dr. Janos DRABIK
Switching to the Natural Economic Order is the Future of Mankind
Why is globalisation anti-human?
Ladies and Gentleman!
Let me mention the following at the outset: I am not value-free and what I have to say is based on the value-basis acknowledging the universal ethics. Under universal ethics I mean the recognition and protection of the fundamental needs, interests and values of all people based on the equality of rights. Before we start to analyze the problems of globalization, we have to touch upon the nature of the problems. In terms of their possible solutions, problems are either convergent or divergent. Methods suitable to solve convergent problems cannot be used to solve divergent problems. Abstract mathematical methods can be well used for the convergent problems of the natural sciences and these problems in theory can be solved. On the other hand, for solving problems in connection with people, the human society and its activity (and so with economics), mathematical methods can be used only with limits, as subsidiary means.
In the case of divergent problems at least two valid answers can always be given. On the other hand, in the case of convergent problems it is theoretically possible to give one sole answer. The problems in connection with people are divergent because life and all human activities are complex and dynamic and so they can be described only by the double demand of the mutually complementary contrast pairs. All life phenomena in society are a state of balance between the contrastive sides that perpetually get upset and are to be constantly restored if we want to avoid the development of an extreme situation. I would like to support these introductory remarks of mine only by a few examples. It is a good example of a convergent problem when the task to create a two-wheel vehicle driven by human power gets solved. After several draft solutions, the circle of the answers grows narrow and eventually only one answer turns out to be long-lasting: this vehicle is the bicycle, which of course can have several versions.
This version is long-lasting because it is suitable for the natural laws and the human needs. The essence of convergent problems is that the more thorough we study them, the more the answers come near to each other. So, theoretically, these scientific, technological-technical problems can be solved permanently, because people are not present in these. Physics, chemistry, astronomy and theoretical sciences as mathematics and geometry deal with convergent problems.
In case of problems valid for people, social life and economics we experience that the more we study them, the more conflicting answers we arrive at. The more logical and clearer these answers are, the more they contradict each other. This is why we can call these problems ramifying, divergent problems. In the human community we call society the two requirements that conflict each other most frequently are freedom and equality. The former favours the strong, the latter favours the weaker. Equality sets limits to freedom, while the exaggerated freedom, the “overequalization” liquidates it. While dealing with the questions of people and society, we find ourselves facing human life and the contrasting pair typical of it, i.e. birth and growth, decline and death, and in connection with society: freedom and order.
Due to these inevitable contrasts, the balance of human life, and so that of society and economic life cannot be created with abstract mathematical formulas either. But even if they cannot be solved, they can be surpassed temporarily with a human-centred, complex approach. For doing so, on the basis of mutual dependence and responsibility, we have to keep the fundamental needs and interests of our fellow-beings in view, that is, according to the Christian ethics, we indeed have to love our fellow as we do ourselves. The need for freedom and equality are opposite needs, however, they can form a mutually complementary and sustainable unity with the help of brotherhood, solidarity and communal spirit. In this case it is the human-historical experiences and the higher, divine abilities of men (or those that can be traced back to natural laws) which are the standard, and not logic. In our approach God means the absolute fairness and the unconditional universal ethics obligatory to everyone to which each and every people can join via its transcendental dimension. This means that we rise above ourselves.
To understand divergent problems better, we have to say that in a substantive-ethical democracy functioning on the basis of direct participation, justice and mercy are simultaneously necessary. Seemingly, one contradicts the other, but in fact the mutual dependence between them makes the order of such substantial democracy lively and balanced, which is fundamentally different from the present system of plutocratic dictatorship presented as an alibi-democracy. However, mercy without disciplining force and order is chaos and anarchy. Society simultaneously needs change and stability, the keeping of tradition and renewal, the joint prevalence of the public and individual interest through the consensus between them which has to be continuously renewed.
Demand pairs, double demands have to be met in the economic life too. The harmonious, stable and well-balanced economic life needs the strong frames of the market’s operation and the free movement of its participants, the prudent planning and the economic freedom of “do as you wish”, the healthy growth and the natural decline simultaneously. The health of society and the economic life within depends on the joint and continuous fulfilment of these conflicting requirements. If only one of the requirements is fulfilled, it makes the society merciless, it leads to imbalance and then disintegration. This is what happened to the Soviet- type socialist system whose ruling layer seized the achievements of the citizens’ work and obtained the absolute command of them, including the command of their lives too.
Property is power, and those who have an absolute right over property have an absolute power over people as well. This system, as we know, has shamefully failed. The ultra-liberal plutocratic world order stands before this very same opportunity as well, where the owners of the global money monopoly monopolize the achievements of the work of the other people for themselves by financial techniques, and with the help of the financial and real property, they obtain the domination of the world for themselves, too. This system is also unbalanced and we are witnesses of its disintegration.
The concept of globalisation began to be used at the end of the 1950s by American strategic planners and the experts of the so-called “think tanks”. However, the concept of globalisation can thank its real career to the reports published by the Roman Club in the 1970s. Since globalisation is too a divergent circle of problems to face, as far as its judgement is considered, there are people who accept the content of it and support it and there are others who criticize and even attack it. Those who accept it describe the phenomena of globalisation as if they could be traced back to natural laws. They regard globalisation as the organic part of the relationship between people and nature. Thus globalisation is not only inevitable but is equal to development and progress. Previously, the expression “modernisation” was used for the phenomena of globalisation but they took the interpretation of technical modernisation from “modernisation” and abandoned the requirements in connection with the modernisation of human society that had really been emphasized before. The modernisation of human society means that society is made to be a fairer medium where the achievement of the work remains at where it was created. Technical modernisation meant the development of the technological revolution: the industry and transportation leaning on fossil energy sources, the automobile, the aeroplane, and even the rocket, but telecommunications, the telephone, the radio, the television, the internet and nanotechnology also have to be counted among these.
According to the interpretation of globalisation as such technical modernisation, these global processes, like natural laws, cannot be influenced. At the same time, their effect is positive and therefore globalisation has to be welcomed as the natural and inevitable accessory of the long-term development of humanity. Furthermore, they say that globalisation is in fact value-free and in terms of politics and power it is a neutral phenomenon. They think that globalisation as independent from human choice of value. This view questions the raison d’etre of the criticism of globalisation as it is not possible to make natural laws such as gravitation a matter of criticism either.
Since, as I have already mentioned, we face a divergent problem, we think it is natural that in the course of the last two decades a series of approaches has been developed criticizing globalisation. Strong anti-global protests and mass demonstrations have also blossomed out from these. One part of the anti-global criticisms focuses on the quantitative, while the other part on the qualitative criticism of globalisation. The criticisms about the quantity or the extent of globalisation on the one hand regard the process as inevitable but on the other hand criticise the exaggerations and limitless shamelessness of it. Therefore they want to bring the powers of globalisation under control in a certain form. We can mention among these Pope Benedict XVI’s now third encyclical which was timed for the meeting of the G8 leaders in Italy on 8 July, 2009. We will later return to the critical analysis of the encyclical’s relevant part.
According to the other big group of people opposing globalisation, the problem with present globalisation is about its content and quality. The problem is not only that a fundamentally value-free or even easily manageable process over-expands its possibilities and therefore becomes unmanageable. The main problem is that globalisation is originally a destructive, dangerous world-historical development which can be even regarded as fatal from the point of view of humanity. They do not only claim that globalisation is not a natural law and therefore it is avoidable, but they also emphasize that referring to political, power and ideological neutrality is an attempt of the now concretely describable plutocratic structure to present itself non-existing by the false interpretation it supports. And there is no sense in criticising something which does not exist.
This question touches the inner problem of globalisation, because if this power structure, which forces this system on the world and of which it is the beneficiary, does not exist, than those controllers who keep this system in balance do not exist either. The basic theorem of the system theory is that all systems collapse in time if there are no balancing counter-forces. A driving force that exists in itself is not capable of self-organization and inevitably becomes self-destructive. A part of the anti-global critics regard globalisation as a form of existence which can turn out to be a fatal dead end for humanity.
The main problem with globalisation is that it is the private monopoly of money that has become world-wide, functioned by the interest mechanism. This interest mechanism forces the world economy for a growth which uses up the unrecoverable fossil energy sources and destroys the natural environment which is no longer capable of regeneration. On our finite Earth no subsystem can grow (develop) infinitely. What we need is not a sustainable i.e. infinite growth, but sustainable energy sources, the survival of humanity and its home, the planet called Earth.
