: Excuse me sir, but if you take a look you will see that I have a sound eye in theintersection of my two sides.

Stranger: Yes, I see it, but to look in space you do not need an eye on your perimeter, but onyour surface, that is on what you probably call your interior. In Spaceland we callthat your surface.

Me: An unseen eye in my interior! In my stomach? You are pulling my leg!

Stranger: I am not in the mood for that. I tell you that I came from space, from the land ofthree dimensions from where I looked upon your plane, that what you call space toyourself. From there I could see everything what you call a body, a surface enclosedby three or more sides. I saw your houses, churches, even your wardrobe and yourcash-box, also your inner body, your stomach; everything was visible to me.

Me: That is all easy to say for you, sir.

Stranger: But not easy to prove, you mean. But I will prove it to you. When I came to here, Isaw four of your sons, the pentagons, in their room with their two cousins, thehexagons. I saw your youngest kid, the hexagon, talk to you for a while, then hewent back to his room. After that I arrived here. How did I do that, could you makea guess?

Me: I assume you entered through the roof.

Stranger No, no, your roof has been repaired recently and there is no hole in it. I told youalready that I came from space. Aren’t you convinced of it by what I told you aboutyour kids?

Me: You could have informed yourself before coming here.

Stranger: (absent- mindedly) How could I explain it to this fellow?… Wait, I have an idea. Ifyou see a straight line, how many dimensions do you think is has?

Me: The gentleman treats me as if I was an ignorant, who does not know anything frommathematics, someone who thinks that a line has only one dimension. No sir, wesquares know better. A woman, although we call her a line, is in reality andscientifically spoken a very thin rectangular, with two dimensions, a length and awidth, or thickness.

Stranger: But the fact that she is visible means that she has still another dimension


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Me: As I told you already, we see the length, and we assume the width, which is,although very small, still measurable.

Stranger: You do not understand me. When a line would only have length and no thickness,she would not occupy space and so she would be invisible.

Me: I must admit that I do not understand what you mean.

Stranger: Height is a dimension for me, just as length and width are dimensions for you. But itis difficult to see for you because in your Flatland heights are so small.

Me: Sir, it is easy to control your statement. You say I have a third dimension. Adimension has a direction and can be measured. Then measure my height and showme its direction, then I will be convinced. Otherwise....

Stranger: (thinking) That is impossible, how can I explain it?…Well, listen very carefully.You live in a plane. What you call Flatland is the flat surface of what I could call aliquid, and you move in that plane without being able to escape from it or sink. I amnot a flat figure, but a body. You call me a circle, but in reality I am an infinitenumber of circles, one on top of the other and with diameter varying from 0 to 10inches. When I cross your plane, an intersection is created, which you rightly call acircle. Even a globe – as I am called in my world of origin – must present himself asa circle to the people of Flatland. Your two-dimensional world is too thin to containme. I can only show you a tiny slice of myself, a circle... But I see that you do notbelieve me. Watch me very carefully. I will go up. You will see this, as my circleswill get smaller until only a dot is left, and then I will disappear completely.

I (the square) could not see that he was “going up”, but the circle indeed became smaller untilit vanished before my eyes. I rubbed my eyes to be sure I was not dreaming. But it was nodream. From the depths of nowhere came the hollow voice of the stranger: “You see, I havedisappeared completely, are you convinced now? Take care, I will slowly return and you willsee my intersection with your plane getting bigger.”

Although I saw the facts before my eyes, the reason of them was totally obscure to me. All Icould understand was that he had made himself smaller, disappeared, then came back andfinally made himself bigger again. When he had regained his original size, he sighed deeply,as he noticed the bewildered look on my face indicating I still did not understand. After awhile I heard him saying to himself: “I will try to explain it by analogy.”

Globe: Tell me, mister mathematician, when a dot would travel over a distance in thedirection north, and it would leave a shining mark, how would you call that mark?

Me: A line segment.

Globe: How many ends does a line segment have?

Me: Two.


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Globe: Suppose this line segment moves parallel to itself from west to east, so that every dotof that line segment leaves a shining mark. Then a diagram is formed. How wouldyou call it?

Me: A square.

Globe: How many sides does a square have, and how many corners?

Me: Four sides and four corners.

Globe: Now try to imagine the following. Think of the square of Flatland moving upwardand parallel to itself.

Me: What, to the north?

Globe: No, not to the north! Upward, so it leaves Flatland. Think of every dot of your innersurface moving upward in that direction. Is that clear to you?

I had to control myself, the square said, because I felt the urge to attack the stranger and tokick him back into the space he came from, out of Flatland anyway, just to get rid of him. ButI managed to stay outwardly calm.

Me: What kind of figure is developed by that move? I am sure there must be a name for itin the language of Flatland!

Globe: Oh sure, that is very simple. But by the way, you shouldn’t call the result a figure. Itis better to speak of a body. I will describe it to you by the method of analogy. Westart with a dot, and because it is a dot it has only one end. A moving dot generates aline segment with two ends. A moving line segment generates a square with fourends. Now you can answer your own question: 1, 2, 4 are elements of a geometricalprogression. What is the next element?

Me: Eight.

Globe: Correct! The moving square generates something you do not have a name for, but wecall it a cube, with eight ends. Are you convinced now?

Me: And does that creature have sides, just as corners or ‘ends’ as you call them?

Globe: Of course, but not what you call sides, but what we call sides. You would call thembodies.

Me: And how many sides or bodies does this so-called cube have?

Globe: How could you ask! A dot has no sides, a line segment has two sides, by way ofspeaking, and a square has four sides. 0, 2, 4 are elements of an arithmeticalprogression. What is the next element?


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Me: Six.

Globe: Exactly. You see, you have answered your own question. The cube is surrounded bysix sides, this means by six creations as yourself. Is everything clear now?

Me: You monster, impostor, dream or devil, I will no longer bear your insults! You willdie or I will die!

And I threw myself on him.

In another book you can read the following version of this close encounter of the third kind(Ferguson, Marilyn, 1985, The Aquarian Conspiracy - Personal and Social Transformation inthe 1980s, Paladin Books, London.)

In the durable Victorian fantasy, Flatland, the characters are assorted geometricshapes living in an exclusively two-dimensional world. As the story opens, thenarrator, a middle-aged Square, has a disturbing dream in which he visits aone-dimensional realm, Lineland, whose inhabitants can move only from pointto point. With mounting frustration he attempts to explain himself – that he is aLine of Lines, from a domain where you can move not only from point to pointbut also from side to side. The angry Linelanders are about to attack him whenhe awakens.

Later that same day he attempts to help his grandson, a little Hexagon, with hisstudies. The grandson suggests the possibility of a Third Dimension – a realmwith up and down as well as side to side. The Square proclaims this notionfoolish and unimaginable.

That very night the Square has an extraordinary, life-changing encounter: avisit from an inhabitant of Spaceland, the realm of Three Dimensions.

At first the Square is merely puzzled by his visitor, a peculiar circle who seemsto change in size, even disappear. The visitor explains that he is a Sphere. Heonly seemed to change size and disappear because he was moving towards theSquare in Space and descending at the same time.

Realizing that argument alone will not convince the Square of the ThirdDimension, the exasperated Sphere creates for him an experience in depth173.The Square is badly shaken:

There was a dizzy, sickening sensation of sight that was not like seeing; I saw aLine that was not a Line; Space that was not Space. I was myself and not myself.When I could find my voice, I shrieked aloud in agony, “Either this is madness orit is Hell”.

“It is neither, calmly replied the voice of the Sphere, It is Knowledge174; it is ThreeDimensions. Open your eyes once again and try to look steadily.”

173 The Sphere pushed the Square out of Flatland into Spaceland.174 Gnosis, direct personal experience.


212

Having had an insight into another dimension, the Square becomes anevangelist, attempting to convince his fellow Flatlanders that Space is morethan just a wild notion of mathematicians. Because of his insistence he isfinally imprisoned, for the public good. Every year thereafter the high priest ofFlatland, the Chief Circle175, checks with him to see if he has regained hissenses, but the stubborn Square continues to insist that there is a thirddimension. He cannot forget it, he cannot explain it.

So far for the story of the square in Flatland. You can read some other funny adventures of thesquare in The Fourth Dimension written by Rudy Rucker. Rudy Rucker even discusses“parallel” two-dimensional worlds, and how one world would look like seen from the otherone through a “peep-hole”. Weird!

We see that there is a total lack of effective communication between the two: the sender(globe) is not able to explain the third dimension to the receiver (square). Even if sender andreceiver have signal-spaces with the same number of dimensions, the problem of non-effective communication can still arise. We illustrate this with an example.

Two signal spaces with D = 2 and just one dimension in common

The sender, at the left, produces the signal

S = s2.x

2 + s

3.x

3

175 Actually an ordinary polygon, pretending to be a perfect circle.

s2 X2

X3

s3S

D = 2

X1

X2

s2

D = 2

S


213

The receiver, at the right, can only recognize the component s2.x2 of that signal, because theother component lays outside his signal-space. There is loss of information.

In general, we can state that effective communication between a sender and a receiver ispossible176 only within the intersection of their signal-spaces. Transmission of informationoutside their common signal-space is not possible by the communication process itself, as wasdemonstrated in the discussion between the globe and the square. “To speak about languagepresupposes a language”, Wittgenstein wrote. “This implies that, in a way, one cannot teachthe use of a language, not in the way one teaches to play a piano. What I mean is this: I cannottranscend language by the use of language itself177.” In our abstract representation withsignal-spaces, this means that it is impossible for the sender (globe) to transfer the extradimension he has to the receiver (the square) only by means of the communication process.This conclusion has important consequences for education and science in general. We willdiscuss these consequences in a later section.

12.6 Trade-off between time and energy

It takes time and energy in order to transmit information from sender to receiver. One of thebasic features of communication systems is the trade-off between time and energy needed inorder to transmit information:

• By using more energy, one can save on the time needed, i.e. one can transmit theinformation in a shorter period of time.

• By allowing more time for the transmission of information, one can save onenergy, i.e. one need less energy in order to transmit the information.

The time T (seconds) needed for transmission of a certain quantity of information I (bits) isalso related to the bandwidth B (Hertz) of the communication channel. When the bandwidthof the channel is larger, then the capacity C (bits/second) of the channel is larger, so the rateof transmission R = I/T (bits/second) can be larger. More bits of information can betransmitted per unit of time, so less time is needed to transmit the quantity of information I.

In a communication system there are always non-intended disturbances – noise – whichinterferes with the actual signal being transmitted. This makes it a little bit more difficult forthe receiver, as he does not know which part of the signal he receives is the signal actuallysent by the sender, and which part is due to noise – or other senders who deliberately disturbthe real signal. In communication theory one has proven the following relation, known as theHartley-Shannon law:

C = 2B . log2 (1 + S/N)

where

• C is the capacity of the channel (bits/second)

176 …is possible but does not necessarily occur. The two parties must be aware that there is an

intersection. Two fans of the Rolling Stones, who never met before, are waiting for the bus to come: they willnot start to speak about the Stones, but about the weather, as they are both standing in the rain.

177 Just as one cannot transcend Ratio by the use of Ratio itself.


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• B is the bandwidth of the channel (Hertz = 1/second)

• S is the power level in the signal (Watt)

• N is the power level in the noise signal (Watt)

So one has several options in order to increase the capacity C of the channel and to decreasethe time T needed in order to transmit a certain quantity of information I.

• One could increase the bandwidth B. In our model sender and receiver have theirrespective signal spaces. One could see the overlapping of their signal-spaces as ameasure of the bandwidth: more overlapping means a greater bandwidth, so lesstime and/or energy is needed. But this increase in overlapping usually asks forsome initiative and co-operation of the receiver, which, unfortunately, usually alsoasks for some coercion (see the cost-benefit analysis in the next section).

• One could reduce the noise level N, eliminate the disturbing signals, but this is notalways obvious, especially with communication among human beings: who istelling the true signal and who is telling the false signal?

• One could increase the signal level S. Indeed, sometimes people start to yell ateach other when their message does not seem to get through. But as we have seenin the story of Flatland, this does not necessarily improve the communication.When the signal sent falls outside the intersection of the respective signal-spaces,then no amount of yelling will improve the communication. If one tries to transmitHi-fi music over a telephone-wire with a limited bandwidth, then the quality of themusic at the receiver’s end will not become Hi-fi just by increasing the volume onthe stereo equipment at the sender’s end.

So in communication between human beings – bestowed with free will, sometimes evolvedinto stubbornness – these options are not so obvious. But as engineers are – as the wordimplies – sometimes very ingenuous, they have found a technique in order to circumvent a lotof these problems in technical communication systems. If you take a picture – a snapshot – ofa certain part of the surface of the earth from a plane or a satellite, the picture is usually ratherhazy due to the distance: the real signal is attenuated too much, so a lot of the details are lost.But by flying over the region with a constant speed and capturing data of a rectangular regionwhich “moves” over the surface of the earth, then information on one particular detail – e.g.point P – on the surface is contained in the signal over a longer period of time – the time forthe plane to fly from A to B. By applying the technique of convolutional integration on therecorded signal it is then possible to construct a detailed picture of the area covered.


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A reconnaissance plane recording an area

The US Army has used this technique in order to get detailed pictures taken out of a plane or asatellite of countries considered being the enemy to the people of the USA, and it is also usedin PC technology. Next time you scan a picture into your PC, try to understand what you seeon your screen: during the scanning process a rather hazy image appears on the screen of yourPC, but then the PC takes some time in order to process the received signal, which results in avery sharp image. You can even choose the resolution you want. If you want a high resolution– a high information content – the scanning and processing will take more time: you have toscan the image at a slower speed and the PC needs more time for the processing of the “raw”image to the “clear” image. So the trade-off between information-content, energy and time isnot only valid in the transfer but also in the manipulation of information.

In this book we have tried to use the same technique: we have studied some facts and eventsfrom the obscure past – sometimes at a rather slow pace in order to get the most out of it – andinterrelated them to each other – convolution – in order to get a clear view on the past and thepresent.


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12.7 Implications on education and science

Effective communication between sender and receiver is possible only in the intersectionregion of their signal-spaces. When a sender transmits a signal with a component outside thesignal-space of the receiver, the latter is not able to grasp this component. In this section wewill apply this conclusion in two special forms of communication: education – ascommunication between teacher and student – and science – as communication amongscientists and between scientists and Nature.

12.7.1 Education

Education is the process of molding peoples mind, more specific the shaping of their signal-space, the way they perceive the world and react to it. One can ask the question: how does theparadigm of a person develop? A little child has a limited view of the world, a grown personhas a broader perception of it, and, as we have seen in the previous section, this perceptioncan differ from one person to another. So the question can be formulated as follows: how doesa person’s signal-space expands? What is the trigger for this growth? And how does it comethat one person succeeds better in this than another person?

As discussed before, this expansion of the signal space is not possible by the communicationprocess alone. Imagine someone who has never eaten or even seen a mango, and you want toexplain to him what a mango tastes like. You can try to describe the fruit and compare it toother types of fruit. This description, however detailed, will never be accurate enough tospecify a mango and its taste. The one and only effective way is to give the other person amango, so that he can see, feel, smell and finally taste it. By personal experience (action) theperson can expand his signal-space, can add a new dimension to it. Karl Bühler has alwaysstressed the fact that observation has to be considered as an activity. This is true for everyaction of cognition and exploration178.

A mother can tell her child: “Take care not to touch the fire, as it will hurt you”, but the childwill not be able to appreciate (decode) the message if it did not had the experience of painbefore, and if it has not yet learned to associate the words “fire” or “hurt” with physical pain.The signal-space of the child must have been expanded by own experience of pain in order forthe child to understand what the mother says. As Ortega y Gasset has formulated it: “Thebody is the policeman and the teacher of the mind”179.

If own, sometimes painful experience would be the only way to expand their signal-space,people would build up only a rather limited signal-space, in the first place determined by theirown direct surroundings. However, the signal-space is expanded for a great deal by education:the teacher imparts knowledge to the student. But he is not able to do this by the process ofverbal or written communication alone. By this communication process he can only makerelations with – linear combinations of – concepts already familiar to the student. He cannotimpart concepts totally new to the student just by talking about them: these concepts arecontained in his signal-space, but not in the student’s one. The teacher – as a sender – has alarger signal-space180 than the student – as a receiver. Effective verbal or writtencommunication in one direction from teacher to student is not possible. Or the teacher has todo something and show what he means, or the student must give his full participation and

178 K. Lorenz, Our Last Chance, pp. 60-61179 W. Fuchs, Thinking with Computers, p 45180 At least in his own field of specialization, not necessarily as a human being.


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make an effort to expand his signal-space, so he can receive the message181. By repeating,reformulating and applying the concept, the student can show towards the teacher that he hasunderstood the material correctly or that he misunderstood it. Effective communication fromstudent to teacher is perfectly possible because the signal-space of the teacher – in general –contains the signal-space of the student. Education is, in essence, feedback-communicationfrom student to teacher.

The true teacher knows you can’t impose learning. You can, as Galilee said,help the individual discover it within. The open teacher helps the learnerdiscover patterns and connections, fosters openness to strange newpossibilities, and is a midwife to ideas. The teacher is a steersman, a catalyst, afacilitator – an agent of learning, but not the first cause.


Everyone who has studied probably has had, at one time or another, the experience of goingthrough a course or a textbook, making neither head nor tail of it. By making an effort –spending energy – and going through the course once more – spending time – the insightgrows and the material becomes familiar. By feedback of his perception towards the teacherby means of exercises, rehearsals and examinations the student can prove that he understandsthe material. Perhaps he will not succeed at once so he has to retry. The expansion of hissignal-space does not come by itself: it requires energy and time to do so.

It is human nature to be rather opportunistic – if not to say lazy – in spending energy andtime: there must be a reward in order to do so. With most individuals external motivation ismore dominant than internal motivation. Why would a person put time and energy inlearning? This is done after making a cost-benefit analysis. The person asks himself,consciously or unconsciously, the following questions:

• What will I gain if I put the effort in expanding my signal-space, if I try to makemyself familiar with the new concepts? This could be a certificate, a grade,promotion, acknowledgment.

• What will it cost if I do not put the effort in it? This could be reexamination, nocertificate, no grade, lay-off, disapproval.

If the reward and/or the punishment seem important enough to the person, then he is willingto put the time and effort in learning in order to expand his signal-space. If they do not seemimportant enough, he probably will not make the effort.

Here we can see an explanation for the decreasing quality in the education system and thelower education level of social minority groups: due to the economic recession, the high levelof unemployment with young people and the lack of perspectives for a well-paid job, there isless motivation with a lot of students to put effort in their studies.

The signal-space of a person is formed for a great deal during his education at school. Oncehe has left school, he will still expand his signal-space, but predominantly in those directionsthat will bring benefits to him and avoid costs. This means in directions indicated to him byhis job. Other directions require an effort without promise of any immediate gain: they do not

181 This is the reason why we have included some mathematics in this appendix: to help you realize that

effort is needed in order to assimilate something unfamiliar.


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catch his attention; he is not willing to spend time and energy on them. This is sad, becausethe rewards/punishments are not always immediately visible. Often they only appear after along time. This shortsightedness can have strong implications later in time.

We can also understand the concepts “selective cognition” and “prejudice” in this context.When a person is confronted with something or somebody in a first, superficial way, he willusually form himself quickly a first impression: he projects his perception on already knowndimensions in his signal-space – pegs to hang things on. Later impressions on the same thingor person are related to the dimensions already known, and thus are biased by the firstimpressions. Elements of the message that fit on the existing pegs are accepted and thusreinforce the first superficial impression, while components strange to the first impression oreven in contradiction with it and which do not fit in the frame are ignored, even if one thinksof himself as basically an “intellectual”182.

In this section we have seen how important education is. Costs and benefits are crucial in thisprocess. The system is based on rewards and punishment. The molding of the signal-space ofindividuals and consequently also the paradigm and value-system of a society is basicallydone at school and university. Having control over the process of education or the media isthe same as having control over the direction in which a society will think and act183.

Demagogues of all times – and of this time – have always been aware of thefact that man sticks to the ideals he gained during childhood184.

They knew – and know – how to manipulate this. If one once had a discussionwith an indoctrinated person, one clearly sees that he screens all counter-arguments and discards all other values with an extreme light-heartedness...

It is most peculiar how a fanatic person adopts such a feeling of personalfreedom from this unconditional surrender to a certain doctrine. He identifieshimself completely with the values and ideals he has been impregnated with.He does not see the strait waistcoat he is wearing. He does not see that he haslost the most essential feature of human beings: the freedom of thought.

K. Lorenz, Our Last Chance, pp. 139-140.

12.7.2 Science: academic versus scientific

One could define science as the whole set of human activities aimed at gaining insight inreality, Nature. The nature of reality is of an infinite complexity and variety. In our model ofthe communication process, we could represent reality as a signal-space with an unknownnumber of dimensions, a great deal of them still unknown to us. Every scientist communicateswith reality from his own signal-space: he questions reality, he performs experiments, and hegets answers from reality, the results of his experiments, which he will try to fit in his signal-space. No scientist will dare to claim that his signal-space contains that of reality. Althoughhis insight can grow, he is still limited in his view of reality. As Merleau-Ponty has

182 Read “academic”, people who do not have the time to expand their signal space, as they are too busyto make ever new linear combinations of unity-vectors in their own limited signal-space.

