Christopher M. Quigley
B.Sc., M.M.I.I., M.A.
Ourworld lurches from financial crisis to financial crisis yet very few academics,reporters or commentators point out the fatal flaw in current orthodox economic theory which is the central force behind these crises. The flaw relates to the general lack of purchasing power in contemporary society. This weakness in classical economic theory is not new and many scholars have explained the problem however, increasingly, the issue is being conditioned out of people’sconsciousness. The collapse of the international banking system, as a result of the Sub-Prime; “Originate to Distribute” catastrophe, has brought the Achilles heel of Keynesian economics into sharp focus. The elite thus fear that the prospect of a “greater depression” will force change that will eliminate theirposition of control and privilege. Hence the current “spin” emanating from controlled media outlets. The growth of the “tea party movement” is a case in point. Should this political revolution gain in power the possibility of real change in US economic policy will become increasingly probable thus the perceived need to crush it or at the very least gain ownership and control over it. The end objective of this grass root movement is the dismantling of FED interest bearing credit policy in favour of treasury cash, the abolition of the “open door” Chinese trade policy and the redistribution of true purchasing power to the average American citizen. Fairly remunerated citizens need to replace foreign robots. Robots do not buy cars, raise families, and care for the well being of elderly parents. Americans must stop looking on their nation simply as a mechanical economy and start to see it as a human society.
Why is purchasing power so important? It is fundamental because without money no exchange can take place. In order to understand what I am talking about let us look at the historical example set by Henry Ford. He completely redefined “classical” economics through the policies undertaken by the Ford Motor Company in the 1920’s. Under “normal” theory it was assumed that a corporation could only maximise profits by increasing price and limiting supply. Ford did the exact opposite because he had a more holistic view of the role of the corporation in society.He doubled the wages of his workers, decreased the price of the Model T and in the process remade the Ford Motor Corporation. (This policy was not inflationary because he knew he could at least double supply through increased efficiencies). The company boomed. How did this happen. It was axiomatic for he understood the importance of money and purchasing power in communities. With Ford’s workers able to make a good living, their financial anxiety ceased and staff turnover dropped by a multiple of five in one year. This dramatically decreased management expense and increased productivity. Workers finally had peace of mind. With the increased disposable income in the Detroit area the general economy boomed. All classes of economic sectors expanded. As a result
more workers, new business owners, company managers, insurance brokers, real estate brokers, bankers, salesmen, craftsmen, delivery men, builders, farmers and retailers could afford Ford cars. Demand for the model T doubled through the increased buying power WHICH HE HAD CREATED. Accordingly profits at the Ford Motor Company dramatically improved as a result of his innovative policy.
Ford understood economics and he understood the issue of PURCHASING POWER. FOR HIM PURCHASING POWER WAS NOT CREDIT BUT
CASH. HE REASLIZED THAT WITHOUT THE MONEY TO PURCHASE HIS CARS POTENTIAL DEMAND WAS IRRELEVANT. THEREFORE HE
REDISTRIBUTED DIVIDENDS FROM THE OWNERS TO THE WORKERS. THIS BRILLIANT INSIGHT MADE THE FUTURE FOR THE COMPANY. It built up the economy of Detroit and it helped define America as a country where a factory worker was respected and well paid, not exploited, as had been the case throughout the English industrial revolution. The American dream was Ford’s vision made manifest. It was a dream brought to fruition not through political fantasy but through the laws of accounting, finance, production and marketing.
“Power and machinery, money and goods, are useful only as they set us free
to live. They are but means to an end. For instance, I do not consider
the machines which bear my name simply as machines. If that was all
there was to it I would do something else. I take them as concrete evidence
of the working out of a theory of business, which I hope is something
more than a theory of business—a theory that looks toward making
this world a better place in which to live. The fact that the commercial
success of the Ford Motor Company has been most unusual is important only because it serves to demonstrate, in a way which no one can
fail to understand, that the theory to date is right.
Considered solely in this light I can criticize the prevailing system of industry and the organization of money and society from the standpoint of one who has not been beaten by them. As things are now organized, I could, were I thinking only selfishly, ask for no change. If I merely want money the present system is all right; it gives money in plenty to me. But I am thinking
of service. The present system does not permit of the best service
because it encourages every kind of waste—it keeps many men from
getting the full return from service. And it is going nowhere. It is all a matter of better planning and adjustment.”
