Vous êtes sur la page 1sur 59

PAGE PROGRESS OR DECLINE?

THE PLIGHT OF WESTERN ECONOMIES WITH SPECIAL REFERENCE TO THE EU AND THE MEDITERRANEAN

by Sarah Gildea

A Thesis Submitted in Partial Fulfillment of the Requirements for a Degree of Masters in Religions and Cultures Specializing in Mediterranean Cultures

at Pontifical Gregorian University 2012

DRAFT

PAGE Contents Introduction Education Different Cognitive Systems The Importance of Tradition Tradition As Identity Tradition as Fulfilling Human Needs Confusing Means with Ends Economic History The Seeds of Globalization 1971 The New Globalization European Relations with Mediterranean Countries Conclusions Appendix I Bibliography Introduction 3 7 12 16 18 24 29 30 40 42 50 52 54 55

Last year I attended a conference on the subject of the Mediterranean and the idea of a EuroMediterranean Union. Comments from this conference have led me to further investigate the possibility of such a union. Would it actually be beneficial to the Mediterranean countries? Why would the European Union countries be interested in such a union? To answer these questions, I first needed to get a historical picture of the two areas what are their 'track records', what have their relations been like in the past? For this, I discovered two authors who became fundamental in my research: Carroll Quigley and Ann Pettifor.

PAGE

Carroll Quigley was a famous professor from Georgetown University1 in the United States, who taught courses on the history and development of civilizations in the School of Foreign Service at the university. This subject is probably better known as Universal History, or Historiography. His thoughts were influential with the U.S. Department of Defense and other government entities in the 1960's and 1970's, and many powerful and influential American politicians were his students. His knowledge, observations and experience cover the whole of man's activities. Most readers will be unfamiliar with Dr. Quigley. His most important books for our topic are The Evolution of Civilizations and Tragedy and Hope. Quigley was a historiographer who wanted our understanding of history to be more scientific, so he began by applying the scientific method to the social sciences,2 and from this he was able to distinguish seven stages of historical change which can be witnessed for all civilizations.3 Before going into more detail, we first need to be reminded that most scientific 'laws' are not statements of what actually happens in the world, but are idealized and perhaps at times, oversimplified relationships between things or ideas. The scientific 'laws' of Galileo or Newton were of this character. The planets, in fact, do not follow the laws of planetary motion as described by Newton, except in an approximate way (and for this, it's best to not even look at the planet Mercury). This same observation applies to the Social Sciences, and even more so. If in the first case, we have a science of unintelligent phenomena that follows a certain patterns only generally, how many more variables will enter in to a science which relies on human action, thought and emotion?4 Knowing this then, Dr. Quigley recognized that there were certain patterns of human behavior that repeated themselves throughout history, and if we could recognize from these patterns where we

1 Georgetown has the single largest percentage of alumni in Marquis Who's Who. 2 Intellectual, religious, social, political, economic and military sciences. 3 C. QUIGLEY, The Evolution of Civilizations, Macmillan Press, NY, 1961, page 2. Labeled as Mixture, Gestation, Expansion, Conflict, Universal Empire, Decay, and Invasion.

PAGE

stand presently (whether we were in the period of expansion, or period of decay), we could better direct the course towards the future by making the political and economic adjustments necessary. He was not the first to observe these historical changes of nations,5 but he is one of the more recent, and therefore had much more historical data to draw from. He had wanted to make these observations understood in the United States, in the hopes that this knowledge would help redirect that country from the decline Quigley believed he was witnessing. It always frustrated him that each nation, including our own, regards its own history as unique and the history of other nations as irrelevant to it.6 These observations were met with harsh criticism by some of his students,7 yet it is difficult to disagree with his observations, which are unparallelled by anyone today. Complimenting the work of Dr. Quigley will be the writings of Ann Pettifor (Quigley died in 1977). Dr. Pettifor is a product of colonization in South Africa, and grew up watching the gold mines in operation. She is currently a fellow of the New Economics Foundation, has been actively involved in educating the general public on international finance, and was also directly responsible for the cancellation of 100 billion in debt for 35 developing (third-world) countries. She is a perfect compliment to the work of Dr. Quigley, in that she picks up economic and political history at the very time Dr. Quigley was unable to continue. As far as I am aware, she has no idea of his existence. By utilizing these two authors in particular, from different cultures and different parts of the world, we can also dispell the idea of 'conspiracy theories'. This is why the reader will find we occasionally parallel quote both authors. It is the purpose of this paper to draw on their knowledge and experience (as well as supplimental materials) and apply it to the subject of the European Union and Mediterranean Culture, and the possibility of a Euro-Mediterranean union.

4 C. QUIGLEY, The Evolution of Civilizations, page 32. 5 It is believed that Ephorus (4th BC) was the first, followed by other historians through history, the most famous is probably Arnold Toynbee. Dr. Quigley readily admitted studying the works of Toynbee, and critics believe Dr. Quigleys' work to be much more solid than that of his predecessor.

PAGE

The Mediterranean has always been the center of the world. They are the gateway for trade between the East and West, the South to the North. All reason therefore, should tell us that those countries, united, should be the economic power of the world but they are not. From approximately 600AD the area has been torn apart through wars and religious division, the Christians and Muslims both responsible for the destruction, and world wars for which they had very little responsibility. Their culture, creativity, sense of learning and adventure crumbled to what some call an amoral familism a mere shadow of their former intellectual, artistic and ethical greatness for which they had been known. The Mediterranean area went through their period of Gestation, Expansion, Conflict, Empire, Decay and Invasion. The civilization which took their place in greatness and power was Europe. European countries also went through their periods of Gestation, Expansion and Conflict ultimately to arriving at two World Wars. The European Union was initially founded in 1952 to prevent further wars between these countries, and to increase economic security within the member states. A certain economic criteria had to be met by member countries, but this criteria didn't need to be met until after their entrance. When the European monetary union was agreed upon in 1991, only two countries met the criteria: Luxemburg and Finland.8 The other countries 'promised' to meet the criteria after their entrance. They never did. Unfortunately, the creation of the European Union as a way to solve financial problems was nothing more than shuffling the same old deck of cards, done in a rather hurried fashion, with the benefit that member countries would have easier access to loans from the IMF (International Monetary

6 C. QUIGLEY, The Evolution of Civilizations, page 15. 7 No one wants to admit that their country may be in decline, or that mistakes were made that need to be addressed. 8 Special Report: The Emu Criteria, http://news.bbc.co.uk/2/hi/special_report/single_currency/66945.stm Accessed January 17, 2012.

PAGE

Foundation). This gave the false impression of economic growth, and gave the IMF, a non-elected body, more political power. The EU member states only weakly addressed and only temporarily resolved the real issues of their own declining countries, each counting on the other to carry the weight of the rest. The truth is, the strongest of the European countries England, France, Germany have very little experience at working at a true economic system. Their means of expansion in the past had been through invasion and colonization. During the height of colonialization in the United States, England possessed 39% of all shipping in the world. In 1922, they held sway over almost a quarter of the Earth's total land mass and were the largest colonial empire in the world. The French colonial empire was the second-largest in the world, yet today, both struggle with the rest of the European countries for a stable economy. What happened to all of their tremendous wealth? In the opinion of Dr. Quigley, in the case of England, the government wasn't paying attention. The Industrial Revolution spread from them to Europe and the United States, to South America and to Asia. Then, World War I occurred. If there is any one way for a rich country to become poor, it is through war. Instead of being a creditor, England quickly became a debtor to the United States financial institutions.9 Then, the financial institutions took over. What we are observing is that the European Union countries are following Dr. Quigleys' 7 Stages of Historical Change, they are currently in the period referred to as Decay, and therefore any union with them would have to be made in very careful steps, to insure, for example, that the Mediterranean countries don't simply get pulled down further into decay with the EU. To further demonstrate the validity of these observations, the next few chapters will be devoted to providing examples of social and cultural decay within the EU (and the United States). These examples will include the fields of Education, the recognition of differing Cognitive Systems

PAGE

throughout the world, the importance of Tradition, and our inability today to distinguish the Means from the Ends. Once these demonstrations have been established, we can then retrace European history, and perhaps discover exactly where the problem lies.

Education

Todays' problems war and peace; urban problems; environmental pollution and the destruction of our natural basis for living; the rising tide of mental illness, emotional instability and personality disorders; racial problems; growing social disintegration and violence; the problems of under-developed countries - Not one of these falls into one of the academic departments into which our educational establishment is divided.10 These disciplines were separated at the end of the 19th century, when it was believed that politics was separate from economics, and that neither was closely related to psychology, history or technology. All these different aspects became 'specialized'. None of these problems which we must solve if we are not to perish falls cleanly, or even mainly, into any existing academic discipline. That is precisely why we are so helpless in dealing with them.11 "Once when we were all philosophers we used a common language to talk of common things. ... But the division of labor, in both society and in the science of society, has long since moved us far down different paths from our once-common center. We are no longer philosophers; we are rather doctors of philosophy of a variety of kinds. We appear to be using different languages to talk about unrelated things. Some talk of incomes, prices and investment. Others talk of status, role and socialization. And when we are obliged to advise our governors on the concrete issues of the day, neither governor nor advisor understands how each one's knowledge articulates with that of the other."12
9 C. QUIGLEY, Tragedy and Hope, page 276. 10 C. QUIGLEY, Obsolete Academic Disciplines, The HOYA (1967 or 1968). http://www.carrollquigley.net/Articles/Obsolete-Academic-Disciplines.htm Accessed October 30, 2011. 11 Ibid. 12 J.S. BERLINER, Economy, Society and Welfare. A Study in Social Economics. NY, Praeger Publishers, 1972, page 3.

PAGE

In the early 1900s, most American government officials felt ignorant of finance, so they sought advice from bankers whom they considered to be experts in the field. The history of the last century shows, as we shall see, that the advice given to governments by bankers, like the advice they gave to industrialists, was consistently good for bankers, but was often disastrous for governments, businessmen, and the people generally.13 We need to understand the difference between what is a substantially good idea that will profit the majority and what is merely a good idea that will profit only a few, just as we have to understand the difference between a real education and a diploma. Education, correctly defined, means training toward growth and maturity to prepare a person to deal, in a flexible and successful way, with the problems of life and of eternity. It does not mean ... obtaining a ticket of admission to some other bureaucratic structure, however large and rich that may be. ... Today, over-specialization and the great speed of change have destroyed, or almost destroyed, the context of everything, and we are reduced to purely operational definitions and meanings. But, since all operational definitions are solipsist, and everything in the world today has become isolated and subjective, any meaning in either teleological or contextual or even functional terms has become impossible and we are faced with the total triumph of the Meaningless and The Absurd.14 'Training towards growth and maturity to better deal with the problems of life' is what we would consider a real eduction; 'obtaining a ticket of admission' (a diploma) is not allowing the individual to be a person, but only a subject human cattle as it were, and not human capital. The tone of these quotes may seem emotional, but Dr. Quigley was reacting to changes taking place at Georgetown and other American universities in the 1960's. In the opinion of Dr. Quigley, Georgetown had started to compromise its educational program to become a fifth-rate Harvard, rather than retain its Catholic Christian traditions.

13 C. QUIGLEY, Tragedy and Hope, page 67. 14 C. QUIGLEY, Is Georgetown University Committing Suicide?, The HOYA (April 28, 1967). http://www.carrollquigley.net/Articles/Is-Georgetown-University-Comitting-Suicide.htm Accessed December 15, 2011.

PAGE

He also stated in the above quote that we are faced with the triumph of the meaningless and absurd. This might sound like the grumblings of an old professor, but Daniel Kahneman might agree. Here is part of his brief interview on why people don't make rational choices: During [the '90s] when there was terrorist activity in Thailand, people were asked how much they'd pay for a travel-insurance policy that pays $100,000 in case of death for any reason. Others were asked how much they'd pay for a policy that pays $100,000 for death in a terrorist act [alone]. And people will pay more for the second, even though it's less likely. What psychology and behavioral economics have shown is that people don't think very carefully. They're influenced by all sorts of superficial things in their decision-making, and they procrastinate and don't read the small print. You've got to create situations so they'll make better decisions for themselves. ... You'd certainly want to reframe decisions about savings. People should have to opt out [of automatic payroll savings plans] instead of opt in.15 Back in the early 1900's, H.G. Wells stated that man's fate depended on a race between education and disaster. This was similar to the feeling which animated Cecil Rhodes when he established the Rhodes Scholarships,16 about a century before Wells. Rhodes and his collection of powerful political friends became later loosely known as the (Alfred) Milner Group. One of their powerful members was Lionel Curtis,17 who believed that people could be educated for freedom and responsibility by giving them always a little more freedom, a little more democracy, and a little more responsibility than they were quite ready to handle. This is basically a Christian attitude the belief that if men are trusted they will prove trustworthy ....18 In the US, we no longer have intellectually satisfying arrangements in our educational system, in our arts, humanities or anything else; instead we have slogans and ideologies. An ideology is a religious or emotional expression; it is not an intellectual expression. So when a society is reaching its end, in the last couple of
Quigley also notes in this article that there was an essay in Newsweek entitled, Why Is There No First-Rate University In The Nation's Capital? B. LUSCOMBE, 10 Questions, Time Magazine, December 5, 2011, page 60. Kahneman received the Nobel Prize in Economics in 2002. He has never taken a course on the subject. C. QUIGLEY, The Anglo-American Establishment, (NY: Book in Focus, Inc.), 1981. Page 64. Lionell Curtis is the uthor of The Commonwealth of Nations (1916); Dyarchy (1920), and Civitas Dei: The Commonwealth of God (1938). C. QUIGLEY, The Anglo-American Establishment, page 64.

15 16 17 18

PAGE centuries you have what I call misplacement of satisfactions. You find your emotional satisfaction in making a lot of money, ...19 or in a host of rather meaningless exercises.