183 Noam Chomsky, Failed States, the section on Institutionalizing State-Corporate Control, pp. 236-241. “The long-term-consequences for the society could be severe”.

184 At Eaton, Cambridge, Oxford, Yale, Harvard, most students learned about Thomas Malthus, butwere never instructed that he was wrong and that Pierre Francois Verhulst was right.


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formulated it: “So long as I keep before me the ideal of an absolute observer, of knowledge inthe absence of any viewpoint, I can only see my situation as being a source of error. But onceI have acknowledged that through it I am geared to all actions and all knowledge that aremeaningful to me, and that it is gradually filled with everything that may be for me, then mycontact with the social in the finitude of my situation is revealed to me as the starting point ofall truth, including that of science and, since we are inside truth and cannot get outside it, all Ican do is define truth within the situation”185.

Based on the work of Edward de Bono we can make some interesting remarks on the subjectof progress of scientific research seen as an activity and as a process of communication. Mr.de Bono has written some very interesting books on the subject of creativity. One of thesebooks is The Use of Lateral Thinking, in which he compares scientific activity with “diggingholes”. The reader will find it easy to draw a parallel between the concept “signal-space” andthe holes of Mr. de Bono.

It is one thing to suggest that new ideas are useful, profitable and exciting, butquite another thing to suggest that something deliberate can be done abouthaving new ideas. No one would disagree with the first suggestion, but mostwould doubt the second.

There are two opposite ways of improving a process. The first way is to try toimprove it directly. The second is to recognize, and then remove thoseinfluences that inhibit a process. If a car does not seem to be moving fastenough, the driver may either press harder on the accelerator or he may makesure the brake has been fully released. To design a car that goes faster thedesigner could either put in a more powerful engine, or reduce the weight andair resistance that slow the car down.

It may be more useful to study stupidity in order to understand intelligence. Itmay be easier to see what the stupid person lacks186 than to see what the cleverperson has extra. Instead of trying to understand why one person invents, itmay make more sense to see why other people do not. If it is possible to obtainsome insight into what prevents the emergence of new ideas, either in generalor in a particular person, then it may be possible to improve the ability to havenew ideas.

Lateral thinking is made necessary by the limitations of vertical thinking. Theterms lateral and vertical were suggested by the following considerations.

It is not possible to dig a hole in a different place by digging the same holedeeper. Logic is the tool that is used to dig holes deeper and bigger, to makethem altogether better holes. But if the hole is in the wrong place, then noamount of improvement is going to put the hole in the right place. No matterhow obvious this may seem to every digger, it is still easier to go on digging inthe same hole than to start all over again in a new place. Vertical thinking isdigging the same hole deeper; lateral thinking is trying again elsewhere. Thedisinclination to abandon a half-dug hole is partly a reluctance to abandon theinvestment of effort that has gone into the hole without seeing some return. Itis also easier to go on doing the same thing rather than wonder what else to do:there is a strong practical commitment to it.

185 M. Merleau-Ponty, Le Philosophe et la Sociologie, pp. 136-137.186 All fans of Malthusianism back to school!


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It is not possible to look in a different direction by looking harder in the samedirection. No sooner are two thoughts strung together than there is a direction,and it becomes easier to string further thoughts along the same direction thanto ignore it. Ignoring something can be hard work, especially if there is not yetan alternative. These two sorts of commitment to the half-dug hole may beregarded as commitment on invested effort and commitment of direction.

By far the greatest amount of scientific effort is directed towards the logicalenlargement of some accepted hole. Many are the minds scratching feeblyaway or gouging out great chunks according to their capacity. Yet great ideasand great scientific advances have often come about through people ignoringthe hole that is in progress and starting a new one187. The reason for starting anew one could be dissatisfaction with the old one, a temporal need to bedifferent, or pure whim. This hole-hopping is rare, because the process ofeducation is designed to make people appreciate the holes that have been dugfor them by their betters. Education could only lead to chaos if it were to dootherwise. Adequacy and competence could hardly be built on theencouragement of general dissatisfaction with the existing array of holes. Noris education really concerned with progress: its purpose is to make widelyavailable knowledge that seems to be useful. It is communicative, not creative.

To accept old holes and then ignore them and start again is not as easy as beingunaware of them and hence free to start anywhere. Many great discoverers likeFaraday had no formal education at all, and others, like Darwin or ClerkMaxwell, had insufficient to curb their originality. It is tempting to supposethat a capable mind that is unaware of the old approach has a good chance ofevolving a new one. A half-dug hole offers a direction in which to expendeffort. Effort needs a direction and there are few more frustrating things thaneager effort looking for a direction. Effort must also be rewarded by sometangible result; the more immediate the results, the more encouraged is theeffort. Enlarging the hole that is being dug offers real progress and anassurance of future achievement. Finally, there is comfortable, earnedfamiliarity with a well-worked hole...

Oilmen do not perhaps find it so difficult to appreciate the paradox that sittingabout deciding where to dig another hole may be more useful than digging thesame hole deeper. Perhaps the difference is that, for an oilman, digging costsmoney, but for scientists and industrialists, not digging is more expensive.Without a hole, how can a mind exert its well-trained effort? The shovels oflogic lie idle. There is no progress, no achievement. Today, achievement hascome to be ever more important to the scientists. It is by achievement alonethat effort is judged, and to pursue his career a scientist must survive manysuch judgments.

No one is paid to sit around being capable of achievement. As there is no wayof assessing such capability it is necessary to pay and promote according tovisible achievements. Far better to dig the wrong hole (even one that isrecognized as being wrong) to an impressive depth than to sit aroundwondering where to start digging. It may well be that the person who is sittingaround and thinking is far closer to digging a much more valuable hole, but

187 I hope this book has convinced you that there is a new economic hole worth to be elaborated.


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how can such a thing be judged until the hole is actually started and the resultbecomes visible?

In the long run it may be far more useful to have some people about to achievethe right thing than have everyone actually achieving things of lesser worth,but there are few who are willing to invest in mere possibility. In the presentsystem who can afford to think? Who can afford the non-progress of abortivethought?

An expert is an expert because he understands the present hole better thananyone else except a fellow expert, with whom it is necessary to disagree inorder that there can be as many experts as there are disagreements – for amongthe experts a hierarchy can then emerge. An expert may even have contributedtowards the shape of the hole. For such reasons experts are not usually thefirst to leap out of the hole that accords them their expert status, to startdigging elsewhere. It would be even more unthinkable for an expert to climbout of the hole only to sit around and consider where to start another hole. Norare experts eager to express their expertise as dissatisfaction with the hole, asdissatisfaction is too eagerly expressed, and often more forcibly, by manyothers who have not earned the right to be dissatisfied. So experts are usuallyto be found happily at the bottom of the deepest hole, often so deep that ithardly seems worth getting out of them to look around.

Because the mind is happier enlarging by logic an existing hole, becauseeducation has encouraged this, and because society has elected experts to seethat it is done, there are a lot of well-developed holes continually enlargingunder the impact of logic effort. Many of the holes are extremely valuable interms of the ore of practical knowledge that is removed from them. Others area waste of effort.

There is nothing wrong with a hole that is a waste of effort. At least there isnothing wrong with its location, though the size may be extravagant. Thereought to be many more such holes in original places. Many of them might wellbe a waste of effort, but some of them could turn out to be extremely useful.But to start such holes more people would have to escape the powerfulcommitment there is to the dominant hole.

The effect of the dominance of old and apparently adequate ideas is oftenunderestimated. It is assumed that an old idea should be regarded as a usefulstepping-stone to something better until that something better turns up. Thispolicy may be practical but it can inhibit the emergence of new ideas. If a goodcartoonist has captured with a few dominant lines the impression of a face, it isextremely difficult to put that impression aside, look at the face again andcome up with a new way of expressing it.

Sects, which assemble on mountaintops on predicted days of doom to await theend of the world, do not come down on the morrow shaken in their ideas, butwith a renewed faith in the mercifulness of the Almighty. New information thatcould lead to the destruction of an old idea is readily incorporated unto itinstead, for the more information that can be accommodated, the sounder theidea becomes. It is like putting some drops of quicksilver on a surface. If youmake one drop larger and larger, it approaches neighboring drops, and as soonas it touches them, they lose their identity and become shifted bodily into the


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larger drop. As with dominant ideas, the big drop always swallows up thesmaller one; it is not a matter of compromise...

Dominant ideas need not always be so obvious for them to exert just aspowerful an organizing influence on the way a person thinks and approaches aproblem. Old and adequate ideas, like old and adequate cities, come to polarizeeverything around them. All organization is based on them, all things arereferred to them. Minor alterations can be made on the outskirts, but it isimpossible to change the whole structure radically and very difficult to shiftthe center of organization to a different place.

Edward de Bone, The Use of Lateral Thinking, pp. 21-26.

So far Edward de Bono in one of his books on creativity. The picture he draws of “academicexperts” sitting in their different holes describes in a very lucid but accurate way thesyndrome of real scientific progress: too much specialization leads to problems ofcommunication among academics of different disciplines and even among academics of thesame discipline (remember the hierarchy). It is almost epidemic. It also leads to the fixation ofacademic thinking in very rigid patterns. So you may now better understand the followingquote:

Problems cannot be solved at the same level of consciousness that createdthem.

Albert Einstein.

You have to transcend the limitations of your signal-space, your paradigm, your frame ofreference, your ratio and take a bird’s eye view over the field of holes. You have to leave yourown Flatland in order to have what may seem at first a dizzy, sickening sensation of sight, buton the long run may prove to be a very rewarding and liberating one, not only on personallevel, but also for humankind as a whole and for future generations, your children and yourgrandchildren.

12.8 Conditions for effective communication

In this appendix we have discussed a few basic concepts on the subject of information andcommunication theory. Now we can formulate some conditions that must be satisfied in orderto achieve effective communication. If one of these conditions is not met, problems will arisefor sure.

12.8.1 Unambiguous Coding

The transformation of a concept into a word in order to describe that concept, and vice versa,must be unambiguous in both directions. This is usually not the case with every day speech. Aconcept can be described by more than one word, often with a slight difference in meaning. Aword can also cover more than one concept. So there is a chance of mutilation of information:the receiver can give another meaning to the word than was intended by the sender. Incolloquial speech, however, there is enough redundancy built in, so the receiver is able to


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deduct the right meaning of the message out of the context. There is also the possibility offeedback-communication: the receiver in turn can respond to the sender so the sender candetermine by this feedback that the concept or message was interpreted correctly or wasmisunderstood.

A source producing symbols that are not absolutely essential to convey information is said tobe redundant. The redundancy of English text, for example, is estimated to be about 50%. Yushld b abl t red ths evnto svrl ltrs r msng. We have built a lot of redundancy in this book.Certain concepts and relations were stressed again and again and were described fromdifferent points of view. By doing this, we hope that the essence of the message will havebeen understood by the reader.

12.8.2 Time and energy

Due to the limited capacity of a communication channel, one needs a minimum amount oftime to convey a certain quantity of information. This amount of time is greater when theinformation-content of the message is greater. The amount of information, and thus the timeneeded, is greater when the message sounds more unlikely. In order to receive newinformation one has to do an effort. So if the receiver does not spend enough time and energyin receiving and processing the message, then effective communication will not be possible.

We warn the reader that a lot of information contained in this book probably lookedunfamiliar at first glance, especially the notion that more purchasing power for the ones withreal needs can lead to higher profits for private business. Please spend enough time on it andmake an effort. A second reading of this book in whole or in part, after a period of reflection,might be useful.

12.8.3 Signal-space

Effective communication between sender and receiver is possible only within the intersectionof their signal-spaces. In this book a number of signals were transmitted to the reader whichmight fall outside his signal-space, or which might even clash with his fixed opinions and wayof thinking. It is up to the reader to evaluate those signals in a critical but open-mindedmanner, and, eventually, to expand his signal-space. At several stages in this book we havediscussed the rewards or punishments that could follow if the reader does make or refuses tomake the effort to abandon some prejudices and fixed opinions.

12.9 A thought to brood on

In this appendix we have gained some insight in the process of communication. Much to ourregret we have to conclude that a lot can go wrong when two people communicate:

• There is not always an unambiguous relationship between what is meant and whatis said.

• The receiver does not always give enough time to the sender to convey hismessage.


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• The sender is afraid to start the communication in the first place, as he is afraidthat his message will not be understood as he hopes it should be understood (self-censorship).

• The signal-space of the receiver might be too narrow to grasp the full content ofthe message: he receives what he can or likes to receive.

• The receiver is not always willing to spend the time and effort to expand hissignal-space in order to receive more signals if he does not see any direct gain of it– especially in the age of video-clips and TV commercials.

In designing a technical communication system, the designer of it will take care that theseproblems do not occur. He is situated, by way of speaking, at a higher level than thecomponents of the communication system. He is at the outside of the system, so he canimpose his directives to the sender and the receiver in order to achieve effectivecommunication between both of them.

A designer can impose his directives both onto the sender and the receiver.

A human being is at the same time a sender and a receiver of information. If somewhere in theUniverse, at a higher level, there is a designer of our communication system – a MasterBuilder – we can conclude that, from an engineering point of view, he did a lousy job! Thecommunication process between human beings does not function properly: people do not giveeach other enough time to explain new ideas, a lot of people argue to prove they are rightinstead of having a discussion to solve the problems, and new ideas are shattered on walls ofunbelief, indifference and resistance...

Maybe there is no Master Builder? Or did He deliberately design us such a lousycommunication system by giving us free will instead of imposing His own will...? The bookof Job…? So that we would not live the life of a NIMBY…? That we should share in eachother’s mind…? So that things could become better…? To share each others intellectual andmaterial wealth…?

Designer

Sender Receiver


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13 Appendix B: Economy and dissipative structures

A lot of people think that the history of the world is predestined and that it hasa goal. In reality the evolution follows unpredictable routes. On this reflectionwe have based our belief in the possibility of creativity, freedom and, aboveall, sense of responsibility of mankind.

K. Lorenz, Our Last Chance, p 10.

One reason the idea of historical determinism has traditionally invited so muchhostility can be traced to a popular misconception. True, the concept meansthat history follows a set pattern; that society evolves and undergoestransformations in tune with a discernible rhythm. But it does not imply, as iscommonly believed, that humanity cannot make its own destiny; nor does itsignify fatalism and resignation before the might of the Providence. Allhistorical determinism means is that, while man indeed is the architect of hisown fate, he has to operate within bounds determined by a higher principle:Nature.

R. Batra, The Great Depression of 1990, p. 24.

In system theory, it has been shown that for a certain set of systems, one can “force” them toevolve to a predefined end-state by applying a control-policy. But the path towards that end-state is usually “fluctuating”: the several state-variables, output-variables and also the control-variables oscillate around certain values. These oscillations are determined by the systemequations, the eigen-values and eigen-frequencies. This is the case for systems in the “linear”region. But if some state-variables show signs of saturation, non-linearities can occur,resulting in seemingly chaotic behavior. So both statements by Konrad Lorenz and Ravi Batrahave their “region of validity”. And here’s the reason why.

13.1 Energy and entropy

Western society has been influenced for a great deal by Newtonian physics and the advance ofthe method of science. From the 17th and 18th century onward, as contrasted with theHellenistic way of thinking, scientists confined themselves to the study of what can bemeasured, quantified and expressed in mathematical expressions – mathematical expressionswhich then allowed them to make predictions of the experimental results. This mathematicalapproach towards reality has had great influence on the way man perceived the world.

For Aristotle, physics was the science of processes, of changes that occur innature. However, for Galileo and the other founders of modern physics, theonly change that could be expressed in precise mathematical terms wasacceleration, the variation in the state of motion. This led finally to the


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fundamental equation of classical mechanics, which relates mass m andacceleration a to force F:

m . a = m . d²r/ dt² = F (1)

Henceforth physical time was identified with the time t, which appears in theclassical equation of motion. We could view the physical world as a collectionof trajectories, such as the figure below. shows a “one-dimensional” universe.

A trajectory represents the position X(t) of a test particle as a function of time.The important feature is that dynamics make no distinction between the futureand the past. Equation (1) is invariant with respect to the time inversion t -t:both motions A, “forward” in time, and B, “backward” in time are possible.However, unless the direction of time is introduced, evolutionary processescannot be described in any nontrivial way.

Ilya Prigogine, From Being to Becoming, p. 2.

X(t)

t

B

X(t)

t

A

World lines indicating the time evolution of the coordinate X(t)corresponding to different initial conditions:(A) forward in time; (B) backward in time.

So classical physics described an “invariable” world, a world without qualitative evolution,where time is just a mathematical variable: the physics of being, as Prigogine has labeled it.This is manifested in the law of conservation of energy, which states that the total quantity ofenergy in the universe cannot change: energy can change from one form to another – e.g.kinetic energy can change into potential or electrical energy and vice versa – but the sum ofall forms of energy remains the same.

Since the end of the 18th century, one has started to make distinction between useful and not-useful energy, as not all transformations of energy are possible. In this respect we can say that


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the transformation of kinetic energy into potential energy and vice versa cannot go on forever,as some of the kinetic energy is lost as heat or thermal energy due to friction, and this heatcannot again be transformed to potential energy. So in the course of time the amount ofpotential and kinetic energy will decrease while the amount of useless thermal energy willincrease. To describe this irreversibility, one has introduced the concept of entropy next tothat of energy.

As already mentioned, dynamics describe processes in which the direction oftime does not matter. Clearly, there are other situations in which this directiondoes indeed play an essential role. If we heat part of a macroscopic body andthen isolate this body thermally, we observe that the temperature graduallybecomes uniform. In such processes, then, time displays an obvious “one-sidedness”...

The second law of thermodynamics as formulated by Rudolf Clausiusstrikingly summarizes their characteristic features. Clausius consideredisolated systems, which exchange neither energy nor matter with the outsideworld. The second law then implies the existence of a function S, the entropy,which increases monotonically until it reaches its maximum value at the stateof thermodynamic equilibrium:

dS/dt ≥ 0

The second law of thermodynamics, then states that irreversible processes leadto a kind of one-sidedness of time. The positive time direction is associatedwith the increase in entropy.

Ilya Prigogine, From Being to Becoming, pp. 5, 6.

Entropy can be considered as a measure for disorder: in an isolated system, that has nointeraction with other systems, the disorder will increase in the course of time, structures aredegraded. In such an isolated system there will never again arise ordered structures just bythemselves. If, for example, hot water and ice are put together in a thermally sealed container,then after some time one will have lukewarm water. And never again will one find ice and hotwater together in that same container if it is left by itself.

A clockwork, for example, is a relatively isolated system that needs energy torun but does not necessarily need to interact with its environment to keepfunctioning. Like all isolated systems it will proceed according to the secondlaw of thermodynamics, from order to disorder, until it has reached a state ofequilibrium in which all processes – motion, heat exchange, and so on – havecome to a standstill.

F. Capra, The Turning Point, p. 291.

In nature, however, one does not only see this evolution from order to disorder or chaos.Certain systems and organisms show strong tendencies towards more order. Sometimes verycomplex structures and forms of organization become manifest. As an example we can thinkof the evolution of an impregnated ovum towards a human being with its complex system of


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tissues and organs. These evolutions, which in a way are also irreversible, seem to be incontradiction with the entropy-law.

But we must stress the fact that the law of entropy is only valid in isolated systems, whichhave no exchange of matter or energy with their surrounding world. As a matter of fact, suchsystems are rather unusual and very often of a technical origin, created by man. In nature wewill rather find closed and open systems.

• Closed systems exchange only energy with their surroundings, and no matter.

• Open systems can exchange both energy and matter with other systems.

Open and closed systems have the possibility of continuously importing free energy from theenvironment and to export entropy. This means that increasing entropy, in contrast to isolatedsystems, does not have to accumulate in the systems and increase there. Entropy can alsoremain at the same level or even decrease in the system (see figure below).

deS

diS>0

An open system in which diS represents entropy productionand deS represents entropy exchange between system andenvironment.

So the evolution towards more order in an open or closed system is not in contradiction withthe second law of thermodynamics. An open or closed system interacts with its surroundingsystems and thus can be considered as an integral part of a larger system. According to thesecond law of thermodynamics, entropy or disorder can continually increase in the largersystem if this is an isolated system, while order can increase in one or more of its subsystems.


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And when the overall system – like the Earth – is not isolated, but open or even closed,order can increase in all of its subsystems!