Interest and the money system controlled by it are of course capable of infinite growth, but the real economy forced by the money system is not capable of such growth. The plutocratic civilisation which now has been controlling our world for 250 years is an order of unsustainability and even till now it could only be operated by a certain form of force. This is why we regard globalisation as the power system of force (the permanent wordwide civil war). Globalisation can be regarded as a new lifestyle whose aim is to create and operate an artificial reality that serves the strategic aims of the plutocratic interest groups. This system which serves the plutocratic elite expands through liberalisation, deregulation and privatisation. The plutocratic world order has built a network which is capable of using force, disciplining and interpreting in a way which is influencing and supervising human consciousness. The first element of the plutocratic world order is the forcing power, that is, the network of the multinational companies. The other institutional system of the plutocratic world order consists of the trans-national financial structures. Here belong the Bretton Woods-twins, the World Bank and the IMF, the WTO (the World Trade Organization), the investment funds, the institutions of credit analysis and the central banks.
The third institution of the plutocratic world order is the consciousness industry. It is the telecommunicational, scientific and educational institutions of this industry that formulate and spread the frame of interpretation which presents the world-dominating order of globalisation as a natural law.
The competition between the producer economy and money economy
The above makes it evident that the plutocratic system that is now controlling the world is not the same as entrepreneurial freedom based on equal chances and the market economy built upon it. This plutocratic system, the chrematistics differs significantly from the economy, namely the real economic life that serves the satisfaction of human needs. Aristotle already sharply distinguished the economy that serves to satisfy human needs from the money economy that creates more money out of money, in which the emphasis is not on the traffic of goods and on value-creating production. Economy deals with producing goods that are necessary for life and are useful for the state. It produces use values. On the other hand, money economy wants to make more money from money. In a production economy the main aspect is to satisfy the needs. The creation of money happens through economic activity. Money, which is the mediatory agent of the value-creating producer economy, is an agreed sign which holds the trust of the economic actors. However, money in itself is valueless. What do has a value is the thing that it represents. Therefore, in fact producing the sign should be due to those who produce the value which this sign represents.
In this present plutocratic world order the creation of money has been completely separated from producing the goods and services that hold value. Therefore, producing money has become an industry itself where an enormous amount of money was attempted to be produced by evading the real economy. The recent financial world crisis was also induced by the fact that the money industry which had got separated from the producer economy was producing uncovered money of the order of hundreds of trillions and was creating money market products to them offering virtual securities, the so-called “toxic assets”, that is, toxic financial means. The money bubble that came into existence this way from the uncovered trillions of dollars was bound to burst.
In this crisis it became clear that money is only secondary and the real value is produced by the producer economy. The bank system producing and moving the mediatory signs in fact is only dividing the results of other people’s work. One of the alternatives of today’s global chrematistic is the social market economy and the welfare state. Another way out can be the protectionism that defends local economic interests and autonomy. The beneficiaries of the plutocratic system have made a swear-word out of protectionism, although it does not mean anything else only protecting the weaker economic actors from the economic predators with superior force.
There have been some attempts to combine globality and locality harmoniously, mainly in Japan, Taiwan, South-Korea, Hong Kong, Singapore and Malaysia. The present plutocratic system is talking about a market economy based on free enterprise, but in reality the economic management that has become ultra-liberal is operating a monopoly system, an economy of power. This economy of power is against the productive combination of protectionism and welfare state. In the ultra-liberal plutocratic order the financial structures dominating the world economy and the corporate empires do everything to annihilate local ability to enforce interests i.e. protectionism and the welfare state. In this global plutocratic system the economy becomes a production line whose function is to make the money capital flow from bottom to top, to the owners of the financial sphere. The rearrangement of income is taking place from production work to the direction of money capital, by monetizing, privatising and creating trans-national markets across borders.
From the above mentioned the most important is monetizing, in other words, that some kind of price expressed in money is attached to all existing things and human activities. The trick here is that those who do not have such mediatory agent do not have any chance to survive in the plutocratic order. They do not have any other choice but to join those who are sentenced to liquidation and annihilation.
If we are looking for the future ways of surpassing the present situation, then we have to resort to scientific foresight. This among others mean that we attempt to take stock of the possibilities, needs and probabilities and thus to find the way out. The alternative of the plutocratic globalisation can be the global order based on the priority of producer property, in which the institutionalized form of economic-social irresponsibility and limitless selfishness, the corporation bearing a legal personality gets to be liquidated. In a natural economic order the property can exist only attached to a concrete, natural person and the amount of property depends on the performance of its operator. The natural person-owner has a share in its profit in proportion to his performance and he can freely possess this surplus.
This is not the failed system of extreme equality, the “over-equalization”. But it is not equal to the system of the plutocratic world order that is based on financial diversification either, to which a preference is shown to be called democratic capitalism. In the new property structure only a natural person can be an owner and the extent of his property goes by the performance of this natural person. The order of just inequality would replace today’s order of extremely unjust inequality.
In the system called socialism the interest groups that exercised power took away the properties and work achievements from those creating value by the help of the means of police force practiced by the party-state. The members of the nomenclature that directed the party-state were in possession of the material conditions of freedom without personal achievements. In the present plutocratic dictatorship the interest groups that monopolize the monetary privileges for themselves monopolize the achievements of the work of others by the help of the private monopoly of money. They take the task of producing the mediatory agent of the economic life away from the states exercising public authority and forward it to the bank system which is in their possession. The private monopoly of money makes it possible to draw away the work of those creating value in the form of interest, which is the general theorem of getting someone into dept, and to drive the states, the economic actors and the individuals into debt traps.
The dept spiral started out this way is constantly moving the created values to those who possess the monopoly of creating the signs, namely the money. In both systems, in state monopoly and money monopoly, unjust inequality prevails because in an unnatural way the one who possesses the achievements of work is not the same person who created it with his performance. It is this unnatural system that has to be replaced by the system of just inequality suitable for the human nature. This is the natural economic order, in which two people are different mainly on the basis of their performance.
In the natural economic order based on the priority of production the role of money decreases and the primary function of money will be to act as a go-between in economic processes. In this new system the possibility to make more money directly out of money (by omitting the production economy and personal performance) will be put an end to. The money system operated by the private money monopoly and the mechanism of charging interest will be replaced by the public money system. The credit money charging interest will be replaced by the neutral global currency standing above all the national currencies, which can lead to world trade relations really working based on free and equal chances.
The term natural economic order was first used by Silvio Gesell, a German-Argentine businessman. Gesell was known to be a socially committed thinker, and in 1919 he was invited to be the finance minister of the Bavarian government of that time. Silvio Gesell already died in 1930 and opposed both Marxism and national socialism. The American world- famous economist-mathematician Irving Fisher called himself the modest follower of the Argentine businessman Silvio Gesell. And John Maynard Keynes said that the world will learn more from him than from Marx and that the 21st century will be his.
Gesell deduces the concept of natural economic order from the natural state of men. If we do not originate money from a somewhat irrational superhuman power dominating human society, than the harmony of economy and society comes into existence from the free game of powers and reason. Gesell emphasized that an economic order can only be qualified natural if there are no privileges, that is, monopolies in it, and the layer of money capital that possesses the mediatory agent of economy does not dominate it. Such natural economic order does not come into existence by itself. It can be created by ceasing all privileges, the private money monopoly in the first place, because this is the only way real equality of chance belonging to everyone can be provided.
Gesell is being silenced and disliked by the ruling layer of the present plutocratic world order although Gesell has sharply distanced himself from racist and anti-Semite ideology. Darwin’s theory based on the fight for existence had a great effect on him, but Gesell refused to use this automatically for the society and the economy. He regarded the communal spirit of a nation as natural and healthy, and therefore he accepted moderate nationalism as a healthy attribute. However, he opposed extreme nationalism, chauvinism. He thought that the expansion of the nation states should be replaced by the cooperation of the European states based on equality. He was convinced that the condition for peace is the success of justice, both in financial-economic and social-political affairs, including international relations as well. Therefore, it is justice based on the universal ethics that has to be realized in the first place, and it is only after this that we can talk about long-lasting peace.
My personal opinion is that there is no good capitalism, there is no good plutocratic system, but it is possible to create a more or less just market economy free of monopolies, operating on the basis of equal chances. Capitalism is not the same as market economy, not to mention social market economy. Real market economy is a system related to natural persons and their performance, and it provides the freedom of equal chances for all economic actors. The operation of the present plutocratic world order is facilitated by the fact that it has the most important universal monopoly, the private money system operated by the interest mechanism. Gesell did not formulate it this way, but he multiply came out in support of the open world market free of any kind of monopoly.
