Attached in html is Martin Hattersley's brief to the MacDonald Commission, Part I.
Title: A New Way Forward: Brief - J.M.Hattersley 1983
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August 1983
In common with almost all countries of the world, Canada is affected by a complex of economic problems, of which the most outstanding are those of unemployment, price inflation, internal and international debt, trade competition, and business collapse.
At the same time, immense improvement in techniques of production, centred around the computer, the robot, and innovations in chemistry and microbiology, are offering to mankind the prospect either of an immensely increased standard of living - or of poverty as a result of unemployment.
The observation is made that modern manufacturing techniques involve immense expenditures on research and development ahead of production. Production itself takes place with a small labour force and large amounts of capital. Mass employment on the production of consumer goods, as distinct from capital developments, is becoming a thing of the past. This has created a situation where the total output of consumer goods in the economy at any time has become progressively less connected to the quantity of paid employment distributing incomes to potential purchasers during the same period of time. Therefore a situation has arisen whereby an artificial pressure has been created throughout the world's economies to develop capital spending, including spending on armaments, for the major purpose of distributing incomes to workers rather than for any other valid economic or political reason.
The generally accepted use of bank credit (which is effectively the creation of new money) instead of personal savings for the purpose of financing capital needs, leads to increasingly violent swings of the trade cycle, to a heavy burden of personal, corporate and government debt and debt service charges, and to a lack of personal investment income to members of the general public. Certain changes to the existing fractional reserve system of banking are therefore suggested to correct this situation. Suggestions are also made for the electoral reforms necessary to make economic and political changes feasible under our Parliamentary system.
SUMMARY . . . . . . . . . . Page 2
INDEX . . . . . . . . . . Page 3
PRELIMINARY . . . . . . . . . Page 4
ARGUMENT . . . . . . . . . . Page 4
THE WORLD OF THE 1980's . . . . . . . Page 6
THE PROBLEMS WE FACE . . . . . . . Page 6
FLAT EARTH ECONOMICS . . . . . . . Page 8
Unemployment . . . . . . . . Page 8
Incomes . . . . . . . . . Page 9
Inflation . . . . . . . . . Page 10
The National Debt . . . . . . . Page 10
Foreign Trade . . . . . . . . Page 11
Productivity and Competition . . . . . Page 13
Wealth and Money. . . . . . . . Page 14
OUR MONETARY SYSTEM TODAY . . . . . . Page 14
MONETARY INSTABILITY AND COST . . . . . . Page 23
Instability. . . . . . . . . Page 23
A distorted economy . . . . . . . Page 25
Cost . . . . . . . . . . Page 27
Third world debt. . . . . . . . Page 29
SOLUTIONS AND RECOMMENDATIONS . . . . . . Page 30
Monetary Stability . . . . . . . Page 30
Debt . . . . . . . . . . Page 31
Foreign Exchange. . . . . . . . Page 32
Unemployment . . . . . . . . Page 34
Business and the Environment . . . . . Page 35
THE POLITICAL ASPECT . . . . . . . Page 36
RECOMMENDATIONS . . . . . . . . Page 39
APPENDICES . . . . . . . . . Page 40
A. Statistical Approach . . . . . . Page 40
Actual and calculated Price Index changes,1926-1962 Page 42
B. Summary of recommendations . . . . . Page 46
ACKNOWLEDGEMENT The research assistance of MDI Foundation, and the financial assistance of Social Credit Publications Trust in the preparation of this brief are gratefully acknowledged.
NOTE (1998)Since this brief was originally prepared, the requirement of a fixed percentage of cash reserves to be held by Chartered Banks to back their "promises to pay" has been replaced by capital requirements that in effect reduce their backing for such promises to an even lower figure - thus creating pressure for those banks to merge, and to press the public to make use of even more bank-created substitutes for legal tender money. The costs to the nation in taxes, debt, and the possibility of bank failure is therefore actually more severe now than when this Brief was originally written.