The book Entropy, A New Worldview of Jeremy Rifkin is in this respect wrong, as Mr. Rifkinfails to recognize that the entropy law is only valid in isolated systems, and the Earth is aquasi closed system: there is energy exchange with the rest of the Universe, as radiation of theSun is absorbed, used in all kind of physical, meteorological and biological processes, andlow valued thermal infrared radiation is expelled back to the Universe as heat. And there iseven a small amount of matter that is exchanged: meteorites enter the atmosphere andsatellites and other space craft are sent into orbit or even to other planets. But this exchange ofmatter is so small that it can be neglected. The Earth can be considered as a closed system,with the Sun as its main energy source.

But how does this happen that in not-isolated systems the internal order can increase? Is therean underlying mechanism that governs this evolution? This question has fascinatedgenerations of scientists, as it is related to the question on the origin of the world and theorigin of life. According to the reductionistic approach in science, based on classical physics,the origin of life is a result of sheer luck, and living organisms should be considered as “anaccident”, a pathological phenomenon in a pure materialistic dead world. By accepting purecoincidence or sheer luck as the initial cause of life, every further questioning on the meaningof life becomes irrelevant.

Classical thermodynamics was focused primarily on isolated systems in their state ofequilibrium – where entropy has reached a maximum and increase of entropy has stopped –and on systems which are very near to this state of equilibrium – in which a deviation fromthis equilibrium was considered as a temporal disturbance and in which evolution could onlylead towards the equilibrium state itself. During this evolution, the increase in entropy is verysmall, the deviations from the equilibrium are small, so one can assume linear relationsbetween the increase of entropy and the different variables of the system. As a result of theselinearities, the mathematics to describe these systems are rather easy and well understood.This explains why scientists have confined themselves for so long to the study andexploration of this part of thermodynamics: they had found themselves a hole and they hadthe tools to dig it deeper. We just mention two results that came out of this digging process,and which will proof to be very important in the course of this discussion.

In 1931, Lars Onsager discovered the first general relations in non-equilibriumthermodynamics for the linear, near-to-equilibrium region. These are thefamous reciprocity relations. In qualitative terms, they state that if a force –say “one” (corresponding, for example, to a temperature gradient) – mayinfluence a flux “two” (for example, a diffusion process), then force “two” (aconcentration gradient) will also influence the flux “one” (the heat flow)...

The general nature of Onsager’s relations has to be emphasized. It isimmaterial, for instance, whether the irreversible processes take place in agaseous, liquid, or solid medium...

A second general result in this field of linear non-equilibrium thermodynamicsbears mention here. We have already spoken of thermodynamic potentialswhose extrema correspond to the states of equilibrium toward whichthermodynamic evolution tends irreversibly. Such are the entropy S for


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isolated systems, and the free energy F for closed systems at a giventemperature. The thermodynamics of close-to-equilibrium systems alsointroduces such a potential function. It is quite remarkable that this potential isthe entropy-production P itself. The theorem of minimum entropy productiondoes, in fact, show that in the range of validity of Onsager’s relations – that is,the linear region – a system evolves towards a stationary state characterized bythe minimum entropy production compatible with the constraints imposed uponthe system....

The stationary state toward which the system evolves is then necessarily a non-equilibrium state at which dissipative processes with non-vanishing ratesoccur. But since it is a stationary state, all the quantities that describe thesystem, such as temperature concentrations, become time-independent.Similarly, the entropy of the system now becomes independent of time.Therefore its time variation dS = 0 vanishes. But we have seen that the timevariation of entropy is made up of two terms – the entropy flow deS and the

positive entropy production diS. Therefore dS = 0 implies that deS = - diS < 0

(so it is negative). The heat or matter flux coming from the environmentdetermines a negative flow of entropy deS, which is, however, matched by the

entropy production diS due to irreversible processes inside the system. A

negative flux means that the system transfers entropy to the outside world.

Therefore at the stationary state, the system’s activity continuously increasesthe entropy of its environment. This is true for all stationary states. But thetheorem of minimum entropy production says more. The particular stationarystate toward which the system tends is the one in which this transfer of entropyto the environment is as small as is compatible with the imposed boundaryconditions...

Linear thermodynamics thus describe the stable, predictable behavior ofsystems tending toward the minimum level of activity compatible with thefluxes that feed them.

Prigogine, Stengers, Order out of Chaos, pp. 137-139.

For non-scientists this may all seem rather esoteric. But in the third section of this appendixthings will become clear when we will stress the importance of these conclusions in relationwith the evolution of socioeconomic systems.

Since the 1970s studies in thermodynamics have crossed the border of systems near toequilibrium. In systems that are in a state far from equilibrium, the relations between thedifferent variables of the system are rather non-linear and one is confronted with phenomenaof a totally different nature. In linear systems, in a state near to equilibrium, the irreversibleprocess of increase of entropy can only lead towards the equilibrium. Remember thataccording to the concept of “evenly rotating economy” formulated by the economist MurrayRothbard, when everything is perfectly known by everybody, technology is stabilized, andmanagement is perfect, then the economy evolves to a stationary state and profit tends todecline to zero. But in non-linear systems, in a state far from the equilibrium, this is not thecase!


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According to the second law of thermodynamics, isolated systems evolve toward the state ofthermodynamic equilibrium, regardless their initial state. Due to the supply of energy andmatter from the surrounding systems, open and closed systems can evolve towards a statewhich is not the thermodynamic equilibrium, but which is notwithstanding stable: anequilibrium of a higher order. This principle has been studied in great detail by Professor IlyaPrigogine of the University of Brussels, who was granted the Nobel Prize chemistry in 1977for his pioneering research and the elaboration of the theory of “dissipative structures” andself-organizing systems”.

I would like to stress the fact that Prigogine’s findings do not only apply to pure chemicalsystems, but rather to all kind of systems, whether they are natural or socioeconomic: it haseverything to do with the mathematics of linear and non-linear systems.

13.2 Dissipative structures

The study of the behavior of open and closed systems in states far from the thermodynamicequilibrium has resulted in a new branch in thermodynamics, which transcends classicalthermodynamics and where non-classical concepts are used such as history of a system, orderand stability as a result of fluctuation, consecutive instabilities and catastrophes in systems,and coherence of a system as a whole.

13.2.1 The origination of dissipative structures

Open and closed systems interact with their surrounding world: they both exchange energywith other systems, open systems also exchange matter. In irreversible processes in isolatedsystems near the state of equilibrium, entropy increases while ordered structures aredestroyed. In open and closed systems, on the contrary, which are in a state far fromthermodynamic equilibrium, ordered structures can evolve spontaneously – this mechanismwill be explained later in this section. These ordered structures are called “dissipativestructures”. These are structures which themselves maintain energy and matter penetration byway of exchange with the environment and which give rise to the self-organization of globallystable structures over extended periods of time188.

By extracting energy and matter – i.e. ordered structures – from their surrounding world andby degrading these, using their components as input in their internal process of self-renewal,these systems are able to maintain their state far from the thermodynamic equilibrium, so thata stable structure originates. During this process entropy (disorder) is produced, which is then“dissipated” towards the surrounding systems in the form of degenerated matter (waste) anddegenerated energy (heat). Think of your own body as a dissipative structure: you eatdelicious food, which smells good and tastes good and looks good, which is digested in yourbody, used as energy source and material for growth and cell renewal ... and which is then“dissipated” as something that is lukewarm and stinks. But this material, in turn, can form theinput for other living organisms: plants, which feed animals, etc., which in turn end their lifeon your table!

The construction and maintenance of such an internal organization and order is done at theexpense of the surrounding systems: there is a permanent interaction with the outside world

188 E. Jantsch, The Self-Organizing Universe, p. 29.


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needed in order to extract highly ordered energy and matter from them and to expel lowvalued waste and thermal energy towards those same surrounding systems. However, theconstruction of such an internal order is, within certain boundaries, independent from thesurrounding systems: the system itself has a certain autonomy with respect to the outsideworld in the way it organizes its internal structure. So the dissipative structures are also called“self-organizing systems”. In this sense, the constitution of your body is irrelevant to the exactcomposition of your food, although it may influence your body mass index and health if somekind of food in your diet are lacking or are too abundant.

Besides this duality of autonomy from the outside world for the organization of its internalorder on the one side, and permanent interaction and exchange of energy and matter in orderto feed the construction and maintenance of that structure on the other side, dissipativestructures are subject to still another – at first sight – paradox: their stability in a state far fromthe thermodynamic equilibrium. Dissipative structures continuously extract ordered structuresand energy from their surrounding world in order to organize and maintain their internalstructure. This policy prevents them from slipping down towards the static equilibrium statewhere entropy (disorder) is at its peak, where the increase of entropy has stopped, where timeand evolution have stopped and where the system is dead so to speak. On the contrary, thesystem keeps on functioning in a state far from equilibrium. At the same time self-organizingsystems tend to have a high degree of stability, but this is not a static stability as with thethermodynamic equilibrium, characterized by invariableness and stiffness, but rather adynamic stability, in which the overall structure of the system remains the same while there ispermanent change in its components. This process of permanent changes occurs according torhythmic oscillations: organized dynamic structures are a result of rhythmic patterns.

The dynamic stability of a self-organizing system on the macro-level is based on permanentoscillations on the micro-level. These oscillations on the micro-level play also a basic role inthe origination itself and the evolution of dissipative structures. When the deviations from theequilibrium state reach a certain level, for example due to positive feedback, this can result ina qualitative change in the nature of the system itself.

The system stabilizes in a new organization structure quite different from its near-equilibriumstate and characterized by higher energy extraction from its surrounding world than in theformer equilibrium. The new order that has originated in this way can be of a temporal or aspatial nature. In temporal dissipative structures, the passing of the threshold triggers thesystem to leave the equilibrium state so it comes in a “loop”: the system keeps on goingthrough the same cycle according to a fixed pattern and in a fixed amount of time, bothspecific for the origination structure the system has reached.


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The figure above shows the limit cycle behavior of the Brusselator. The same periodictrajectory is obtained for different initial conditions (the initial conditions 1, 2 and 3 all lead tothe same periodic cycle). The letter S represents the unstable steady state: this means that ifthe system is in state S, even the smallest disturbance is enough in order to force the system toleave that state (via 4 to the same periodic cycle)!

13.2.2 The evolution of dissipative structures

The fluctuations that caused the origination of a dissipative structure out of a region near theequilibrium state do not cease to exist, but, on the contrary, constitute the basis for furtherevolution of the system from one stable organization structure towards another. In a way, adissipative structure is stable within certain boundaries of these fluctuations. If they becometoo large, then the system can become unstable and this might result in a completereorganization of the system.

When the system is disturbed, it has the tendency to maintain its stability bymeans of negative feedback mechanisms, which tend to reduce the deviationfrom the balanced state. However, this is not the only possibility. Deviationsmay also be reinforced internally through positive feedback, either in responseto environmental changes, or spontaneously without any external influence.The stability of a living system is continually tested by its fluctuations, and atcertain moments one or several of them may become so strong that they drivethe system over an instability into an entire new structure, which will again befluctuating and relatively stable. The stability of living systems is never


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absolute. It will persist as long as the fluctuations remain below a critical size,but any system is always ready to evolve.


The study of the stability of a certain system is not an easy task, especially when unknown orunpredictable corruptive phenomena are in the play. But still we can formulate a veryinteresting rule on this subject.

Nevertheless, one general result has been obtained, namely a necessarycondition for chemical instability: in a chain of chemical reactions occurring inthe system, the only reaction stages that, under certain conditions andcircumstances, may jeopardize the stability of the stationary state are preciselythe “catalytic loops” – stages in which the product of a chemical reaction isinvolved in its own synthesis.

Prigogine, Stengers, Order out of Chaos, p. 145.

This general conclusion will proof to be of great value when we discuss the evolution ofsocioeconomic systems later on in this appendix.

In a region of stability, the behavior of the system is determined by a certain syntax, and is, toa certain degree, predictable. When the system migrates from one stable organizationstructure (region of stability) towards another, it remains in a transit zone for a short period oftime. And it is typical in such a transit zone that the system has the choice among at least twodifferent organization structures it can evolve to. Therefore this transit zone is also called abifurcation zone. This choice for the system introduces chance into the picture: it is notalways predictable which one of the several possible options the system will choose in such abifurcation point, so one cannot predict the precise evolution of the system in this region ofinstability. Remark the contrast with the predictability in the region of stability!

In this respect we can say that a certain dissipative structure is just one phase in the evolutionof a dynamic system, in which longer “deterministic” stability zones alternate with shorter“probabilistic” bifurcation zones. In these bifurcation zones the system has the freedom ofchoice for its further evolution, and the further it has evolved from the equilibrium state, themore options it can or has to choose from.

A second property of a system in a transit zone, next to the freedom of choice among at leasttwo options, is the principle of maximum entropy production. A particular aspect of this self-determination is the principle of maximum entropy production which holds near the unstablephases, in which a new structure forms. During the transition, entropy production increasessignificantly, whereas close to an “autopoietic” stable state it tends towards a minimum. Inother words, the system does not spare any expense for the creative build-up of a newstructure – and justifiably so as long as an inexhaustible reservoir of free energy is availablein the environment. At first, high energy penetration and maximum entropy production act asforce for change, whereas after the establishment of a new basic structure there is a gradualshift toward a criterion of minimum entropy production per unit of mass189.

A system can evolve through several organization structures, which become more and morecomplex. The structures further away from the “dead” equilibrium state are characterized by a

189 E. Jantsch, The Self-Organizing Universe, pp. 50, 141.


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greater extraction of energy and matter from the surrounding world and an increasingproduction of entropy, which is dissipated towards that same surrounding world. Due to theincreased complexity of the organization, a greater flow of information is needed in order toassure the coordination of the several components and subsystems. And this increasedinformation flow, by itself a result of the increased complexity, can also stimulate evolution:complex structures evolve quicker than simple ones. And due to the increasing number ofoptions in the bifurcation points, ever more organizational structures can arise: there is anevolution from simplicity and unity towards complexity and diversity at an ever-increasingspeed190.

13.2.3 The relation between the micro and the macro level

Dissipative structures cannot exist on their own: they need their environment from where theycan extract energy and matter in order to feed their internal processes and to where they canexpel degenerated products (waste and heat). So one has to consider these systems as a part ofa larger encompassing macro system.

On the other hand, a dissipative structure itself can be composed of several subsystems, whichby themselves are also dissipative structures and which feed their internal processes bysharing the amount of energy and matter that the overall system has extracted from itsenvironment... or by extracting the necessary resources from other structures within thatoverall structure.

This leads us to the notion of a leveled structure, in which each unit on a certain level is at thesame time part of a structure of a higher level and by itself composed of several structures of alower level. In this leveled structure there is interaction and interdependence amongcomponents on the same level and across levels.

Many aspects of the relationships between organisms and their environmentcan be described very coherently with the help of the concept a stratifiedorder, which has been touched up earlier. The tendency of the living systemsto form multi-leveled structures whose level differ in their complexity is all-pervasive throughout nature and has to be seen as a basic principle of self-organization. At each level of complexity we encounter systems that areintegrated, self-organizing wholes consisting of smaller parts, and, at the sametime, acting as parts of larger wholes. For example, the human organismcontains organ systems composed of several organs, each organ being made upof tissues and each tissue made up of cells. The relationship between thesesystem levels can be represented by a “system tree”.


In this leveled order of dissipative structures each system is linked with its environment by theexchange of energy and matter and by feedback-loops, both stabilizing and destabilizing. Thisallows for a very complex evolution. The circumstances in which the system of a micro levelevolves are determined by the macro level. But the evolution of the macro level itself is the

190 Cfr. the principle of ephemeralization formulated by B. Fuller in his book Critical Path.


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resultant of the evolution of the underlying micro level. So both levels influence each other’sevolution. This is called co-evolution.

In such a stratified order, certain rules that are valid on one level can be overthrown onanother level. So it is very well possible that the same action yields opposing results on twodifferent levels: an action, which is good on one level, can be bad on another level. Theseconsiderations may seem rather strange for the minds of the people in the west. On the otherhand, they are very characteristic for several eastern philosophies.

In order to contract a thing, one should surely expand it first.In order to weaken, one will surely strengthen first.In order to overthrow, one will surely exalt first.In order to receive, one will surely give first.This is called subtle wisdom.

Lao Tzu

13.2.4 Symbiosis

A dissipative structure extracts the energy and matter, needed for its existence and evolution,from its environment. This environment can be the surrounding world of the encompassingsystem, or it can be another subsystem within the overall system.

In the latter case we could think of the situation as if the one system is parasitizing on theother. If, however, the one system is extracting too much energy and matter from the otherone – if it exploits the other to the limit – then this system destroys its own source of vitalresources, and thus endangers its own existence and evolution.

In a balanced ecosystem animals and plants live together in a combination ofcompetition and mutual dependency. Every species has the potential ofundergoing an exponential population growth but these tendencies are kept incheck by various controls and interactions. When the system is disturbed,exponential “runaways” will start to appear. Some plants will turn into“weeds”, and some animals into “pests”, and other species will beexterminated. The balance, or health, of the whole system will be threatened...

Detailed study of ecosystems over the past decades has shown quite clearlythat most relationships between living organisms are essentially cooperativeones, characterized by coexistence and interdependence, and symbiotic invarious degrees. Although there is competition, it usually takes place within awider context of cooperation, so that the larger system is kept in balance. Evenpredator-prey relationships that are destructive for the immediate prey aregenerally beneficent for both species. This insight is in sharp contrast to theviews of the Social Darwinists, who saw life exclusively in terms ofcompetition, struggle, and destruction. Their view of nature has helped create aphilosophy that legitimates exploitation and the disastrous impact of ourtechnology on the natural environment. But such a view has no scientificjustification, because it fails to perceive the integrative and cooperativeprinciples that are essential aspects of the ways in which living systemsorganize themselves at all levels.



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As it is very well possible that opposing rules may be valid on the micro level and the macrolevel, we should not be surprised if individual greed and self-interest lead towards the creationof “pests” and the destruction of the overall system, while on the other side cooperation andaltruism of individuals and groups can have a positive influence of the system as a whole,ergo also on those who take advantage of it. When two subsystems are competing for theavailable energy and matter necessary for their survival and evolution, this might result intoconflict and struggle. But this could also lead towards a forced evolution. From time to timeduring its evolution, every organism is forced to create a new environment for itself, becausethe old one is occupied by another one. These circumstances could be one of the reasons whyspecies evolve to a higher level191. The system is forced to be creative in order to secure itsown survival. In doing so, it can evolve towards a situation which, as a matter of fact, mightbe better than the previous one. As an introduction to the next section, we will apply this ideaon a socioeconomic system.

England is supposed to be the country where the Industrial Revolution started.Very often historical studies mention only the positive aspects of thisevolution. But essential to the start of the Industrial Revolution was theimpotence of England at the end of the 18th century to compete with itsneighboring countries. Compared to Flanders, England was no longer ofeconomic importance. It was standing at a crossroad: or it had to give up itseconomic, political and military supremacy to other countries, or it had tochange its economy very drastically by the introduction of technologicalinnovations. There was no other way to compete with countries with a lowlevel of labor-cost. The introduction of the spinning-machine, the shuttle andthe steam engine in industry induced a radical change in the life of laborers andin the economy as a whole. The resulting substantial increase of productivitywas a new agent in the economic process, so competition was no longer only amatter of the level of labor-cost.

C. Vandenbroeke, Purchasing Power in Flanders, pp. 56-57.

13.3 Socioeconomic systems

A lot of the ideas and concepts on dissipative structures, discussed in the previous sections,have been implicitly used in this book when we discussed economy. We have no intention torepeat all of this. We will confine ourselves to the most striking similarities betweendissipative structures and socioeconomic systems. We think that these could form the basisfor a further detailed study, which is beyond the scope of this book.

On several occasions in previous chapters we have looked upon enterprises, social groups andcountries as if they were systems constructing and preserving their internal order. In order todo this, energy and matter are extracted from the surrounding world and used to feed theinternal processes while degraded energy and matter are dissipated towards the environment(thermal and other kinds of pollution). Perhaps we could consider the striving for profit as therealization of more internal order – and dissipating more entropy towards the environment –while making a loss is the equivalent of increased internal chaos or entropy. In this respect thequestion we have formulated in the section on economic misconceptions – whether profit ispossible and whether one system makes profit at the expense of loss for another system –

191 K. Lorenz, Our Last Chance, p. 48.


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could be compared to the question how it is possible that some systems succeed in increasingtheir internal order at the expense of other systems.

In an isolated economy (autarky) with zero-growth, there can indeed be no profit. Butcountries are open systems: they exchange matter and energy with their surrounding world: anindividual country can increase its internal order; it can make a profit for society. And whenwe consider the earth as a whole, then we can speak of a closed system: only exchange ofenergy is possible with the “outer world”, but still it can increase its internal order, it ispossible to make a profit for all of humanity!

And if the overall system is not isolated, but open or even closed like Spaceship Earth, profitcan increase for all of its subsystems! It does not has to be “us or them”!



In this respect we can also understand the evolution of the profit-ratio as described in thesection on the evolution of the profit-ratio. In times of war, which surely are bifurcationzones, the profit-ratio increases suddenly, just as there is maximum entropy production nearunstable phases in the evolution of dissipative structures. The profit-ratio shows the tendencyto decrease in between wars, just as the entropy production tends to a minimum in the stableregion of a dissipative structure.