He supported the ceasing of custom borders and narrow-minded national trade protectionism too. He did not live through World War II, therefore he did not have to face that the monetary system that came to existence after the war and its organizations of universal authority, the World Bank and the International Monetary Fund have been all enforcing the interests of the trans-national money cartel. Gesell wanted an international currency federation which would circulate a neutral global currency that would stand above all the national currencies. Neutral money is “tame” money not suitable for exercising power. Such a neutral global currency would be able to operate the world trade in a way that could lead to just exchange ratios.
The plutocratic power-economy is unfit for operating an economy suitable for the needs and interests of each and every people. The money system pressed to expand by the interest mechanism forces an economic growth that destroys the natural environment and energy sources necessary for maintaining life. Socialism and capitalism which work as the systems of unjust inequality are not the alternatives of each other, they are both the opposites of the just inequality dependent on personal achievement.
There are several reasons for the failure of the market economy’s opposites, namely the state-monopoly and money-monopoly economic system. The most important reason can be found in the errors of the money system. The first such error is that the interest mechanism operating in the money system can only secure the circulation of money in the middle term, but never in the long-term. The long-lasting charging of interest is a mathematical-logical impossibility, and therefore it is only suitable for maintaining the circulation of money for a limited time.
Many of our contemporaries still believe that we only pay interest if we raise a loan. This is a mistake, because every price contains an interest which the producer and the servicer raising the loan pay to the bank system in order to obtain means of production. Thanks to the brainwashing activity of the mass media we also believe that paying the interests is a just service. The interest system only redistributes the produced income, and it does it so by constantly pumping the money from those that live from their work to those who can accumulate and lend their money. It is also a misconception about the interest mechanism that we have to pay interest because of inflation. Inflation is the concomitant of the loan system, and the interest is needed to secure the circulation of money. Interest makes it possible to have income without achievement, and, as we have mentioned before, it presses the economy to a forced, unnatural growth and increases the inequality between incomes.
Gesell would restore the public money system in the natural economic suggested by him This would mean that instead of charging interest, the mediatory means of economic life i.e. the money would get under the control of the society. And the circulation of money would not be secured by the interest mechanism but by the duty of money usage and money retaining. This would not favour those who have a large amount of money surplus but the whole society and the state or region representing it, those issuing and using the money. This way, the role of money would be limited to its original function, that is, it would be a mediatory means of exchange again.
The financial world system and the economic world crisis put the leading groups of the present plutocratic world order at a crossroads. They are aware of the fact that it is not only the financial and economic system that has got into a crisis, but the ecologic balance of our planet has also got upset. Therefore it is no longer possible to keep postponing the replacement of the present system which is based on the private money monopoly and is operated by the interest mechanism. We have mentioned already that the present plutocratic world order is an empire with a private nature which does not set out from the fundamental interests of the whole humanity but of the selfish interests of the privileged interest groups of this world order.
As the institutional establishment of the New World Order has got on the agenda, it has become necessary to remove the trillions of dollars that had been produced by the methods of big industries and to convert the existing money into covered money, above all by making the states run into debt on a scale which had no precedent in world history before. The elite of the world is also considering escaping to an armed conflict. Plans have been made to issue a kind of Global Single Currency, a world currency covered by precious metal, and to establish a Central Bank of global authority which is necessary for operating this system. But even that question has not been decided yet whether it should be the Bank of International Settlement in Basel, the International Monetary Fund which is also invested with the authority of a central bank, or some third organization.
The global elite of the plutocratic world order does not want to hear about the free economic model of Silvio Gesell. In spite of this, the ideas of Gesell about free money have been spreading. Irving Fisher, the advisor of president Roosevelt said about the free money suggested by Gesell that it would be able to properly control the circulation of money. In the present monetary system operated by interest mechanism it is the interest mechanism that most upsets the stability of the price level. Fisher was of the opinion that using free money would in a few weeks help America come out of the crisis it got into between 1929 and 1930.
Let us summarize: why has the plutocratic world order got into a crisis? First of all, because the money economy has not only separated from the producer economy but it has also suppressed it. This monetary system is a parasite construction operated by the bubble money issued by the banks and the speculations with capital transfer made by the investors. By the separation of the money economy from the producer economy, an unbalanced system has come to existence. The public welfare serving the needs of all people has become subordinated to the one-dimensional selfish profit interests of the wealthy interest groups. The sign mediating the processes of real economy, namely the money has also been transformed. Debt has replaced the role of money. Debt money differs from normal money in that it comes to existence debited with interest from the first. This necessarily leads to the economic actors running into debt and becoming dependent.
The biggest error of the present plutocratic economy is that it necessarily creates indebtedness. This plutocratic economy, when it had became global, did not allow the states to use their individually issued national currencies any more. It forbade the states to issue money individually and to control their credit system with issuing real money covered by the work of that certain national economy and the economic actors functioning in it.
About the strategy of the leading groups of the plutocratic world order, it is worth quoting the concise definition of university professor Carroll Quigley, mentor of Bill Clinton, from his book Tragedy and Hope, page 324. According to this, the aim of the international network of the money asset owners is nothing less than “to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences.”
The central bank of the United States, the FED was established in 1913 and is a private financial institution in the hands of private banks. Since it is one of the important institutions of the plutocratic world order, its activity has an effect on the whole world. Due to the activity of the FED there is never enough money to satisfy the needs of the producer real economy. This makes it possible for the private banks owned by the international money cartel to offer to help the actors of the real economy and to supply the missing amount of money in return for a proper interest. They have become the institutionalized means of the central banks and the producer economy to make the actors of the economic life indebted. They force them to raise loans from them in exchange for a high interest defined by them by artificially decreasing the amount of money in circulation.
Those disposing over the monopoly of the credit system are interested in making this system general and to help it obtain a leading role in the whole world. In order to make more people raise loans and run into debts they supported unlimited consuming, lavish spending, the desire for obtaining, all of which destroys saving and consumption that adjusts to income. Due to the vacillation of the present plutocratic world order and its central currency, the FED-dollar, the problem of money and interest has become a stressed matter in international politics again today. The financial crisis caused not only an economic, but also a social, societal and even a political crisis, too.
It is worth referring to how the international money cartel has been looting Hungary in the last one and a half year. Hungary’s running into debt began when it raised a credit of one billion dollars between 1973 and 1989, this was the amount that actually flowed into the country. During the same period it paid 11 billion dollars worth of interest and a 22 billion dollars worth of unpaid debt still remained. In 1990 the now democratically elected government decided that it would privatize one part of the national wealth in operation and from the incoming money it would pay the debt of the country. The working national wealth was estimated by the International Monetary Fund to be 130-140 billion dollars.
90 % of this was sold, but altogether a value of 20 billion dollars flowed into the country during the last 19 years. The central bank, which is exclusively under the control of the foreign financial structures, kept these 20 billion dollars on its own foreign exchange account and it gave the Hungarian state forint issued on its own. This forint, after circulating in the national economy, became a profit in forint for the companies owned by foreigners, an interest in forint in the banks and a capital endowment in forint for the capital investors. These foreign asset owners changed the forint for foreign exchange in the foreign exchange account set up in the
National Bank and brought it out from the country. This way, the forint got back to its issuer, and the National Bank annulled it with different methods and withdrew it from circulation. It inflated most of it or it withdrew it from money circulation with other, so-called “sterilising techniques” and sent it back to where it produced it, that is, into the air. The Hungarian people therefore basically got inflation in exchange for its national wealth.
In the last one and a half year, the trans-national financial structures carried out the drain of the income of the Hungarian national economy by basically flooding the country with speculative hot capital. While the fivefold of the gross domestic product (25 thousand billion forints) appeared on our bank accounts in 1995, in 2008 it is 43 times bigger than the now 28 thousand billion forint worth GDP. This huge amount of foreign exchange (mainly euro and dollar) arrived in the country to make an interest of 12-14% instead of the 2-3%, denominated to forint. When it sucked itself with the huge margin of real interest, it wanted to leave freely. In order to do that, it was and is necessary to have a large sum of reserves on the foreign exchange account of the Central Bank. The 18.5 billion euro in 2008 were not enough, this is why the international money cartel forced a further 25 billion dollar and 20 billion euro on Hungary via the International Monetary Fund and the EU, so that it can completely bring out the huge interest difference drained from the Hungarian national economy without being disturbed. The residents were told that the state budget has got into a situation “near bankruptcy” and that it is for avoiding state bankruptcy and preserving workplaces in the real economy why it’s necessary to accept the 25 billion dollar stand-by credit, to which a 5% interest have to be paid in advance even if this interest is not called.