It is also to be noted that the Economic Council of Canada, a government agency empowered to evaluate economic trends in Canada from a non-partisan standpoint, was abolished in the interests of government economy under the Mulroney regime.
At the outset, I would like to express my pleasure that a Commission such as this has been set up.
Across the world today, and with distressing similarity to the Great Depression of the 1930's that struck the world some years after the boom that followed World War I, another Great Depression has begun to make its appearance. New technologies and immense progress in techniques of production should have made it possible to offer a fuller and more satisfying life for mankind than ever before - yet the chief reward to the average working person, whether blue collar or professional, has been the threat of lost employment and the poverty that derives from it.
"Poverty in Plenty" has once again become an everyday reality. Nothing could be more worth while at this moment in our nation's history than to seriously study the condition and the great potential of our nation and map out directions for the future, and your Commission, with the broad terms of reference it has been given, and the wide view it has taken of its responsibilities, will, I hope, prove a worthy vehicle through which this can be done.
The argument I wish to present is that the immense progress in techniques of production and national wealth that has been made since the commencement of the Industrial Revolution two hundred years ago has been the result of a number of factors such as specialization of employment, the use of power, use of tools of progressively more complex types, and particularly, the development of knowledge and skills that have enabled human effort to be applied with increasingly more potent effect.
This progress is essentially the development of a system whereby a single person, instead of working on his own in a large number of fields with limited output to satisfy his various desires and needs, works to turn out a large and specialized output of goods and services in a very limited field, exchanging his surplus with the surplus production of many different specialists in many different areas.
The key to the efficiency and increased production of wealth that comes from this specialization lies in the efficiency of the process of exchange. If the system of exchange is efficient, then an immense degree of specialization, both in human activities and in machinery to assist these activities, is possible. If it breaks down (and many factors can cause it to do so: shortage or loss of confidence in the medium of exchange, government taxes, controls or planning contrary to market influences, breakdown of law and order and respect for private property) the standard of living of a whole community can be impaired, sometimes very suddenly and very drastically.
The institution of an effective money system has proved over history to be the best means of providing a system of exchange where seller and buyer are able with a minimum of friction, and with a maximum of efficiency and satisfaction, to exchange wealth of one kind for that of another. The particular success of Western capitalism over the past two hundred years has stemmed from the development of an effective system of monetary exchange through its joint stock Banking system, which has provided a means whereby a supply of money (in the form of bank credit) has been made available for the development of capital and commerce, at far less cost than would have been the case if the money supply had depended solely on the supply of precious metals. Through the banking system, also, credit could be supplied in a quantity that the world's gold and silver supplies could never have matched. The built in possibility of bank failure prevented the unlimited expansion of credit, which would have the effect of destroying the bank before it destroyed the value of the monetary unit. This has rendered Bank credit frequently superior to state created fiat money (its principal rival for acceptance as the monetary unit) in the past.
The general acceptance of private banking as the means for supplying the nation with its money supply, which is particularly the case in Canada, should not blind us, however, to a number of its shortcomings. Some of these are:
Difficulty in accurately controlling the total of the nation's monetary mass.
The cost to the business community and the consuming public alike of interest on credit created by the banking system and used as the prime medium of exchange.
Difficulty in providing the economy with a sufficient monetary mass in times of recession when borrowing is unattractive or impossible from a business point of view.
An immense burden of National, corporate and personal debt, which cannot be repaid without cancellation of most of the country's money supply.
The possibility of excessive Bank influence in both the political and economic spheres, through favouritism in the supply of credit.
Capital financing for business from Bank sources rather than through personal savings, which leads to unhealthy debt/equity ratios, inflation in times of capital expansion, and devastating recession when it ceases.
Possible loss to the public and economic collapse arising from bank failure occurring through dishonesty, imprudent investment, or other cause.