10

Jacob Viner once noted that people are not narrow in their intellectual interests by nature; it takes special and rigorous training to accomplish that end.20 What I believe is lacking in many public schools and universities today is something the ancient Greeks called . This could be simply translated as education, but education in the Greek mind meant more than studying only the basics. Education for the ancient Greeks wasn't about simply learning a trade that, they considered ; we might be tempted to translate this as 'banal', but it etymologically refers to mechanical tasks unworthy of a learned citizen.21 Since the ancient Greeks strongly believed in self-government, their education also included rhetoric, philosophy, natural history, geography, as well as ethos - good habits. This training, they believed, made a man good and made him a capable citizen or king. Have the courage to use your own intelligence.22 This is the motto of the Enlightenment. Timothy Leary also boldly bleated out, Think for yourself. Question authority. These statements weren't made to inspire actual intellectual development; they were made to impose the writers' own ideology over the current one. Unless one has a proper educational formation, how will he know what questions to ask? How will he see through complex terminology, the vague phrasing, the intentional manipulation of authors, the contradictions? How can one presume to call into question a system that they don't understand?

19 C. QUIGLEY, Lecture, "Public Authority and the State in the Western Tradition: A Thousand Years of Growth, A.D. 976 1976, Georgetown University, 1978. http://www.carrollquigley.net/Lectures/The-State-of-Communities-AD-976-1576.htm Accessed January 19, 2012. 20 E. HELLEINER, States and the Reemergence of Global Finance, From Bretton Woods to the 1990s, London: Cornell University, 1994. page vii. 21 Paideia http://en.wikipedia.org/wiki/Paideia Accessed February 13, 2012. 22 I. KANT, Risposta alla domanda: che cos lilluminismo? 5 dicembre 1783. Traduzione dalloriginale tedesco di Francesca Di Donato.

PAGE

11

In the Italian language, 'education' and 'culture' appear almost synonimous, and one can only tell the difference by the context of the sentence. In the English language, we might say a man is 'cultured', but the presumption is that he is not only educated he is rich. However, the word culture originally stems from the Latin and was linked to agriculture, and by this is meant the way of life of the people. If the ancient Romans had been primarily hunters instead of farmers, we might have ended up with a word (and perhaps an attitude) that was very different from 'culture'. In Italian, this understanding has developed over the centuries to signify not just civilization, but also knowledge. Herman Daly wrote that few colleges and universities teach economic history, because exploring this history ... might expose the frailties and fallacies of economic assumptions that the profession likes to regard as universal and timeless.23 Lional Curtis wrote, back in 1916, that responsible government ... can only be realized for any body of citizens in so far as they are fit for the exercise of political power. In the Dependencies the great majority of the citizens are not as yet capable of governing themselves and for them the path to freedom is primarily a problem of education In this world commonwealth the function of government is reserved to the European minority, for the unanswerable reason that for the present this portion of its citizens is alone capable of the task civilized states are obliged to assume control of backward communities to protect them from exploitation by private adventurers from Europe ...24 The Milner Group had the idea of Westernizing India through education, planning that the Westernized Indians would in turn, help their backward Indian cousins. Instead, much more money was spent on higher education than elementary, and those Indians who became Westernized either

23 A. PETTIFOR, The Coming First World Debt Crisis, NY: Palgrave Macmillan, 2006, page 123. 24 C. QUIGLEY, The Anglo-American Establishment, pages 64-65. Regarding the phrase, backward communities: Although it may sound patronistic, we the basic intelligence of civilizations as those who are more technically advanced. Those more technically advanced civilizations are naturally going to see themselves as much more adept at leading and governing those less developed civilizations.

PAGE

12

abandoned their backward cousins and left the country, or pursued their own interests within the country. The history of British relations with India in the twentieth century were disastrous. the materials they had to work with were intractable and there were inconvenient obstacles at home, but these problems were made worse by the misconceptions about India and about human beings 25 These misconceptions were found within the changing educational system of the British, the different cognitive systems of the two cultures, and racial abuse by ill-mannered English.26 All done with the best of intentions, these good intentions contributed largely to the dissolution of the British Empire, the race wars in South Africa, and the unleashing of the horrors of 1939-1945 on the world.27

Differing Cognitive Systems

Different peoples in different parts of the world think very differently from each other. This should be self-evident, but the United States has made serious political mistakes, thinking that they could just move into a backward country, throw money at the problem and it would solve itself. The reality turned out to be very different. The United States have spent untold billions of dollars in the last 20 years, with almost no constructive results. We were told it was an economic problem, capable of solution with technical training and inflows of capital. We poured money into backward countries, corrupting them, and making millions of native peoples discontented, only to discover that the real obstacles were in the minds of those peoples, in the way the looked at human experience, and in their value systems, which were largely incomprehensible to us. The only real help we got from the academic community came from

25 C. QUIGLEY, The Anglo-American Establishment, page 224. 26 It is important to note that according to Dr. Quigley, the Milner Group, who were actually in charge of the English presence in India, were in no way racially prejudiced against them. 27 op.cit.

PAGE anthropology because it was almost the only academic field which tried to study societies different from ourselves as functioning wholes.28 The African values the present, whereas many middle-class Americans put all emphasis on the importance of the future Each society has such a system of categories and of valuations of categories. This is known as the society's 'cognitive system.' It is the most important thing we can know about any society and the most difficult to learn. When individuals speak of the 'inscrutable Chinese' or the 'mysterious East,' they are really saying these remote peoples have cognitive systems that are different from theirs and are therefore more or less incomprehensible to them.29

13

On a practical level then, how do Western Christian missionaries communicate with Eastern Hindu's, who believe the body is a prison and that all tangible reality doesn't actually exist? How do they communicate with Muslims, when their first question is, explain the Trinity? When people or groups with different cognitive systems interact, frictions and clashes occur, in many cases, without anyone's being able to see why. This happens even when there may be a maximum of goodwill on both sides. Cognitive sophistication makes it possible to know both one's own cognitive system and that of the different group with which one works so that one may be able to translate both talk and actions from one such system into the other, while recognizing the conventional and arbitrary nature of both. Cognitive sophistication is so rare and so difficult to acquire that interaction across cultural barriers is a frequent cause of conflict. This applies to all relationships across cultural barriers not only to those with other nations and major cultures but also to those within a culture, such as relationships between suburbanites and slum dwellers or between races or social classes.30 Another example can be seen in the Eastern verses Western attitude towards manual labor: Aversion to manual labor, in particular work that involves dirtying one's hands, is another Bedouin attitude that has widely influenced the Arab mind. Many middleclass or working-class Americans quite willingly engage in tinkering around the house
28 C. QUIGLEY, Obsolete Academic Disciplines. 29 C. QUIGLEY, Needed: A Revolution in Thinking. http://www.carrollquigley.net/Articles/Needed-A-Revolution-in-Thinking.htm Accessed February 19, 2012. Specifically, we are referring to the Bantu speakers (Kenya, Somalia and Unganda), who use a verb system based on completed or uncompleted action, whereas European languages, by contrast, have a past, present future verb system. The language structure is how these cultures structure their experience. The Bantu structures time with a broad extended duration of the present, a fairly long past, but an almost dimensionless future. Therefore, the 'future preference' of our value-system is not compatible with the 'present preference' of the Bantu. Exporting our social and economic way of life on them has proven to be very difficult. This is called the Sapir Whorf Hypothesis, and it is a controversial idea, because it is difficult to prove scientifically. M.S. FINDLAY, Language and Communication: A Cross Cultural Encyclopedia, Santa Barbara: ABC-CLIO, Inc. 1998, page 163. 30 C. QUIGLEY, Needed: A Revolution in Thinking.

PAGE This American readiness to 'do it yourself' contrasts sharply with the Arab unwillingness to engage in any activity of this kind, or, in fact, to undertake any type of manual work. Americans like to do such work, while the Arabs of similar socioeconomic status not only dislike it, but consider it actually demeaning.31 No self-respecting Saudi would ever collect trash We leave it to the beasts.32

14

Arabs detest manual labor as strongly as they hold their scriptures precisely because of their scriptures. In this case, Genesis, 2:17-19. Cursed is the ground for your sake. In toil shalt you eat of it all the days of your life '. Why must man toil all his life? In the Arabic world where the Genesis tradition was formulated, work is a curse. In the Middle Eastern ethic, therefore, from pre-biblical times down to the present, the ideal has always been to escape the curse of work, to acquire riches through a stroke of luck, by finding a treasure by buying something cheap and selling it at a high price ...33 This is contrary to Western thought, which had embraced a Catholic ethic, believing that Jesus God, ennobled work by taking it on Himself. Work is therefore no longer a curse, but personally edifying a means to salvation. Differing cognitive systems is one reason why, in the case of the Mediterranean countries, there has been a boundary conflict area between the three post-Classical civilizations (Byzantine, Western, and Islamic) since A.D. 600. After having been the backbone of the Mediterranean civilization for over a thousand years, ... the shift was so disruptive of community life in the area from the Golden River to the Golden Road that its problems have not been solved since, especially in view of the social and ethical failures of the two post-Classical religions, Christianity and Islam These failures of religion made it impossible to create any religious, territorial, or social community, and forced living patterns back toward the 'amoral familism' of the extended family.34
31 32 33 34 R. PATAI, The Arab Mind, page 120. J. PERKINS, Confessions of an Economic Hit Man, page 42. R. PATAI, The Arab Mind, page 122. C. QUIGLEY, Mexican National Character and Circum-Mediterranean Personality Structure. American Anthropologist, 75: 319-322. This quote is a summation of Raphael Patai's book, Golden River to Golden Road, from 1962. http://www.carrollquigley.net/Articles/Mexican-National-Character-Circum-Mediterranean-Personality-Structure.htm

PAGE

15

Paul Romer, hailed by many as Nobel Prize worthy, is completely uninterested in cognitive insight. He wants to help poor, developing communities by developing 'charter cities' creating a 'democratic' city alongside a city whose government has become institutionalized, and therefore can not develop. His economic theory really isn't saying anything new one could hardly call it 'radical'. Paul Romer, according to Aditya Chakrabortty, is a California economist who doesn't know enough imperial history. If he did, he'd realise that the English Whig Thomas Macaulay said it all before, when he said of India in 1833: 'It is scarcely possible to calculate the benefits which we might derive from the diffusion of European civilisation among the vast population of the East . . . To trade with civilised men is infinitely more profitable than to govern savages." That was a view of the Empire as the white man's burden: then it came with Orientalists, now it is accompanied by corporate logos. In both cases it comes with great lashes of condescension and a lack of knowledge about the countries one is imposing on.35 Dr. Romers' latest endeavor is to create a Hong Kong in Honduras. It's governance will be neither authoritarian nor fully democratic. Rich countries can oversee the administration of the charter cities, in particular the judicial system and police to protect them from interference by the 'host nation'. Somehow, this will avoid the abuse of power that is so common in poor countries: The idea of setting up a charter city echoes the way that big companies adapt to change. They often set up new divisions unencumbered by the old rules. These can be dramatic successes. Target, America's second-largest discount retailer, began life as an internal start-up but eventually took over its parent company, Dayton Hudson.36 In other words, if all goes well, this charter city (financed by outside investors, with its own government and laws), could one day take over Honduras.

Accessed February 19, 2012. A. CHAKRABORTTY, Paul Romer is a Brilliant Economist But His Idea for Charter Cities is Bad, http://www.guardian.co.uk/science/2010/jul/27/paul-romers-charter-cities-idea Accessed January 1, 2012. Thomas B. Macauley was an early member of what will develop into The Milner Group, as mentioned by Carroll Quigley, The Anglo-American Establishment, page 31. 36 Hong Kong in Honduras, http://www.economist.com/node/21541392 Accessed February 18, 2012. 35

PAGE

16

Dr. Romer proudly speaks of the Chinese city Shenzhen as the model the first 'Special Economic Zone' city, created on the model of Hong Kong, with 'market rules'.37 TheTaiwan firm Foxconn moved in, and received the contract to make the iPhone, using Chinese labor. Nine laborers have killed themselves there in one year.38 A few others had attempted, but were found in time.

The Importance of Tradition

Tradition as Identity People follow traditions whether they are aware of them or not. There is no such thing as a tradition that holds one back from the future, because traditions surpass both place and time. However, if certain individuals don't know the basis for those traditions, they may exhibit certain behaviors that might seem strange to others. The semetic proclivity to repetition for example oral tradition - goes back to the time before it was easy to write, or for people who were constantly moving and couldn't afford the added weight of books. Usually for religious reasons, it was to recall how God protected them, and it is still practiced on certain Jewish holidays. For other Arabs, there were also tribal traditions, sometimes legendary but more often with religious meaning. Oral tradition is a challenge today in the Arab world. One Tunisian professor explained the value and benefit of oral tradition within the Mediterranean cultures. The history of the peoples and the meaning of their myths and traditional beliefs helps one to know who they are and communicates that they are a member of a long, large and interesting 'family'. Other Arabs however, bemoan the

37 Paul Romer's Radical Idea: Charter Cities, http://www.ted.com/talks/paul_romer.html Our subject starts at 7:10. Accessed February 18, 2012. 38 Chinese Factory Under Scrutiny As Suicides Mount, http://www.time.com/time/world/article/0,8599,1991620,00.html Accessed February 18, 2012.