Up to this day, about 80% of this enormous sum have been called, but nor the Monetary Fund, nor the Central Bank, nor the state is willing to tell that exactly how much credit was obtained by whom and when from this stand-by credit. The deficit of the Hungarian budget is today in the middle of the average of the European Union countries. This is what we can say about the foreign debts of the Hungarian state too. The Hungarian budget and the foreign debts of the Hungarian state therefore did not make it necessary to raise this enormous credit. Since the actors of the producer economy – the small and medium businesses in the first place – did not obtain credits later either, the money was not spent on what it was drummed into the residents by the mass media, that is, to save the workplaces. It is still unknown today exactly who got the money, since on 27th July, 2009, no one else than Péter Felcsuti, the managing director of the Raiffeisen Bank and the president of the Hungarian Bank Association told that the banks got nothing from this money. So if the state did not get any, the producer economy did not get any and the financial institutions belonging to the bank association did not get any, then where did the 80% of this enormous sum get to?
The answer can only be the following: they filled the foreign exchange account of the Central Bank with this, so that the stunningly high speculative hot capital arriving in Hungary could undisturbedly take out the interest difference it made from to the fact that the foreign financial structures could achieve that the Hungarian National Bank raise the normative interest rate high. While in the other countries of Europe and the world the interest rates began to be decreased due to the effect of the financial crisis, in Hungary in the course of a few months it was raised by more than its half, to 11.5%. Even at present – after several decreases – the interest rate in Hungary is quite high: 8.5%.
It is not only the emerging countries like Hungary that got into a difficult situation due to the still ongoing financial world crisis, but the most well- developed industrial countries are also being choked by the debt-service burdens. The monetary conflicts (for example that the countries of the European Union had to take a debt of 3000 billion euro upon themselves from public money to help out the banks that ravaged irresponsibly in the monetary system they transformed into a global financial casino) affects the present plutocratic world order and the stability of the world economy fundamentally. This ultra-liberal plutocratic order turned out to be unnatural and therefore it does not have reason for existence in the long run. In this system the freedom of the wealthy elite was deformed into the limitless freedom of abusing the freedom of others.
Therefore the system is fundamentally unnatural. Something can be called natural if it adjusts to the basic outer and inner living conditions of people. The most suitable order for the human nature is the one in which each and every man can expand the most and where its optimal development is secured. This can be measured as well. If we look at how much energy and human energy source is needed for one square kilometre to produce a product of a bigger quantity and better quality, then the economic and social order where people can expand the most can be regarded the most natural one. It has to be kept in view that the output of the economy and the economic performance is for the people and it is not the people who are for the profit and the interest.
Gesell considered healthy competition to be very important, because this is the only thing that can make it possible for the one performing the best to develop and the unsuitable one to be eliminated. However, the competition equal to the natural laws can be possible only if the privileges are completely ignored. Equality of chance can only be secured if it is the personal attributes and performance of each and every person that decide the outcome of the competition. This is how the best features can be selected and be passed on to the next generations.
For the competition going on based on the equality of chance it is necessary to freely say the truth and the justice that respects the dignity of all people. This openness is also a fundamental factor of competition. In an era when secrets are predominating, let us think of state secrets, official secrets, business secrets, bank secrets, national security secrets, these many secrets all advance that the dishonest and deceitful people can also be successful and obtain bigger profit by keeping their fraudulent methods secret. A man can suit his own nature if he can follow his rightful and just self-interest, the self-supporting instinct that is in his genes as a natural law. It has been proven that among the circumstances of the equality of chance that is due to everyone, people can perform optimally both individually and together with others. And if this is the case, then the tree which bears good fruit cannot be bad. We have to strive for a social freedom which includes the entrepreneurial freedom based on the economic equality of chance as well.
Following the self-interest is not the same as selfishness. In order to make a just system work, it has to be made possible that everyone enforces their self-interest in the right proportion. And this is only possible if each and every person himself has disposal over the result of his work. This is the material basis for enforcing his self-interest, for his self-determination and personal freedom. The result of work therefore can only belong to the one who did that work. If we do not build economy upon this self-interest, if not everyone can have fair profit and the result of his work based on his free decision, then the natural economic order is unable to function.
Therefore the natural economic order replacing the plutocratic system of globalisation can be based only on a private property that is linked to a person, reflects its performance and is burdened with responsibility towards the other people. However, private property can, as the association of free individuals, function in communal versions of different stages and co-operative forms as well. Neither the state-monopoly power nor the private-monopoly plutocracy can take away from a value-creating person the individual freedom, independence, personal responsibility and the right to dispose over the result of his work. The basis of the individual and social freedom is the private property linked to the achievements of the individual and the self-determination based on this.
Pope Benedict XVI’s encyclical about globalism
Pope Benedict XVI published his now third encyclical, papal pastoral letter, circular, with the title Caritas in Veritate (Love in the Truth) at the time of the summit meeting beginning on 8th July, 2009 in the earthquake- stricken L’Aquila in Italy. In this pastoral letter which consists of 54 pages in German, Benedict XVI deals with the world-wide financial and economic crisis, globalisation, development, solidarity and the fight against poverty. The encyclical aspires to make the world more just and to enforce Christian solidarity. He draws the conclusion from the developed financial and economic crisis that the entire world system needs a fundamental structural change.
Benedict XVI warns that if the profit interest suppresses the ambition for the common good and the pursuit of profit becomes an aim itself, then it brings the danger that the economy is destroyed and poverty becomes world-wide. The pope expresses his doubts about the functioning of the completely uncontrolled free market. The encyclical draws attention to the fact that the actors of the financial system and economic life of the world have been abusing their uncontrolled financial and economic power more and more, and they have pulled out the financial and economic processes from the authority of the morals. The encyclical says the following about this: “In the long term, these convictions have led to economic, social and political systems that trample upon personal and social freedom, and are therefore unable to deliver the justice that they promise.”
According to the pope, the profit is only useful if it serves the interest of the whole humanity. In economy moral norms and business ethics are also necessary to make it function properly in the interest of the public welfare. Ethics itself has to be human-centred and not profit-oriented. Point n. 67 of the encyclical makes suggestions about the structural reform of the financial, economic and political system that has got into a crisis.