The suggestion is therefore made to the Commission that the supply of Canada's medium of exchange through the Chartered banking system should be controlled on the basis of a statistically calculated "fiduciary issue" of allowable Bank credit, rather than the present "fractional reserve" system, where the quantity of credit in circulation cannot be controlled other than by a vicious elevation of interest rates. It is further suggested that the activities of "near banks" - institutions of all kinds whose promises to pay, although not backed 100% by legal tender payable on demand, yet pass from hand to hand in settlement of debts - be similarly controlled.
It is further suggested that the enormous cost of Canada's National Debt could by this means be almost entirely eliminated, since financing could be undertaken at cost (likely under 1% per annum) through the publicly owned Bank of Canada, once the threat of inflationary credit expansion by the chartered Banks under the fractional reserve ratio rules has been done away with.
The preliminary outline of the Commission's work raises the question as to whether the troubles of the present time are merely temporary phenomena - or whether they are signs of a deep seated change in the nature of the economy itself.
My reply to that question is certainly that we are at the beginning of a completely new era in the history of the human race: one that involves such a radical development of human capabilities that today's resources and social institutions will look as restricted and hidebound to future generations as those of the Middle Ages look to ourselves - but yet this does not mean that the ordinary rules of mathematics or of economics have been repealed, nor that the situation that we find ourselves in is completely without precedent.
Perhaps the closest parallel to the conditions of this, the second Elizabethan era, is that of the time of the first Queen Elizabeth. In those days, the new frontier was the Americas: now it is outer space. In those days, the explosion of popular knowledge and informed communication was the result of the invention of the printing press: now it is that of radio, TV, telecommunications and the computer. In those days, acute inflation was the result of quantities of precious metals brought back from the New World: now, it is from the abandonment of the Gold Standard in favour of money existing chiefly as computer information. In the England of those days, there was widespread unemployment and a flight to the towns by those who had once been independent yeomen, as a result of the development of land-intensive sheep farming requiring little labour, and the enclosure of lands previously held in common. Today, the intensive use of capital in production, and the exhaustion of free "homestead" land that was previously the new place to start for the economic failures of our system, is also creating a pool of urban unemployed that it may be very difficult to dissipate.
Another parallel with our times - they were ones of domestic violence, and international and civil wars. They were times when the conscience of individuals enlightened by the new learning fought against and eventually achieved freedom from the control that tradition could once maintain over the ignorant. We too, in the twentieth century, are going through our times of passionate conflict of nation against nation, class against class, and belief against belief. Perhaps we too, in our time, (the atom bomb permitting) can hope to win through to a new age of reason, where scientific enquiry will replace unthinking passion in the discussion of social and economic questions. Perhaps this Royal Commission has a place in this process.
To itemize the most conspicuous economic problems we face, and have faced to a greater or lesser degree throughout most of this century, these are as follows:
Inflation. Apart from a time of marked price decline in Canada during the years of the 1930 depression, the level of consumer prices has been steadily rising in Canada throughout the period since World War I - and since World War II, has commenced to rise with alarming rapidity. In the past 25 years in Canada, the dollar has lost over 75% of its original value. Only extremely severe "tight money" policies, involving unprecedently high interest rates, and devastating effects in the health of business, have been successful in checking (but not entirely eliminating) this continual fall in the value of the monetary unit.
National Debt. Since 1968, and particularly in the past two or three years, the federal deficit, and the cost of servicing it, has climbed to unprecedented levels - so much so that in this 15 year period, the amount of the federal deficit has climbed to a greater sum than the whole of the 1968 budget. Provincial and Municipal budgets are under similar stress, and the load that these deficits are placing on the capital markets of the nation in turn makes it difficult for this market to service the needs of business at economic rates.
International Trade. Much of Canada's economic prosperity depends on finding overseas markets for primary agricultural and mining production. The acute budgetary problems of less developed countries makes the continuance of these markets problematic. Furthermore, the competition to Canada's industries from either hyper-automated industries such as those of Japan, or of low wage economies, such as those of Hong Kong, Taiwan and Korea, are creating devastating competitive pressures on Canadian manufacturers that perhaps cannot be measured up to within Canada except through either a return to "sweated labour", or a degree of tariff protection.