PAGE

17

backwardness of the country in cultural development39 and cite the Arab proclivity to repetition as the very reason why their culture is not developing. The Tunisian professor sees Oral Tradition as a valuable and necessary part of Arab life; another Arab in Iraq see it as a stumbling block to the future. In the Western world, they have had the opposite problem: When American Catholics decided to leave their ghetto (right after the Jews and just before the Italians and Negroes), they did what any people fleeing a ghetto do: they uncritically embraced the outside world, without seeing that that world was moving rapidly toward increased chaos, corruption and absurdity. They abandoned completely a basic principle of the Christian West: that salvation is to be found, either for the individual or for the community, only in slow growth in terms of one's own traditions and background.40 Perhaps the problem might be in both these cases is that there are persons who don't explore the content of their oral tradition. In the case of the Western world, there are some people can move to another culture, go to a university in a new city for example, and discover and accept the oral tradition of this new city because they didn't explore the content of that tradition either. They are just exchanging one tradition for another. This is outlined in a rather complicated form by Kiely, S.J., which we have tried to repeat here. Keily, quoting Professor Lawrence Kohlberg, uses the phrase hierarchy of abstract values.41 These are beliefs like abortion, belief in one or several gods, women wearing a fular, etc., that come from a religious or family tradition. When students attend a university, some go through a period of moral reasoning referred to has the 4 substage. Their moral 'norms' encounter other 'norms' vastly different. They have never been taught that there are other 'traditions' in the world, and thus confronted, go through a period of disorientation and lose confidence in their traditional morality. The affect can be permanent or temporary.

39 R. PATAI, The Arab Mind, page 340. 40 C. QUIGLEY, Is Georgetown Committing Suicide? 41 S.J. KIELY, Psychology and Moral Theology, Lines of Convergence. Gregorian University Press, Italy, 1987. pages 56-

PAGE

18

The main differences between Islam and Christianity lie in their normative and psychological functions; in their view of the supernatural, their exclusiveness, and their teleological orientation, the two are more similar than different. This means that the crucial difference is not doctrinal but functional; what Muslims fear from Westernization is not that it will cause their co-religionists to abandon Islam in favor of Christianity, but that it will bring about a reduction of the function of Islam to the modest level on which Christianity plays its role in the Western world.42

Tradition as Fulfilling Human Needs One of the most progressive personality disorders in many societies is neurosis and psychoses which are basically simply forms of self-deception, combined with an obstinate refusal to face the facts of the situation.43 Pride is a particulary subtle and aggressive type of self-deception, and it affects everyone to a greater or lesser degree. But, when this pride leads to a self-deception that is so misguided as to allow a person or a country to forget, deny or denigrate their own heritage and traditions that person or nation then becomes dangerous to themselves and to others around them. The history of abortion and euthanasia is a vast topic, but we can offer at least a few observations. Slavery of persons became unfashionable in the US in the mid 1800's; it was abolished. But, in freeing the slaves, the South also created a large, unemployable population farmers survived because labor had been relatively free. The quick and simple solution was the introduction of abortion.44 The propaganda however, backfired. It was married, middle-class white women who started

58. 42 R. PATAI, The Arab Mind, pages 155-156. 43 C. QUIGLEY, Is Georgetown University Committing Suicide?. http://www.carrollquigley.net/Articles/Is-Georgetown-University-Comitting-Suicide.htm Accessed December 15, 2011. 44 Only with the demise of slavery did 'inventiveness' enter into the Southern states. They had actually considered shipping all the 'ex-slaves' back to Africa, but abortion was less expensive. Before 1860, all inventions in the US came from the Northern states. C. QUIGLEY, The Evolution of Civilization, page 134: The cotton gin, mass production and interchangeable parts,

PAGE

19

to consider abortion as a viable option. What was once considered a last resort over the course of the 19th century, became socially acceptable by the late 20th century. Now, it is common and legal in most countries throughout the world, including the Mediterranean, but the affects have hit the north European/American populations the most. Germany has killed off enough of their own population to justify closing 2,000 schools. They claim to have begun a process to correct this problem, but it may be too late.45 The majority of the European population today is estimated to be over the age of fifty, whereas in the Middle Eastern countries, 70-80% of their population is under the age of thirty five.46 In the mean time, eight million Muslim Turks now inhabit Germany, and no one seems to understand why the Muslims haven't integrated. Preservation of the species is a primary and fundamental law, which is the standard and measure of all the other natural laws depending from it.47 However, governments of richer countries are depopulating. Looking at this subject from an entirely secular viewpoint, abortion makes no economic sense unless you are seeking short-term gain over long-term investment. Nationalism was the excuse of the18th-19th centuries48 to divide countries and separate peoples. The 19th and 20th century has seen the rise of Globalism.

45

46 47 48

steamboat, screw propeller, revolver, electric motor, vulcanizing rubber, sewing machine and anesthesia are all inventions from Northern states. About 500,000 women aged under 30 have left for Western Germany in the past 15 years. After 1990, the fertility rate in the East dropped to 0.77. Since 1989, about 2,000 schools have closed because of a paucity of children. http://en.wikipedia.org/wiki/New_states_of_Germany http://www.nytimes.com/2009/06/19/world/europe/19germany.html Accessed December 15, 2011. For more updated statistics, see https://www.cia.gov/library/publications/the-world-factbook/ F. KHOURY (Jordanian Embassador to Italy), speaking during a conference. Another source for statistics can be found at As Europe Ages, Its Economies Look Vulnerable, http://www.npr.org/2011/09/24/140736119/as-europe-agesits-economies-look-vulnerable Accessed December 15, 2011. J. LOCKE, Essays on the Law of Nature, 113-14. These dates will vary from author to author. One could say Nationalism began in the early 1400's with the Council of Constance, where bishops voted to elect a pope in national blocks. The 'Peace of Westphalia' of 1648 solidified boundaries, but only to a certain extent. Some say Globalism truly began with the discovery of the Americas, yet others will say, not until we have a global currency did we truly have Globalization.

PAGE A state of individuals, such as we have now reached in Western Civilization, will not create persons, and the atomized individuals who make it up will be motivated by desires which do not necessarily reflect needs. Instead of needing other people they need a shot of heroin; instead of some kind of religious conviction, they have to be with the winning team. Human needs are the basis of power.49

20

Human beings have basic needs they have social and emotional needs that in the past, were satisfied through their families, communities and religious beliefs. In the US we no longer have communities, except shattered, broken, crippled, isolated ones.50 Pope Benedict XVI has observed, "At the heart of every culture, whether perceived or not, is a consensus about the nature of reality and the moral good, and thus about the conditions for human flourishing.51 People need other people. When these needs aren't met, we find people like Sirhan Sirhan, who killed Robert Kennedy because no one had ever noticed him and he was determined that, from now on, someone would know he existed.52 In some Chinese factories, workers are not allowed to speak to each other while working and are made to sign an 'anti-suicide' pledge.53 The belief of Dr. Quigley is that in certain civilizations, over the course of several centuries, fundamental communities are broken up and gradually disintegrate into smaller and smaller groups, ending in what we call nuclear families, a mother and perhaps a father who eventually lose all discipline and control of their children, because they no longer have the support of a community. The result of this process is a state which is not only sovereign but totalitarian, and it is filled with isolated or atomized individuals. Liberals try to destroy communities with the aim of making all individuals identical, including boys

49 C. QUIGLEY, Lecture, "Public Authority and the State in the Western Tradition. Accessed January 19, 2012. 50 Ibid. 51 Pope Benedict XVI, Difficulties and Hopes of the Catholic Church in America. http://press.catholica.va/news_services/press/vis/dinamiche/b0_en.htm Accessed January 23, 2012. 52 C. QUIGLEY, Lecture, "Public Authority and the State in the Western Tradition. Other mass murders committed as a result of loneliness or social disintegration include George Hennard (1991, 23 dead, 20 injured), Toi Musuo (1938, 30 dead), Campo Elias Delgado (1986, 30 dead, 20 injured), Martin Bryant (1996, 35 dead, 21 injured). 53 You are NOT allowed to commit suicide: Workers in Chinese iPad factories forced to sign pledges, http://www.dailymail.co.uk/news/article-1382396/Workers-Chinese-Apple-factories-forced-sign-pledges-commit-

PAGE

21

and girls. And since what we get in history is the result of diverse groups struggling for their wants, the individual, detached from any sustaining community, is faced by gigantic and irresponsible corporations. The disintegration of the community in the Arab countries may be much more difficult to accomplish. First, there is no concept of privacy among Arabs. In translation, the Arabic word that comes closest to privacy means 'loneliness'!54 Community is a very strong part of their culture; hospitals are designed with facilities for relatives a patient cannot possibly keep them out, even if he or she wanted to.55 Humans also have religious needs they have a need for a feeling of certitude in their minds about things they cannot control and do not fully understand. Today in the Western world, religion is a burden to politics and business, and many in those fields act as if religion has nothing to do with politics and business,56 when the fact is, the structure of every state in any civilization has always been based on mans' idea of a deity. The disruption of communities, the destruction of religion and the frustration of emotions were greatly intensified by the Industrial Revolution If you can be bought with a higher salary to go to San Diego and give up all your friends and associations,57 that is a sign of the external control the society has on its' civilians today. The Western world, when it was Christian, had an end - a 'final cause'. Because of its Christian tradition, work58 was personally edifying and a means to an end and the governments were another instrument towards that same end. Like the government, all other entities that assisted in achieving this end were also the means.

suicide.html Accessed January 19, 2012. 54 M. NYDELL, Understanding Arabs; A Guide for Modern Times, 4th edition, Boston: Intercultural Press, 2006, page 20. 55 Ibid., page 21. 56 Guest speak Paolo Garonna at the IASEM conference in 2011 in Maratea immediately dismissed the topic of religion during a discussion regarding European versus Mediterranean country's needs and interests. 57 C. QUIGLEY, Lecture, "Public Authority and the State in the Western Tradition. 58 By work, we will include economy, as a surplus of things produced by work enable the acquisition of other

PAGE

22

In the West today, religion has largely lost its function as an inner sustaining force ... most Westerners do not feel the need to be saved, although they certainly feel insecure. Toynbee speaks of 'the spiritual vacuum which has been hollowed in our Western hearts by the progressive decay of religious belief that has been going on for some two-and-a-half centuries.59 By contrast, in the Arab world, and in the entire Middle East, all religions have such spiritual sustaining power. All share with Islam the 'characteristic of being able to generate a psychological certainty of possessing the Truth, of following the Right Path, and of wielding the Perfect Key to the gate of the Great Beyond'.60 Furthermore, a common theme of Arab writers and journalists is the necessity for scrutinizing Western innovations, adopting what is beneficial and rejecting those that are harmful. They want to modernize, but not at the expense of certain traditions.61 This is not to say that retaining ones traditions is the key to economic success, but it is a key to a healthy, vibrant community. Empires don't collapse because of deficiencies in the military or political level they collapse because no one cares. Because Europe has abandoned their traditions and refuses to reform itself in a true sense, they can only blunder forward into an unexplored future (as in existentialist philosophy or in the contemporary flood of writings on theology).... No solution is possible or conceivable unless it is firmly rooted in our Western Christian heritage.

This does not mean going back to anything we had before, but it does mean going back to our roots in the past, and growing onword from those roots, which must be found in a period of our past before the alien gods of material affluence, of power-thirsting, of sexobsession, of egotism and existential self-indulgence, became the chief ames of life, eagerly embraced, as they are by our 'trahison des clercs'.62

things, therefore, an economy. 59 R. PATAI, The Arab Mind, page 153. Patai is referring to Arnold J. Toynbee (1889-1975). 60 R. PATAI, The Arab Mind, page 153. 61 M. Nydell, Understanding Arabs: A Guide for Modern Times, Fourth edition, Boston: Intercultural Press, 2006, page 7.

PAGE

23

Decreasing expansion, growing class conflicts, declining democracy, dying science, decreasing inventiveness, and growing irrationality63 are signs of a society that is in Decay (the 6th stage of the 7 Stages of Historical Change). Inventiveness, on the other hand, is a sign of the vitality interior and exterior of a society. If a nation doesn't continually re-invent themselves through some type of Expansion (the 3rd stage of the 7 Stages), that nation is destined to fall. Inventiveness doesn't depend on 'inventive races' or poverty.64 It depends on whether innovation is encouraged and rewarded. In Germany it is not easy to start a business. In fact, in none of the core EU countries is it as easy as say, Singapore, the United States or New Zealand.65 In order for a society to remain powerful and strong, it must be organized in such a way that it has an incentive to invent new ways of doing things,66 it must be able to accumulate a surplus, and this surplus must be used to pay for or utilize new inventions. This inventiveness is their instrument of expansion much less costly and damaging than creating wars. But, invention is not an easy thing. How is it that non-inventive Eastern Europeans suddenly became inventive in the United States?67 Niente cultura, niente sviluppo. Dove per 'cultura' deve intendersi una concezione allargata che implichi educazione, istruzione, ricerca scientifica, conoscenza. Per studio dell'arte si intende l'acquisizione di pratiche creative e non solo lo studio della storia dell'arte. La dicotomia tra cultura umanistica e scientifica si rivelata infondata proprio grazie a una serie di studi cognitivi che dimostrano che i ragazzi impegnati in attivit creative e artistiche sono anche i pi dotati in ambito scientifico.68

62 C. QUIGLEY, Is Georgetown Committing Suicide? 63 C. QUIGLEY, The Evolution of Civilizations, page 158. 64 C. QUIGLEY, The Evolution of Civilizations, page 120. Some societies, like Mesopotamian civilization or our own Western civilization, are very inventive. Others, like many primitive tribes, or civilizations like the Egyptian, are very uninventive. Nor does 'necessity' have much to do with inventiveness. If it did, those peoples who are pressed down upon the subsistence level, or even below it, in their standards of living, like some of the Indian tribes of the Matto Grosso, would be very inventive, which they are not. Or, if invention were in any way related to necessity, the poverty stricken fellahin of Egypt or Trans-Jordan or the equally hard-pressed coolies of China or the peasants of India would have devised some new and helpful methods for exploiting their available resources. This is far from being the case. 65 Economy Rankings, http://www.doingbusiness.org/rankings Accessed January 21, 2012. 66 C. QUIGLEY, The Evolution of Civilizations, page 132. 67 C. QUIGLEY, The Evolution of Civilizations, page120. 68 Niente cultura, niente sviluppo, Il Sole 24 ore, http://www.ilsole24ore.com/art/cultura/2012-02-18/niente-cultura-

PAGE

24

The leaders of modern European countries want to create a sustainable system, not a culture. Berlin has around 400 houses of prostitution, legalized and taxed. Can a city grow and develop with only 'bars and beaches'? The Forbes list of America's 20 Most Promising Companies69 has as Number 1 a new fast food restaurant chain (we already have about 200); over half the companies were either internet or computer related businesses; the rest included such 'creativity' as food delivery. No industry was listed. The 'degeneration of political culture and the brutalization of social conflicts' are two of the characteristics of the last 20 years.70 Misplaced satisfactions leads to an increasing remoteness of desires from needs, and this leads to an increased confusion between the means and the ends.