(„67. Gegenüber der unaufhaltsamen Zunahme weltweiter gegenseitiger Abhangigkeit wird gerade auch bei einer ebenso weltweit anzutreffenden Rezession stark die Dringlichkeit einer Reform sowohl der Organisation der Vereinten Nationen als auch der internationalen Wirtschafts- und Finanzgestaltung empfunden, damit dem Konzept einer Familie der Nationen reale und konkrete Form gegeben werden kann. Desgleichen wird als dinglich gesehen, innovative Formen zu finden, um das Prinzip der Schutzverantwortung£146] anzuwenden und um auch den armeren Nationen eine wirksame Stimme in den gemeinschaftlichen Entscheidungen zuzuerkennen. Dies scheint gerade im Hinblick auf eine politische, rechtliche und wirtschaftliche Ordnung notwendig, die die internationale Zusammenarbeit auf die solidarische Entwicklung aller Völker hin fördert und ausrichtet. Um die Weltwirtschaft zu steuern, die von der Krise betroffenen Wirtschaften zu sanieren, einer Verschlimmerung der Krise und sich daraus ergebenden Ungleichgewichten vorzubeugen, um eine geeignete vollstandige Abrüstung zu verwirklichen, die Sicherheit und den Frieden zu nahren, den Umweltschutz zu gewahrleisten und die Migrationsströme zu regulieren, ist das Vorhandensein einer echten politischen Weltautoritat, wie sie schon von meinem Vorganger, dem seligen PapstJohannes XXIII., angesprochen wurde, dringend nötig. Eine solche Autoritat muB sich dem Recht unterordnen, sich auf konsequente Weise an die Prinzipien der Subsidiaritat und Solidaritat halten, auf die Verwirklichung des Gemeinwohls hingeordnet sein,£147] sich für die Verwirklichung einer echten ganzheitlichen menschlichen Entwicklung einsetzen, die sich von den Werten der Liebe in der Wahrheit inspirieren laBt. Darüber hinaus muB diese Autoritat von allen anerkannt sein, über wirksame Macht verfügen, um für jeden Sicherheit, Wahrung der Gerechtigkeit und Achtung der Rechte zu gewahrleisten. [ 1481 Offensichtlich muB sie die Befugnis besitzen, gegenüber den Parteien den eigenen Entscheidungen wie auch den in den verschiedenen internationalen Foren getroffenen abgestimmten MaBnahmen Beachtung zu verschaffen. In Ermangelung dessen würde namlich das internationale Recht trotz der groBen Fortschritte, die auf den verschiedenen Gebieten erzielt worden sind, Gefahr laufen, vom Kraftegleichgewicht der Starkeren bestimmt zu werden. Die ganzheitliche Entwicklung der Völker und die internationale Zusammenarbeit erfordern, daB eine übergeordnete Stufe internationaler Ordnung von subsidiarer Art fur die Steuerung der Globalisierung errichtet wird und daB eine der moralischen Ordnung entsprechende Sozialordnung sowie jene Verbindung zwischen moralischem und sozialem Bereich, zwischen Politik und wirtschaftlichem und zivilem Bereich, die schon in den Statuten der Vereinten Nationen dargelegt wurde, endlich verwirklicht werden. ”)
According to the German text we can see (in a non-word for word translation) that Benedict XVI thinks that “In the face of the unrelenting growth of global interdependence, there is a strongly felt need, even in the midst of a global recession, for a reform of the United Nations Organization, and likewise of economic institutions and international finance, so that the concept of the family of nations can acquire real teeth. (…) One also senses the urgent need to find innovative ways of implementing the principle of the responsibility to protect and of giving poorer nations an effective voice in shared decision-making. (…)”
“To manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration: for all this, there is urgent need of a true world political authority, as my predecessor Blessed John XXIII indicated some years. (…)”
“Without this, despite the great progress accomplished in various sectors, international law would risk being conditioned by the balance of power among the strongest nations. The integral development of peoples and international cooperation require the establishment of a greater degree of international ordering, marked by subsidiarity, for the management of globalization. (…)”
“They also require the construction of a social order that at last conforms to the moral order, to the interconnection between moral and social spheres, and to the link between politics and the economic and civil spheres, as envisaged by the Charter of the United Nations.”
It turns out from the quoted text that Benedict XVI actually suggests a New World Order, a kind of world government. These expressions sound frightening to those who analyse the questions of the present plutocratic world order more deeply. We have already quoted the university professor Caroll Quigley about what the global strategy of the super-wealthy investor is. A common religion that would be a syncretic religion mixing the world religions is necessary for the success of this strategy. (Syncretism as a religious term means the superficial coordination, mix of the different religious, philosophical trends and the hybrid spiritual system that is created this way.)
Further there is need for a common currency, the abolishment of the nation states and the national self-identity, the personal control including everyone, the state-control of the population growth, and in political life for the roughly controlled society, propagandistic literature, privileged political and economic leading layer, centrally supervised information, education and public health. We could continue the list further. If a system like this became global and humanity was controlled from one power centre, it could be nothing else but dictatorship.
Due to the fact that the money monopoly has become global, in the 20th century and in these days the political, economic and opinion power have also become highly concentrated. It has become more and more evident that the plutocratic world-elite follows a strategy whose aim is to create a world order controlled from one centre, to create a kind of central world governing. The anti-globalist thinkers and movements that criticise the strategy of the plutocratic world order oppose the creation of a world order controlled from one centre and they wish to secure the free development of humanity by the help of the nations and religions preserved in their natural state. After this it is not easy to answer the question: What made pope Benedict XVI suggest the transferring of control of the whole mankind and the international life to a power centre having a global authority?
Up to now, the Vatican City has not signed the UN Universal Declaration of Human Rights and the European Convention of Human Rights. It was unwilling to do so because neither of them referred to God as the source of human rights and political rights. Benedict XVI is therefore aware of the deficiencies of the UN, namely that this world organization is not inclined to acknowledge the creating God as the authority that can act as the base of the individual and collective ethics. It is also a well-known fact that the reference to Christianity as one of the founders of the European culture did not get into the draft constitution of the European Union either. The Vatican City acknowledges the human and political rights, but it establishes them in a way fundamentally different from the classical liberal view system.
Liberalism advocates that the human and political rights cannot be controlled by the state in the name of any kind of sacral-ethical order. The liberal belief does not acknowledge the existence of such order. On the other hand, the Catholic view recognizes the human and political rights inside the frame of a Christian-ethical frame. The question arises: does Benedict XVI give up the standpoint of the Vatican City in point n. 67 of his encyclical? When he writes about the reform of the UN, what kind of changes does he think about actually? The word “reformation” cannot mean to make this institution accept the sacralisation serving as the basis for the individual and collective ethics, as the UN has been one of the important institutions of the liberal world domination efforts since its existence. The present liberalism, which has lead to the interest groups with the money monopoly becoming extremely rich and therefore obtaining too much power, deformed freedom into the freedom of absolutely abusing the freedom of others.
Property is power. Those who obtain an extremely big property obtain extremely much power. And the freedom of the extremely powerful man means the concentration of the freedom taken away from others. Therefore liberalism that eliminated freedom in fact has never built anything, but demolished the obstacles in the way of the absolute power of the plutocratic world-elite in the first place. It was demolishing anything that stood in its way. Liberalism means the absolute power of the money monopoly that got out of all the control of the public, which at the same time secures the absolute possibility of abusing this power too. The world domination of the private money monopoly makes it possible that the producer property get centralized and concentrated under the hegemony of a small interest group too. This neo-liberalism or ultra-liberalism has pushed out the social market economy from the economic life and replaced it with the plutocratic system that uses the alibi-democracy’s empty forms.
A social market economy can only come to existence if its mediatory agent is the society and the interest-free public money that is under the exclusive control of the state. Moreover, the property system has to be reformed so that the property is linked to that natural person who can behave ethically on his own. The legal abstraction that bears the name “legal person” is not capable of this. The economy which is based on the legal person is the preserver of the unethical business behaviour and it is never capable of behaving in any other way than it was put by Milton Friedman: “The business of the business is the business”, that is, the business (activity) of those doing business (the businessmen) is to make business, that is, to make profit for themselves. This means the disregard of all ethical rules.
Benedict XVI should have returned to the re-regulation of the role of money according to the Christian principles. Money is a valueless but necessary mediatory sign, the mediatory agent of economic life, and as such, the right to issue it is due to those who produce the product and service, which is the real value represented with this sign. Money therefore is due to everyone who creates value. The most important feature of money is that it carries trust. Its content is information based on trust. Without the present bank system the financial system and the economy could be operated in a much fairer way by the commercial and clearing houses. These could give an account of the services of the actors participating in the producer economy with signs carrying different trust.
The biggest problem with the institutional system of the present financial world order is that there is no need for it. The Bible forbids charging interest in many places. It is common knowledge that the Islam regards charging interest unethical even today. If someone wants to invest his money, he can do it by giving it to a money institution which invests it in the producer economy and if there is profit to it, it is divided by the two investors, the owner of the money and the institution taking on the managing of money, based on principles previously fixed. If the business is a loss-maker, they bear the loss together in the same proportion. However, the present money monopoly operated by the interest mechanism insists on charging interests after the signs (that were by the way created from the air) even if the money given by it as a credit does not mean any kind of economic profit for the borrower. In other words, the present wealthy layer is not wiling to bear a proportionate risk and responsibility with the raiser of the credit that works in the producer economy and creates value.
Therefore, the Vatican City first of all should examine whether it is possible to return to the interest-free money system that the Bible and the Catholic Church had regarded as its own until Martin Luther. It is a well- known fact that Christianity gave up the prohibition of interest finally only following the teachings of Calvin. John Calvin’s ascetic ethical view encouraged tireless work and cutting down on consumption. Overall, it helped the expansion and accumulation of capital. In the question of capital expansion, Calvin set out from Martin Luther’s views and made a difference between legitimate profit and dishonest wealth. He regarded legitimate profit as the necessary consequence of certain professions. By dishonest wealth he meant the growth of wealth at the expense of others.
Calvin believed that God permits the legitimate profit if it is the concomitant of certain professions. At the same time God, as the owner of the earthly goods, gives the goods only as a possession (as a loan) to the people on the condition that they manage it for the benefit of their fellow- creatures. Calvin did not consider wealth condemnable, in fact, he thought that wealth can mean an opportunity to donate. He condemned wealth only if it violated the interests of others and turned man away from God. So in his teaching the accumulation of capital in private hand and the redistribution of the capital for charitable aims can also be found.