The environment. A further problem which is going to be of greater and greater concern in the world as frontiers and undeveloped land become exhausted, is the contamination of the world's environment with waste of all kinds - organic waste, toxic gases, heavy metals, asbestos dust, radioactivity as well as insecticide and fertilizer residues and other forms of chemical pollution which could, if present trends are allowed to continue and if no proper countermeasures are taken, make the globe virtually uninhabitable within a short period of time. Environmental protection costs money, and the particular problem created by this situation is that, in a highly competitive world economy, the temptation is to cut corners and expenses by disregarding the problem to the serious long term detriment of the human race. "Love Canal" and Minimata disease may only be the forerunners of even more serious horror stories in the future.
When a problem goes unsolved in spite of many years of effort to find a solution, this often enough occurs because the framework of previously conceived ideas concerning the situation inhibits the radical change in view point necessary to come up with an answer. Those who believe in Phlogiston, for instance, will never be able to understand the chemistry of combustion. Those who believe that the world is flat are incapable of understanding gravitation or the motions of the planets.
Our lack of progress in finding solutions to economic problems of long standing, therefore, should by now be prompting us to consider whether it is some wrong preconception of the economic situation - equivalent to the belief that the earth is flat to a would be space explorer - which is preventing us from sailing out in a new direction and discovering a new world of economic prosperity. And in fact, inspection does reveal, around each of our major problems, a conventional wisdom of "flat earth" ideas which explains our lack of success.
These fallacies can be listed.
1. "That automation destroys employment". This is an untruth. A "job" is a standing order by an employer to an employee to supply him on a regular basis with one of the basic factors of economic production - human effort. With labour, as with any other of the traditional factors of production, demand is a function of price. Automation, giving more output at a cheaper price, naturally tends to replace the direct use of labour in production - but if the price of labour were to fall to zero - if people were willing and able to work for free - jobs would appear from everywhere: the demand for labour would become almost limitless. The surplus of unemployment that we see across the world today is not because there is no work to do. It is because labour cannot afford to work for employers at the price the employer can afford to pay, and at a price competitive with the machine for similar output.
The problem is one of the price of labour. Most of us, if someone volunteered to work for us for free, would find no end to the useful work that could be done - care for the aged or for children and the sick, cleaning and improving the home, and when immediate needs had been satisfied, in scientific research, education, or other cultural activities! We might find servants to pump gasoline, wait on us in retail stores, butlers and maids - services which have almost passed out of existence as labour costs have brought in the "serve yourself" society of today.
Unemployment is the failure of a potential worker to find some person willing to buy his labour, and the reason for unemployment is that the price of labour is too high compared with the resources of the employer to purchase it, and the value he can get from its use. This does not necessarily mean that Canada's million and a half unemployed should go back to work for starvation wages. However, if they did have alternative sources of income to supplement their wages, or if in some way, their living and especially their housing costs could be cut down, then wage rates could be reduced, involuntary unemployment could be eliminated, all without any sacrifice of the worker's standard of living.
The above is of course purely theoretical. But it leads on to an other "flat earth" fallacy.
2. "That earned income is the only income." Karl Marx paints a picture of the proletariat sweating under the capitalists of his day, forced to supply the greatest output possible on a wage which is the minimum necessary to keep body and soul together. In the atmosphere of unrestricted free enterprise of his time, of course, the capitalist could hardly do otherwise, or under the "iron laws of economics" his enterprise would not survive. Similarly, in today's atmosphere of acute international competition for markets, Canada appears to be faced with the same dilemma - cut costs (including wages, and the government costs of the "welfare state") or go under. Already, this has been the justification for severe cutbacks in wages and social services in British Columbia - it has, too, been to a greater or lesser degree the policy of the governments of both the United Kingdom and the United States in the past two or three years.