We have also stated that a socioeconomic entity has no raison d’être on itself, but should beconsidered as a subsystem that has a certain role to play inside a system of a higher level andin interaction with other entities within that system. The notion of co-evolution between themicro-level and the macro-level has been introduced in the basic assumption of our economicmodel that profit (micro-level) is a consequence of growth (macro-level), and that the wayhow profit is divided among socioeconomic subsystems on the micro-level determines futuregrowth on the macro-level.

The way socioeconomic subsystems evolve is conditioned by the evolution of the overallsystem, but at the same time we can say that the overall system is the resultant of theunderlying subsystems. From this co-evolution follows the idea that seemingly conflictinginterests – higher wages for employees versus higher profits for employers – can form a unityif we consider them from the level of the overall system. Rules which are valid on the micro-level can yield the opposite result if applied to the macro-level.

From the interplay of opposites follows the periodical behavior of economic entities. Withincertain boundaries of the fluctuations, the economic system evolves according to a stable,well-defined and even predictable pattern: it has a strong dynamic stability. So one canunderstand the periodicity and the recurrence of most economic entities as shown in the


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chapter 2: the system keeps on going through the same cycle according to a fixed pattern andin a fixed amount of time: about sixty years, two generations. In the US economy there hasbeen at least one recession every decade, and a great depression every third or sixth decade inthe sense that if the third decade managed to avoid a depression, then the sixth decadeexperienced a cumulative effect – an all-out disaster192.

Disturbances and fluctuations can be neutralized by applying negative feedback mechanisms.If we consider the economy of a country in its initial stage, when the elementary needs are notyet fulfilled, as after a war, then we can see reciprocity relations. The principle of the rubbercylinder described by Buckminster Fuller in the section The Social Purpose of Profit is, as amatter of fact, nothing else than the principle of reciprocity introduced in the theory ofthermodynamic systems by Onsager: in a young economy the pursuit of profit and thesatisfaction of needs have a mutual influence on each other. By trying to increase his turnoverand his profit, a businessman hires employees. So these employees are now in a condition thatthey can satisfy their needs. And by increasing the wages of the employees, so theirpurchasing power increases, the companies can make a greater turnover and more profit. Thefeedback mechanism has a stabilizing influence and is used to “fine-tune” the economy(Keynes). One thinks in terms of equilibrium and continual growth and progress, equilibriumof supply and demand, complete employment

But, alas, the necessary condition for the system to become unstable – the catalytic loopmentioned in the previous section – is also fulfilled. One of the state-variables of the systemplays a role it its own synthesis: profit is at the same time a result of economic growth, whilethe distribution of profit determines future growth and thus future profit. So, when thefluctuations of certain variables become too large, due to the positive feedback-loops – therich becoming richer and the poor becoming poorer – then the whole socioeconomic systembecomes unstable, the oscillations grow193 to such an amplitude that certain variables go intosaturation, non-linearities occur so that the system’s internal dynamics change drastically. Abifurcation zone is reached. The former model of the economic process is no longer adaptedto the economic reality, as a new socioeconomic system has evolved.

Under the watchful eyes of the Keynesian policy-makers, capitalism seemed tobe operating smoothly for a full quarter of a century following the SecondWorld War. There were mild collapses occasionally, but no duplication of the1929 tragedy194. But just when the war against economic crises seemed to havebeen won, another intractable problem, potentially more dangerous than largescale unemployment, cropped up and has persisted since 1969 – namely thecoexistence of inflation with a high level of unemployment. This problemeluded Keynes, for there is supposed to be a trade-off between unemploymentand inflation in the Keynesian system: both cannot rise or decline at the sametime. As yet there is no consensus among economists – there hardly ever is –as to how the new challenge should be met. The problem admits of no simpleand politically feasible solution195.

R. Batra, The Great Depression of 1990, p. 72.

192 Ravi Batra, The Great Depression of 1990, p 118.193 See the charts in the section the evolution of money-growth and inflation from The Great Depression

of 1990 written by Ravi Batra.194 But October 2008 surely was a new bifurcation point!


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In this respect we can understand why there have been so many different “economic schools”in the course of history: the economy changes in the course of time, so there can be noeconomic theory that is valid in all circumstances and for all times. One should rather think ofit as a temporal stage in the evolution of a dynamic system.

Economists tend to freeze the economy arbitrarily in its current institutional structure insteadof seeing it as an evolving system that generates continually changing patterns. To grasp thisdynamic evolution of the economy is extremely important, because it shows that strategieswhich are acceptable at one stage may become totally inappropriate at another196.

As discussed in the previous section, we can propose a stratified order to describe thesocioeconomic systems:

• Spaceship Earth.

• Political and economic power-blocks.

• Countries.

• Socioeconomic groups (branches of industry, unions,...).

• Socioeconomic entities (families, companies,...).

• Individuals.

Most of these systems are open: they exchange matter and energy with their surroundings.Only the system of the highest level is closed, as the Earth exchanges mainly energy with theUniverse (useful solar energy is taken in while low-valued thermal energy is dissipatedoutwardly) and no or very little matter is exchanged. In this stratified order, each subsystemtries to construct its own internal order by extracting useful energy and matter from its outsideworld and by expelling entropy and disorder to its outside world. This outside world can bethe system of a higher level, a lower level or the same level.

In the latter case we can say that one subsystem is parasitizing on another one. As theexploited system is obstructed in its striving for more internal order, or even worse, as itsinternal order is destroyed by the extraction of energy and matter and by the entropydissipated by the other system197, we can say that this surely will not happen by free will: therewill be oppression of one system by the other, oppression that might even be imbedded in thelegal system198. This parasitism, based on oppression, cannot go on forever. Tensions arisebetween the exploited and the exploiting socioeconomic subsystems, and these tensionsincrease as the internal order of the exploited system is more and more hampered, so its verysurvival is at stake.

When these tensions exceed a certain level, a zone of instability and turmoil is reached, abifurcation point characterized by the fact that the systems have the choice – in a way to speak– from at least two options. One option could lead to the integration of the two subsystemsinto a new system, which then extracts the matter and energy needed for its evolution from athird system. The situation of parasitism, exploitation and oppression continues: “internalparasitism” is then replaced by “external parasitism”. Lower classes in the two merged

195 Eight days a week?196 F. Capra, The Turning Point, p. 236.197 Shell in Nigeria, see the film The Age of Stupid.198 See Buckminster Fuller, Critical Path, chapter Legally Piggily.


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systems are granted more rights and material wellbeing as a reward for their support duringthe turmoil, while exploitation becomes an “export product”. But after a period of stableevolution, problems will rise once more due to the depletion of matter and energy in the thirdsystem or the increasing tensions between the third system and the other two. Againintegration of the third system can occur, etc.

In this respect we can understand the evolution towards socioeconomic power-blocks of everincreasing magnitude, parallel with the arising of democracy in the western world. Nowadayswe can recognize as major socioeconomic power-blocks the capitalistic western world, theformer communistic countries, the Asian emerging economies, and the poor southernhemisphere, that functions as source of cheap labor, raw materials and energy, without beingable to increase its own economic internal order. Now, at the beginning of the 21st century,humankind has reached the physical borders of its ecosystem. This holds the danger that thewestern world could fall back from a system of external parasitism to a system of internalparasitism: as matter and energy can no longer be extracted from other subsystems, thedifferent subsystems within a power block might try to increase their order at the expense ofother subsystems: power-blocks could then disintegrate199 instead of integrate to a system of ahigher level, social evolution is then reversed in time. The society falls back to a lower levelof evolution, with less democratic rights and less material wellbeing for all the social classes,except, of course, those in command, the military and the intellectual priesthood.

But if a certain group of subsystems feed their internal processes by importing energy andmatter from their outside world, then there is no need for internal exploitation, oppression andparasitism within the system. If we apply this on the highest level of our stratified order,Spaceship Earth, then we can see that a world society with social justice and withoutparasitism and oppression of one subsystem over the others is only possible if the subsystemsimport all or most of the energy they need from outside the Earth. The establishment of solarenergy and renewable energy from wind and tidal waves, geothermal energy andhydroelectricity as the basic energy source for our social and economic system is not only anecological must, but also a necessary – although not sufficient – condition in order to evolveto a society with social justice, where all socioeconomic entities can live with each otherwithout mutual aggression, parasitism or oppression. Ecology, development of the ThirdWorld countries and the cry for peace (make love, not war), which have been supported on anintuitive basis by generations of young people since the Summer of Love of 1967 and theanti-war movement, are inseparably linked to each other. And now they seem to bescientifically supported by the “systems view of life”, which has originated out of the theoryof dissipative structures and self-organizing systems.

The systems view of life is an appropriate basis not only for the behavior andthe life sciences, but also for the social sciences, and especially for economics.The application of systems concepts to describe economic processes andactivities is particularly urgent because virtually all our current economicproblems are systemic problems that can no longer be understood via Cartesianscience.

Conventional economists, whether neoclassical, Marxist, Keynesian, or post-Keynesian, generally lack an ecological perspective. Economists tend todissociate the economy from the ecological fabric in which it is embedded, and

199 Is this respect we can understand the fall of the Roman Empire, as it failed to install a new internal

socioeconomic order once it had reached the borders of its physical world, borders which were imposed by thelevel of communication and transport technology at that time.


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to describe it in terms of simplistic and highly unrealistic theoretic models.Most of their basic concepts, narrowly defined and used without the pertinentecological context, are no longer appropriate for mapping economic activitiesin a fundamentally interdependent world.


In order to elaborate this new vision in science, economy and society, it is of paramountimportance that a joint effort is made out of different academic disciplines, ignoring thetraditional and institutionalized boundaries. A bird’s eye view over the field of holes inneeded. Today, we urgently have to extract out of the synthesis of every scientific disciplinethe key elements, and incorporate them in a harmonic and cosmic overall picture... Toaccomplish this endeavor demands for a cyclopean mind, as it transcends the capabilities of asingle human being. This intellectual and cultural effort can only be tackled with a reasonablechance for success by a group of scientists and researchers200.

On the other hand, we must not ignore the importance of individual efforts as sources ofrenewal within rigid and outdated structures.

We believe that models inspired by the concept of “order through fluctuation”will help us with these questions and even permit us in some circumstances togive a more precise formulation to the complex interplay between individualand collective aspects of behavior. From the physicist’s point of view, thisinvolves a distinction between states of the system in which all individualinitiative is doomed to insignificance on the one hand, an on the other,bifurcation regions in which an individual, an idea201, or a new behavior canupset the global state…

Be it biological, ecological, or social evolution, we cannot take as given eithera definite set of interacting units, or a definite set of transformations of theseunits. The definition of the system is thus liable to be modified by itsevolution. The simplest example of this kind of evolution is associated with theconcept of structural stability. It concerns the reaction of a given system to theintroduction of new units able to multiply by taking part in the system’sprocesses.

The problem of the stability of a system vis-à-vis this kind of change may beformulated as follows: the new constituents, introduced in small quantities,lead to a new set of reactions among the system’s components. This new set ofreactions then enters into competition with the system’s previous mode offunctioning. If the system is “structurally stable” as far as this intrusion isconcerned, the new mode of functioning will be unable to establish itself andthe “innovators” will not survive. If, however202, the structural fluctuationsuccessfully imposes itself – if, for example the kinetics whereby the“innovators” multiply is fast enough for the latter to invade the system insteadof being destroyed – the whole system will adopt a new mode of functioning,its activity will be governed by a new “syntax”.

200 J.B. Quintyn, A Cultural Journey Through Biology, Mathematics, Cosmology, Theory of Relativity,

Cosmogony, p. 191.201 Eight days a week?202 ... the system is “structural unstable” (it is!) and ...


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Prigogine, Stengers, Order out of Chaos, p. 206, pp. 189-190.

It is up to us, “the people”, to do something “for the people” about what is described in thisstudy. But you and I cannot do this alone. It has to be done “by the people”. The first step is toreach out and touch somebody’s mind, pushing barriers and planting seeds fast enough, toinform other people, your family, friends, colleagues… who might be interested in this matter.They can then inform other people, and so one. Maybe then world affairs can be changed.

Consider the following table, and you will be surprised how easily and fast you can reach outto the whole world after some “iterations”: you share this study with 2 persons, they share iteach with two other persons, and so on. After 10 “iterations”, 210 = 1,024 persons have beenreached. But you could also inform 3 persons, or 4… The result is really spectacular.

2 to the power 10 is 1,024 Your street

3 … 59,049 Your community

4 … 1,048,576 Your town

5 … 9,765,625 Your state

6 … 60,466,176 Some other states

7 … 282,475,249 Your country

8 … 1,073.741,824 Some other countries

9 … 3,486,784,401 Half of the world population

Beyond that, we have to go extraterrestrial.

13.4 Dissipative structures, communication and creativity

13.4.1 Extension of Shannon’s communication-model

In appendix A we have introduced some basic notions on information and communicationtheory. Our line of thoughts was based on the information theory elaborated by Shannon andothers. We have explained and illustrated several topics, such as

• The information content of a message, determined by its probability of occurrence.

• The capacity to transmit information over a channel and the minimum time and/orenergy needed in order to transmit a message.

• The concept of signal-space as the abstract representation of the paradigm of aperson or a society.

But this theory has its limitations: it only deals with “stable communication structures” in thesense that, once the signal-space of sender and receiver are given, these two can onlycommunicate within the intersection of their two signal-spaces. The communication model


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evolved in appendix A is applicable on the transfer of information that fits in an a prioridefined and rigid structure. This is indeed the case for most technical communication systems.Living organisms, and man in particular, are able to handle stimuli and signals which do notfit in their initial signal-space, and they can even adopt the structure of their signal-space inorder to encompass this new information. This dynamic process of expansion of signal-spacesis not covered by the Shannon-model described in appendix A. So we were forced to illustratethis with the help of the metaphor of digging holes of Edward de Bono. We then also madeallusion of the existence of a new hole that would help us in understanding the origination of anew hole. In electronics this is called “bootstrapping”. In the textbook Integrated Electronicson page 277 we read: The term arises from the fact that, if one end of a resistor changes involtage, the other end of it moves through the same potential difference; it is as if the resistorwere “pulling itself up by its bootstraps203”.

In the classical theory, communication is mainly considered as a one-way transfer ofinformation from the source to the destination. The transmitted message falls within apredefined and rigid structure. Furthermore, this process of transfer of information leaves thesender and receiver unchanged. When for example the destination has received a messagewith a certain probability of occurrence and thus a certain information content, then thechance for another transmission of the same message remains the same: next time the samemessage is received the destination receives the same value of information.

Carl Friedrich von Weizsäcker has defined information as “that which generates newinformation”204. According to him, the purpose of communication is not only the sheertransfer of information from sender to receiver, but also to influence the receiver and toinduce a certain change in his behavior. The receiver can then react in a way which is notpredefined in his signal-space: new information-unity-vectors are created. His son, Ernst vonWeizsäcker, calls this kind of information “pragmatic information”. This pragmaticinformation is composed of two aspects: confirmation and novelty (see figure below).

203 I find this a rather amusing thought. A levitating resistor?204 E. Jantsch, The Self-Organizing Universe, p. 50-53.


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PragmaticInformation Shannon -

Weaver

NoveltyConfirmation

100%0%

0%100%

Pragmatic (effective) information is composed of the two componentsnovelty and confirmation, and reaches a maximum when bothcomponents are balanced. After E. von Weiszäcker (1974).

Confirmation is that part of the information that fits within and thus strengthens the existingknowledge of the receiver: confirmation completely falls within the existing signal-space ofthe receiver, so no new insights or ideas are transmitted. Confirmation does not induce anychanges with the receiver, so the pragmatic information content is nil.

Novelty, on the contrary, is information which lays completely outside the signal-space of thereceiver and in most cases will confuse that receiver: the stimuli and signals he is faced withare perceived as erratic and chaotic, as he cannot project them on known concepts, on alreadyestablished information-unity-vectors of his signal-space a that time, he does not know how tohandle the new information. So, complete novelty has no pragmatic information contenteither.

Confirmation and novelty are complementary aspects of pragmatic information: when one ofthe two is high, the other is low. Only a combination of confirmation and novelty results intoa reasonable pragmatic information content, and in between the two extremes lays acombination which yields a maximum of pragmatic information, i.e. can have a stronginfluence on the behavior of the receiver.

With the help of Erich Jantsch we can describe how a person’s signal space is expanded, andwe do this in terms of the theory of self-organizing systems.


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We may now easily establish the connection between this model of pragmaticinformation and the ordering principles at work in equilibrium and non-equilibrium structures (see figure below).

��

Pragmatic Information

Equilibriumstructures

NoveltyConfirmation

100%0%

0%100%

Dissipative structures transform novelty into confirmation, whereas equilibrating structures tend towards maximum confirmation. Dissipative structures may evolve through states characterized by maximum novelty (instable threshold) to new states characterized by a balance between novelty and confirmation (autopoiesis). In this transition, the entropy production reaches a maximum (area A), whereas in autopoiesis it tends toward a minimum (area B).

A B

Entropy production

Autopoiesis

Dissipative structures

Instabilitythreshold Equilibr ium

A hundred per cent confirmation corresponds to a system in thermodynamicequilibrium. That pragmatic information becomes zero at this point is thecorrelate of the impossibility of bringing about any directed effect inequilibrium. A hundred percent novelty, in contrast, may be interpreted as theinstability phase in which stochastic processes cease to confirm the oldstructure and have not yet established the new structure. Everything happeningin this phase is novel. In between, in the balance between novelty andconfirmation, we find the domain of autopoiesis.

The scheme according to figure above also allows the representation of thechange in entropy production occurring when a new dissipative structure isborn. Entropy production205, is this context, is nothing else but the productionof structure, implying at the same time more information and moreconfirmation. Immediately beyond the “chaos” of the instability thresholdmaximum entropy production is needed to attain a certain degree of

205 More entropy is less structure. I think Jantsch meant here that energy is needed in order to create

more structure. In doing so, the high valued energy is degraded to entropy, which is then dissipated. So, in thissense there is entropy production, but also consumption of energy. This remark of me is in line with the rest ofhis explanation. I have added this remark in order to counter Malthusianistic organizations which still adhere theprinciple of creative destruction, like the Halliburton Company and the Carlyle Group. You do not needdestruction in order to create new forms of organization. This can be done by mutual agreement and consent.


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confirmation. Area A in the figure above has to be “won” very quickly by hardwork206. After the formation of an autopoietic structure, however, the systemoscillates in a balance between novelty and confirmation and has to do workonly to the extent that novelty must be coped with continuously, as exemplifiedby area B in the time unit. This work, or entropy production, never becomeszero because the structure is “kept busy” by novelty entering through theexchange with the environment. In the scheme, it is pushed toward the left sothat maintaining the balance requires ever new work (movement towards theright in the scheme). In this way, novelty is continuously transformed intoconfirmation. Cognition is not a linear process, but a circular process betweenthe system and its environment.

E. Jantsch, The Self-Organizing Universe, pp. 52-53.

A lot of the considerations that we have formulated in appendix A can be understood in theseterms. There we have said that there is no transfer of information possible outside theintersection of the signal-spaces of sender and receiver. Now we can expand this view: ifthere exists already a certain intersection between the two signal-spaces, and there is theintention with both communication partners and they are willing to spend the energy and timeto transfer novelty into confirmation, then communication can result into an increase of theregion of intersection. This increase of the intersection of the signal-spaces in turn results intobetter communication opportunities and also an increase of the individual signal-spaces ofboth parties. Both their paradigms have been expanded thanks to exchange of their mutuallyexclusive information-unity-vectors. Isn’t this the proof that interdisciplinary research is amust, while specialization, in the long run, leads to pure confirmation, to mummification, tointellectual death?

Communication is possible only where the cognitive domain of autopoieticsystems overlap sufficiently. In intellectual discussions, too, a “dialogue of thedeaf” only too often results. The other system has to have the possibility, inenergetic and functional respects, of partially realizing the same dynamics.Communication is not giving, but the representation of oneself, of one's ownlife, which evokes corresponding life processes in the other. This is the way inwhich living systems communicate with each other.


So we can recognize the origination of an irreversible process: the expansion of the signal-space of all parties involved in the communication process by the continuous transformationof novelty into confirmation.

In the fourth of the books in which Carlos Castenada transmits the world viewof the shaman Don Juan of the Mexican Yaqui Indians, there is a strikingparallel and generalization of this principle. According to Don Juan, reality isdivided into two aspects, one of which (the tonal) comprises the regularities ofa world ordered by our concepts, whereas the other (the nagual) represents theunexpected. The latter aspect may be mastered by creative thought and actionand by spontaneous decisions (i.e. by free intuitive will). Thus the task of life

206 I hope one day you will join us!


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is the never ending transformation of the nagual into the tonal, of novelty intoconfirmation. The British Nobel Laureate in Physics, Brian Josephson (1975),has pointed out that this implies a new expression for the directedness of time,for the irreversibility of life processes.