Calvin had new thoughts about the functioning of money as capital, too. At the time of Calvin, according to the official standpoint of the Catholic Church, charging interest was prohibited. The prohibition of charging interests had been stated by the second council of Nicaea (787). This standpoint of the Catholic Church indeed appears in its certain decisions. The third council of the Lateran brought in a law against usurers and punished them with excommunication and denying them church funeral. Pope Gregory XX actually ordered the Christians to chase out the merchants and money loaners who broke the interest prohibition. Pope Clement V condemned the principals who permitted the paying of loans given at interest. They explained the interest prohibition by referring partly to the Bible and partly to Christian theologians and the teachings of Aristotle.
The great Greek philosopher, Aristotle also disclaimed the productivity of money. However, the regulations of the Church were evaded. Interest was usually presented as default interest. The Church also raised a loan at interest, so the Church itself also got into a contradictory situation. Calvin’s economic policy removed the conflict between theory and practice that had been going on for hundreds of years. Calvin first explained his interest theory in his letter De usuris in 1545, then in his commentary written to the books of Moses published nine years later. In his writing “De usuris” Calvin lifts the interest prohibition. He writes the following:
“Because if we completely forbid interest, we restrict the conscience more than God does.”
He acknowledges the right for charging interest and he permits it with certain conditions. Martin Luther strictly forbade charging interest in theory and he only permitted it with exceptions. On the other hand, Calvin permits it in theory and forbids it only exceptionally. Calvin denies that charging interest is unknown to the spirit of the Bible. “There are no proofs whatsoever in the Bible saying that all interests should be completely condemnable”
Although he quotes and explains the same places in the Bible as his predecessor, he arrives at a different result. Calvin identifies two interests. One of them is the consumer loan and the other one is the productive loan. The consumer one does not represent a producing power for the debtor and therefore no recognition or reward is due for it. This kind of loan serves the living and helping, in other words it is an interest-free loan of a charitable nature.
In the case of the productive loan, which can create a new value together with the work of the one raising the loan, the reward, namely the interest can be justified. The productive loan is a loan given for a kind of business by which the debtor is able to gain profit. So it can be regarded as a loan that carries interest. Calvin believes that the Bible only talks about the first kind of loan, since the second kind of interest only developed during the decades that followed. The frequently quoted words of Jesus Christ in the Gospel according to Luke are the following: “Lend, expecting nothing in return.”
Calvin interprets this as we have to help the poor sooner than the rich. Therefore, the sentence of Jesus Christ quoted most frequently by those opposing interests is not about the complete prohibition of interest but it rather encourages supporting the poor.
The Christian theologians’ other main argument against interest is based on the Old Testament of the Bible. This strictly forbade the Jews to charge interest in trade among them. John Calvin believed that the Christian community of his age could not be considered the same as the Jewish communities of the biblical ancient times. This is because trade had undergone serious changes until the 16th century and therefore rationally thinking, it is unconceivable to forbid interest among Christians. In the next part of De usuris Calvin tries to prove the productivity of money and on the basis of this the legitimacy of charging interest. Calvin abandons the view concerning the nature of money. He tries to refute the idea which refers to Aristotle saying that money, as opposed to agricultural land, does not have a yield capability.
He refused the teaching of St Thomas Aquinas stating the unproductiveness of money. Calvin did not consider money from the consumer’s point of view any more, but from the merchant’s and the banker’s point of view. He pointed out that besides the value of the metal in it, money can have yield if it is invested, circulated, used. The profit does not come from the money itself, but from its income. Finally he summarizes his basic theory in De usuris as follows: “We do not have to give our judgement of interest to God, on the basis of a certain decision and his order, but only according to the rule of fairness.”
The protestant preacher of Geneva also compared the accepted institution of mortgage with the prohibited interest-charging. He drew the conclusion that neither of them is fairer than the other. He thought that there is no significant difference between mortgage and interest, there is only difference in name. It is not their name that decides whether a thing is fair or sinful. Therefore, similarly to the institution of mortgage, Calvin lifted the prohibition of interest, too. At the same time, however, Calvin set limits to the freedom of charging interest. The first limit orders the interest-freeness and priority of the loan given for consuming. The second limit: do not charge interest from the poor, and he who gives loans shall not be so yearning for profit that he is negligent in fulfilling his obligation and shall not suppress the poor brothers. In the third exception he formulates the principle of equity: nothing shall occur not in line with natural equity. Christ orders the following in verse 31 of chapter 6 of the Gospel according to Luke: “And as ye would that men should do to you, do ye also to them likewise.”
The fourth exception defines a practical rule referring to equity: if someone raises a loan, he shall win as much money or even more with it as the sum of the borrowed money was. In case of the fifth exception the
Geneva preacher draws attention to the responsibility towards God, which has to be kept in view in the economic life too: it is not the ordinary and generally accepted custom according to which we should decide what is allowed to us, but we shall rather adhere to the rule based on the speech of God.
Calvin did a lot in the interest of the general welfare by initiating different social measures. The priority of the public interest is reflected in the sixth exception as well: we shall not consider only the private good of those with whom we do business but shall also consider what is good for the public. Calvin finally mentions the measure of the interest too, and he subordinates the measure of the interest to the laws of the country: When charging the interest, the measure which is permitted by the laws of the country or region in question shall not be exceeded.
During his analysis of the parts of the Old Testament in the Bible, Calvin emphasized that in the case of the earthly goods the idea of solidarity has to prevail in connection with the interest, too. In Christian interpretation, social justice feeds from love, mercy and compassion. He considered the exemplary manifestation of Christian love when someone selflessly lends. He draws the conclusion that nowadays interest prohibition does not function as a cohesive power of community, as it did in the times of Moses. Calvin refrained from using the words usury and usurer. In his opinion it is the Christian fairness that makes it possible to differentiate between the unacceptable form of interest and the accepted interest. He regarded interest as justified in two cases: if the debtor does not pay off due to bad intention and if the loan is productive, in other words, if it took part in creating a certain value. Calvin at the same time knew that if we bear certain forms of interest-charging, we can open a way to abuses too. The complete prohibition of interest entails that the honest and the dishonest are given the same punishment.
He also writes down: it is indeed a rare thing to see someone who is an honest man and at the same time is a usurer. Calvin’s instruction that work cannot suffer a loss because of the capital and money is very timely. According to Calvin the respect and wage of the creditor cannot be as high as that of the worker who created the value. Crediting does not involve any kind of effort and even the interest is created by the work of the person who does the producing work. It is also an important instruction of Calvin that money cannot be the basis of profit if its yield, the interest entails the poor getting in a more disadvantageous situation.
The great figure of the Reformation therefore lifted the interest prohibition and announced the freedom of interest-charging by taking the laws of fairness and love into account. Instead of a word for word analysis of the Bible, he gave the theoretical-religious establishment of the answers that had already developed in practice to the questions that emerged in the economic life. He advanced the development of market economy not only theoretically but also by his practical measures. Geneva, the Protestant Rome, became a flourishing city-state, to which the fact also contributed that it made the operation of the banks and the various financial institutions possible. He himself also established a Christian bank, but at the same time he always kept social justice in view. As a Christian he tried to harmonize fraternal love, brotherly sympathy and economic growth. In this way he could keep the frail balance between economic welfare and social justice.
Thus Calvin and Protestantism wanted to operate the financial system carrying interest based on a kind of “gentleman agreement”. However, the banks and financial institutions are far from behaving like gentlemen, therefore they have to be persuaded to observe the financial and business ethics in another way. We can completely agree with the aim Benedict XVI suggests in “Caritas in Veritate” (Love in Justice, Die Liebe in der Wahrheit), namely, that it is social justice which ought to be globalised instead of the world system of looting with interests and making people indebted. We can less agree with the fact that to a certain degree he distances himself from the so-called “Dependency” theory and he warns against the return of protectionism.
According to the representatives of the dependency theory, the so-called “Third world” countries could not modernize themselves and catch up with the advanced industrial countries because by losing their independence they got into a dependent situation on the developed world. According to the representatives of the Dependence theory it is in the interest of the West to maintain this financial, economic and technical dependency. The dependency theory has several trends, but it is common in them that they attribute the third world’s stagnancy and their falling behind in development to the fact that the values created by them were taken away from them by the advanced industrial countries with financial and economic methods, first of all by indebting and trans-national corporations.