The purpose of the worker's income is to make available to him the food, clothing and shelter and other things he needs for a reasonable standard of living. The problem of the proletariat is not necessarily that it is underpaid, but that all it needs to survive in the world has to come from one single income source - the sale of labour. Yet the requirements of survival can come quite easily from several income sources, not just one:
Ownership of productive assets. This may be the increasingly rare species - the businessman or farmer who owns his own enterprise - or it may be an investor who, directly or indirectly, has a share in the ownership of profitable productive enterprises which bring him an income without him having to do a hand's turn of work. Some people may regard this as immoral. To me, it is a simple reflection of a phenomenon that has been with us ever since the Industrial Revolution. Output today comes primarily from the use of tools and machinery. Employment today comes chiefly from labour put out on the tools and machinery that will create the output at a future time. Investment is the tie by which those who go without consumption at one point, in order to make it possible to manufacture the tools of production, are paid off handsomely in the future when that production comes about without their labour being required.
Incomes, in fact, can come from many sources other than employment - and the more they come from such sources, the more the price of labour can be lowered, and with that, the level of employment restored.
3. "That inflation comes from governments printing money". This hoary piece of conventional wisdom continues to hold its ground in spite of the fact that the Government of Canada has not printed any money at all since the "shinplaster" went out of circulation in 1935. It is a fairy tale a little similar to that which blames inflation on "world conditions", sunspots, greedy capitalists and/or workers, or which says that "inflation is an incomprehensible plague that no-one can understand."
The reason for this belief that, somewhere in the backrooms, "governments are printing money", in spite of a complete absence of all the evidence of it that a normal enquirer would expect - government printed paper money, for instance - must surely be, firstly, the obvious fact that there is much more money in circulation than there was, say twenty-five years ago, and secondly, another long standing fiction that "Banks do not create money - they simply lend out their customers' deposits".
If there is a vast increase in the money supply of the nation, and if the Banking system does not create this increase, we are almost forced back on the legend that Governments are printing money, in spite of a total lack of evidence that this is the case. On the other hand, once we accept the fact that the major part of Canada's money supply originates from credit created by the Chartered Banking system, which has the right to issue "promises to pay" which pass as money to a value of $1.00 for every five cents it holds in cash, then we can suggest that the proper dictum is that "Inflation is the result of the chartered banking system creating credit." Belief that this is in fact the case becomes stronger the more one vainly searches to find any depositor at any solvent bank who can say: "My money in the Bank is not available for me to use. The Bank has lent it out!"
So, too, let us dispense with the fiction that the rate and manner in which consumer prices have been rising is beyond human comprehension. It is possible to demonstrate from the published statistics that the Consumer Price Index varies almost exactly in accordance with the following two factors:
A more detailed analysis of the computation of this relationship applied to Canadian statistics appears as Appendix "A" to this brief.
4. "That money cannot be created without the creation of debt."Incredible as it may seem, when the Federal Government finds its income running short in a year of recession when program needs are high and taxes cannot be raised, it considers no other alternative but to borrow the necessary shortfall.
The process of borrowing involves the Government printing paper promises to pay in the form of Treasury Bills, which it sells at a discount, so giving an "effective yield" to the purchaser. Some of these Bills are purchased by the Bank of Canada, a highly profitable Crown Corporation, which gives either credit in its books or legal tender Bank Notes to the Government in exchange for these Bills. The remainder of these bills can be purchased by financial institutions such as Chartered Banks. Assuming that the Bank of Canada has purchased a sufficient number of Treasury Bills, and the Government has spent the proceeds of sale on its salaries and various programs, these will have been deposited in the Chartered Banks by the recipients. In very round figures, every million dollars so deposited gives the Chartered Banks the opportunity to buy twenty million dollars of Treasury Bills with "Bank Credit" - that is, with the Bank's own promises to pay. This Bank Credit is secured by the impeccable reputation of Canada for paying its debts. Twenty one million dollars that never existed before are now in circulation. Canada is in debt an additional twenty one millions of dollars, and the interest burden of this (unless paid off in the future) will be an annual charge of three million dollars or so in taxes on the Canadian people, year after year after year.