Confusing Means with Ends

There are many different political philosophies: Marxist, Capitalist, Communist, Democratic, Socialist, etc., and they all look good and work perfectly on paper. Dominated by the state, or a private-enterprise-based economy both models can work quite well, as long as they reflect the structure of power in the society.71 All one needs is good management which truly looks to the needs of the people they represent. A Communist government could be just as easily plagued with corruption as a Democratic one. Political Liberalism was an agreement on justice as fairness between citizens, based

niente-sviluppo-141457.shtml?uuid=AaCqMotE&p=2 Accessed February 28, 2012. 69 America's Most Promising Companies, http://www.forbes.com/lists/2011/28/most-promising-companies-11_land.html Accessed January 9, 2012. 70 A. PETTIFOR, ed., Real World Economic Outlook; The Legacy of Globalization: Debt and Deflation. Hampshire: Palgrave Macmillan, 2003, page 17, quoting D. Messner and F. Nuscheler, World Politics Structures and Trends' in P. Kennedy (ed), Global Trends and Global Governance, (London: Pluto Press), 2002. 71 This is partially why quickly imposing democracy in Arab countries is not as successful as we might like. One need only to look at Latin America or Africa, where they have an election and if the army doesn't like the man who is elected, they move in and throw him out. Or, the uneducated masses who have never voted before, and they're handed a piece of paper to put in a box. They are not practicing democracy if they don't know what their actions mean.

PAGE

25

on the common reason (and the natural72 goodness) of all citizens. There is also 'Social Liberalism', which is focused on the freedom to develop. Political conservatism is seen as having respect for tradition and the preservation of the Christian religion. Again, they all look great on paper. The real difference between these political philosophies is how they are actually practiced how extreme are the members. We have in the United States and Europe today for example, a radical form of liberalism that Lord Milner referred to back in 1906 as an odious form of Socialism ...which attacks wealth simply because it is wealth, and lives on the cultivation of class hatred.73 The never-ending debates between Democrats and Republicans in the United States, and similar debates throughout the world's democracies, reflect the subtle but important differences of opinion about how to allocate resources. Often, these are disputes about whether the private sector can handle the allocation of resources on its own or whether the government should be involved.74 A government, no matter what type it is, is nothing more than an instrument for a civilization to operate successfully. They are only the means they are not the 'end' (human needs are the 'end'). We are not working for the government, but for our own security and future, and this is organized and helped by people we elect for this purpose. Some cultures can work better with a Socialist 'instrument' than they could with a Capitalist one. This is not Utilitarianism doing whatever is necessary to obtain maximum happiness. We are referring to a government who sets out to satisfy human needs, then, later on, human wants. Some cultures are more productive with an absolute monarchy. When the social arrangements of a government transform from meeting real social needs into social institutions serving

72 Here, we begin to see a shift away from a Christian based morality. This will develop into the idea that men have an innate goodness that is distorted and enslaved by bad institutions and conventions. As Rousseau said, 'Man is born free yet everywhere he is in chains.' Thus arose the belief in the noble savage, ... C. QUIGLEY, Tragedy and Hope, page 34. Nineteenth century books often assume a polarization of the individual versus the state, while many twentieth century books seek to portray the state as the solution to most individuals' problems. - C. QUIGLEY, The State of Communities, 976A.D.-1576A.D.. 73 C. QUIGLEY, The Anglo-American Establishment, page 68. We mention this because some accuse the current American President, Barrack Obama, of following the Socialist formula, whereas others see him as Anticolonist: D. D'SOUZA, How Obama Thinks, http://www.forbes.com/forbes/2010/0927/politics-socialism-capitalism-privateenterprises-obama-business-problem.html Accessed February 19, 2012. 74 M. LIEBERMAN R. HALL, Introduction to Economics, South-Western College Publishing, Mason, Ohio, 2000. page 5. This is sometimes referred to as the 'Principle of Subsidiarity'.

PAGE

26

their own purposes regardless of real social needs, it has become an institution. When this instrument the government - becomes an institution, it is usually because of how the surplus of that country or nation was applied. In economic terms, you can say that the rate of investment decreases, and if it is not made up by reform or circumvention, the invention and accumulation of surplus begin to break down.75 As a government becomes decreasingly effective in the purpose for which it was intended, it becomes more and more an institution. Such institutions do not have the flexibility to adjust to the pressures of a changing reality.76 For example, in the late 1940's in the United States, a rivalry began between the various armed services for congressional appropriations began a struggle over slicing the annual budget. Each of these armed services also had alliances with the industrial complexes that supplied their equipment. These industries not only supply funds, such as advertising, for each service to carry its message to the congress and the people, but also exert every influence to retain equipment and tactics in obsolescent modes and types by dangling, before the high officers who can influence contracts, offers of future well-paving consultant positions with the industrial firms concerned. And those retired officers encouraged their successors to do the same, at the same time inhibiting the lower officers of the armed services in their efforts to obtain fresh ideas, fresh tactics, and fresh equipment for America's defense.77 In the case of Europe, Europe is unsurpassed in its inventions and discoveries and there is nothing wrong with technical progress as such. What is wrong with Europe is that, because of her irreligiosity, she has nothing to guide her, and so confuses means with ends. This being the case, power and science are ever growing in Europe, while ethics and religion are ever declining. This is why all progress leads Europe nowhere but to suicide. As

75 C. QUIGLEY, The Evolution of Civilizations. Pages 138-139. 76 C. QUIGLEY, The Evolution of Civilizations, page 17. 77 C. QUIGLEY, Tragedy and Hope, pages 758-759.

PAGE European civilization is corrupt in its roots, no wholesome fruit can come of it. Its dominant role is merely the consequence of the decline of Islam.78

27

Long study of the history of many social organizations has convinced me of one thing: when any such organization dies be it family, business, nation, religion, civilization or university, the cause of death is generally 'suicide.' Or, if we must be more specific, 'suicide by self-deception.'79 An example of this 'self-deception' can be seen in this next example - in this case, confusing the consequence with the cause: The French and German governments had tried to convince the entire membership of the European Union that they need to give up fiscal sovereignty, or else [face an international financial crisis]. As Ann Pettifor explains, It is not the answer to the crisis. It's addressing the wrong problem. It's addressing a problem of fiscal deficits which are a consequence of the financial crisis, and it's that which they should be addressing. They're not looking at the causes of the crisis, which is a broken global banking system. Instead, they're looking at the consequences, and trying to fix fiscal deficit, and that's not going to solve the problem.80 Our last example will be taken from a yet-to-be-published book from the University Santa Croce in Rome. One of the authors is Michel Camdessus, former Managing Director for the IMF (1987-2000), and a member of the Pontifical Commission for Justice and Peace, among other highlevel positions. The title of his article is From a 'Culture of Greed' to a Culture of Common Good. In it, he states that this present economic crisis, is the first true crisis of globalization itself. Dr. Camdessus seems to have forgotten the Great Depression. We will see shortly that this is actually the fourth great, global economic crisis.81 Dr. Camdessus also states that the cause of the crisis is a culture of greed, as if it is the entire world

78 R. PATAI, The Arab Mind, page 156. 79 C. QUIGLEY, Is Georgetown Committing Suicide? 80 A. PETTIFOR, Cross Talk with Peter Lavelle. Recorded December 6, 2011. http://www.youtube.com/watch?v=UhByd7zSYzc Accessed January 21, 2012. 81 Other authors have counted many more 1873, 1884, 1890, 1893 and 1907, according to E. WICKER, Banking Panics of the Gilded Age. Cambridge, 2000.

PAGE

28

population that is at fault. Although he acknowledges that the financial market was left to its own devices without rules or monitoring institutions, he lays the blame primarily on a culture of consumption, and he bemoans the fact that the IMF was not allowed to broaden its mandate from monetary to financial issues. This could sound very right and reasonable. The general public consumes, we use up valuable resources, it's the fault of the consumer. However, buying and selling is what makes an economy. If an industry creates a product that consumes energy, is this the fault of the customer who buys it, or is it the fault of the industry and the governments who permitted that product to be created? Many years before, John Maynard Keynes saw that the markets' major flaws were rooted in monetary arrangements that favoured speculation and excess consumption rather than production of a product. The market Keynes is referring to is not some untouchable force that is moved by other untouchable forces the market is presidents of financial institutions, or governments (manipulated by them) who affect policies to make an economy the way we have it. A government can create consumption through tax cuts and an increase in transfer expenditures. 'Transfer expenditures' are payments for things that don't provide a service or production. Charities, donations, gifts, scholarships, grants for researching 'awareness programs' free money, which are temporary expedients, can prevent a more severe economic decline, but they stimulate consumption, not investment. Ronald Reagan did this while president.82 These measures don't help economy in the long run. When an economy is in recession, the long term solution is for the government to invest in public works expenditure that will pay for itself; this gives investors more confidence to invest in industry to produce.83

82 The Saudi royal family also did this, when they, after their incredible financial success in 1981, augmented the government expenditure. [including] free medical care and free education, including university studies. Students received free tuition, books, room and board, and a stipend of $300 monthly. R. PATAI, The Arab Mind, pages 341-343. Unfortunately, the benevolence on their part only turned into expectation on the part of their university graduates the Saudi royal family gave away too much, and all the new graduates expected jobs paying at least $10,000 a month in addition to a car and a secretary. Now, there is cultural greed. 83 Extracted from: V. CHICK, D. COE, A. PETTIFOR, Eight Fallacies in the LSE Keynes/Hayek Debate,

PAGE

29

Camdessus isn't entirely wrong our crisis is certainly the result of greed, but it's not common consumer greed. It is a result of the greed of private financial institutions who have pressured and manipulated the governments for over two centuries. His solution is to grant the IMF more political power (they are a non-elected body), eliminate the veto power of the US and European countries on critical issues, and to create yet another (unelected) committee to make critical global decisions. His ideas would be great for the IMF and for bankers in general, but it would be disastrous for the general population.

Economic History

Having briefly provided examples of social and cultural decay within the northern European countries and America within the fields of Education, Tradition, Culture and Religion, we can now go back and retrace European history, and perhaps discover exactly where the problem lies. Dr. Quigley once told his class that there was little point in discussing the Third World when they knew so little about how their own society works.84 The work of many economic historians has been very subjective based on their own experiences or education, bur rarely on the history of economics itself or on the total capacity of a given society. Francois Quesnay considered the economy as a system of interacting parts but he considered only agriculture. For him, merchants, artists and manufactures added nothing to labor and capital. Adam Smith, who saw Glasgow transformed by trade and industry, saw the economy in terms of labor, discovering that ten men making a pin will make more pins per day than one man making a

http://www.primeeconomics.org/?p=635 Accessed February 18, 2012. 84 C. QUIGLEY, Weapons Systems and Political Stability: A History, Washington: University Press of America, Inc., 1983,

PAGE

30

pin but he did not consider agriculture.85 And so also, in regards to the actual policy, what the farmer likes, the factory worker doesn't like. Yet, there are still basic fundamental, principles that economics must follow and be maintained if a society is to remain viable.

The Seeds of Globalization The seeds of globalization begin in the late 1700's with a group of intellectuals who would meet at particular dining clubs in London.86 They started out as a social group, didn't really have a particular name or agenda, and contained members of both political parties. By the mid 1800's, they had split into Conservative or Liberal groups. The Lord Salisbury group (Conservative) was considered too social for Alfred Milner, who took over the Cecil Rhodes87 group. 'The Milner Group' were one of the very few organized, powerful political entities, and skilled as they were in political and personal relations, endowed with fortune, education and family connections, they were all fantastically ignorant of economics88 even those members of the group, like Brand or Hichens, who were regarded within the Group as its experts on the subject. Brand was a financier, while Hichens was a businessman in both cases occupations that guarantee nothing in the

page x. 85 Book Review, Making Adam Smith, http://www.economist.com/node/16740415 Accessed December 31, 2011. We may note in passing, as Herman Daly has reminded us, that while neo-liberal economists from Adam Smith onwards have always urged nations to adhere to economic frameworks which give citizens maximum freedom (freedoms which do not oblige them to take into account the interests of the nation as a whole) no firm or corporation would give its staff the same privileges. A. PETTIFOR, The Coming First World Debt Crisis, page 32. 86 C. QUIGLEY, The Anglo-American Establishment, page 30; A. PETTIFOR, The Coming First World Debt Crisis, page 31. Carroll Quigley can name the early members of this elite society Adam Smith, Edward Gibbon, Rudyard Kipling, Lord Acton. His source was Lord Oxford and Asquith, Memories and Reflections, Boston, 1928, I, 311-325. For verification purposes, it is easier to access http://pds.lib.harvard.edu/pds/view/14181257?n=2&printThumbnails=no Accessed January 13, 2012. 87 The colony Rhodesia was named after him (the Republic of Zimbabwe as of 1980). 88 C. QUIGLEY, The Anglo-American Establishment, page 65. Although we may note some obvious similarities between running a business and running a government, there are also some fundamental differences. Ineffective employees are fired; in a society, they get welfare.