But indeed, in order to let the process of expansion of its signal-space take place, the receivermust be willing to do the effort to gain new experiences and to transform these intoconfirmation.

Each system has to make its experiences by itself, has to cope by itself with itsstructural problems and has to itself secure the energy flow to unfold its life...

True learning is never rote learning, but always stimulated experience byoneself.

E. Jantsch, The Self-Organizing Universe, p. 205.

In this respect we can see that having an open mind towards novelty is the same as having anopen mind towards life itself. To isolate oneself from novelty and new ideas and to base one’sopinion purely on (academic) confirmation can only lead to mummification, to rigidity, tointellectual death.

13.4.2 Scientific evolution

The insights we have gained in our discussions on dissipative structures and self-organizingsystems as well as previous considerations on pragmatic information, novelty andconfirmation can be applied to describe how scientific ideas evolve in the academic world.

Based on their scientific research and the results of their experiments, scientists deductgeneral rules and principles, which in turn constitute the fundamentals of a scientific theory.Further experiments are then set up and their results interpreted in terms of that theory. Theaspect confirmation rules over novelty, novelty is as much as possible reduced toconfirmation, which increases the authority of the theory. In terms of dissipative structures,we can say that “established” science is the region of stability, where determinism isdominating. Unfortunately, it happens often that novelty, which cannot be reduced toconfirmation within the ruling theory, is ignored or even rejected.

There are striking examples of facts that have been ignored because thecultural climate was not ready to incorporate them into a consistent scheme.The discovery of chemical clocks probably goes back to the nineteenthcentury, but their result seemed to contradict the idea of uniform decay toequilibrium. Meteorites were thrown out of the Vienna museum because therewas no place for them in the description of the solar system.

Prigogine, Stengers, Order out of Chaos, p. 307.


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But with the help of technological means, the scientist increases his field of observation, hecan expand the intersection of his signal-space with Nature. In doing so, he is faced with evermore phenomena and experimental evidence which cannot be reduced from novelty intoconfirmation. The ruling theory, which is like a stable and even rigid organization pattern, isfaced with an increasing pressure of facts, so that after some time a small number of scientistsstart to question the validity of that theory. Then science goes through a crisis, it has reached abifurcation point it its evolution. It is a striking feature of such a transformation period that alot of attention and energy is spent by the “confirmationists” in trying to save the old theory,while others, the “novelists”, are vigorously examining the new phenomena and searching fora new consistent theory. Basic principles, which were once commonly accepted knowledge,are put to question. This usually happens by individuals or small groups, and totallyunorganized or uncoordinated. If often falls out of the control of the establishment. As withthermodynamic dissipative structures, several options are possible: scientists can start to dig anew hole on several places. Chance and intuition play an important role in this.

The holistic knowledge of the system’s own evolution which corresponds tore-ligio and which may already be observed in chemical dissipative structures,may be called in-tuition, which is literally learning from within. Intuition is notstructural knowledge, but knowledge of one’s own historical process. In thisway, intuition becomes the only factor to guide direction when in processes offast change, the orientation by means of stored information and by means ofinterpreting the exchange with the environment all fail.

E. Jantsch, The Self-Organizing Universe, p. 220.

Initially, the collective resistance and criticism from those who still adhere the well elaboratedholes and established theories because of their academic status and the “unacademical”approach of the others is a brake on the individual attempts for an intellectual “renaissance”.But once one of these new theories becomes more and more structured and successful inexplaining experimental results, then the academic world is willing to accept it. More andmore scientists start to work on it, so it is elaborated to a well-proportioned theory. Again weenter a stable region, were all experimental results will be described in terms of the newtheory. Novelty has become transformed into confirmation.

So we can see scientific evolution as a succession of longer regions of stability, characterizedby collectivity, rationality and determinism, alternating with short bifurcation regions, whereindividual creativity, intuition and very often pure chance prevail.

13.4.3 Evolution of the brains

The main feature of the evolution of life from the most primitive organisms towards thepresent day Homo Sapiens is the evolution of the brain and the neural system207. All the stagesof this evolution are still present in any human being. According to the Americanneurophysiologist Paul D. MacLean one can see the brain as being composed of three parts(the “thriune brain”), each with their own structure, features and information-processing

207 E. Jantsch, The Self-Organizing Universe, p. 165-169.


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capacity. Each of the three parts has evolved during a certain stage in the evolution of livingorganisms.

First there is the part that developed about 250 to 280 million years ago, together with thereptiles (the reptilian brain). One of the main characteristics of this part of the brain is thedifficulty to process new information, it cannot handle new situations. It is, so to speak,genetically pre-programmed and it does not provide the ability to learn. Emphasis iscompletely on the processing of the aspect of confirmation of information. This part of thebrain uses very little energy.

In the second place there is the limbic brain, which originated together with the first mammalsabout 165 million years ago. This part has already a limited capacity to handle new stimuli,but at the same time it is considered to be the cause of the fact that most human beings sticktoo long to certain prejudices and idée’s fixes.

And finally, there is the neo-cortex, which originated together with the primates (apes andhuman beings) 50 million years ago. In this part of the brain lay the powers to abstract, toreason, and to transcend the limitations of the immediate environment, in the sense that mandevelops the mental power to change the world around him according to his will (self-reflexive mind). Totally new information can be processed, new information (ideas) can becreated. This part of the brain uses most of the energy. It is a striking feature with man thatthis part of the brain is more developed than with any other living being, and, although thebrain constitutes only a small part of the total weight of the human body, it takes the majorpart of the total consumption of oxygen and energy.

This is in complete agreement with the model described by Jantsch: transformation of noveltyinto confirmation demands a lot of energy. With the evolution of living organism towardshigher forms, the consumption of oxygen in the brain has increased. Conversely, would it thenbe possible to stimulate the mental evolution of an individual or of humanity as a whole, if thesupply of oxygen to the brains could be increased in one way or another?

As already mentioned, the three different types of brain are present in the human brain.According to which type prevails, an individual person shows creative tendencies and has anopen mind to new ideas – creative people are usually very open minded and have a goodsense of humor – or he shuts off the unfamiliar and “hostile” outside world and concentrateshimself in confirmation (prejudices): “The brain destroys in several steps of abstraction partof the information – that part which cannot be expressed in the mental situation model208. Wemay also say that confirmation is increased at the cost of novelty if novelty cannot be copedwith209.” Selective cognition leads to prejudices, prejudices lead to selective cognition.

I hope I have been able to stimulate your neo-cortex and your appetite for novelty. And thatyou fully understand this statement from Albert Einstein: “Problems cannot be solved at thesame level of consciousness that created them.”

We repeat here some lines from our section on the relation between recurrence and paradigm.When a society functions according to a paradigm that is not in harmony with reality, andwhen, in spite of the crisis, it still follows the same line through, when it does not learn thenecessary lessons and when it does not adapt its paradigm, then that society will again andagain be faced with the same kind of crises – even with increasing intensity –, it will againand again go through the same scenario (scripts in transactional analysis, karma in easternphilosophies), just as the principal character in an ancient Greek drama: “The tragic error in

208 Signal-space!209 E. Jantsch, The Self-Organizing Universe, p. 178.


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tragic drama is walking in blindness so that the tragic hero who intends to accomplish acertain result with his actions accomplishes the exact opposite210.”

The cause for recurrence and periodicity in economy can be found in the fact that the currentsocioeconomic paradigm is not in accordance with reality. The ever-repeating cycle ofeconomic crises and wars can only be interrupted if we succeed to transcend the limitations ofthe present paradigm and if we can expand or even transcend our paradigm so it is more intune with reality.

210 Claude Steiner, Scripts People Live, p 60-61


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14 Appendix C: Economy and Control System Theory

14.1 An Economic Two-dimensional Flatland

In our basis theory on the origin of profit we made the simplified assumption that there is aproportional relationship between the amount of money in circulation M and the average pricelevel P. This is not the whole picture, as money has a “velocity”. The following lines areborrowed from Paul Samuelson’s book Economics.

In this discussion professor Samuelson uses the following economic concepts:

• GNP = Gross National Product• M = the amount of money in circulation• V = the “velocity of circulation of money” per year• P = the average price level• Q = the real (as distinct from current dollar) GNP

It is a historical fact that as dollar GNP has grown, so has M. With M now tentimes as large as before World War II, dollar GNP is even more than ten timesas large as its earlier figure...

Why should there be any connection? M is a stock magnitude, something youcan measure at an instant of time like any other balance-sheet asset. GNP is aflow of dollar income per year, something that you can measure only fromincome statements that refer to the passage of time between two dates211.

A new concept can be introduced to describe the Fisher-Marshall ratiosbetween two such different magnitudes: it is called the “velocity of circulationof money” per year and is written as V.

Definition of velocity: The rate at which the stock of money is turning over peryear to consummate income transactions is called the velocity of circulation ofmoney (or more exactly, the income velocity, V).

If the stock of money is turning over very slowly, so that its rate of dollarincome spending per year is low, V will be low. If people hold less money ateach instant of time relative to the rate of GNP flow (prices of apples * amountof apples + prices of oranges * amount of oranges + ...)212, then V will be high.

The size of V will tend to rise with interest rates213. Also V can change overtime with changes in financial institutions, habits, attitudes, expectations,computer communications, and relative distribution of M among different

211 Just as profit or cash flow for a company, or a balance of trade for a country.212 Apples, oranges: quantity sold per year!213 I would say V tends to rise with the rate of inflation! If real interest rates (interest rate minus

inflation) are high, people will be inclined to save more and spend less, so V declines. But of course, wheninflation is high, interest rates are also high, but real interest on saved money is low, so people spend their moneyfaster as it looses its value in their pocket and on their savings account. Thus V increases with inflation!


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kinds of institutions and income classes. These changes in V need not,however, be abrupt, volatile, or completely unpredictable214.

In every case, this formal definition of the velocity of circulation of moneyholds:

V = GNP / M = (Σ pi*qi) / M = (P * Q) / M (unit = per year)

Here P stands for the average price level and goes up and down with an indexof the price level, while Q stands for the real (as distinct from current dollar)GNP and has to be computed statistically215 by the process of deflating GNPwith a price index...

After economists have invented the concept of velocity of circulation ofmoney, they can rearrange its formal definition to get a new identity called the“Quantity Equation of Exchange”:

M * V = P * Q

or

P = (V/Q) * M = k * M 216

where k is a positive proportionality constant217...

The crude Quantity Theory: If 1975 M is nine times 1939 M, then anadherent of what can be called the “crude Quantity Theory of Money andPrices” would have to predict that the 1975 price level P should be almostexactly nine times 1939 P 218. The fact that prices have only quadrupled in thatperiod would be a refutation of this crude notion that the price level moves indirect proportion to the money supply...

The idea behind the Crude Quantity theory is simple. If the government effectsa thousand-fold increase in M, then one can predict there will be a gallopinginflation in which P rises 1,000-fold – or more cautiously, at least somewhere

214... as V, a result of how fast people are spending their money, is more difficult to manipulate than M,

as we have seen in the section on inflation.215 (Σ pi*qi) is the product of a 1*N matrix with a N*1 matrix, and thus a scalar. But stating that Σpi*qi =

P * Q, the product of two scalars, is mathematically nonsense.216 Concentration of wealth results in a lower V, as rich people tend to hoard up their money. This

results in a lower P, and thus to unemployment, lower wages, lower economic growth and thus to… lower futureprofits for companies. Distribution of wealth, on the contrary, results in a higher V, as people with basic needstend to spend their money. This results in a higher P, and thus to more employment, higher wages, highereconomic growth and thus to… higher future profits for companies.

217 Constant at a certain point in time, but not constant over a time period. So it would be better to writeP(t) = k(t)*M(t)!

218 Note the error in this statement! It assumes that k=V/Q has remained constant over the years. But Iam pretty sure that Q has increased considerably from 1939 to 1975, so it is wrong to conclude that 1975 Pshould be nine times 1939 P! This simple, “proportional” type of reasoning is typical for the two-dimensionalthinking of most academics.


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between 500-fold and 2,000-fold. Crude as this notion is, there is someusefulness to it. Thus when the head of the German central bank denied that itsprinting carloads of currency had anything to do with the 1920-1923 trillion-fold increase in prices, his statement was nonsensical. If he had said, “I am justa civil servant, forced, by the clamor of the populace in a defeated nation withgrave external and internal disorganization, to take part in an upward racebetween P and M” – if he had said this, we could feel sorry for him. But whocan deny the elementary fact that a vastly larger bidding of German marks fora limited supply of goods has to send prices expressed in marks skyward?

Money differs basically from ordinary goods like wheat or steel. We wantwheaten bread for its own sake, steel for hammers or knives. We want moneyonly for the work it does in buying us wheat or steel219. If, in 1923, all Germanprices are a trillion times what they were in 1920, it is natural to want about atrillion times as much M as in 1920220. Therein lays the valid core of the crudeQuantity Theory. But we must be wary of extrapolating it to real-life caseswhere all Ps [prices] have not changed in the same balanced proportions.

Rudimentary as it is, then, the rude Quantity Theory linking P directly to M isuseful to describe periods of hyperinflation and various long-term trends inprices, such as those in Spain and elsewhere in Europe after the New Worldtreasure was discovered221.

Since galloping inflation can put an intolerable strain on a democratic society,it is well to preach the crude Quantity Theory in season and out of season – notbecause in its crudest form it is in season very often, but because it is sourgently needed in those disorganized times when its message is in season222.

A sophisticated Quantity Theory: Few people still subscribe to the crudeQuantity Theory. But we should not use its inadequacies to damn the valuabletruth that the money supply can have important effects on macroeconomicmagnitudes such as investment, employment, production and prices...

Economists such as Chicago’s Milton Friedman are not surprised to find Mgrowing sevenfold while P only triples; for they believe that only in timeperiods when real output remains roughly the same – say, at a high-employment level – can one expect M and P to be directly related. They expectM and GNP (or PQ) to be related. This belief is based upon the hypothesis that

219 Although, some people hoard up money just for the sake of money, even if they have already enough

wheat and steel! Money can’t buy me love, but politicians, and even armies and countries are just a piece ofcake.

220 Or was it the other way around: because 1923-M was a trillion times as much as 1920-M, 1923-price-level was a trillion times as much as in 1920. Indeed, according to the law of supply and demand, whendemand is low, prices are decreasing... except when more money is printed and put into circulation by the centralbank.

221 There was a sharp increase of the amount of gold- and silver-money in circulation as the queens andkings of that time started to make coins of that gold and silver coming from the New World and started to spendthat “new” money, created out of something that came from outside their own country and this increase was notbalanced by a proportional increase in real production inside the country.

222 The fall of 2008, more than 700 billion dollar created out of nothing by the Federal Reserve!


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the velocity of circulation V can be predicted to be reasonably constant, or, ifnot constant, it is at least subject to predictable changes...

A sophisticated Quantity Theorist cannot be accused of believing that V is afundamental constant of nature. What he does believe is that controlling thebehavior of M will help much to control GNP, for the reason that the resultingchanges in V will be either so small or so predictable as to make one confidentthat dollar GNP will still move in the same direction of M.....

P. Samuelson, Economics, p 286-287.

Whatever the subtle differences between “sophisticated” or “crude” may be, P is related to M.Governments have a limited impact on V, but they can ”control” M very easily, with thestroke of a pen they can create 700 billion dollar out of the blue.

We have also noticed in this discussion that a multidimensional problem has been reduced toa one-dimensional cause-and-effect relationship. E.g: Σ pi*qi was reduced to PQ, expressed incurrency unit per time unit. PQ as one entity makes sense to me, but what are the values of P(average price-level) and Q (real, deflated GNP) as separate entities? Economists usestatistical computation, based on a subset of pi’s and qi’s and deflating techniques in order to

calculate price indexes and deflated GNP. I really wonder if the outcome of thesemanipulations – based on subsets of data – have anything to do with our multi-dimensionallife and reality. P. Samuelson argues that as prices in 1923-Germany were higher than in1920, so 1923-M should also be higher: a cause-effect relationship. In my footnote, I haveturned his line of reasoning upside-down: indeed what is cause and what is effect?

Reality is very complex, one could see it as a signal-space with an infinite number of unity-vectors x

1, x

2, x

3, x

4, x

5,... In order to understand reality one can select one of them, say x

1,

and explain e.g. 50 % of a certain phenomenon in terms of correlation between x1 and the

phenomenon. A correlation, however, is not necessarily a cause and effect relationshipbetween x

1 and the phenomenon.

By adding a second unity-vector, say x2, one could explain maybe 75 % of the phenomenon,

by adding a third one, let’s say x5, one could perhaps explain 85%, etc.. But by taking x

4, x

2

and x7, one could maybe have explained 90% of the phenomenon. The more unity-vectors are

included in the picture, the more one can explain a phenomenon. But the chosen subset ofunity-vectors is also important: some have a greater influence on the phenomenon than otherones, based on their “eigen-values”.

A researcher in management training techniques has discovered a rather funny thing: mosttheories confine themselves to only two unity-vectors, rather arbitrarily chosen, in order toexplain a phenomenon223, as this is rather easy to visualize on a flat slide or to print in a book,and thus easy to sell to their audience, while theories with three or more unity-vectors aredifficult to represent and thus difficult to sell.

In the discussion above we have also noticed this trend to “truncate” reality to only twodimensions: in the equation MV = PQ we have four variables, so this equation was reduced toP = kM, easier to grasp, forgetting the fact that Q and V and thus also k change in time. This

223 X-Y theories, so every academic inclined person can elaborate his own theory.


256

habit to think only in two-dimensional correlations and then even accept them as a cause andeffect relationship is typical for of a lot of academic oriented scientists, not only economists.

Economists tend to picture the economic process in circular flow diagrams like the onesbelow224. The first figure is a rather “static”, book-keeper-like description, as it is difficult toexplain how economic growth can occur: it describes a situation of equilibrium; it is the two-dimensional graphical representation of the national product account of a country over theperiod of one year, but what does it says for the next year?

Business Public

Goods flow and earnings flow.

Wages, interests, profit, etc, in $

Goods and services

Productive services

Consumption, purchases, in $

In the figure below, savings and investments are added in order to make the picture more“dynamic” so one can “understand” how the economy grows and at which rate.

224 See Samuelson, p. 180, p. 231.


257

Business Public

Goods flow and earnings flow, A more dynamic view.

Wages, interests, profit, etc, in $

Goods and services

Productive services

Consumption, purchases, in $

A: Technologicalchange,

Lowered interestrates

Z: Savings

In a lot of textbooks the input at A is presented as a “pump”, the output at Z as a “sink”.Pumps and sinks are hydraulic devices, used by plumbers. So, a “more hydraulic view” is amore appropriate subtitle for this figure than “a more dynamic view”. And A does not comeout of the blue, and Z does not disappear into a black hole, as if the saving and loan “industry”is not an integral part of the economy. And what about government spending?

So, just consider the figure as a two-dimensional metaphor of economics. Metaphors are veryoften used in order to disguise the fact that one does not know the rational explanation. If youcannot convince, then confuse.

14.2 A Multidimensional View on Economy

In order to get a more scientific picture of the dynamic behavior of the economy I suggest toconsult some expert in the field of control-systems theory. The following discussion is basedon Control Systems Theory written by Professor Olle I. Elgerd, chapters 3 and 5.

One of the most attractive aspects of control-systems theory is its general applicability tocontrol problems of the most varying engineering types. In the following, maximumadvantage will be taken of this fact in order that the presentation will be fully acceptable toany senior engineering student. Indeed, the book should not prove impenetrable to students ofbiology, medicine, and business, who quite often are concerned with control problems ofgreat complexity.


258

At the outset, it should be pointed out that we shall be concerned with systems. Websterdefines a “system” as a “collection of objects united by some form of interaction orinterdependence225”.

The control engineer invariably will be interested in the dynamic, or live, characteristics of asystem. As a rule, the “objects” making up the system will not be in a state of a staticequilibrium relative to each other and the surrounding world. Under the influence of externalstimuli, the state of the system will be changing with time in a manner entirely attributable tothe character of the stimuli and the bonds of interaction.

In principle, it is possible to change the state of a system in any prescribed fashion byproperly choosing the inputs, at least within reasonable limits. In other words, one may exertinfluence on the system state by means of intelligent manipulation of its inputs. This then, in ageneral sense, constitutes a controlled system. The figure below depicts the general structureof a control system.

General control system structure.

ControlledSystem

ControllingSystem

u1

u2

um

.

.

.

Controlforces

r1

r2

rp

.

.

.

Input orreferencecommands

c1

c2

cp

.

.

.

Output orcontrolledvariables

Feedback channel

Outputmonitoring

...

z1 z2 zk

Disturbances

The output of the system is measured by the p variables c1, c

2, ..., c

p, which in some way are

related to the state of the system. It should be pointed out that these visible and measurableoutput variables do not necessarily need to tell the whole story about the state of thecontrolled system. It may be desired to control only part of the system, or it may not bephysically possible to measure all the so-called “state-variables”, as they remain invisible tothe outside world of the controlled system. In the following, the c-variables will be referred toalternately as outputs and controlled variables.