Behind the promises of the commercial banks of this country, and giving us confidence in their ability to pay, stands the Bank of Canada. Its Bank Rate is an open offering to any bank in cash flow trouble to borrow from it at the stated rate. Behind the Bank of Canada stand the printing presses of the British American Bank Note Company, able to deliver legal tender money - almost the only legal tender money there is in Canada - in quantities sufficient to satisfy any conceivable demands for currency that the public might place upon it. Behind this paper of the Bank of Canada stands the law of the Canadian government - that the paper of the Bank of Canada is lawful money - legal tender for the settlement of debts. In financing the National Debt in the way it does, the Government is, at immense cost to the Canadian taxpayer, borrowing credit created by the Chartered Banking system which would be worthless paper if it were not for the Government's own guarantee that it will never allow the Banking system to fail.
As an exercise in lunacy, this process takes the prize. It enables, for instance, insolvent Banks who have overlent to insolvent Dome Petroleum Company to put together a package by which an insolvent Government will give them a guarantee, and all will be saved from failure. Canada must be the only place in the universe that three negatives can be assembled together and used to manufacture a positive!
Once upon a time, the Canadian Government issued Treasury notes - without debt. Even now, through the Royal Mint, it issues Canada's coinage - without debt. Many nations, including particularly the early American colonies, issued paper money - without debt. Treated responsibly, it did not lead to runaway inflation. Adam Smith's "Wealth of Nations" seems to indicate that in the American Colonies, it led to prosperity far beyond that of the Britain of his day. The creation of a nation's money supply by borrowing it from the Chartered Banking system is a farce and an absurdity, which not only involves unnecessary levels of taxation and restriction of social services on the populace, but also prevents the economy having a sufficient supply of a cheap and credible medium of exchange to work at an optimum level of activity.
5. "That prosperity depends on Foreign Trade". This is actually one of a number of fallacies centering around the foreign sector. Some others related to it are:
What confusion! Suffice to say that the firm attachment of Canada's monetary authorities to the policies of Washington in the recent period of inflation, coupled with extensive Canadian borrowing in the U.S.A. to protect Canada's exchange rate, has done more to destroy Canadian business, employment and prosperity in recent years than any other article of monetary policy in the past fifty years, home grown or imported.
The Canadian people only work for Canadian dollars. An "inflow of foreign investment", therefore, is no more than the purchase by foreigners of quantities of Canadian currency with the foreign currency: the currency itself never crosses the national boundary. As was the case, for instance, in the Diefenbaker years, when U.S. investment in Canada's oil industry was at its height, the major effect of such investment is the flattering one of driving up the exchange rate of the Canadian dollar. This in turn makes Canadian industry uncompetitive in world markets. Foreign investment in Canada therefore becomes the way by which we sell out the ownership of our industries, at the price of our own unemployment.
Money is not international - it is a call on the resources of the persons whose nation makes use of the money, nothing more. There is a real danger in all attempts to give the world an international currency, and equally, in removing all barriers to trade. The danger is one of speculation, and of competition. Speculation, because if a quantity of money can be moved from one end of the world to the other, faster than goods can be moved, artificial fluctuations of the price level (particularly of immovables such as real estate) can easily be achieved. Competition, because Canada is a country that will always have non-competitive overheads built into her productive system, arising from climate and from geography. If we cannot sell anything without meeting the keenest of world competition, we may as well close down all our industries - they are heading in that direction already!
In fact, Canada should rather think in the reverse direction - that the area covered by her national banking system and her monetary unit may well be too big, leading to continual swings of prosperity as money moves between "have" and "have-not" provinces. The United States system of localized banking, and the success, for instance, of the Alberta Treasury Branch system in refloating the Alberta economy after the 1930's depression, may be indicators that localized and not too mobile forms of credit may be a valuable tool in preventing excessive swings in prosperity between the regions of the Canadian economy.