PAGE

31

way of economic knowledge or understanding.89 The goal of Economics is to understand how business activities fit into the broader picture of our society. The field of business, by contrast, takes an exclusively how-to approach.90 Globalization begins with this select group of individuals, they controlled almost every aspect of it, and each period of globalization has ended disastrously. The first period was a time when Britain's finance sector was bankrolling railway, commodity and mining projects around the world.91 Europe was able to produce its own iron, steel, and copper to build its own railroads and telegraph wires, but the non-European world could construct these things only by obtaining the necessary industrial materials from Europe and thus becoming the debtor of Europe.92 Some members of the group (until 1931, at least) believed that the key to all economics and prosperity was considered to rest in banking and finance.93 The first part of the group prevailed in English politics until 1931, then the second part of the group prevailed until at least 1945. To protect their loans, London bankers needed an international financial system that would guarantee the value of loans made,94 and guarantee the value of the repayments. They needed a standard framework that would not fluctuate because it rained too much or not enough in any given locality. The system selected was the 'gold standard', and the men in charge were not prime ministers and presidents they were international bankers who wrote the rules of international trade. International bankers prefer to loan to governments and kings because it is more profitable than loaning to private individuals. The loans are larger, and are secured by the nations' taxes. These men included

89 Ibid. 90 M. LIEBERMANR. HALL, Introduction to Economics, page 2. 91 A. PETTIFOR, The Coming First World Debt Crisis, page 30. Specifically, the first railways were completed in England in 1830, Canada (1832), India (1855) and Pakistan (1861). 92 C. QUIGLEY, Tragedy and Hope, page 28. 93 C. QUIGLEY, The Anglo-American Establishment, page 122. Milner himself however, insisted that financial questions must be subordinated to economic questions and economic questions to political questions. As a result, if a deflationary policy, initiated for financial reasons, has deleterious economic or political effects, it must be abandoned. 94 A. PETTIFOR, The Coming First World Debt Crisis, page 30.

PAGE

32

the famous Meyer Amschel Rothschild,95 whose male descendants generally married first cousins or even nieces, and established banking branches in Vienna, London, Naples, and Paris, as well as Frankfort,96 guaranteeing cooperation in ways no other banking system would ever achieve. To play along with the new international framework, only three rules needed to be followed: 11. A countrys' central banks had to set the value of the local currency in relation to a fixed amount of gold; 2. Their domestic money supply was backed by the quantity of gold actually held in the central bank's reserves; 3. Each country would give its residents complete freedom to move gold in and out of the country.97

If a country freely allows its residents to move gold out of the country, how is the value of that local currency really secure? And, creditors insisted that any loans made to that country would be repayed in gold (thereby further lowering the amount of gold reserve) not Canadian dollars or Indian rupees, whose values fluctuated. This all came to a crashing halt with the first Great Depression, which took place in 1873. Because they were tied to the 'gold standard', the increments in gold holdings had become insufficient to keep up with the demand for money that had resulted from growth in the economy. In 1886 the world's largest known gold reserves were discovered London's powerful finance sector, led by Cecil John Rhodes and Lord Alfred Milner, then set about using all the instruments of imperial power, including war, to extract and transfer that gold from South Africa to the vaults of London. In 1887, just one year after the discovery, Rhodes registered and boldly named a new company in London: 'Gold Fields of South Africa Ltd.' In 1899, local resistance from Afrikaner Boers (farmers) led to war, and to the defeat of the British in 1902. But Britian's finance sector went on to win the peace. For by World War I Britain had secured sole purchasing rights to all South Africa's gold production.98

95 Lord Rothschild (1744-1812) had been named trustee in the will of Cecil Rhodes. Other banking names include Schroder (assets today worth 211.6bn) and Morgan. 96 C. QUIGLEY, Tragedy and Hope, page 57. Today, this is referred to as endogamy within the family. 97 A. PETTIFOR, The Coming First World Debt Crisis, page 32. 98 Ibid, page 31.

PAGE

33

During the period 1880-1914, financial, trade and labour markets continued to be liberalized, leading to a globally integrated economy,99 but also draining the natural resources of third-world countries in favor of the more powerful European countries. At the same time, rather than sideline or minimize the role of the state, the gold standard before and after 1914 'had the ironic effect of intensifying the importance of the nation as a unified entity'.100 Britain didn't notice the changes that were taking place in Germany until Germany started to outdo them in sales, service and quality of goods. Germany started acquiring African colonies and were actually the ones who encouraged the Boers in their war against Britain.101 Strange alliances began between nations (for financial and strategic reasons), wars started between Eastern European countries, squabbling initiated over which European country would colonise which part of in Africa, and a few accidents took place which fueled popular hysteria between nationalities - the assassination in Austria was a relatively minor event, which alone, wouldn't have started a world war. Beginning in 1914, this war once again brought to an end the system that had been so carefully put in place by London's bankers.102 Because of this second great economic crisis, politicians finally subordinated the interests of finance through controls over the movement of capital and goods.103 Legislation blocked international transactions and the export of gold was either banned or heavily restricted. In late 1918, the first World War ended, and the bankers immediately began again to wrest control of the financial system. Winston Churchill and others were subject to unrelenting pressure

99 Ibid, page 34. 100 Ibid, page 34, quoting Block, F., 'Introduction' to the new edition of The Great Transformation by Karl Polanyi. Beacon Press, 2001. 101 C. QUIGLEY, Tragedy and Hope, page 187. 102 A. PETTIFOR, The Coming First World Debt Crisis, page 34. 103 Op.cit., page 35.

PAGE

34

from Montagu Norman, Benjamin Strong, governor of the Federal Bank of New York, and other Federal Reserve officials.104 The Treaty of Versailles concluded (among many other things) that Germany was at fault for the war.105 Under great pressure in 1921, Germany accepted the reparations bill of 132 billion marks. 82 billion was forgiven, but Germany was expected to pay on the other 50 billion at a rate of 2.5 billion a year in interest and 0.5 billion a year to reduce the total debt.106 The German government, probably resentful at being forced to accept these arrangements, refused to reduce its own expenditures and made little effort to reduce their spending on imports; for there part, creditors refused to allow a free flow of German goods (Britian charged a usurious 26% tax on imports from Germany), and they refused to accept the goods as payment.107 The Dawes plan followed,108 adding the ability for Germany to make further loans (not adjusting the principle), which put them even further in debt after five years. Germany paid 10.5 billion marks in reparations but borrowed abroad a total of 18.6 billion marks. Nothing was settled by all this, but the international bankers sat in heaven, under a rain of fees and commissions.109 And, everything continued on this course, until the U.S. stopped lending. The crisis of the 1920s and 1930s had taught western societies grave lessons about the folly of allowing 'the money-lenders to take over the temple' the main theme of President Franklin D.

104 Ibid, concurs with C. QUIGLEY, Tragedy and Hope, page 67: Naturally, the influence of bankers over governments during the age of financial capitalism (roughly 1850-1931) was not something about which anyone talked freely, but it has been admitted frequently enough by those on the inside, especially in England. In 1852 Gladstone, chancellor of the Exchequer, declared, 'The hinge of the whole situation was this: the government itself was not to be a substantive power in matters of Finance, but was to leave the Money Power supreme and unquestioned.' On September 26, 1921, The Financial Times wrote, 'Half a dozen men at the top of the Big Five Banks could upset the whole fabric of government finance by refraining from renewing Treasury Bills.' In 1924 Sir Drummond Fraser, vice-president of the Institute of Bankers, stated, 'The Governor of the Bank of England must be the autocrat who dictates the terms upon which alone the Government can obtain borrowed money.' 105 "Un'assurdit internazionale": in questi termini poco diplomatici che Eugenio Pacelli nell'agusto 1920 giudicava "quella che viene chiamata la 'pace' di Versailles." P. CHENAUX, Pio XII. Diplomatico e pastore, Paris: Edizioni San Paolo, 2004, page 111. 106 Op.cit., page 263. 107 Ibid, page 264. 108 Largely a J.P. Morgan production (C. QUIGLEY, Tragedy and Hope, page 265), ... the Milner Group has always had very close relationships with the associates of J.P. Morgan and with the various branches of the Carnegie trust. (C.

PAGE

35

Roosevelt's inaugural speech, in 1933 at the height of the international financial crisis.110 His speech has a contemporary resonance: The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit. They [financial institutions] know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.111 By 1925, all of the most important economies of the world were once again tied to the gold standard.112 Most countries were in a hurry to go back. The US went first, because they had the advantage of a large supply of gold. Britain was next, but they weren't so lucky. Churchill didn't know that speculators saw the pound rising and started selling their dollars to buy pounds, driving the value of the pound up faster than it was actually worth, which discouraged exports. He brought Britain back into the gold standard, only to find that the pound was overvalued and their gold reserves were low. Unions protected their wages, and taxing the upper classes failed since they were in control of the government. Britian went into deflation, and only after many years reached stabilization. Belgium and France on the other hand, devalued their currency which encouraged exports. Mussolini overvalued the lira higher than the French franc for the simple motive of prestige, which hurt Italy's economy.113 After all the major countries re-accepted the gold standard, it only took - this time - four years before the New York Stock Market crashed. It was bankers, British and foreign, who dictated the

QUIGLEY, The Anglo-American Establishment, page 183). 109 C. QUIGLEY, Tragedy and Hope, page 266. The Young plan followed after the Dawes plan. 110 A. PETTIFOR, The Coming First World Debt Crisis, page 26. 111 A. PETTIFOR, ed., Real World Economic Outlook, page 8. Roosevelt is the only US president elected to four terms in office (1933 1945). Primary source: Franklin D. Roosevelt, First Inaugural Address, http://www.bartleby.com/124/pres49.html Accessed January 9, 2012. 112 Op.cit., page 36. Also, C. QUIGLEY, Tragedy and Hope, page 282, where Quigley clarifies, ... the financial efforts of the period after 1918 became concentrated on a very simple (and superficial) goalto get back to the gold standard not 'a' gold standard but 'the' gold standard, by which was meant the identical exchange ratios and gold contents that monetary units had had in 1914. 113 C. QUIGLEY, Tragedy and Hope, pages 286-287.

PAGE

36

financial decisions of the British Government, making their credits conditional on the adoption of specific detailed economies, including in particular, a cut in the rates of unemployment benefit.114 For the third time in 56 years, amidst the vast destruction of financial crises, a prolonged depression and a world war, the system of economic government by international capital markets was discredited and brought to an abrupt end.115 Why? Among many other factors (how gold was distributed, falling wholesale prices, the under/over-valuing of currency), it was because people were borrowing money to buy stocks; brokers were lending investors more than two-thirds of the face value of the stocks they were buying; more money was out on loan than the entire amount of currency circulating in the U.S. at this time. Speculation fueled further rises, which created an economic bubble.116 When the stock-market crashed in New York in 1929, the U.S. stopped lending. The Rothschild bank in Vienna declared bankruptcy in 1931.117 The British abandoned the gold standard, and the French bank collapsed in 1932, which brought the US to its most painful stage in 1933. The recovery that took place was rather halting and uncertain. Insofar as it was caused by government actions, these actions were aimed at treatment of the symptoms rather than the causes of the depression, and these actions, by running contrary to orthodox economic ideas, served to slow up recovery by reducing confidence.118 A series of inflations, reflations and deflations119 within the various countries followed, as one country's economic solution resulted in reprisals from other countries, which in turn, called for reprisals from other countries.120

114 A. PETTIFOR, The Coming First World Debt Crisis, page 37. 115 Ibid, page 36. 116 A 'bubble' is when things are priced at a higher rate than is justified by their fundamental value. 117 This in turn caused bank failures in Germany, Hungary, Czechoslovakia and Poland. 118 C. QUIGLEY, Tragedy and Hope, page 311. 119 Banks are fanatical devotees of deflation (which they called 'sound' money from its close associations with high interest rates ... Ibid, page 57. 120 ... in highly industrialized countries, the economic systems were dominated by a handful of industrial complexes. The French economy was dominated by three powers (Rothschild, Mirabaud, and Schneider); the German economy was

PAGE

37

The chief cause of World War II was the banker-engendered deflationary crisis of 19271940.121 Some say it was Treaty of Versailles itself, but the decisions made there didn't have to be carried out with such rigor. The leading characteristic was an extraordinary willingness to borrow money for the purposes of new real investment at very high rates of interest rates of interest which were extravagantly high on pre-war standards, which have never in the history of the world been earned.122 It weakened both the democratic and parlimentary systems, prolonging the war by the early defeats of these states, and gave the energy necessary for aggression in those countries where the government did collapse. During the Second World War, and in the immediate post-war years, politicians and economists tried hard to restore stability and equity to the international financial system.123 If we get through the present crisis and are given a further chance to try and put the world in order, we shall then feel a need to take a broader and deeper view of our problems than we were inclined to take after the War of 1914-1918 ...124

dominated by two (I. G. Farben and Vereinigte Stahl Werke); the United States was dominated by two (Morgan and Rockefeller). Other countries, like Italy or Britain, were dominated by somewhat larger groups. C. QUIGLEY, Tragedy and Hope, page 458. 121 Ibid, page 309. Hitler wanted revenge for what took place after the the Treaty of Versailles. He didn't care about Jews until the Austrian bank collapsed. A. HITLER, Mein Kampf, London, Hurst and Blackett Ltd, English translation, 1939: As I thought that they [Jews] were persecuted on account of their Faith my aversion to hearing remarks against them grew almost into a feeling of abhorrence. I did not in the least suspect that there could be such a thing as a systematic anti-Semitism. Then I came to Vienna. pages 52-53. ... the present Reich has no other possible means of bearing the burden of charges which an insane domestic and foreign policy has laid on it. Here still another wedge is placed on the former, to drive it in still deeper. Every new debt which the Reich contracts, through the criminal way in which the interests of Germany are represented vis--vis foreign countries, necessitates a new and stronger blow which drives the under wedges still deeper. That blow demands another step in the progressive abolition of the sovereign rights of the individual states, so as not to allow the germs of opposition to rise up into activity or even to exist. pages 435-436. Hitler was not a trained politician; he was a trained soldier, and reacted to the financial pressure by doing what soldiers do - attacking those he thought responsible not only the Jews, but also the French and English rather than challenge those responsible for the crisis, or to transform the international financial system. - A. PETTIFOR, The Coming First World Debt Crisis, page 96. 122 A. PETTIFOR, The Coming First World Debt Crisis, page 38, quoting John Keynes. 123 A. PETTIFOR, ed., Real World Economic Outlook, page 8. 124 C. QUIGLEY, The Anglo-American Establishment, page 309, quoting a letter by Toynbee to the Council of the Royal Institute for International Affairs.