225 Society is thus clearly a system! See also appendix B on economy and dissipative structures.


259

Direct control of the system is exerted by means of the m control forces u1, u

2, ..., u

m. These

forces are applied by the controller, which always constitutes both the brain and the brute-force [sic] portion of the overall system. The controller determines proper control actionbased upon the input or reference commands r

1, r

2, ..., r

p, and information obtained, via output

sensors, concerning the actual output c1, c

2, ..., c

p. This constant output monitoring, made

possible through the presence of the feedback channel, is the distinguishing mark of all high-precision control systems. The feedback results in a closed-loop signal flow, and the termclosed-loop control is often used...

The general block diagram would not be complete without the inclusion of k disturbanceinputs z

1, z

2, ..., z

k, In most practical situation, it is necessary to control the system in spite of

the corruptive [sic] influence of various effects that we may classify collectively asdisturbances. These corruptive inputs may be of external origin, or they may emanate fromwithin the system itself [sic]...

It is appropriate to give the following strictly general definition of system state:

The state of a system is the minimum set of numbers of variables226, the statevariables, which contain sufficient information about the past history of thesystem to permit us to compute all future states of the system – assuming, ofcourse, that all future inputs (control forces) are known and also the equations(bonds of interactions) describing the system.

The number n of state variables defines the order or the dimensionality of the system.Sometimes the term state-space is used to designate the n-dimensional coordinate space inwhich the state of the system ranges227. The figure blow depicts the situation in a three-dimensional case. (For higher dimensions, it is difficult to visualize the situationgeometrically.)

226 The truth, the whole truth, and nothing but the truth.227 Remember Appendix A, where we introduced the concept of a multi-dimensional signal-space.


260

State trajectory in a three-dimensional state space.

x2

x3

x1

x2(0) x2(t)

t=0

t

Initially, at t = 0, the total system state can be expressed by the n numbers x1(0), x

2(0),...,

xn(0). Under the influence of the m control forces and the bonds of interaction, the state of the

system will change. The updated state at time t can be expressed by the n numbers x1(t), x

2(t),

..., xn(t). In consequence of this interpretation, we define the state of the system as the n-

dimensional vector x(t), which has as its components the n numbers or state variables x1(t),

x2(t),..., x

n(t), that is

x(t) =

x1(t)x2(t)...xn(t)

or more concisely


261

x =

x1

x2

.

.

.xn

In addition to the state vector x, the m-dimensional control-force vector u, the k-dimensionaldisturbance vector z and the n-dimensional function vector f can be defined:

u =

u1

u2

.

.

.um

f =

f1

f2

.

.

.fn

z =

z1

z2

.

.

.zk

In terms of the vectors x, u, z and f, the behavior of the system can be described by thedifferential vector equation:

dx/dt = f(x,u,z,t)

This means that the change of the system over time is function of the state itself, the controlforce applied and the corruptive disturbances, and of time itself. Indeed, in some cases theinteraction and interdependence of the objects of the system can change over time228.

As already stated, it is appropriate to warn the student not to confuse the state variables of asystem with the system outputs c

1, c

2, ..., c

p, shown in the figure above (general control

system structure)229. It is true that in certain cases they are identical, but more often than notthe output vector is not equal to the state vector. We define the output vector c as the p-dimensional columns vector.

228 As described in Appendix B, Economy and Dissipative Structures: “In this respect we can

understand why there have been so many different “economic schools” in the course of history: the economychanges in the course of time, so there can be no economic theory that is valid in all circumstances and for alltimes. One should rather think of it as a temporal stage in the evolution of a dynamic system.”

229 A lot of economic figures that are published on a regular basis (growth percentages, unemploymentrates, inflation percentages,…) and that are eagerly interpreted by Wall Street analysts are not necessarily thestate variables! I think, together with Ravi Batra, that distribution of wealth as expressed in the Gini-coefficientis a more appropriate state-variable than, for example, the Dow Jones or the GNP per capita.


262

where p ≤ n

c1

c2

.

.

.cp

c =

Ordinarily, the output vector is related to the state vector in the linear fashion230:

c = Cx

where C is a p*n matrix referred to as the output or measurement matrix.

c11

c21

.

.

.cp1

C =

c12

c22

.

.

.cp2

c1n

c2n

.

.

.cpn

so that ci = Σj cij*xj.

In linear, analog systems, given the system variables x and the system equations f, one canstudy the behavior of the system, the effects of the feedback and control policy u on thesystem itself and its output c. This is done by using Laplace transformations, matrix-transformations (“normalization”), determining the n eigen-vectors and n eigen-values of then-dimensional system, and plotting these n eigen-values in the two-dimensional s-plane,where for preserved stability, the eigen-values (or poles) must be located in the left side of thes-plane (figure below). The shaded region is the “forbidden zone” for the poles or eigen-values, as the system then becomes unstable.

230 Unless a state variable goes into saturation, so non-linearities occur and the dynamics of the system

change drastically. The usually applied control policy then no longer yields the desired result.


263

The two dimensional s-plane.

σ

jω

In essence, the Laplace-transformation is a very useful tool in order to truncate a multi-dimensional system to a two-dimensional representation of the system, without losing thewhole picture of the system! There is no sacrifice of correctness and validity for the sake ofvisual simplicity. When continuous monitoring of a system is replaced by periodic sampling,the Laplace-transformation has to be replaced with the z-transformation.

I know, this all seems very complex and esoteric to most of you, as indeed all this informationcomes from a hole that is quite different than the hole in which most politicians andeconomists have been trained. Economists give advice to politicians who make decisions withlong-term implications on socioeconomic systems like branches of industry, countries or eventhe whole Earth. Most politicians have been trained in political sciences, economy, businessadministration or law, some even in chemistry... But there are very little engineers who pursuea political career, alas...

It is beyond the scope of this book to elaborate in a profound way the use of concepts ofcontrol systems theory on the field of economy. But I hope that one day this book couldcontribute a little bit to the destruction of the walls of mutual ignorance between economy andother more “hard” sciences. Nothing less than a multidisciplinary approach can be successful.

Things are getting better, as we share in each other’s mind.

I know, John Lennon.


264

15 Some Loose Ends

15.1 Justification of the methodology

I think some readers might have thought at the beginning of this study: “Déja vu, he is goingthe neoclassical way of economy”. Others will have found occasions to label the author as asomewhat late-developed Marxist, as he criticizes capitalism, profit, creation of money out ofmoney, and the consumer society. Still other readers will have been irritated by the slow andrather schoolish takeoff in the first chapters. It is indeed only after some time that the storygoes crescendo to arrive at a fortissimo231:

“ Oh no232! We are in the wrong paradigm!”

It is because of the needed shift in paradigm that we have spent so much attention inAppendix A on the process of communication and that we have evolved our basic theory soslowly: it takes time and energy for both the sender and the receiver in order to transmit a newparadigm with the help of the linear process of written communication. I hope the reader willforgive me for putting a strain on his patience.

And finally, there will be those who will be offended by the “unscientific” approach. I wouldlike to defend the method I used with the following argumentation. Indeed, it is a differentapproach than other studies dealing with economy... or is it sociology... or political history...or moral philosophy...? Scientific studies, in the classical sense of the word, usually discussone of these topics in isolation, and therefore show major deficiencies.

Authors of these studies limit themselves carefully and even scrupulously to their ownacademic field of research and specialization in order not to compromise their academicreputation. The boundary areas and interfaces with other disciplines are very often neglected,and if they are taken into account, they are defined once at the onset of the study and thenforgotten or considered to be static, unchanging, and exogenous233. In this respect, we stressthe fact that since Locke and Smith, economists have banned the aspects of morality andsocial justice out of their field of study under the pretense that these concepts cannot bequantified in an objective and rational way. These aspects of reality are considered to be theconcern of other, rather “soft” sciences such as sociology and moral philosophy. “We, theeconomists, can only give scientific advice on pure economic matters in a society whereresources are limited234 and where people act in a pure rational way235 in order to maximizetheir material wellbeing”. Phenomena such as oppression, exploitation and war are verycarefully neglected.

But on the other side, sociologists and moral philosophers do not always have the necessaryeconomic background in order to see the impact of the economic system on their field of

231... much alike the way Duane Allman plays the lead guitar on Loan me a Dime on an album of Boz

Scaggs232 ...or some four-letter-word which could accompany a tap on the forehead.233 Think of the holes of Edward de Bono.234 Are they?235 Do they?


265

study and vice versa. So interfaces and boundary areas between different scientific disciplinesare usually neglected, as they are not understood. And if an individual scientist dares to crossthe border, he is very often excommunicated by his “fellow” scientists, without beingaccepted by another discipline. He becomes a gypsy, an outlaw236.

Furthermore, in these classical studies a reductionistic and fragmented approach is used. Onefield of study, such as economy, is already too complex and vast for this approach. So it isunraveled in a multitude of smaller disciplines, theories and specializations – to catalog themis already a discipline by itself! –, all studying a small part of the “big” economy. Soeconomists are tempted to introduce assumptions and approximations which should replacethe interfaces with other specializations in the field of economy237. But once these idealizedapproximations and assumptions are defined, such as free competition and open markets andinformed, rational consumers, they are neglected when it comes to putting things into practiceby politicians and businessmen. Conclusions valid on one level of the economy – a privatecompany – are applied without scruples on a higher level – the economy of a country –,because they suit the aspirations of certain elements in society to enrich themselves.

We also have the strong impression that all these economic theories and disciplines do not fittogether in a coherent way. For sure they are not valid all at the same time under the sameconditions. Okay, they all may be valid when certain specific boundary conditions are met,but there is only one reality: so one could at least expect the boundary conditions to beconsistent with each other. I am pretty well sure that if one would try to integrate all economicdisciplines into a coherent model, one would find a lot of incompatibilities and internaldiscrepancies: there is no consistency, it’s just patchwork. So most of the books, whichdiscuss a subject as this one in the traditional reductionistic way, very seldom manage toexplain things in a coherent manner, but rather describe them and give only time-limitedstand-alone explanations of a few phenomena. In order to explain things to the bone, oneshould first see the overall picture.

The greatness of Hellas lies in the fact that one tried to order all thisfragmented knowledge, that one tried to unite the multitude of phenomena inone overall picture called natural philosophy. Indeed, the highest goal of theGreek philosophy was to construct a cerebral and harmonic model of natureand reality. The basic feature of all Greek philosophers is the fact that theywere seekers of unity. But this feature can be found in sciences of all time. AsLouis de Broglie has put it: “C’est l’espoir toujours renaissant des théoriciensde la physique d’arriver, malgré la complexité sans cesse plus grande desphénomènes connus, a construire des doctrines synthétiques de plus en plusvastes, dont chacune contient et complète les précédentes”...

We stress the fact that the core of philosophical activity is the double effort ofsynthesis and generalization, this is the unification and harmonization of allthings and phenomena. We have to underline that “synthesis” and“generalization” are not the same, but two succeeding stages of study andresearch. Already in 1936 Alexis Carrel raised the alarm in his book Man theUnknown when he noticed that a lot of scientists were trained to a high degree

236 Antony Sutton, Professor of economic history at Stanford University, once made an attempt when he

published a popular version of his academic research on war-profiteering during the Great War and the SecondWorld War. He explicitly mentioned names. He was dismissed. By “Googling” a little bit you can find thereason why.

237 In systems theory this is called “defining the boundary conditions”.


266

of specialization at universities238, while very little attention was given togeneralization and synthesis. With this, he meant generalization of one field ofscience. But this is the first step. Today we have to go a step further, as thesynthesis of one field of study is no longer sufficient. We have to extract out ofevery science its basic principles and unite them into a coherent, self-consistentoverall picture of the world239.

J.B. Quintyn, A Cultural Journey Through Biology, Mathematics, Cosmology,Theory of Relativity, Cosmogony, pp. 27, 191.

So, in this book we have tried to follow this “holistic” approach. Starting from one basicassumption240 – profit as a consequence of growth – we have elaborated in a logical way amodel of the economic process, without introducing any further assumptions, but also withoutbanning certain aspects of the real world as it is, and not as one would wish it to be, toparaphrase Francis Bacon. In doing this, we have taken care to avoid internal contradictions.Every field of study that would like to gain the quality label “scientific”241 should be put tothis acid test of self-consistency.

By consciously letting ethical and moral aspects to intrude into our line of reasoning, we havebeen automatically guided towards phenomena such as over cropping of natural resources,degradation of the environment, exploitation of social groups and other countries, and war.We have not called upon “objectivity” to ban these topics in order to keep the study“academic” and “rational”, or upon simplicity in order to keep the problem manageable. Onthe contrary, we have incorporated these aspects in the overall picture. In doing so, ourinsights have grown, have become broader, deeper, brighter.

And finally, one could criticize this study on its basic assumption – profit or cash flow as aconsequence of growth242. “As a whole, this study is self-consistent, but it is not firmlybased”. Indeed, we did not give a real scientific proof of our basic assumption243. We haveused a very simple line of reasoning in order to let the reader intuitively accept it244. However,in defense of our basic assumption or axiom we would like to postulate three arguments.

• The dimension analysis fits: profit and economic growth are expressed in the sameunit: unit of currency per unit of time (E.g. $ per year)245. Usually economists tendto express growth figures in percentages and profit in currency units. But apercentage is relative to an absolute value, and both growth and profit are realizedover a period of time!

238 They are paid to do that by the power-system they live in to “educate” the minds of young people.

See also appendix A on communication and science. Remember the EIC College, Eaton, Oxford, Cambridge,Harvard and Yale University, WestPoint...

239 I am in great debt to professor Quintyn, as he was the first person who really understood me. Hegave me the zeal to proceed with the endeavour to finish this book.

240 In mathematics one would call this an axiom.241 Which is not the same as “academic”.242 ... and/or a positive balance of trade. But as we think as cosmopolitans, we see the Earth as one little

country surrounded by mountains of infinite space. So growth is the only remaining cause of profit.243 For God’s sake, where should I get the statistical data? Which company publishes honest profit

figures and pays honest taxes?244 According to Spinoza intuition is the highest form of knowledge.245 Think cosmopolitan, forget national borders and balances of trade, also expressed in currency unit

per time unit.


267

• The model that we have evolved out of the basic assumption has allowed us toexplain economic reality (and some other realities) in great detail without need forfurther assumptions and without need for discarding social phenomena or moralconsiderations.

• The model is free of internal contradictions.

Based on these considerations, we dare to say that the approach used in this book is morescientific than those of most academic economists, who work reductionistic, fragmented and“free of” moral considerations. If we say “scientific”, we think of the hard empirical sciencessuch as physics. Physicists are already a long time aware of the fact that one can approachreality only with the help of models and theories, and that the value of the models and theoriesis determined by the amount of experimental phenomena one can explain with these, and notby the volume of paper one can fill with them. And if one experimental result is incontradiction with the theory, then the theory and not the experiment is sanctioned. Reality isalways above theories and models.

I think very few economists would dare to put their models to such an acid test. Furthermore,if an experiment is physics turns out differently than expected from the theory, theconsequences are usually limited in space and in time. When an architect builds a house, he ishold responsible for the quality of the house. When an engineer designs a bridge and thebridge collapses, then he is responsible. But when putting economic theories into practice bypolitical and economical leaders of a country, then the scope of these “experiments” is muchgreater, the consequences can be felt for a long time, and human beings are involved! I thinkthis asks for a little bit more sense of responsibility and reality! As Ravi Batra has expressed itwhen he discusses Reaganomics: "It is as if semantics and rethorics were going to generate aneconomic miracle and frustrate the law of mathematics246".

I hope that, at the end of this book, our basic assumption and the method I have used havegained some credit in the eyes of the reader. And that he realizes that there is really noalternative to Eight Days a Week. It is the logical next stage in the evolution of economy andhumankind: The fourth Wave.

15.2 Model of social evolution

Nous voici donc rendus au moment ou il faut se décider à faire le grand sautdans l’inconnu épistémologique, le même saut qu’on fait en leur temps ceuxqui ont analysé les formes sociales à partir des acquis des sciences de l’époque.

J. Attali, La Figure de Fraser, p. 72.

If history teaches us one thing, it is the fact that the production of the intellectis changing according to the production in the material world.

K. Marx, F. Engels, Communist Manifest.

246 See also Howard Katz, The Warmongers, The economic whores of Babylon.


268

Based on our discussions on economy, and on Professor Prigogine’s theory of dissipativestructures discussed in Appendix B, we will now try to construct a model, a framework, inorder to describe the basic dynamics of the evolution of human society.

• Let us divide according to a certain criterion society in a number of subsystems.Each subsystem can be divided itself in smaller subsystem. Later in this section wewill give two examples of how we could do this.

• Each of the subsystems tries to achieve a certain goal: satisfaction of needs inorder to survive inside the larger overall system (urge to survive).

• In doing so, material and energy is taken as input from other subsystems and usedto feed the internal processes, while output is produced, consciously or byaccident, toward those other subsystems. All the subsystems are imbedded in theoverall system – Spaceship Earth and Nature with all its resources of energy andraw materials.

• There is a dynamic interaction between the several subsystems: the output of onesubsystem can be the input of another subsystem.

• Although the processes and dynamics at the lower levels may seem chaotic andunpredictable, as decisions are made independently by thousands of smallsubsystems, the overall system still evolves according to an orderly, rhythmicalpattern with a certain periodicity. In systems theory one speaks of the “eigen-frequency” or “characteristic frequency” of a system247.

• When this dynamic interaction between the subsystems shows a constant patternover a longer period of time, we can speak of a social structure (the stability zoneof a dissipative structure).

• The urge to survive in man is manifested as satisfaction of needs, search forsecurity and even egotism and greed, but it can also appear as love, altruism(toward family, country, humanity as a whole) and creativity248 (indeed, apparentopposing entities can form a unity!).

• This urge to survive, together with free flow of information as catalyst, induces anevolution in the social structure from one quasi stable structure (quantum-level) toanother, characterized by more material wellbeing, more democracy, and moreequality for more people in a larger economic entity with more and fasterthroughput of information.

• During this evolution, the transition of one social structure to the other is the resultof growing imbalances among subsystems in the overall social structure. Theseimbalances ultimately lead towards a bifurcation point, a state of crisis, where theinteractions among the subsystems are restructured and also leads to changes in theinternal process of those subsystems themselves, resulting in a new pattern, whichwill again be constant over a longer period of time, a new social structure hasoriginated.

247 E.g. a swing has its own eigen-frequency depending on its length and mass. If one applies a

rhythmical force on that swing with the same frequency as the eigen-frequency, then the swinging is sustained. Ifthe frequency of the external force does not match with the eigen-frequency, then the swing will slow down andcome to a standstill.

248 According to the spiritual advancement of a person, one of these manifestations will dominate theother. See Elisabeth Haich, Sexual Power and Yoga.


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• But as society goes through a bifurcation point, there is also the possibility to fallback to a lower “quantum-level” of social organization.

Let us illustrate this with two examples.

15.2.1 Evolution of social classes

Let us take as subsystems the social classes in society. With the model described above, wecan understand the leveling of social classes: over the ages there has been an evolution from asocial structure with a very small upper-class, whose living conditions were far better than thelarger lower class, while there was no middle-class, towards a social structure with a largemiddle class whose living conditions are even better than those of the former upper-class.

Satisfaction of needs and greed were the driving force of the dynamic interplay between thesubsystems249, in casu social classes, which due to the principles of feedback, has resulted intoeconomic growth: ever more input (raw materials, energy, human effort) is processed to evermore output (goods, services, but also pollution), while some of the subsystems can take moreand other less advantage out of the growth.

By the growing satisfaction of needs in one of the subsystems, and because the pursuit ofprofit keeps on functioning as goal on itself (greed), this leads to growing imbalances and aperiod of exploitation begins: one subsystem parasites on the other, it tries to secure its ownposition at the expenses of the others250.

Due to this exploitation and because the aspect satisfaction of needs of the urge to survivealso keeps on functioning in the subsystems which are exploited, tensions occur among thesubsystems. With information-flow as catalyst, this results in one way or another (see infra)towards a reorganization of the social structure – a quantum leap –, by which the exploitedsubsystems gain more rights and the privileges of the oppressors are reduced a little bit. Bothsubsystems integrate into a system of a higher level with a new internal dynamic and a newsocial order. More material wellbeing, more democracy and more freedom for more peopleinside the society, unfortunately very often at the expense of the material wellbeing andfreedom of the people outside that society.

15.2.2 Evolution of geographical classes

Let us now take as subsystems geographic areas. With our model at hand and with theevolution of the social classes in mind, as given in the first example, we can now understandthe evolution towards ever growing economic and thus political entities.

By the growing satisfaction of needs in one subsystem, there may arise saturation of themarket. Or it may also happen that the resources of raw material, land and energy, needed asinput for the economic process of the subsystem, get depleted. So another subsystem is

249 Think of the rubber cylinder.250 “Persons in a privileged position will always first risk their total destruction before giving up any of

their privileges. Intellectual short-sightedness, often simply called stupidity, is undoubtedly one of the reasonsfor this”. J.K. Galbraith.