Benedict XVI wishes to form the extremely imbalanced system of the present plutocratic world order into a fairer world order following the norms of the universal ethics by reforming the United Nations Organization. Montesquieu already stepped up against the absolutist, extremely centralized power concentration. He wished to achieve the mutual control and supervision of power by dividing the branches of state power (separating the legislative, the executive and the judicial branch). At present the world is centralized too much. If we set out from saying that property is power and power is property, then we have to see that during the history of the world the property of humanity has never been centralized before to such extent under the control of a relatively small interest group.
According to the data of the UN Research Institute in Tokyo from 2000, if we reduce the number of the people in the world to 10 and all of the financial and produced wealth of the world to 100 dollar, then one person owns 99 dollars and the other nine own 1. Such a big difference in wealth creates a huge inequality in power. If we do not resort to the decentralization of the wealth circumstances and do not decentralize the financial, economic and political world power that has become too much centralized, then it is impossible to create a fairer world order that better meets the universal ethics and social justice. Extreme predomination in wealth leads to extreme predomination in power, and this makes possible to abuse power on a global scale as well.
It is in fact necessary to decentralize this over-centralized and overconcentrated financial, economic and political power, and to create a division of power where the functionally and regionally divided power branches and regional power centres mutually balance and control each other. Namely, the “Checks and Balances” known form the American constitution, i.e. the means and institutions securing the balance among the certain power branches have to be made global by creating the system of power branches and regional power centres that are capable of mutual checking and balancing.
In my opinion it is not further centralization, the establishment of a world system and a kind of global union controlled from a single centre which is needed, but the separation of the financial power from the producer economy, and that of the financial power from the political and armed power. The financial power also has to be decentralized, namely in a way that the owning of the property has to be linked to a natural person, and its measure has to be linked to the performance of this natural person. This new kind of property system would impede the excessive enrichment and the entailing development of a power-predominance in the hands of a small super-rich layer. At the same time it would prevent excessive impoverishment and the majority of people getting into a deprived and dependent situation because of not having the result of their own work. Those who do not possess the result of their work lose their selfdetermination and personal freedom and they are restrained from living according to the norms of universal ethics.
If the Checks and Balances system, i.e. the system of mutual checking and balancing was made to a global scale, it would make it possible that the owners of the private money monopoly could not abuse their financial overpower, could not be the owners of a predominant part of the producer wealth of mankind and therefore could not control the political power and the life of mankind necessarily. We cannot regard what Benedict XVI suggests, namely the reformation and strengthening of the UN, as a solution.
We emphasize: The over-centralized and over-concentrated world power has to be decentralized to the highest degree both horizontally (according to geographical and geopolitical regions) and vertically (by separating the financial, producer-economical, political and armed power branches) and has to be made capable of creating a balance of power by placing it under the mutual control of each other. What is needed now is not that the little efficient United Nations Organization gets transformed into a Global Union with an effective government. It is a decentralized world order controlled from below, organically built and capable of enforcing the universal ethics that has to be created by strengthening the natural human communities (the family, the nation, the primary religious-cultural communities) and strictly enforcing the principle of subsidiarity. A system like this could represent the culture of life and survival instead of the present system of looting by interests and indebting, which represents the culture of shameless selfishness and death and which necessarily leads to the destruction of humanity and its habitat, the Earth.
“Love your fellow as yourself!”
Man is inclined to good and bad, selfishness and unselfishness at the same time. Getting overly rich makes it possible for a small interest group to unlimitedly enfroce its own selfishness. This selfishness can only be limited if the other group of people also has an amount of wealth and interest-enforcement power based on the wealth that it can step up against the selfishness of the other group with its own selfishness. The selfishness of equal financial, economic and political powers tightening against each other can force the control of the opposing selfishnesses and the following of an ethical behaviour respecting the needs, interests and values of the other. (Mathematics expresses this by saying that if we multiply a minus with a minus, we get a plus, but it is more graphic if we think of the vectors of opposite directions, of which the resultant in case of equal powers is a null vector. The latter expression here illustrates the ethical that is unselfish behaviour.)
How can we protect ourselves from the global power predominance that has grown into a limitless freedom of abuse? First of all we have to rethink the problem of interest, namely on the basis of the ideas of Silvio Gesell that have proven to be durable. If someone states that the circulation of money cannot be secured without the interest mechanism, he has to know that a negative interest also exists and the circulation of the signs playing the mediatory agent of the economic life i.e. money can be secured by this as well. The present system of positive interest rewards the one who holds back this mediatory agent. Negative interest on the other hand punishes the one who holds it back from fulfilling its function in the operation of the producer economy. Therefore the most important task is to liquidate the private money monopoly and to give back the signs of mediating in the economic life to the public authority supervised from below.
The present financial and credit system under private supervision has to be transformed into a public money system and public credit. This would make it possible to liquidate the power of the trans-national money cartel made up of the superrich bankers (the present owners of the private money monopoly). If this extremely powerful group that forces everything under its hegemony and places its selfishness above all public interest is disconnected, then the reform of the circumstances of producer economy can begin with the introduction of the new property system. The essence of this new property system is that it is actors of equal economic power that stand in front of each other and the possibility of economic choice equality is secured to everyone. In a system like this the interest enforcement of the economic actors of equal power is also equalized. This would make it possible to enfroce the norms of the economic-business ethics. The legal persons unable to behave ethically would not have a decisive role in a
system like this. The existence of the legal person is the denial of the ethics in the economic-financial life. A legal person and ethics are incompatible with each other. Therefore, property has to be linked to a natural person, and the measure of the property, as we have already mentioned it several times, has to be linked to the achievement of this natural person.
If all these are carried out in the financial and economic sector, then it can make it possible to replace the present alibi-democracy with the actual-ethical democracy securing the direct participation of each and every person. An ethical democracy like this is suitable for enforcing social justice. I am of the opinion that the Church, to whom it is an order to follow the will of God, the absolute truth and the universal ethics that Jesus formulated as Ego sum via, veritas et vita (I am the road, the truth and the life), should put forward completely different suggestions from what we could read in the recently published encyclical of Benedict XVI.
Now what can be done?
Silvio Gesell expounded in his work “The Natural Economic Order Through Free Land and Free Money” published in 1913 how the financial system with a new principle suggested by him would work. He leaned on the work of the English Henry George, according to whom the agricultural land belongs to God and the entire humanity, and each and every person gets it only to use it when he is cultivating it. The private property of land was unconceivable until capitalism. It is an indisputable truth today as well: only that can be a commodity which one has created with his own achievement. The land, the water and the air cannot be a commodity, because these were given to the people by God and the nature, the universe. So Gesell also advocated that we have to return to the public owning of the land. By this, one form of exploitation disappears: the land rent. This income comes from the fact that the productivity and usability of the lands are different, for example because they are a different distance away from the markets. The landowners usually monopolize the profit for themselves. This land rent is an income without achievement and is the consequence of the monopolized property. If we cease the private property of land, mankind get rid of an unethical and harmful financial burden.
Silvio Gesell, such as the French Proudhon, found out that the goods and money are different from each other in quality. The goods deteriorate, money doesn’t. Proudhon wanted to eliminate this difference by bringing the goods to the level of money. He organized barter houses to do away with money, but his attempt failed. Proudhon was wrong when he thought that the goods’ bent to deterioration is a natural feature and cannot be changed. Whereas Silvio Gesell stated that goods don’t have to be lifted to the same level as that of money, but money has to be made bent to deterioration like goods, and by the help of the laws made by the public authority. One of his suggestions was that for example at the end of every month the value of money should decrease by half per cent, which would be indicated by putting a 5-pfenning stamp on the banknote. If the value of the retained money decreases, then it is not worth to accumulate it. This speeds up the circulation of money. The loan supply increases. The fee of money usage, the measure of interest decreases due to the increasing supply. If the demand and the supply equalize, then theoretically the interest can be reduced to zero.
During the great economic crisis the thoughts of Gesell were tried in practice too. In the Tyrolean city of Wörgl local money was introduced of the order of several ten thousands of schilling. This money circulated 50 times in a year. In Wörlg unemployment decreased to a quarter, bridges, channels and ski lifts were built. Even André Léon Blum, who had been the prime minister of France three times was to travel to Wörlg to study the successful attempt. Due to the pressure of the central banks under its supervision, the international financial cartel forced the Austrian, German, French and Swiss governments to ban the usage of means of exchange by law. In spite of this, the WIR-system in Switzerland has not only got stabilized, but has been working successfully even until today with the centre in Basel.