PAGE

38

They had learned that unrestrained capital flows led to financial instability and ... financing old liabilities with new liabilities ... were incompatible with, and hindered free trade.125 The bankers, not the least embarrassed or inhibited because of the damage they had done, dominated U.S. Foreign economic policy and tried to create a more open international financial order by applying more aggressive pressure on Western European countries to liberalize their exchange controls ...126 Towards the close and continuing after World War II, the northern powers began to lay their foundations for the post-war world. A series of conferences were held, and these are the meetings which created such international organizations as FAO, UNESCO, the UN, the IMF, the World Bank and the Bretton Woods system of economics. The most important aspects of this system for our concerns was that it imposed controls over the movement of capital exchange controls, and restored to governments the power to fix interest rates, which gave them policy autonomy and allowed them to cut back on foreign imports and balance these with exports.127 The IMF was created to supervise these arrangements, to act as emergency lending to countries with temporary difficulties, and also to negotiate any necessary changes to fixed exchange rates.128 However, what the members of the IMF really wanted was complete power to run as much of the world as possible. John Maynard Keynes ... wanted the IMF to have a matching power to draw funds from countries with surpluses to give it the even-handed capacity to maintain international equilibrium between counties. The US, at that time the only surplus country, vetoed this proposal.129

125 Op.cit. 126 E. HELLEINER, States and the Reemergence of Global Finance, page 6. 127 The Bretton Woods system was by no means perfect, but it led to a period of economic and social stability . elected governments and their people were put in the driving seat. The movement of capital was regulated and provided the means and mechanisms for governments to set interest rates. Britain's Labour government, led by Clement Attlee, attempted a deliberate cheap money policy.A. PETTIFOR, The Coming First World Debt Crisis, page 27. 128 Ibid, page 37. 129 Ibid page 38.

PAGE

39

At the same time, those in the banking and finance industry were determined to get the financial system back under their control.130 Just as Churchill had been pressured after World War I, Attlee's Chancellor Hugh Dalton, who succeeded in nationalizing the Bank of England, was ... challenged by Finance, in the shape of the City of London. In his memoirs he wrote: 'The forces against me, in the City and elsewhere, were very powerful and determined I felt I could not count on a good chance of victory. I was not well armed. So I retreated.131 When the European Monetary Union was founded, not 50 years later, the IMF asked for and received substantially what had been rejected by the US, and was rejected by Britain, about twenty-two years ago: Yes, the Commission [IMF] does want to increase its powers. Yes, it is a non-elected body, and I do not want the Commission to increase its powers against this House. Mr Delors, President of the Commission,132 said in a press conference that he wanted the European parliament to be the Democratic body of the Community, he wanted the Commission to be the Executive, and he wanted the Council of Ministers to be the Senate. No! Or, perhaps the [British] Labor party would give all those things up easily? Perhaps being totally incompetent with monetary matters, they'd be only too delighted to hand over the full responsibility as they did to the IMF to a central bank. The fact is, they have no competence in money, no competence on the economy, so yes, the right, honorable gentleman would be glad to hand it all over. What is the point of trying to get elected to parliament, only to hand over your sterling, and to hand over the powers of this House to Europe?133 Every economic system has to be regulated. That is, somehow, decisions must be made as to what is produced, how much of it, and who gets it.134 Every other aspect of our life also engages some type of regulation; job duties and responsibilities, personal diet and exercise, studies and tests before a diploma, driving rules and tickets for infractions against driving laws, proper conduct at a restaurant,

130 After the war Keynesian policies for the management of interest rates were gradually abandoned, under great pressure from the finance sector. Ibid, page 74. 131 Ibid, page 27. 132 French Economist, President of the European Commission from 1985-1995. 133 Margaret Thatcher's statement of 30 October 1990 to the House of Commons on the European Council meeting at Rome held on 27/28 October. http://www.youtube.com/watch?v=U2f8nYMCO2I Accessed January 16, 2012. 134 C. QUIGLEY, The Evolution of Civilizations, page 384.

PAGE

40

and moral and religious beliefs are regulated by that particular religion. The same must also be said for economics. Broadly speaking, between 1945 and 1975, governments did their best to restrict imports to what they could pay for Per capita GDP growth in Latin America, for example, in the years from 1960 to 1980, rose by 80%. By contrast, per capita GDP growth in Latin America since liberalization in 1980 has risen by only 10%.135 Citing the WTO, the IMF notes that annual growth rates in world trade reaching 12% a year between 1951 and 1975, but never rose above 10% after 1975.136 We must be honest and say that the Cold War was also responsible for some of this economic success. The Cold War allowed the build-up of arms (which made up for what was lacking in consumer spending), the development of more sophisticated machinery, and the occasional small war. Quigley, in comparing the domestic politics of 1929 and 1957 noted, the graduate of June 1929 was eager to get out into the prosperity rat-race, while the graduate of June 1957 is hesitant to leave the relative quiet of academic life. The goal of the new alumnus has shifted from riches to security.137

1971 As mentioned earlier, British financers did very well for themselves in the 1800's colonizing Africa, India, and had completed the Suez Canal by 1869. They fell into huge debt with the US as a result of WWII. To pay these loans, the US demanded of Britain that it pay its debts by selling off gold reserves and international investments. This considerably weakened Britain's position as a world power.138 Twenty years later, partially as a result of the Korean and Vietnam wars, the US became a huge debtor. In 1971, President Nixon declared that the US would no longer conform to the Bretton

135 A. PETTIFOR, The Coming First World Debt Crisis, page 39. See Appendix I for an understanding of what Gross Daily Product truly encompasses. 136 Ibid, page 27. 137 C. QUIGLEY, Politics. SFS yearbook Protocol, 1957. http://www.carrollquigley.net/Articles/Politics.htm

PAGE

41

Woods system (the US would not deplete their gold reserves to pay debts). Not only did they default on all of their foreign loans, Nixon declared that creditors should offer new loans to the US, and in exchanget, the US would offer Treasury Bills a receipt for the debt. It is through this maneuver that the dollar became the global reserve currency and today, instead of holding gold reserves, all countries mainly hold low-cost loans to the US (Treasury Bills) as reserves. Rich and poor countries alike hold these Treasury Bills in their central banks, as evidence of their creditworthiness, and of the health of their economies.139 All of this comes about, not as a result of several meetings over a period of months or years, with a committee of scholars or responsible government leaders, or experienced economists, but by a country who was able to default on their loans and get away with it because they were so large and important in the global economic market. Since 1970 the world has changed beyond recognition. ... Banks and finance centers are the centers of the cities now [no longer churches, or even community centers], and finance companies do business around the clock, all a result of the experiment known as 'globalization' or market liberalism ...140 Quite simply, financial globalization has taken place because it is in the interests of a small elite of politically and economically dominant people who have done extremely well out of it ...141 Today, our exchange rates are determined by financial flows as opposed to the balance of trade.142 Removal of these controls allows owners of money to move their funds to any part of the world. Naturaly, they move it to where returns, profits, or capital gains were highest. This made them richer, but also more powerful. In 1970, 90% of international transactions were accounted for by

Accessed January 9, 2012. 138 A. PETTIFOR, The Coming First World Debt Crisis, page 40. 139 Ibid, page 42. 140 A. Pettifor, ed., Real World Economic Outlook, page 5.

PAGE

42

trade: 10% by capital flows (the movement of money). Today, we have a complete reversal: 90% of transactions are accounted for by financial flows not directly related to trade in goods and services.143 Before 1970, investors - owners of money - could only invest in engineering or manufacturing within their own country. Now, with this control removed, these owners of money can invest in any manufacturing anywhere in the world. We could invest in General Motors in the US, but we won't make as much profit as we would investing in Toyota in Communist China (where citizens are treated as slaves, and, we will take our profit the new capital out of China and invest it in stock somewhere else). If GM wants our investment money, we can pressure them to do better, or threaten to take our money somewhere else. It is this very attitude and 'freedom' that pressured CEO's and managers to manipulate their balance sheets; to inflate the real value of their companies144 and other such tricks. This is also why there hasn't been any growth with finance-led globalization companies have been reducing their levels of investment in order to increase dividend payouts to aggressive shareholders.145 Ninety percent of the economic growth that we read about in the newspaper is through banking. The first of the policy changes required by the economists was that government regulations are removed over capital, over lending and borrowing, and over the creation of different financial instruments.146 This began in the 1980's, when consumers could suddenly finance home entertainment systems, power tools, musical instruments, and even cell phones. The average consumer didn't pay much attention to the interest rates, which could be as high as 25%. Especially important for the economists was that controls and regulations were removed over capital moving across national

141 142 143 144 145 146

Ibid, page 31. Ibid, page 47. Ibid, page 14-15. Ibid, page 15. Ibid, page 39. Ibid, page 12. This began in the US under Ronald Reagan, and in Britain, under Margaret Thatcher.

PAGE

43

boundaries. Most governments agreed to this except two, who also happen to have the highest officially recorded rates of economic growth in the recent past.147 These countries are India and China.

The New Globalization Some observers believe the 'new Milner' is Friedrich A. Hayek. He won the Nobel Prize in Economics in 1974 for his pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.148 It was he who approached politicians in Britain, and through the perseverance of he and his colleagues (the Mont Plerin Society), re-educated politicians both right and left in the virtues and powers of market liberalism. When we hear our politicians pushing for 'reforms' of the financial system, labor markets or trade they actually mean fundamental changes both to social and political relationships, and their impact in the past has been revolutionary.149 These reforms follow the laissez-faire policies desired by these economists, which in reality means, 'leave us alone'.150 When the politicians and governments changed their policies and removed these regulations, they abandoned their responsibility for managing finance, for preventing crises, for managing their country's exchange rate, and for protecting the weak, immature, the elderly, the unemployed and, the

147 Ibid. 148 "Laureates, 1974", http://www.nobelprize.org/nobel_prizes/economics/laureates/1974/index.html Hayek shared the award with Gunnar Myrdal. Accessed February 19, 2012. 149 Op.cit., page 11. 150 Just as the negative idea of the nature of evil flowed from the belief that human nature was good, so the idea of liberalism flowed from the belief that society was bad. For, if society was bad, the state, which was the organized coercive power of society, was doubly bad, and if man was good, he should be freed, above all, from the coercive power of the state. Liberalism was the crop which emerged from this soil. In its broadest aspect liberalism believed that men should be freed from coercive power as completely as possible. In its narrowest aspect liberalism believed that the economic activities of man should be freed completely from "state interference." This latter belief, summed up in the battle-cry "No government in business," was commonly called "laissez-faire." Liberalism, which included laissez-faire, was a wider term because it would have freed men from the coercive power of any church, army, or other institution, and would have left to society little power beyond that required to prevent the strong from physically oppressing the weak. C. QUIGLEY, Tragedy and Hope, page 35.

PAGE

44

infirm.151 They no longer protected the nave from slick sales gimmicks that provoked poorer citizens into financing products and homes at ridiculous interests rates, in order to keep up appearances with their richer acquaintances.152 Today, because of the restrictions that were lifted, credit is created from nothing. It is created on demand when a corporation or country applies for a loan from a commercial bank. The commercial bank does not have billions of dollars locked up in its vaults. When a loan is approved, this money is then printed ex nihilo and then interest rates are charged on top of that principle. The bank pays an interest rate to the printing bank (the central bank), and passes that charge (along with their own interest rates, processing fees and other charges) to the borrower and there is no legal limit to how much interest they can charge. The rate of interest is set by the central bank, and it is nothing more than a social construct, varied only by rational choice.153 In 1978 for example, the Bank of England's Minimum Lending Rate was 6.6%. In 1979, capital controls were lifted, and the Bank rate was 15.6%.154 As payments are made, the bank then gets an increase in actual, physical cash they have given the lender only numbers in an account balance credit the banks know they only need about 1% of the loan in actual cash at the bank location, and can have the currency printed on demand if need be. If a country falls behind on their payments, banks then charge additional fees. If it was an IMF styled

151 A. PETTIFOR, ed., Real World Economic Outlook, page 12. 152 In 1977, the Community Reinvestment Act was passed in the US. Deregulation begain in 1980. Mortgage activity grew at least 25% a year from 1994 2003. The US government encouraged banks to provide loans to people who could not afford them. Called the subprime mortgage, the plan was designed to create affordable housing, but many of the people who were given these loans weren't actually qualified to receive them. This also gave a very false impression of economic well-being of the country. These worthless loans were translated into 'mortgage-backed securities' that were sold to other unsuspecting investors until there was no one left to buy them. Both the government (for allowing it) and the banks (for pushing for the reform, and then taking advantage of it) were responsible for the economic problems that emerged from this. And, England did the same thing. 153 A. PETTIFOR, The Coming First World Debt Crisis, page 70. 154 Ibid, page 75.