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colonized in order to create new markets and/or acquire new resources of energy and rawmaterials, so the economic process in the first subsystems can keep on growing.

In the early stage of the colonization, the stage of the explorers and pioneers, growth canoccur for both subsystems, as products, new techniques and know-how are exchangedbetween the two, but after some time there will again arise saturation in the first subsystem.As the aspect greed of the urge to survive keeps on functioning, the colonization leads tostraight exploitation, with all its characteristics of oppression and violence. This preservesalso the social structures in the colonizing systems as it feeds the internal process and allowssome social classes in it to enrich themselves considerably, while the lower classes can picksome grains.

But the aspect satisfaction of needs of the urge to survive keeps on functioning in theoppressed subsystems: so tensions occur between the geographical subsystems. Withinformation-flow as catalyst this results into a reorganization of the relations, where theformer colonized areas are integrated together with the colonizer into an economic entity of ahigher level, with more equal distribution of wealth and more political democracy andequality.

In this respect, we can understand the evolution of the medieval castle, whose residents“colonized” the surrounding farmers and serfs by selling them security and protection –especially against themselves, the trick of the Mafia is indeed very old – in exchange for foodand other goods, over the industrialized countries of the 18th and 19th century, with England251

as major colonial force, to the economic and political power-structures of these days. Whatwill be the next step in this evolution?

15.3 Possible transitions and visions of the future

As already stressed on several occasions in this study, the transition of one social structure toanother is the result of ever growing imbalances among subsystems. The tensions resultingout of these imbalances ultimately lead towards one of the three following ways oftransformation. Only the first two, having the aspects greed and satisfaction of needs of theurge to survive as driving force, have been recognized by Locke, Smith, Malthus and Marx.

• The first way: by a revolution from the bottom of society against the top anddirected to the inside of society, the oppressed ones succeed to overthrow theestablished parasitizing order. This way of transformation is driven by the aspectsatisfaction of needs of the urge to survive. This could be called the Marxist way.

• The second way: by fomenting war from the top of society towards the outside,the established order tries to secure its privileges by anticipating the revolution ofthe lower classes and by diverting the aggression in the form of a war towards anexternal “enemy”, so that other regions can be conquered and colonized252. Oftenthis is accomplished by making internal concessions: the lower classes of the ownsociety are granted some more rights as a reward for the support they have given in

251 Thanks to the East India Company and Thomas Malthus.252 This could be in a form of economic imperialism, where the colonized country remains politically

“independent”, while the leader is a puppet of the economic colonizing force. Marcos in the Philippines, theShah of Iran,… After they were expelled from power they both died in an US army military hospital. They werenever able to publish their memoirs.


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the war against the “enemy”253. In this respect, it is interesting to note that thecountry with the oldest pseudo-democratic traditions and the least violent socialrevolutions has also created the largest colonial empire: England254. In thisevolution, the aspect greed of the urge to survive is the driving force. This could becalled the capitalistic or imperialistic way.

• The third way: by eliminating consciously and in a controlled manner thetensions between the subsystems – social classes as well as geographic classes orcountries. This transformation should be tackled from the top – changed politics, ademocratic world government – as well as from the bottom – changed moral values– and from within – changed pattern of consumption in the rich countries – astowards the outside – a world-wide program to help the Third World in itsdevelopment.

In doing so, we should let us guide by an ecological awareness, and the aspects love andcreativity of the urge to survive should prevail over greed and self-interest instead of beinghollow slogans. These higher aspects of the urge to survive become manifest when theindividual person succeeds in transcending his own little ego and the interests of his owngroup (family, social class, country, race...). A lot of people are already aware of this fact.

The first and most safe step in this new evolution is to adapt modesty; the firsteffort lies within ourselves. We have to conquer our own ego... The 40 pagesof the report [of Taif] are introduced with a personal, polite and above allsolemn letter of Sheik Yamani, president of the “committee on long termstrategy”255. In these pages are outlined the guiding principles in order toestablish a new order in the world, as a replacement of the order that wasenforced by the Western countries on the former colonies after the SecondWorld War. An order which now, three decades later, has proved not tofunction anymore…The main issue of the document of Taif is no longer oiland its price per barrel, but which vision for the future is needed for the worldas a whole256. As a matter of fact, it discusses the need for a rebirth, a newrenaissance. Power structures disapproving or fighting or ignoring each otherstand helpless. The world has to learn to cooperate, but never before has onebeen so afraid of each other...

The document of Taif257 is not a rigid program, but rather a call, a message,pointing all of us to our responsibility. In the first place toward the westerncountries: they can no longer act as despots, but they should rather be a partnerand work together with the other countries towards the birth of a new worldorder...

J.J. Servan-Schreiber, The Challenge, pp. 290, 11, 12.

253 In most European countries the right to vote for every man was introduced after WW I, while the

women had to wait until after WW II.254 A tradition that was later inherited by the USA, not the people of the USA, but the guys behind the

curtain in real control, and with colonialism replaced by imperialism. And with the East India Company still incontrol, even when it officially no longer exists. It is now just called The Company.

255 Didn’t Sheik Yamani fell into disgrace with King Feisal? Why? Some external “diplomatic” pressurefrom the guys behind the curtains? In exchange for a small increase in the price per barrel, paid by you and me?

256 Eight Days a Week and a Fourth Wave!?!257 This report never received the attention it deserved in the western media due to the filtering effect of

“mass” media (see Noam Chomsky in On Power and Ideology), as they were only interested in the price of oil.


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With the next social transformation, which is imminent, the whole population of the earthcould be integrated in one economic entity, labeled as “Spaceship Earth” by BuckminsterFuller. Capitalism in its current form will disappear – just as communism has done – aspolitical and economical system. A new structure of society will emerge, in which the wholepopulation of the earth will live peacefully in freedom together on the basis of equality andfraternity in an unprecedented material affluence for all as they share the resources of theearth.

Imagine there’s no countriesIt isn’t hard to doNothing to kill or die for...Imagine all the peopleLiving life in peace...Imagine no possessionsI wonder if you canNo need for greed or hungerA brotherhood of manImagine all the peopleSharing all the world...And the world will be as one

John Lennon, Imagine.

The means to accomplish this are already at hand. It is only a matter of willpower and mutualtrust. This has been proven at length by B. Fuller in his last book Critical Path, where one canread the reflection of a whole life at the service of humankind.

Critical Path comprehensively traces all important trends of history that haveled to this moment in humanity’s potential first-stage success and its openingof a whole new chapter of humanity’s ever functioning in local support of theintegrity of eternal regenerative Universe.

To know now what we could never have known before 1969 – that we nowhave an option for all humanity to make it successfully on this planet in thislifetime – is not to be optimistic. It is only a validation of hope, a hope that hadno operationally foreseeable validity before 1969. Whether it is to be Utopia orOblivion will be a touch-and-go relay race up to the final moment. The race isbetween a better informed, hopefully inspired young world versus a runningscared, misinformed brain-conditioned, older world. Humanity is in its finalexam as the whether or not it qualifies for continuance in Universe as mind,with the latter’s access to the design laws – called by science the generalizedprinciples – governing eternally regenerative Universe.

Human minds have a unique cosmic function not identifiable with any otherphenomenon – the capability to act as local Universe information-harvestersand local Universe problem-solvers in support of the integrity of eternallyregenerative Universe.

At the present cosmic moment, muscle, cunning, fear, and selfishness are inpowerful control over human affairs. We humans are here in Universe to


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exercise the Universe-functioning of mind. Only mind can apprehend, abideby, and be lead by truth. If human mind comes into control of human affairs,the first thing it will do is exercise our option to make it.

If you read the entire Critical Path book carefully, including its sometimeslong but essential detailed considerations, and pay realistically close attentionto these considerations, you will be able to throw your weight into thebalancing of humanity’s fate. While you258 could be “the straw that breaks thecamel’s back”, comparatively you can also be the “straw” – straw of intellect,initiative, unselfishness, comprehensive integrity, competence, and love –whose ephemerally effective tension saves us.

The invisible tensive straws that can save us are those of individual integrities– in daring to steer the individual’s course only by the truth, strange as therealized truth may often seem – wherever they may lead, unfamiliar as the waymay be.

The integrity of the individual’s enthusiasm for the now-possible success of allhumanity is critical to successful exercise of our option. Are youspontaneously enthusiastic about everyone having everything you canhave?259

For only a short time, in most countries, has the individual human had the rightof trial by jury. To make humanity’s chances for a fair trial better, all thosetestifying must swear “to tell the truth, all the truth, and nothing but thetruth”260. But humans have learned scientifically that the exact truth can neverbe attained or told. We can reduce the degree of tolerated error, but we havelearned physically, as Heisenberg discovered, that exactitude is prohibitedbecause most exquisite physical experiment has shown that the act ofmeasuring always alters that which is measured.

We can sense that only God is the perfect – the exact truth. We can come evernearer to God by progressively eliminating residual errors. The nearest each ofus can come to God is by loving the truth. If we don’t program the computertruthfully with all the truth and nothing but the truth, we won’t get the answersthat will allow us to make it.

When we speak of the integrity of the individual, we speak of that which lifehas taught the individual by direct experience. We are not talking about loyaltyto your mother, your friends, your college fraternity, your boss, who told youhow to behave or think261. In speaking of the truth we are not talking about theposition to take that seems to put you in the most favorable light.

It was the 1927 realization of the foregoing that brought the author[Buckminster Fuller] to reorganize his life to discover what, if anything, thelittle, penniless, unknown individual, with dependent wife and child, might beable to do effectively on behalf of all humanity that would be inherently

258 Who, me, the writer? Or you, the reader?259 This is probably the most important sentence of this whole study! Muhammad Yunus has

expressed this as follows on page 86 of his book Building Social Business : “Is the desire to impact theworld as strong as the desire to make money? That’s the whole issue.”

260 Remember our remark on “half the truth”.261 Remember our discussion in Appendix A on how a person’s paradigm is molded by education.


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impossible for great nations or great corporate enterprises to do262. Thisoccasioned what is described in my “Self-disciplines”.

With world-around contact with youth, generated by invitations to speak to thestudents of over 500 universities and colleges during the last half-century, I canconclude at the outset of 1980 that the world public has become disenchantedwith both the political and financial leadership, which it no longer trusts tosolve the problems of historical crisis. Furthermore, all the individuals ofhumanity are looking for the answer to what the little individual can do thatcan’t be done by great nations and great enterprises.

The author thought that it would be highly relevant to the purpose of this bookto enumerate those self-disciplines that he had adopted and used during thosefifty years. Only those self-disciplines can cogently explain why he adoptedthe design science revolution and not the political revolutions (the strategy ofhistory)263.

B. Fuller, Critical Path, pp. xxxvi-xxxvii.

Just as we have stressed in this book, so does Fuller rejects the possibility of a politicalrevolution. He rather advocates a “design revolution” accompanied with a “moral revolution”in the heart of each individual person. J.J. Servan-Schreiber also describes the possibilities ofa technical (r)evolution in order to uplift humankind to a higher level of development.

Everything in the future will have to change. The industries of the future willhave to be developed as soon as possible. New inventions must go intoproduction as quick as possible. Only in this way will it be possible to createnew industrial activities and new employment to replace the old ones.

A new financial and economic system must be elaborated before theinternational money markets drop the dollar as exchange currency and theinternational monetary system collapses under the huge deficits and debts.

And finally, all economic agreements will have to be rephrased and united in a“new international economic order”. An order that may not be restricted to theindustrialized western world, but should also allow the Third World countriesto play their part.

A new economic vision must evolve, because unless the Third World is giventhe possibilities to develop, there will be no economic expansion at all. Newinventions from scientific research will not develop to new products, there willbe no investments.

But the world does not seem to be ready for this new reality. However, it couldhave a liberating and stimulating influence if all intelligence could be coaxedin order to tackle the most gigantic mission of the century in a methodologicaland common effort, especially with as goal the attainment of equality for all ofmankind.


262 I realized this after reading B. Fuller’s book Critical Path.263 For a list of these Self-disciplines we gladly refer to the book Critical Path.


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15.4 The “other” alternative

If we will be able to make the transition towards the social structure of a higher order willdepend on the path we choose to follow. We hope that by now the reader has understood thatthere is another way next to violent revolution and war, there is a Third Way open for us toget to the Fourth Wave.

But in order to follow this third way, we urgently need a course correction. Those incommand of Spaceship Earth guide it towards the first way (revolution) or the second way(war and imperialism). As long as our democratic rights such as the right to vote, freedom ofspeech, free flow of information, a constitution to control those in power, etc., have not beendismantled, we have the possibility and the responsibility to urge those in command to makethe necessary course alteration, and, if necessary, we have to assign new steersmen.

If we fail to do this, we will return to an Orwellian society, where hate against the others isstimulated, where “excess of democracy” are replaced by “order and law”, imposed by allmeans at the expense of individual freedom “for the general good”, where fear for BigBrother is cultivated and where every form of awakening love is nipped in the bud by raisingone person (Winston) or social or ethnic group against the other (Julia): Divide et Impera264.

Indeed, a society could fall back to a lower level, it could make a major step backwards. Thisis now a real danger for several reasons. First, there are now clear signals that people inEurope are willing – again – to sacrifice personal freedom to a new Fuhrer, in the hope that hewill “solve all the problems” of unemployment, huge budget deficits, lack of security andcrime in the large cities, drugs, etc. What a lack in personal responsibility! History has provenus several times already that this is not the way to do it! They are paying the Mafia forprotection with their personal freedom and their personal wealth!

But the major danger is that the physical borders of the Earth are reached, so furthercolonization and diversion of aggression towards the outside is no longer possible with thepresent state of space technology. In this respect we can understand why the Roman Empirehas disintegrated when it had reached the physical borders of the world according to themeans of transport, communication and navigation systems available at that time. We canavoid this step back into the future if we succeed in preventing the dismantlement of ourfreedom and our rights and the resurrection of economic barriers, both leading us to war. Thenext step upward in the evolution of social structures - the next quantum leap - is onlypossible by leveling within Spaceship Earth itself, in two ways.

This development can only come from the Third World. There is no other “newfront” on this earth. The continual failures in the dialogue between North andSouth have created suicidal tendencies at both sides. In the North this ismanifested as neo-protectionism. To defend this, they argue that cheapproducts of the Third World – cheap because of low wages – flood the marketsin the North and will harm industry and employment. But statistics are incontradiction with these arguments.

The import of products from the Third World countries, together some 14products, has resulted in France in the loss of no more than 25,000 jobs over aperiod of 6 years, especially in the branches of textile and ready-to-wearclothing. But the export toward the Third World has created 100,000 new jobsover the same period, mainly in the branches of machinery and electronics.

264 Divide and rule. See also K. Lorenz, Our Last Chance, p. 163, The undesirable autonomous man.


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When an underdeveloped country starts to develop and to produce, then it mustimport more machinery and technology than it can export goods. So in thedeveloped countries net employment grows – there is no exception to this rule.


But there is also a second front inside the industrialized countries that was not yet recognizedwhen J.J. Servan-Schreiber and Alvin Toffler wrote their visionary books: Eight days a Week– The Fourth Wave.

If we fail to accomplish this leveling in the world, among countries and within countries, if wedo not change our value system and our paradigm, and if we do not let us guide by moralconsiderations instead of material egotism, then inevitably we will become the victim of ourown short-sightedness, we will be destroyed by forces which we have put into motionourselves. In eastern philosophies this is called the Law of Karma.

Instant Karma’s gonna get youGonna knock you right on the headYou better get yourself togetherPretty soon, you’re gonna be deadWhat in the world you thinking ofLaughing in the face of LoveWhat on earth you tryin’ to doIt’s up to you, yeah you

Instant Karma’s gonna get youGonna look you right in the faceYou better get yourself together darlingJoin the human race265

How in the world you gonna seeLaughing at fools like meWho in the heck d’you think you areA super starWell, alright you are

Well we all shine onLike the moon and the star and the sunWell we all shine onEv’ryone come onInstant Karma’s gonna get youGonna knock you of your feetBetter recognize your brothersEv’ryone you meet

Why in the world are we here?Surely not to live in pain and fear

265 “Race” as in Indianapolis as well as the species as well as a strong current!


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Why on earth are you thereWhen you’re ev’rywhereCome and get your share

Well we all shine onLike the moon and the stars and the sunWell we all shine onCome on and on and onYeah yeah alright ah ha

John Lennon, Instant Karma.

15.5 The rebirth of humankind

What will become of humankind in the future cannot be predicted. But surelyit will be conditioned completely by processes which take place within manhimself.

K. Lorenz, Our Last Chance, p. 63.

I think the cause of the economic crisis in the western industrialized countries has becomeclear: the medium in the rubber cylinder has become too thin, the economic process is nolonger based on real needs, so it has become unstable, the goal – fulfillment of needs – and itsconsequence – economic growth, making a profit – have changed roles, the circle of affluenceis broken. On top of this we have seen that the imbalance between the rich and the poorcountries as well as the rich and the poor in the rich countries further destabilizes theeconomic and financial system266. By the policy of moderation and protectionism, one part ofsociety parasitizes on another group, so the consequences of the crisis are amplified bothinside the industrialized and Third World countries as well as between the North and theSouth267. We hope that the reader has come to the realization that the solution cannot be foundin this direction and that this policy can only lead to social regression, confrontation and war.

The only valid option is to prepare consciously and in a controlled manner the next logicalquantum leap in the evolution of society: humankind must adapt an ecological consciousness,develop a worldwide international solidarity across racial and religious and political barriers,and above all – while they still have the possibilities – the rich countries have to give priorityto the development of the Third World. This whole project can be accomplished. This hasbeen clearly demonstrated by Buckminster Fuller in his last book Critical Path. But the pathis indeed critical and delay can no longer be tolerated. And it has to be done if the whole ofhumankind, even the affluent ones, want to survive. We hope that this has become clear inthis study. To dissolve the last doubts I can recommend The Warmongers by Howard Katz,The Challenge by J.J. Servan-Schreiber, The Third Wave by Alvin Toffler and Building SocialBusiness – The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs byMuhammad Yunus as additional reading.

266 See also K. Lorenz, p. 83: Affluence and poverty.267 So it is more a global problem between haves and have-nots.


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There are indeed enough resources on earth to allow a better material wellbeing foreverybody, the people in the Third World and in the industrialized world. It no longer has tobe us or them. But the supplies of raw materials, energy as well as the technical know-howare geographically concentrated, so very few countries are independent from others. But itnever has been intended that one country should be completely independent from the others:growth and evolution do not spring from homogeneity and autarky, but rather from diversityand exchange, as we have discussed in a previous chapter! It has always been the intentionthat we should realize ourselves, by our own free will and our rationality, that we canaccomplish much more with cooperation, solidarity and synergy268 than with confrontation,war and economic autarky.

Love and fraternity, once part of an ideal, have become crucial to our survival.Jesus enjoined his followers to love one another; Teilhard de Chardin added,“or you will perish”269.

M. Ferguson, The Aquarian Conspiracy, p. 443.

The following quote comes from Mr. Muhammad Yunus’ book:

The biggest flaw in our existing theory of capitalism lies in itsmisrepresentation of human nature. In the present interpretation of capitalism,human beings engaged in business are portrayed as one-dimensional beingswhose only mission is to maximize profit. Humans supposedly pursue thiseconomic goal in a single-minded fashion…

No doubt human beings are selfish beings, but they are selfless beings, too.Both these qualities coexist in all human beings. Self-interest and the pursuit ofprofit explain many of our actions, but many other make no sense whenviewed through this distorting lens. If the profit motive alone controlled all ofour human behavior, the only existing institutions would be ones designed togenerate maximum individual wealth. There would be no churches or mosquesor synagogues, no schools, no art museums, no public parks or health clinics orcommunity centers. (After all, institutions like these don’t make anyone into atycoon!). There would be no charities, foundations, or non-profit organizations.

Obviously human beings are driven by selfless motivations as well. Theexistence of countless charitable institutions supported by personal generositydemonstrates this… And yet this selfless dimension has no role in economics.

This distorted view of human nature is the fatal flaw that makes our economicthinking incomplete and inaccurate. Over time, it has helped to create themultiple crises we face today. Our government regulations, our educationalsystems, our social structures are all based on the assumptions that only selfishmotivations are “real” and deserve attention. As a result, we invest vast amountof time, energy, money, and other resources in developing and supporting for-profit businesses. We assume that for-profit businesses are the chief source ofhuman creativity and the only way to address society’s problems. And even asour problems get worse, we fail to question the underlying assumption thathelped to create those problems in the first place.

268 TEAM = Together Each Achieves More269 Love is the only engine of survival, so repent if you want a future.


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Once we recognize this flaw in our theoretical structure, the solution isobvious. We must replace the one-dimensional person in economic theory witha multidimensional person – a person who has both selfish [rational] andselfless [moral] interests at the same time.