Henry Ford “My Life and Work“
Compare for one moment the circumstances in Detroit in the 1920’s and mainstream America today. The exact opposite is occurring. Meaningful wage levels are being destroyed and thus the required buying power is contracting in a structured and planned manner. This system cannot hold. Society is being hollowed out from the inside. Folks do not understand what is happening due to “dumbed down” educational policies. To replace falling money (wage) levels between goods available for purchase and actual purchase capability the banking elites are “managing” the availability of credit. This credit substitute for real wages is an unstable arrangement because the debt is very expensive and is non-liquidating other than through bankruptcy or lotto wins or death. This is no way to run nations.
It creates constant anxiety and eventual depression among citizens. It is
inherently unstable particularly now that most banks are actually insolvent and
are no longer in the position to provide credit in the form of business loans,
credit card facilities, car loans, overdrafts or home equity draw-downs.
Thus in essence the “solution” to “the problem” in America and for that matter in Europe, is enlightened redistribution of purchasing power other than through non existent credit. Currently too much power over such redistribution is controlled by banks and associate entities.
This money centralization is stagnating the system and the fact that this
arrangement failed to regulate itself, and caused a credit collapse, has accentuated the speed of failure by multiples. It is time to change. Society must move on. The intellectual framework to effect this change, as demonstrated by Ford, has been known for over 80 years. Its successful implementation today would bring a renaissance to world commerce and societal development. There is no more important function for Academia today other than to dissemination this vital economic truth.
Armed with this knowledge for how long do we allow the folly of present economic “orthodoxy” to continue? To me this situation is akin to an adult perceiving the behaviour of a wild and immature teenager, wondering when the “penny will drop” and wisdom will prevail. To the elites, who must know the truth, this monopoly credit based boom-bust phenomenon is obviously allowed to continue because they have control. Their ownership motivates them to disregard consequences provided they are protected
through privilege.However, I believe that the truth is too
obvious to ignore anymore. The end result of the current repression is the on-going development of the new modality which I call: “Techno-Feudalism”. This “Techno-Feudalism” will bring with it vast disparities in wealth, ownership and opportunity. It will lead to an eventual obliteration of the middle classes in developed nations. It will engineer the slow Fabian demise of effective democratic institutions in the West. Untamed it will break traditional social cohesion and lead to mass unrest,criminality and despair. But the future does not have to be so bleak. The money solution is so obvious it is “madness” not to sort it out. The truth must beallowed to break free.
“The organism has a right in natural law to draw sustenance from its environment. We cannot with impunity abstract humanity from the natural world. ….Unfortunately, the present financial system creates an ever greater deficiency of effective and unattached purchasing power giving the illusion, through a distorted financial lens, of actual or physical scarcity in the midst of actual and potential abundance…..
We are trying to pass from one type of civilization into another in which the possibilities are such that we cannot begin to imagine. That transition, I believe, will best be facilitated in an environment which provides maximum freedom (immanent sovereignty) for the individual in the context of absolute economic security.”
In the 1930’s the engineer and self-taught economist Major Clifford Douglas claimed that society was intellectually hypnotized and that only a drastic de-hypnotization and re-education could save it. Douglas believed in people. He felt that individuals had far more goodness and potential than society was allowing them for. He reckoned that if common folk were given enough freedom and leadership they could move society and civilization into a new golden age. An age of extended liberty, discovery, art and culture. The alternative he felt would be booms, busts, over-consumption, under-consumption, excesses,depressions and wars. Eighty years later this is exactly what the world has experienced and is continuing to experience. However, the period between each stage is narrowing and the level of debt, instability and inequality are exploding beyond comprehension. To followers of Douglas this situation is not happening by accident; it is happening inevitably because of conceptual flaws in financial and fiscal policy.
The monetary and economic policies of such people as Henry Ford, Clifford Douglas, E.C. Riegel and E. F. Schumpeter et al are heartfelt attempts to bring about “steady state” change to historical economic orthodoxy. It is incumbent on all interested parties who desire to solve this problem of problems to become educated and aware of the available solutions and to actively participate. Not to do so will allow the current “greater depression” to expand and gain a greater grip on economic activity. History shows that such a development will eventually lead to war as sure as night follows day. Thus the choice is clear;do we want war or peace? If you opt for peace, as I do, we must strive to free contemporary economic policy from its death waltz with outmoded Keynesianism.Economic theory must move on, sanity demands it.
“Flight from Inflation”
The Heather Foundation,
“My Life and Work”
In Collaboration with
“Small Is Beautiful”
E. F. Schumacher
Major Clifford Hugh Douglas
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