PAGE

45

loan, restrictive measures are added to the increased debt burden, making it all the more difficult for a country to repay the loans. Therefore, if a country defaults on their loan, they have actually not hurt anyone. No one suffers a loss of 100 billion dollars only the cost of printing and other paperwork involved. It is all just numbers in a computer. This is why it is possible to cancel billions of dollars in debt owed by a country. This type of financing is the new capital. The bank takes no risk the borrower believes he can pay the loan from the sale of their natural resources, or by raising taxes on the citizens. The problem with natural resources is that it can run out, or a larger, cheaper supply might be found somewhere else, driving prices lower. If workers can't work, there is little point in raising taxes. Before 1970, governments allocated resources for the weak and defenseless in society public transport, cultural activities and communication, for example. Today, these roles are being 'privatized' or 'marketized' in many countries, including Europe. The allocation of resources for health, clean water, sanitation, education, pensions, scientific research, transport, broadcasting, sport, culture, mineral extraction, and marketing are but a few of the government functions that, in many countries, are now carried out by 'the invisible hand of the market'.155 Remember, this is not the 'invisible hand' that Adam Smith wrote about, where the poor benefit from the gluttany of the rich this 'invisible hand' is the finance industry who sets interest rates and tells states they must privatize water (for example) in order to re-pay their high-interest loans. This is a grave concern, especially in developing countries, because the void left when these resources aren't allocated to the weak and poor can easily be filled by Non Governmental Organizations, such as extremist groups, who thrive most when economic times are hard for ordinary people.156

155 156

A. PETTIFOR, ed., Real World Economic Outlook, page 17. Ibid.

PAGE Global markets have acted to extract and transfer assets from poor countries to rich countries ... This polarization and divergence is not accidental or 'natural'. It is not because human ingenuity, geography, new technology, and advancement are preset in one part of the world, and lacking in others. Instead, it is a direct consequence of the remarkable economic experiment of market liberalism, which has brought our world to a point of grave peril.157

46

This 'grave peril' is witnessed in a world made insecure by rises in crime, random violence, opportunistic diseases, and the threat of nuclear weapons.158 Textbooks tell us that capital should flow from countries in which it is plentiful the rich world to those in which it is scarce the poor world. But the opposite is happening.159 Even the World Bank has admitted this. The poor are indeed financing the rich, through loans made to them at high interest rates, besides being required to purchase Treasury Bills low-interest loans to the US. In 2001, developing countries paid a total of $122 billion in interest payments on their debt, and $55 billion in the form of profits sent back home by multinational corporations.160 This accounted for about 3% of their GDP, and does not count 'capital flight' from those poor countries, (talented people, like doctors or lawyers who leave the country) which, in 1994 was estimated at some $122.4 billion for all developing countries.161 The flow of resources from the poor South to the rich North has increased steadily. Unfortunately, there is a real paucity of reliable global data on inequalities in wealth. Institutions such as the World Bank, the IMF, and the UN have let us down badly; they do not collect the required figures, arguing that it would be too difficult to provide an accurate assessment. But in our view, there may also be another motive; if the numbers were made available, the polarization in wealth would be too unpalatable for words.162

157 A. PETTIFOR, ed., Real World Economic Outlook, page 6. 158 Ibid. These destructive and frightening consequences are not very different from the consequences of a similar experiment in market liberalism, tried out in the 1920s and 1930s but abandoned between 1945 and 1970. 159 Ibid, page 34 160 Ibid, page 35. 161 Ibid, page 36. 162 Ibid, page 33.

PAGE

47

A long time ago Henry Ford wrote, It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.163 Robert Lucas asked the question back in 1990 with his article, Why Doesn't Capital Flow from Rich to Poor Countries?164 Sebastian Dullien also seemed somewhat surprised to note that, in many cases, net capital flows have reversed and are now flowing from developing and emerging countries towards the rich world, especially towards the United States, United Kingdom, Australia and Spain.165 The power of these international finance markets, like the the power of the IMF, have stripped governments of their political autonomy. Governments are obliged to implement policies effectively dictated by foreign creditors/investors.166 Governments, according to 'neoliberal economists'167 should divest themselves of power, transferring control to unaccountable markets, including financial markets.168 This explains why the European Union can make loans to countries like Nicaragua, conditional on legislating legalized abortion. Developed countries are now getting a taste of the medicine that the IMF has long imposed on others. Developed countries have given up their ability to control the supply of credit and they have given away their capacity to manage their exchange rates and hence their external balances.169 Entire governments namely, the poor ones suffered similar pressures from the finance sector. The IMF and others have forced governments to

163 The quote is repeated by countless authors, but no one seems to know the source. He apparently also stated, A business that makes nothing but money is a poor business. 164 R. LUCAS, "Why Doesn't Capital Flow from Rich to Poor Countries". American Economic Review. Vol 80, No. 2 (May, 1990): 9296. http://www.jstor.org/pss/2006549. Accessed February 12, 2012. 165 S. DULLIEN, Central Banking, Financial Institutions and Credit Creation in Developing Countries, United Nations Conference on Trade and Development, Discussion Papers. No. 193, January, 2009. http://www.unctad.org/en/docs/osgdp20091_en.pdf. Accessed February 12, 2012. 166 A. PETTIFOR, ed., Real World Economic Outlook, page 16. 167 'Neoliberal' is a difficult term, used for both Adam Smith and some economists today. Some liberals today do not want to be referred to as 'neo-liberal'. 168 Op.cit., page 16. 169 Ibid, page 46.

PAGE re-orient their economies towards foreign creditors, and expand revenue-generating exports to raise money for debt repayments. So the pressure has been on to expand exports, which generate hard currency; domestic priorities such as feeding its people and trying to keep them healthy have had to go by the board in many developing countries.170

48

This also often means the stripping of forests, and the handing over of natural assets171 (gold, diamonds, oil). It is the colonial mercantile system all over again, set up to make it easy for those with power and limited natural resources to exploit those with resources but no power.172 The worst extreme was Malawi, who was told by the IMF to sell of is excess grain to pay debts. They unfortunately had a drought the following year, and because they didn't have that grain, about a thousand peopled starved to death.173

To Summarise how the poor stay poor: Because central banks operate under conditions of great secrecy, these facts are not widely known to the citizens of poor countries or indeed of rich countries like Japan, the US's biggest creditor.174 1. Low income countries who show a profit must use that profit to 'build up reserves' of US Treasury Bills (give that profit to the US), rather than use that surplus for domestic spending or reduce poverty in their own country. 2. Each year low-income countries pay hundreds of billions of dollars in repayment of interest and (a little on the) principal on loans to high-income countries. 3. Since there are no controls over the movement of capital, international corporations that work in those 'developing countries' can move their profits to rich countries in US dollars. 4. 'Developing countries' were forced to adopt US-style patent and copyright laws, meaning they pay the same royalties as rich countries.

170 Ibid, page 16. 171 Ibid. 172 J. PERKINS, Confessions of an Economic Hit Man, page 28. 173 Malawi at that point told the IMF to get out, and purchased subsidies for fertiliser so their people could feed themselves. Johann Hari: It's not just Dominique Strauss-Kahn. The IMF itself should be on trial http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-its-not-just-dominique-strausskahnthe-imf-itself-should-be-on-trial-2292270.html Accessed January 21, 2012. 174 Op.cit., page 49.

PAGE 5. Capital flight: The few rich who live in low-income countries can regularly export their wealth to banks in London, New York and Zurich. Also, in terms of human capital, there are more Ethiopian doctors working in Chicago than there are in Ethiopia. 66. This also puts workers (manufacturing, for example) of rich countries into competition with workers in low-income countries. Interestingly, the US government maintains protection for high-paid occupations like doctors, lawyers, journalists and economists.175

49

Globalization has failed on growth. Growth per person during the 1970s was almost 4 per cent per year; while during the 1980s it was only 0.7 per cent per year. Over the 1990's, output per person actually fell by 0.2 per cent on an annual basis. Developing countries have performed particularly badly, especially in Latin America and Sub-Saharan Africa.176 Investment has fallen because finance-led globalization encourages speculative investment in existing assets rather than the creation of new assets. The way to get rich most quickly is to purchase existing companies often state-owned enterprises being privatized to meet the demands of the IMF rather than increasing the productive stock.177 Meetings of the G8 these last few years have been grand jamborees involving rock stars, protesters and any number of international political figures and civil servants. What they have not been are forums in which world leaders gather to co-ordinate and guide the global economy. This stoic refusal to intervene in the global economy to guarantee stability, is viewed by some as irresponsible and poses a threat not only to economic stability, but also to global political stability.178 In the past 30 years, Europe and the US have not developed their own industries. They have instead been relying more and more on credit as the industry, while extorting natural materials from 'developing nations' and using Communist countries as their production facilities. While most economists would agree on the need to have diverse industries at work at the same time, the EU is relying primarily on one - finance. In the event that one industry suffers a loss, the other industries will

175 176 177

A. PETTIFOR, The Coming First World Debt Crisis, pages 49-51. Op.cit., page 36. Ibid, page 38.

PAGE

50

at least sustain the country. But, people usually go for the cheap, simple or easy solution. Until the banks stop lending. Now, the world is in the midst of an economic crisis that responsible governments should have seen coming and should have implimented ways to invert. Michael Camdessus recognises that economic crisis strikes first and foremost at the poorest among us. Then, why didn't he see the present economic crisis coming? Ann Pettifor, Fellow, New Economics Foundation179 states: We did see it coming, a small group of us the thing that really bugged me was that the IMF had gotten things wrong, all the way down the line. They had failed to predict the Mexican debt crisis, they cheered on investors buying tesobonos in Mexico before that crisis, and the IMF failed totally to predict those crisis in September, 2003, absolutely no one was interesting in hearing about a coming first world debt crisis. By 2006, I began to panic, actually. Why no one saw it coming was because we rely on the economists who've got it wrong, systematically. Not just this time, but throughout the '70s and the '80s and the '90s.180 Elected democratic governments have been weakened, and lack the powers, resources and institutions to protect their citizens and firms and to compensate citizens when shocks occur the failure of government to afford protection to citizens is leading to disillusionment with spineless parliaments; and with leaders that have given away to invisible 'markets' key powers to allocate resources for health, public sanitation, transport etc.181

178 179 180

A. PETTIFOR, The Coming First World Debt Crisis, page 49. The New Economics Foundation is a thinktank dedicated to economic well-being for people and the planet. A. PETTIFOR, The IMF Has A History of Getting it Wrong - Accessed February 14, 2012: http://www.guardian.co.uk/commentisfree/video/2009/feb/27/ann-pettifor-capitalism-crisis?fb=native A full transcription is available at http://www.guardian.co.uk/commentisfree/2009/feb/26/recession-economy-capitalism To be fair, there were others who also saw it coming: ... The special privileges granted to Fannie [Mae Federal National Mortgage Assoc.] and Freddie [Mac Federal Home Loan Mortgage Corp.] have distorted the housing market by allowing them to attract capital [money] they could not attract under pure market conditions [giving loans only to those who could afford to pay them back] like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged overinvestment in housing. Transcribed from Dr. Ron Paul Discusses Austrian vs. Keynesian Economics on Morning Joe recorded 15/05/2009 http://youtu.be/Gf3NxGM5IkU Accessed February 14, 2012. 181 A. PETTIFOR, The Coming First World Debt Crisis, page 52.

PAGE

51

European Relations with Mediterranean Countries Having seen how the European countries have treated themselves as well as their neighbors over the past few centuries,182 it will come as little surprise that in my opinion, any type of union with them spells suicide. The Mediterranean countries, in spite of their faults, have some advantages that could protect them from financial totalitarianism. For example, some brag about their strong religious beliefs History demonstrates that faithsoul, a belief in higher powersis essential. We Muslims have it. We have it more than anyone else in the world, even more than the Christians. So we wait. We grow strong.183 The major religions, with the exception of Islam, have on the whole acquiesced, focusing mainly on matters of private morality. Islam itself is under pressure from the finance sector to dilute the condemnation of usury ...184 The current situation in Greece should stand as a very loud warning to all the other Mediterranean (and Middle Eastern) countries: Today, they are being used as a scapegoat. Instead of accepting that it is the broken banking system; the de-regulated financial Eurozone, and the deflationary monetarist policies of the Maastricht Treaty that are the roots of the crisis,185 the 'Troika'

Here is a quote from Bob Traa, doing exactly what Dr. Pettifor is warning: ... the public sector is very large and another essential element of a credible fiscal strategy must be to reduce the public sectors claim on resources: a credible strategy must primarily focus on sustainable expenditure cuts. This inevitably will require closure of inefficient state entities as well as reductions in the exceptionally large public sector work force and in generous public sector wage ... Remarks by Bob Traa, Senior IMF Resident Representative in Athens, Greece, http://www.imf.org/external/np/speeches/2011/091911.htm Accessed February 19, 2012. 182 When we read about the terrible attrocities done during the process of colonization, we should also remember the 60-80,000 German civilian massacres during World War II, the 7 to 15 million Christian Russian kulaks of 1924-30 who were starved to death, the Spanish Civil War massacre as well as the more recent wars in the former Yugoslavia. 183 J. PERKINS, Confessions of an Economic Hit Man, page 27. 184 A. PETTIFOR, The Coming First World Debt Crisis, page 121. 185 A. PETTIFOR, Greece as Whipping Boy for 'Troika' Bullies,