Muhammad Yunus, Building Social Business – The New Kind of Capitalismthat Serves Humanity’s Most Pressing Needs, pp. xv-xvi

As already stressed several time, this crisis holds a real danger, but it also gives us theopportunity to start to build a new and better world, assuming that we succeed to change ourvalue system and to adopt a new consumption pattern, and above all, assuming that we learnto transcend our own little ego and to trust our fellow human beings.

And this may be the most important paradigm shift of all. Individuals arelearning to trust – and to communicate their change of mind. Our most viablehope for a new world lies in asking whether a new world is possible. Our veryquestion, our anxiety, says that we care. If we care, we can infer that otherscare too.

The greatest single obstacle to the resolution of great problems in the past wasthinking they could not be solved – a conviction based on mutual distrust.Psychologists and sociologists have found that most of us are more highlymotivated than we think each other to be! For instance, most Americans polledfavor gun control but believe themselves in the minority. We are like DavidRiesman’s college students, who all said they did not believe advertising butthought everyone else did. Research has shown that most people believethemselves more high-minded than “most people”. Others are presumed to beless open and concerned, less willing to sacrifice, more rigid. Here is thesupreme irony: our misreading of each other.


You may say I’m a dreamerBut I’m not the only oneI hope someday you’ll join usAnd the world will be as one

Imagine, John Lennon

We have also discovered who is to blame for the crisis: “We have met the enemy and they areus!” Or rather some less distinguished manifestations of the human urge to survive: lack offaith in the future which results in greed, an unrestrained desire to accumulate material goodsand money and to “protect” them by all means, even at the expense of our surroundings,nature, and our fellow human beings. And these vices of us are seized upon with both handsby clever guys who manage to get rich by selling us a pup, so that they can acquire ever moremeans to swindle even more. Indeed, Marilyn, the supreme irony! Our value system and ourway of living have to be rebuilt from the bottom up. Everyone has to redefine for himself themeaning of “happiness” and “wellbeing”. In doing so, let us keep in mind the followingwisdom from the I Ching, the Book of Changes.


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After a time of decay comes the turning point. The powerful light that has beenbanished returns. There is movement, but it is not brought about by force... Themovement is natural, arising spontaneously. For this reason the transformationof the old becomes easy. The old is discarded and the new is introduced. Bothmeasures accord with time; therefore no harm results.

It is now up to you to make the choice.

I hope that by now the reader will have realized that the cover of this book is just a cartoonversion of the ideas expressed in it.

15.6 An additional message to some scientists

I can recommend the book Merchants of Doubt written by Professor Naomi Oreskes and ErikConway on the systematic dissemination of false “scientific” studies in order to deny theharmful effects of global warming, the dangers of smoking, second hand smoking and otherphenomena.

There is one important story that I missed in the book: the introduction of aspartame in thefood chain as a replacement of sugar as “sweetener”, a breathtaking story on the origin of thispurely chemical product, the machinations of a certain politician-businessman and some ColdWar “scientists” in order to have aspartame approved by the FDA, and the toxic side(?)effects of this “sweetener”. This has been already thoroughly investigated and documented byDr. Betty Martini. She has set up an organization with as goal to ban aspartame from the foodchain: http://www.mpwhi.com/main.htm

In the United Kingdom there are already several chain stores who have decided to ban allproducts containing aspartame from their shelves. So scientific and civic attention andactivism do matter! Let this be a stimulus for all of us who really do care about public healthand the future of humankind on this planet Earth to carry on.

In a review on Merchants of Doubt in The Observer/The Guardian I read the following: “Thefar right in America, in its quest to ensure the perpetuation of the free market, is now hell-bent


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on destroying the cause of environmentalism”. But perpetuation of the free market is only oneside of the coin: Malthusianism and Social Darwinism, leading to genocides and wars is theother side of the coin.

The motives of the far right are mainly ideological. Ideology comes first, money followsautomatically. And they are just the visible 10% top of the iceberg that generates the money.The invisible 90% and their hidden agenda are explained in this book.

As Professor Oreskes writes in her book on page 213: “We take for granted that greatindividuals – Gandhi, Kennedy, Martin Luther King – can have a great positive impact on theworld [All three of them died by a bullet, because their visionary ideas on the future ofhumankind as a whole on planet Earth was orthogonal to the “vision” of the 90% invisiblepart of the iceberg. I could add Bishop Romero, Malcolm X and many others to this list.] Butwe are loath to believe the same about negative impacts – unless the individuals are obviousmonsters like Hitler or Stalin. But small numbers of people can have large, negative impacts,especially if they are organized, determined, and have access to power.”

I would like add to this: “access to the necessary funds, or the magical mechanism to createthe necessary funds out of thin air”: a small numbers of people who acquired the “license” tocreate “fiat money” out of nothing in order to finance their “projects”.

http://www.save-a-patriot.org/files/view/whofed.html

You may focus on the 10% top of the iceberg of visible “scientists”, but these are just“dispensable thinkers” and can be sacrificed, often with a financial bonus, and replaced at anytime. The invisible 90% of the iceberg who supports them financially and ideologically ismuch more important. As I demonstrate in this book, just as Professor Antony Sutton did inhis research, the monsters Hitler and Stalin really did receive financial and industrial supportfrom that same small number of people. To understand who they are, and why they are doingwhat they are doing is more important than what they are doing.

The warfare arsenal of the “merchants of death” may be impressive, but their “magic box”and “conjuring-book” are also rather poorly equipped, just as the one of the merchants ofdoubt. They always use the same tricks, and these can be easily exposed once you know themechanism and the why behind them. You can read this in chapter 4 of this book: “Somewrong economic premises”.

To know that these things do happen and even who is behind these schemes is one thing, tounderstand why is quite another story. As the Greek philosopher Plato describes in hisAllegory of the Cave of, we should not only focus on the shadows on the wall, but try tounderstand what really causes these shadows. When one has found the real cause, one canunderstand that both topics are related: they have the same origin. The mechanisms that causethe recurrence of financial and economic crises are also the cause of the mass atrocities allover the world (wars, genocides, famines, civil wars,…) and the systematic dissemination offalse “scientific” studies in order to deny the harmful effects of global warming, DTT,aspartame, and tobacco, and to defend the “free market”.

A lot of people in the rich countries are just NIMBY’s, who are not concerned withgenocides, famines, wars, pollution and global warming, as long as these do not happen intheir back yard and are not too visible on TV. But these same people are also affected by thefinancial and economic crisis. So, if they could understand the underlying cause of their ownmaterial misfortune, then maybe they could be willing to show some solidarity with thepeople in the poor countries who are the victims of mass atrocities and the global over-cropping of natural resources.


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In addition to referring to the book Merchants of Doubt, I mention the following list ofhistorical “events” that I borrowed from the following website:

http://www.apfn.org/apfn/experiment.htm

I don’t think it needs additional comment. It very well illustrates how some scientists stillthink like Thomas Malthus, and that they ban any morality from their “experiments”.

1931 Dr. Cornelius Rhoads, under the auspices of the Rockefeller Institute for MedicalInvestigations, infects human subjects with cancer cells. He later goes on to establishthe U.S. Army Biological Warfare facilities in Maryland, Utah, and Panama, and isnamed to the U.S. Atomic Energy Commission. While there, he begins a series ofradiation exposure experiments on American soldiers and civilian hospital patients.

1932 The Tuskegee Syphilis Study begins. 200 black men diagnosed with syphilis arenever told of their illness, are denied treatment, and instead are used as human guineapigs in order to follow the progression and symptoms of the disease. They allsubsequently die from syphilis; their families never told that they could have beentreated.

1935 The Pellagra Incident. After millions of individuals die from Pellagra over a span oftwo decades, the U.S. Public Health Service finally acts to stem the disease. Thedirector of the agency admits it had known for at least 20 years that Pellagra is causedby a niacin deficiency but failed to act since most of the deaths occurred withinpoverty-stricken black populations.

1940 Four hundred prisoners in Chicago are infected with Malaria in order to study theeffects of new and experimental drugs to combat the disease. Nazi doctors later ontrial at Nuremberg cite this American study to defend their own actions during theHolocaust.

1942 Chemical Warfare Services begins mustard gas experiments on approximately 4,000servicemen. The experiments continue until 1945 and made use of Seventh DayAdventists who chose to become human guinea pigs rather than serve on active duty.

1943 In response to Japan’s full-scale germ warfare program, the U.S. begins research onbiological weapons at Fort Detrick, MD.

1944 U.S. Navy uses human subjects to test gas masks and clothing. Individuals werelocked in a gas chamber and exposed to mustard gas and lewisite.

1945 Project Paperclip is initiated. The U.S. State Department, Army intelligence, and theCIA recruit Nazi scientists and offer them immunity and secret identities in exchangefor work on top secret government projects in the United States.

1945 “Program F” is implemented by the U.S. Atomic Energy Commission (AEC). This isthe most extensive U.S. study of the health effects of fluoride, which was the keychemical component in atomic bomb production. One of the most toxic chemicalsknown to man, fluoride, it is found, causes marked adverse effects to the centralnervous system but much of the information is squelched in the name of nationalsecurity because of fear that lawsuits would undermine full-scale production ofatomic bombs.


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1946 Patients in VA hospitals are used as guinea pigs for medical experiments. In order toallay suspicions, the order is given to change the word “experiments” to“investigations” or “observations” whenever reporting a medical study performed inone of the nation’s veteran’s hospitals.

1947 Colonel E.E. Kirkpatrick of the U.S. Atomic Energy Commission issues a secretdocument (Document 07075001, January 8, 1947) stating that the agency will beginadministering intravenous doses of radioactive substances to human subjects.

1947 The CIA begins its study of LSD as a potential weapon for use by Americanintelligence. Human subjects (both civilian and military) are used with and withouttheir knowledge.

1950 Department of Defense begins plans to detonate nuclear weapons in desert areas andmonitor downwind residents for medical problems and mortality rates.

1950 In an experiment to determine how susceptible an American city would be to abiological attack, the U.S. Navy sprays a cloud of bacteria from ships over SanFrancisco. Monitoring devices are situated throughout the city in order to test theextent of infection. Many residents become ill with pneumonia-like symptoms.

1951 Department of Defense begins open air tests using disease-producing bacteria andviruses. Tests last through 1969 and there is concern that people in the surroundingareas have been exposed.

1953 U.S. military releases clouds of zinc cadmium sulfide gas over Winnipeg, St. Louis,Minneapolis, Fort Wayne, the Monocacy River Valley in Maryland, and Leesburg,Virginia. Their intent is to determine how efficiently they could disperse chemicalagents.

1953 Joint Army-Navy-CIA experiments are conducted in which tens of thousands ofpeople in New York and San Francisco are exposed to the airborne germs Serratiamarcescens and Bacillus glogigii.

1953 CIA initiates Project MKULTRA. This is an eleven year research program designedto produce and test drugs and biological agents that would be used for mind controland behavior modification. Six of the subprojects involved testing the agents onunwitting human beings.

1955 The CIA, in an experiment to test its ability to infect human populations withbiological agents, releases a bacteria withdrawn from the Army’s biological warfarearsenal over Tampa Bay, Fl.

1955 Army Chemical Corps continues LSD research, studying its potential use as achemical incapacitating agent. More than 1,000 Americans participate in the tests,which continue until 1958.

1956 U.S. military releases mosquitoes infected with Yellow Fever over Savannah, GAand Avon Park, FL. Following each test, army agents posing as public health officialstest victims for effects.

1958 LSD is tested on 95 volunteers at the Army’s Chemical Warfare Laboratories for itseffect on intelligence.


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1960 The Army Assistant Chief-of-Staff for Intelligence (ACSI) authorizes field testing ofLSD in Europe and the Far East. Testing of the European population is code namedProject THIRD CHANCE; testing of the Asian population is code named ProjectDERBY HAT.

1965 The CIA and Department of Defense begin Project MKSEARCH, a program todevelop a capability to manipulate human behavior through the use of mind-alteringdrugs.

1965 Prisoners at the Holmesburg State Prison in Philadelphia are subjected to dioxin, thehighly toxic chemical component of Agent Orange used in Vietnam. The men arelater studied for development of cancer, which indicates that Agent Orange had beena suspected carcinogen all along.

1966 CIA initiates Project MKOFTEN, a program to test the toxicological effects ofcertain drugs on humans and animals.

1966 U.S. Army dispenses Bacillus subtilis variant niger throughout the New York Citysubway system. More than a million civilians are exposed when army scientists droplightbulbs filled with the bacteria onto ventilation grates.

1967 The CIA and Department of Defense implement Project MKNAOMI, successor toMKULTRA and designed to maintain, stockpile and test biological and chemicalweapons.

1968 The CIA experiments with the possibility of poisoning drinking water by injectingchemicals into the water supply of the FDA in Washington, D.C.

1969 Dr. Robert McMahan of the Department of Defense requests from congress $10million to develop, within 5 to 10 years, a synthetic biological agent to which nonatural immunity exists.

1970 Funding for the synthetic biological agent is obtained under H.R. 15090. The project,under the supervision of the CIA, is carried out by the Special Operations Division atFort Detrick, the army’s top secret biological weapons facility. Speculation is raisedthat molecular biology techniques are used to produce AIDS-like retroviruses.

1970 United States intensifies its development of “ethnic weapons” (Military Review,Nov., 1970), designed to selectively target and eliminate specific ethnic groups whoare susceptible due to genetic differences and variations in DNA.

1975 The virus section of Fort Detrick’s Center for Biological Warfare Research isrenamed the Fredrick Cancer Research Facilities and placed under the supervision ofthe National Cancer Institute (NCI) . It is here that a special virus cancer program isinitiated by the U.S. Navy, purportedly to develop cancer-causing viruses. It is alsohere that retrovirologists isolate a virus to which no immunity exists. It is later namedHTLV (Human T-cell Leukemia Virus).

1977 Senate hearings on Health and Scientific Research confirm that 239 populated areashad been contaminated with biological agents between 1949 and 1969. Some of theareas included San Francisco, Washington, D.C., Key West, Panama City,Minneapolis, and St. Louis.

1978 Experimental Hepatitis B vaccine trials, conducted by the CDC, begin in New York,Los Angeles and San Francisco. Ads for research subjects specifically ask forpromiscuous homosexual men.


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1981 First cases of AIDS are confirmed in homosexual men in New York, Los Angelesand San Francisco, triggering speculation that AIDS may have been introduced viathe Hepatitis B vaccine

1985 According to the journal Science (227:173-177), HTLV and VISNA, a fatal sheepvirus, are very similar, indicating a close taxonomic and evolutionary relationship.

1986 According to the Proceedings of the National Academy of Sciences (83:4007-4011),HIV and VISNA are highly similar and share all structural elements, except for asmall segment which is nearly identical to HTLV. This leads to speculation thatHTLV and VISNA may have been linked to produce a new retrovirus to which nonatural immunity exists.

1986 A report to Congress reveals that the U.S. Government’s current generation ofbiological agents includes: modified viruses, naturally occurring toxins, and agentsthat are altered through genetic engineering to change immunological character andprevent treatment by all existing vaccines.

1987 The Department of Defense admits that, despite a treaty banning research anddevelopment of biological agents, it continues to operate research facilities at 127facilities and universities around the nation.

1990 More than 1500 six-month old black and hispanic babies in Los Angeles are given an“experimental” measles vaccine that had never been licensed for use in the UnitedStates. CDC later admits that parents were never informed that the vaccine beinginjected to their children was experimental.

1994 With a technique called “gene tracking”, Dr. Garth Nicolson at the MD AndersonCancer Center in Houston, TX discovers that many returning Desert Storm veteransare infected with an altered strain of Mycoplasma incognitus, a microbe commonlyused in the production of biological weapons. Incorporated into its molecularstructure is 40 percent of the HIV protein coat, indicating that it had been man-made.

1994 Senator John D. Rockefeller issues a report revealing that for at least 50 years theDepartment of Defense has used hundreds of thousands of military personnel inhuman experiments and for intentional exposure to dangerous substances. Materialsincluded mustard and nerve gas, ionizing radiation, psychochemicals, hallucinogens,and drugs used during the Gulf War .

1995 U.S. Government admits that it had offered Japanese war criminals and scientistswho had performed human medical experiments salaries and immunity fromprosecution in exchange for data on biological warfare research.

1995 Dr. Garth Nicolson, uncovers evidence that the biological agents used during the GulfWar had been manufactured in Houston, TX and Boca Raton, Fl and tested onprisoners in the Texas Department of Corrections.

1996 Department of Defense admits that Desert Storm soldiers were exposed to chemicalagents.

1997 Eighty-eight members of Congress sign a letter demanding an investigation intobioweapons use & Gulf War Syndrome.

The editor’s preface to The Warmongers is a very interesting addition to this list.


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Throughout the history of man, a struggle has raged between thosephilosophies proclaiming the necessity for men to live according to thedecisions of a higher authority, and those philosophies which have identifiedman’s nature as requiring the independent use of an individual’s rationalfaculties.

Most of man’s story has been dominated by the proponents of the authoritarianphilosophy. The material progress of the 19th and 20th century is a result of thefounding of the United States of America, representing the culmination ofyears of struggle and development of the individualistic English rationalphilosophers270. While the United States broke free of the decadence of the OldWorld Power and authoritarianism, it remained free for only a short while271,succumbing to civil war, WW I and WW II.

How the secular proponents of the authoritarian philosophy, the “shepherds” ofmankind, have led our nation into these disasters and their present plan is thesubject of this book272. Whether they are able to ensnare America in a worldconfrontation in 1981 or 1985 will largely determine the course of humanityfor the next several centuries.

Our age will see a resolution of this great struggle. If the victorious philosophyis the correct one273, then mankind will rapidly advance into the space age ofthe future. If the incorrect philosophy temporally triumphs, then societies willrecede to a feudal style to wait for a re-emergence of rationality.

Should the “shepherds” fail in their plans, then forces which have beenbuilding up since 1946274 will sweep them aside for the foreseeable future –possibly forever.

On the question of motive, secular level proponents of authoritarianism seekpower and riches – goals which have always been sufficient for them to justifywhatever methods they have used. Their philosophic counterparts, however,have always claimed they were seeking the good of mankind – perhaps for thesame reason a shepherd looks after his sheep. Whatever their motives, what isof greatest concern to us is that their secular plans are conducted in secret.Why? Would they lead mankind to the slaughter?

This book demonstrates that such plans do exist and that they are kept hiddenfrom the public views.

Stephen A. Zarlenga, Editor in Chief.

And the following recommendation comes from a scientist who through his research hadcome to the realization that time is just a construction of the mind:

270 You see, they are not so bad the English people. But some of them still think Britannia (read the East

India Company) rules the waves. But individual yachtsmen can do this too!271 Remember the East India Company, swiftly shifting its interests into the USA!272 Howard Katz, The Warmongers.273 I’m pretty confident on this, with a little help from my friends.274 The mind guerrilla!


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It is quite remarkable that we are at a moment of profound change in thescientific concept of nature and of the structure of human society as a result ofthe demographic explosion. As a result, there is a need for new relationsbetween man and nature and between man and man. We can no longer acceptthe old a priori distinction between scientific and ethical values. This waspossible at a time when the external world and our internal world appeared toconflict, to be nearly orthogonal. Today we know that time is a construction [ofthe mind] and therefore carries an ethical responsibility.

The ideas to which we have devoted much space in this book – the ideas ofinstability, of fluctuation – diffuse into the social sciences. We know now thatsocieties are immensely complex systems involving a potentially enormousnumber of bifurcations exemplified by the variety of cultures that have evolvedin the relatively short span of human history. We know that such systems arehighly sensitive to fluctuations. This leads both to hope and a threat: hope,since even small fluctuations may grow and change the overall structure. As aresult, individual activity is not doomed to insignificance275. On the other hand,this is also a threat, since in our universe the security of stable, permanent rulesseems gone forever. We are living in a dangerous and uncertain world thatinspires no blind confidence, but perhaps only the same feeling of qualifiedhope that some Talmudic texts appear to have attributed to the God of Genesis:

Twenty-six attempts preceded the present genesis, all of which weredestined to fail. The world of man has arisen out of the chaotic heart of thepreceding debris; he too is exposed to the risk of failure, and the return tonothing. “Let’s hope it works” (Halway Sheyaamod) exclaimed God as hecreated the World, and this hope, which has accomplished all subsequenthistory of the world and mankind, has emphasized right from the outsetthat this history is branded with the mark of radical uncertainty.

Prigogine, Stengers: Order out of Chaos, pp. 312-313.

Radical uncertainty? Have some faith in my project. It is really not a matter of “radicaluncertainty”, rather of our inevitable destiny as humankind on this Spaceship Earth to reallymake it, as Buckminster Fuller has written in his book Critical Path. Indeed, HalwaySheyaamod!

My next book will be about an Octopuses Garden in the Sun observed from within a YellowSubmarine.

275 As Buckminster Fuller has proved with the life he decided to live.


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Eight Days a Week - The Fourth Wave