Foreign trade is obviously also no complete source of answers to the world's problems of underconsumption. If domestic consumers are short of purchasing power, then of course it is attractive to try and sell abroad: this is not for the purpose of exchange of commodities, but to dispose of surpluses which otherwise will not find a market. There is really nothing Canada wants from the Soviet Union in exchange for its wheat - certainly not Lada cars! It is for this reason that credit is extended to foreign markets by almost all nations including our own on almost irrationally generous terms. But all nations cannot solve their problems of lack of market demand in this way. Those who do succeed in so doing - like the Japanese - can become the workshop of the world. Those who do not - and even those who do chiefly by export of raw materials with little labour content, like Canada - had better think of some better way of maintaining domestic employment levels.
Those nations who invest substantially overseas - as was Britain's situation in Victorian times, and that of the U.S.A. more recently - obtain very beneficial economic results. Their investment itself creates an artificially low exchange rate for their currency, which in turn is extremely helpful in making them competitive in foreign markets. Canada's penchant for borrowing capital abroad is the very reverse of this, and extremely harmful to the national economy.
6. "That Productivity and Competition are the key to economic renewal". The suggestion is often encountered that if only business would become more efficient and competitive, we would not lose the "international trade war", and could set our industries humming once again. This is another variation of the theme that foreign trade will solve all problems. This, however, is really just as practical a suggestion as saying that only the runner who can win the race should be allowed to run at all. Only hares are to be allowed to participate: tortoises are barred. Common sense tells us, however, that in terms of total distance travelled, the slowest tortoise can still add something to the achievements of the fastest hare!
Productivity in our modern world means getting more production from fewer workers. The workers not required go on the scrap heap. In the case of the individual company, this of course spells efficiency. In the case of a nation, where the net result is half the working population out of work, and the other half working seventy hour weeks to avoid the same fate, the situation becomes ludicrous. There is no more productivity in having half a nation out of work and the rest working at 100% efficiency, than to have the whole nation only working at 50% efficiency. The social cost of the former is actually higher than that of the latter.
Canada is a cold country with a scattered population. Moreover, her favourable endowment with natural resources means that, if these are the factors of production she best contributes on international markets, then other nations such as the Japanese will be the ones to add the labour and capital, and a competitive international environment will keep our unemployment level uncomfortably high. (Britain has had the same problem in dealing with the wealth coming from the exploitation of North Sea oil.) Efficiency may be all to the good - but cheapness is not necessarily the same as efficiency. How much must we pay in terms of degraded environment, lowered quality of life, poor housing, dangerous or unhealthy work environments, and general loss in the enjoyment of work itself, if competition decrees that unless we are cheaper than any, we have no right to exist as manufacturers at all?
7. That producing wealth produces money." A final and related misconception. The idea sometimes gets around that "If we produce more wealth we will have more money" - as if, for instance, growing a bumper wheat crop grew the dollar bills to buy it with. Of course this is untrue. The production of money is independent of the production of real wealth - and the bumper wheat crop simply leads to an "agricultural surplus" unless independent steps are taken to correct the monetary imbalance this "overproduction" causes.
- Re: Not again!!, (continued)
- Re: Not again!!, Ted Winslow Tue 13 Jul 1999, 22:13 GMT
- Re: Not again!!, Rosser Jr, John Barkley Wed 14 Jul 1999, 19:57 GMT
- General Theory Seminar, RHolt1234 Tue 13 Jul 1999, 15:48 GMT
- In Desperate Need of Money, John Gelles Tue 13 Jul 1999, 05:03 GMT
- A New Way Forward, William B. Ryan Tue 13 Jul 1999, 01:48 GMT
- Uncertainty and Liquidity Preference, Ted Winslow Sun 11 Jul 1999, 12:57 GMT
- Re: Uncertainty and Liquidity Preference, chip poirot Sun 11 Jul 1999, 14:10 GMT
- Re: Uncertainty and Liquidity Preference, f.c. maclachlan Sun 11 Jul 1999, 15:53 GMT
- Re: Uncertainty and Liquidity Preference, Ted Winslow Sun 11 Jul 1999, 18:11 GMT