PAGE

52

[the IMF/EU/ECB, the three banks that are participating] want to blame Greece and its taxpayers. At least their problems have certainly alerted all the Mediterranean and Middle Eastern countries of the dangers of the 'Troika'. They borrowed the money and they have to pay it back. Seems fair enough, but let us look at some details. One loan, from May, 2010 was for 110bn. For that, they were expected to pay an additional 131bn in interest and refinancing charges.186 Greece is in its' fifth year of a recession, and the 'Troika' want Greece to re-capitalise its banks with the loans it may receive in the year 2012. The banks want the money that Greece borrows to go to banks. Private sectors (the private banks who have added up the 131bn in interest and other charges) have offered to write off 50-70% of the debt, which would leave Greece paying 53bn interest on a 110bn loan.187 And, the IMF just increased its membership fee to 1.5 billion for all members. The loans are made to suite the private banking system; they are not suited for the people of a particular country, and the austerity measures imposed on them are very similar to the austerity measures imposed on Germany after World War I. It was these measures that paved the way for Nazism. Ann Pettifor believes that if Greece defaulted, they would regain autonomy over their policy making, they could determine their own economic policy. In 2001, Argentina defaulted from their loans, and ran their economy to suit their people, not to suit creditors. How well they are doing as a result, is another matter.

http://www.huffingtonpost.com/ann-pettifor/greek-debt-crisis_b_977733.html Accessed January 7, 2012. 186 C. DOUZINAS, P. PAPACONSTANTINOU, Greece is Standing up to EU Neocolonialism, http://www.guardian.co.uk/commentisfree/2011/jun/27/greece-bailout-eu-neocolonialism Accessed February 14, 2012. 187 The loans initiated at 14% interest, the same as the loans to Portugal. Refinancing charges and other fees actually

PAGE

53

Conclusions

In spite of its economic and technical superiority, Europe is actually quite poor. As noted briefly, our educational system in the public realm needs a complete overhaul that would allow more citizens to be better informed of political and economic currents, and it would create better politicians. Today, a quality education is cost prohibitive to most creating class differences and preventing the equal opportunity to educate and improve the citizens. This creates an oligarchy, not a democracy. The classical definition of 'democracy' is etymologically from demos, 'the people of the country' + arche, 'rule'. The financial system has to be closely regulated. Interests rates need to drop to a level that encourages small and medium sized business investment and production. Some have asked why interest should be paid at all. Banks do have a right to make a profit, but there is a saying among some Egyptians, make a living; not a killing. Bankers have been making a killing (sometimes literally) for over 200 years or more. Loans to states or international bodies need to follow certain standards: Responsibility, impartiality and accountability equally to both parties the lender as well as the borrower. Several principles should guide the design of institutional arrangements that can deal justly with debt. The first is that there should be recognition that it takes two parties to make a loan, and that each of these two parties can be reckless, irresponsible, and delinquent in its actions. Insofar as either party to a loan acts in this way, it ought to shoulder part of the burden of the crises that often ensue. Losses from bad loans and bad debts should not, therefore, fall solely on the debtor. The second principle, based on a fundamental principle of the rule of law, is that no one ought to be judge in their own court. Any courts that are developed to resolve debt crises must be fair and impartial with respect to the parties to the loans in question. The third principle is the principle of accountability. Sovereign debt crises are public, not private, crises involving the use of taxpayer funds. If the resolution of these crises is to be achieved within a framework of
bring the interest rate up closer to 50%.

PAGE justice, and if democratic scrutiny of public funds is to be strengthened, then it will be vital for the process to be open, transparent, and accountable to citizens and taxpayers.188

54

Government also needs to reorganize themselves so as to better serve the intentions they are meant to serve. The have become institutions serving their own needs, and they need to revolutionize and become once again the instruments that create great societies. Full employment and good wages are vital to social and political stability; they nurture a sense of stability and well-being in society, and give us the confidenceadn assurance to do more than just pursue money, profit and consumption.189

The only thing that might possibly save Western society is that its' ontology is such that it always seeks to understand reality, which is perceived as in constant change.190 We understand that circumstances change, and we adapt. Since we can understand that reality is subject to change, reform is always possible.191 Reform is clearly necessary. What we need are courageous reformers politicians who are willing first to reform themselves, rather than asking the common people to suffer more sacrifices.

Historiographers have become too specialized today. There is no 'universal history', scholars typically specialize in a particular theme and region.

188

A. PETTIFOR, Resolving International Debt Crises Fairly, http://www.carnegiecouncil.org/resources/journal/17_2/roundtable/1023.html Accessed February 14, 2012. 189 A. PETTIFOR, The Coming First World Debt Crisis, page 51. 190 C. QUIGLEY, The Evolution of Civilizations, pages 17-18. 191 R. PATAI, The Arab Mind, page 273.

PAGE Appendix I What is the 'GDP'? Gross Domestic Product, is supposed to be the total value of all final goods and services produced within that economy during a specified period. This means financial assets as well as physical capital, human capital, and research and development expenditures. In the late 1970s and early 1980s, the two were roughly the same. By 2000, financial assets were worth about three times the value of real assets underlying them. There was a total divorce from economic reality.192 But, financial assets don't represent anything real, and don't aways have physical worth. Some derive value simply from a contractual claim. Mortages and sub-prime mortgages are a good example of financial assets. So, the GDP is equal to total expenditure and total income. This measures economic performance across nations. Higher GDP growth is seen as a measure of success.193 It fails to account for the economic impact on the environment; it counts clean up costs for natural disasters as 'goods' rather than 'bads' it only measures flows so a country that is very much in debt can be seen as the richest county in the world, according to the GDP. 'Savings' are defined as any income that is not consumed. Debt repayments are therefore defined as savings!194 The total external US debt already stands at more than $2.3 trillion, more than the total foreign debt of all developing countries combined!195

55

EU members were initially asked to keep their deficits from exceeding 3% of their GDP.196 Most never achieved that goal. Now, they're trying to get it down to 100% of their GDP. If poor countries can develop and accumulate capital domestically without capital inflows (or even with net capital outflows), where do they get their capital from? Natural resources, such as metals.

192 193 194 195 196

A. Pettifor, ed., Real World Economic Outlook, page 23. Ibid, page 30. Ibid, page 30. Ibid, page 52., according to IMF International Financial Statistics. M. SCHUMAN, The Euro's Last Stand?, Time Magazine, December 5, 2011, page 30.

PAGE Bibliography Books:

56

J.S. BERLINER, Economy, Society and Welfare. A Study in Social Economics. NY, Praeger publishers, 1972. D. BROWN, A New Introduction to Islam. Blackwell Publishing, Malden, MA, 2004. P. CHENAUX, Pio XII. Diplomatico e pastore, Paris: edizioni san paolo, 2004. C.W. ERNST, Following Mohammad: Rethinking Islam in the Contemporary World, Chapel Hill: University of North Carolina Press, 2003. M.S. FINDLAY, Language and Communication: A Cross Cultural Encyclopedia, Santa Barbara: ABCCLIO, Inc. 1998. E. HELLEINER, States and the Reemergence of Global Finance. From Bretton Woods to the 1990s, London: Cornell University, 1994. A. HITLER, Mein Kampf, London, Hurst and Blackett Ltd, English translation, 1939. I. KANT, Risposta alla domanda: che cos lilluminismo? 5 dicembre 1783. Traduzione dalloriginale tedesco di Francesca Di Donato. S.J. KIELY, Psychology and Moral Theology. Lines of Convergence. Gregorian University Press, Italy, 1987. M. LIEBERMAN R. HALL, Introduction to Economics, South-Western College Publishing, Mason, Ohio, 2000. J. LOCKE, Essays on the Law of Nature. M. NYDELL, Understanding Arabs; A Guide for Modern Times, 4th edition, Boston: Intercultural Press, 2006. R. PATAI, The Arab Mind. Hatherleigh Press, NY, 2002. J. PERKINS, Confessions of an Economic Hit Man, San Francisco, Berrett-Koehler Publishers, Inc., 2004. A. PETTIFOR, The Coming First World Debt Crisis, Palgrave MacMillan, NY, 2006. (ed), Real World Economic Outlook. The Legacy of Globalization: Debt and Deflation. Hampshire: Palgrave Macmillan, 2003.

PAGE C. QUIGLEY, The Anglo-American Establishment, (NY: Book in Focus, Inc.), 1981. , Evolution of Civilizations. (NY: Macmillan), 1961; Indianapolis: Liberty Press, 1979.

57

, Tragedy and Hope: The World in Our Time. (NY: Macmillan), 1965. Pages numbers quoted reflect the pdf version of the book, and not the actual hard copy. , Weapons Systems and Political Stability: A History, Washington: University Press of America, Inc., 1983. E. WICKER, Banking Panics of the Gilded Age. Cambridge, 2000. Articles: B. LUSCOMBE, 10 Questions, Time Magazine, December 5, 2011. M. SCHUMAN, The Euro's Last Stand?, Time Magazine, December 5, 2011. Internet Articles: Will Greece Default on its Debts? http://www.aljazeera.com/programmes/insidestory/2012/02/20122874148886993.html Pope Benedict XVI, Difficulties and Hopes of the Catholic Church in America.
http://press.catholica.va/news_services/press/vis/dinamiche/b0_en.htm

D. D'SOUZA, How Obama Thinks, http://www.forbes.com/forbes/2010/0927/politics-socialismcapitalism-private-enterprises-obama-business-problem.html C. DOUZINAS, P. PAPACONSTANTINOU, Greece is Standing up to EU Neocolonialism, http://www.guardian.co.uk/commentisfree/2011/jun/27/greece-bailout-eu-neocolonialism S. DULLIEN, Central Banking, Financial Institutions and Credit Creation in Developing Countries, United Nations Conference on Trade and Development, Discussion Papers. No. 193, January, 2009. http://www.unctad.org/en/docs/osgdp20091_en.pdf. "Laureates, 1974", http://www.nobelprize.org/nobel_prizes/economics/laureates/1974/index.html R. LUCAS, "Why Doesn't Capital Flow from Rich to Poor Countries". American Economic Review. Vol 80, No. 2 (May, 1990): 9296. http://www.jstor.org/pss/2006549. C. QUIGLEY, Is Georgetown University Committing Suicide?, The HOYA (April 28, 1967). http://www.carrollquigley.net/Articles/Is-Georgetown-University-Comitting-Suicide.htm Accessed December 15, 2011.

PAGE

58

, Mexican National Character and Circum-Mediterranean Personality Structure. American Anthropologist, 75: 319-322. http://www.carrollquigley.net/Articles/Mexican-National-Character-Circum-MediterraneanPersonality-Structure.htm , Needed: A Revolution in Thinking, Today's Education. March-April, 1975. Originally published in the National Education Association Journal 57 (May 1968), pp. 8-10. http://www.carrollquigley.net/Articles/Needed-A-Revolution-in-Thinking.htm , Obsolete Academic Disciplines, The HOYA (1967 or 1968). http://www.carrollquigley.net/Articles/Obsolete-Academic-Disciplines.htm Accessed October 30, 2011. , Lecture, "Public Authority and the State in the Western Tradition: A Thousand Years of Growth, A.D. 976 1976, Georgetown University, 1978. http://www.carrollquigley.net/Lectures/The-State-of-Communities-AD-976-1576.htm , Politics. SFS yearbook Protocol, 1957. http://www.carrollquigley.net/Articles/Politics.htm B. O'NEILL, RIP Democracy Says Brendan ONeill http://www.incise.org.au/2012-02-03/ripdemocracy/ Dr. Ron Paul Discusses Austrian vs. Keynesian Economics on Morning Joe recorded 15/05/2009 http://youtu.be/Gf3NxGM5IkU A. PETTIFOR, Resolving International Debt Crises Fairly, http://www.carnegiecouncil.org/resources/journal/17_2/roundtable/1023.html , Cross Talk with Peter Lavelle. Recorded December 6, 2011. http://www.youtube.com/watch?v=UhByd7zSYzc , Greece as Whipping Boy for 'Troika' Bullies, http://www.huffingtonpost.com/annpettifor/greek-debt-crisis_b_977733.html Accessed January 7, 2012. , The IMF Has A History of Getting it Wrong, http://www.guardian.co.uk/commentisfree/video/2009/feb/27/ann-pettifor-capitalism-crisis?fb=native A complete transcription is available at http://www.guardian.co.uk/commentisfree/2009/feb/26/recession-economy-capitalism Special Report: The Emu Criteria, http://news.bbc.co.uk/2/hi/special_report/single_currency/66945.stm Johann Hari: It's not just Dominique Strauss-Kahn. The IMF itself should be on trial, http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-its-not-just-dominiquestrausskahn-the-imf-itself-should-be-on-trial-2292270.html

PAGE Paul Romer: Paul Romer's Radical Idea: Charter Cities, http://www.ted.com/talks/paul_romer.html

59

A. CHAKRABORTTY, Paul Romer is a Brilliant Economist But His Idea for Charter Cities is Bad, http://www.guardian.co.uk/science/2010/jul/27/paul-romers-charter-cities-idea Hong Kong in Honduras, http://www.economist.com/node/21541392 Chinese Factory Under Scrutiny As Suicides Mount, http://www.time.com/time/world/article/0,8599,1991620,00.html Franklin D. Roosevelt, First Inaugural Address, http://www.bartleby.com/124/pres49.html Adam Smith: http://www.economist.com/node/16740415 Accessed December 31, 2011. Margaret Thatcher, http://www.youtube.com/watch?v=U2f8nYMCO2I Remarks by Bob Traa, Senior IMF Resident Representative in Athens, Greece, http://www.imf.org/external/np/speeches/2011/091911.htm I. TRAYNOR, Greece Granted 120bn EU Bailout http://www.guardian.co.uk/world/2011/jun/24/greece-eu-bailout-david-cameron Statistics: As Europe Ages, Its Economies Look Vulnerable, http://www.npr.org/2011/09/24/140736119/aseurope-ages-its-economies-look-vulnerable Accessed December 15, 2011. Paideia, http://en.wikipedia.org/wiki/Paideia Accessed March 12, 2012. "Niente cultura, niente sviluppo Il Sole 24 ore, http://www.ilsole24ore.com/art/cultura/2012-0218/niente-cultura-niente-sviluppo-141457.shtml?uuid=AaCqMotE&p=2 Accessed March 12, 2012.