The interest-free financial system is operable and is one of the viable alternatives of the present financial world order. At present the issuing of money is in private hands. On the other hand, in the Gesellian system the issuing of money is the exclusive right and obligation of the public authority. This public authority makes sure that the goods supply and the amount of money are balanced. It also pays attention to see to the development of the price level with consumer baskets. If the general price level increases, then the public authority phases out money or simply limits the issuing of new money. In order to have public money in the circulation again, it is necessary that the financial sovereignty and its monetary and fiscal instruments be given into the exclusive authority of the public authority. At present, there are about 5000 local moneys functioning in the world, and more than 3000 of them are doing it successfully. All of these however can mean a partly and provisory solution.
It is noteworthy what is going on Venezuela. In this South-American country the unprecedented and continuous economic upsurge has been already going on for five years. The domestic gross product of the South- American country doubled between 2003 and 2008 and the poverty was reduced considerably. The Chavez government much attacked by the representatives of the plutocratic world order broke with the neo-liberal financial and economic policy. It made a sweeping turn into the direction of participative democracy and economic equality of chance. It adopted a law about the development of the people’s economy, which helps to make the relations between the towns, production and consumption more democratic. Due to this law ‘solidarity barter groups” were established in ten towns, which have been proving to be more and more successful. The economic strategy followed by the Venezuelan government is the alternative of the neo-liberal model also known as the Washington Consensus. They worked out the eight models of publicly operated property and practically speaking they phased in the thoughts of Silvio Gesell in certain areas.
Of course, the wide usage of interest-free money and other exchange means come up against a firm resistance of the owners of the private money monopoly at present. The protectors of the plutocratic world order state that interest-free money or money made to circulate by negative interest does not stimulate to be sparing. This statement is a mistake or a conscious misleading. Due to the money kept in circulation, the producer- value creating real economy is continuously growing. It is the capacity expansion happening here, the objects that get built, the surplus products and services that mean the gain, the savings. So there indeed is (a significantly increased) saving, but not in the financial sector, on the level of signs, but in real economy, in the expansion of goods and services.
A global Lautenbach plan is needed
One of the respectable economic experts of Weimar Germany, Dr Wilhelm Lautenbach’s suggestions concerning the consequences and possibilities of economic interest expansion should be studied and used again. Lautenbach announced his memorandum on 16th September, 1931 in Berlin at the meeting of the Friedrich List Association, with the title “The Possibilities of Boosting Economic Activity by Means of Investments and Expansion of Credit”. Lautenbach proved that the natural way of overcoming the economic and financial emergency is not restriction and the forcing of economic restraints, but the expansion of performance. Lautenbach made a distinction between emergencies. One of the emergencies derives from the warfare economy and the unusual producing tasks.
The other type of economic emergency is the economic decline, the recession and the depression. In these cases (because of the lack of spending power), the demand lags behind the supply in spite of the slowed down production. There are two reactions to this decrease in production. One of them is the deflationary monetary policy, when they want to eliminate the budget deficit with fiscal means, and at the same time the amount of money in circulation is decreased by high interest rates. An another answer to depression is that the monetary authority decreases the basic interest rate, the fiscal authority decreases the taxes, and the leaders of the social politics and the economic life decrease the wages. These three cost factors of the economic performance affect the economic life differently. The reduction of interest rate helps the foreign capital flow out of the country as it can get more favourable interest there. However, this threatens the foreign exchange rates and decreases the inland amount of capital. And the reduction of taxes is practically impossible at time of recession, since the income of the state decreases anyway and it is forced to do a severe budget restriction.
Even in depressive circumstances there is product surplus, intact production capacity and unused labour force. Therefore it is practical if this unused economic capacity is somehow started up and utilized. For this, the state has to create new economic needs for the producer economy, namely by submitting cheap interests. However, the need financed this way has to be a productive need increasing the activity of the producer economy and not one of consumptive nature. Thus, the public authority (based on its monetary prerogatives) can only grant public credit to develop the infrastructure and bring the production capacities into motion.
What is the essence of productive credit creation?
First of all Lautenbach suggested that the concrete plans of big infrastructure programs be worked out and financing has to be secured for their realization only when these are done. The form of financing is the commercial bills of exchange issued by the government. These bills are accepted both by the central Bank and the other commercial banks since the government takes on guarantee for them. The banks have to secure short-term and long-term credits for the companies that take part in the programs developing the infrastructure and increasing production. These companies pay each other with these discountable and stately guaranteed commercial bills and they use cash only for the wages. As their costs come in the form of cheques and bills, they hardly have to use financial credit.
So Lautenbach considered the conscious and well-thought out intervention of the state necessary to overcome the economic setback. He referred to the fact that in 1923 Japan could build up Tokyo that had been previously destroyed in the earthquake this way. The Japanese government issued the credit, this increased the productivity and the standard of living, which exerted an unprecedentedly positive influence on the entire Japanese economy.
The Germany of Lautenbach adopted the Japanese example. According to this, the entrepreneur, who takes part in the programs initiated by the state, can start investments that are brand new, or can correct apparatuses to which he does not have the appropriate liquid assets alone because of the economic setback. Since the commercial bills of exchange issued at the start of the projects can be discounted, they can be converted after 12-15 months to middle- or long-dated government securities. These are covered by the growing domestic income. Therefore only those economic programs can receive credit, whose implementation satisfies an important need or increases the volume, productivity and competitiveness of the economy. This way the value-creating real economy recovers, and the plus output covers the expansion of the issued credit and the money circulation. And this does not cause inflation, because the state and the bank system issues only as much credit as it is necessary to the extension of the real economy. In fact the capitalization of the national economy and the entire society is realized.
Lautenbach’s ideas were at first rejected, and they were implemented with complete success only after 1933. The most important objection against it was that the issuing of money by the state can cause an inflation which led to the complete depreciation of the Mark in 1923. It is unquestionable that at this time the Reichsbank issued as much money as it was necessary to fulfil the obligations of reparation. The amount of money issued this way significantly exceeded the capabilities of the German national economy. This economy could not produce the goods and services that could have covered the amount of money put in circulation. Hyperinflation was the consequence of this, due to which one trillion marks had to be paid for half a kilo of bread. This absurdity forced the Germans not to use the mark in circulation any more, since they had to carry a whole cart of money for a kilo of bread.
Does history repeat itself?
In 2009 we could already witness that due to the world crisis broken out in 2008 both in the US and in Great Britain money was issued to an extent as much as or even higher than in the German situation in 1923. Therefore, similar inflationary phenomena would have had to appear. But these phenomena did not occur. This implies that the German inflationary wave in 1923 had other reason than that of the state putting too much money in circulation with the note press.
The order of magnitude of the money issuing is the same. The effect however is markedly different. We can find the explanation to this in the writings of Hjalmar Schacht, the confidential man of the Wall Street ordered to Hitler (who was the president of the Reichsbank for a long time and an economic top minister as well.) Schacht published his work “The Magic of Money” in 1967. In this work he reveals such previously unknown facts which completely smash the interpretation forced to the world by the international financial community. It was actually the transnational money cartel speculating on the depreciation of the mark that increased the inflation to an unimaginable extent in Germany after the World War I. The foreign investing financers were speculating with a huge amount of money to the value of the depreciating mark, using the speculative techniques of the stock market what we briefly call [in English] as “short-selling”.
The investors use the technique of short-selling when they count on the price decrease of a certain money or money substitute. According to this method, the speculator borrows the monetary assets and sells them being aware that later he has to buy these monetary assets back and has to give them back to their original owner. The speculator therefore calculates that the price will decrease and therefore he can put away the difference. The mass selling of the German mark with shorting made it possible that the privately owned banks submitted a huge amount of money to the speculators.
When the need for credit occurred, the huge amount of marks was issued by the banks from the air and then lent to the investor-speculators in exchange for the fact that they paid a real interest of a considerable extent to the banks for these credits. First the German central bank, the Reichsbank satisfied this financial need of the speculators. However, when the Reichsbank was no longer capable of satisfying the unlimitedly surging financial need with own issued mark, then the privately owned commercial banks took over the lending. The commercial banks were allowed to issue money from the air unrestrictedly and to lend that at a significant interest to the financial speculators.
The future of mankind depends on the earliest possible switch to the natural economic order.
I suggest neither optimism nor pessimism, because both of them make us be prone to passivity. We have to be completely active, because mankind has arrived at a crossroads. Those who see the situation hopeless should think of the fact that only for the sake of the hopeless are we given hope. For the sake of those without hope that hope is given to us.
Thank you for listening.
dr. Janos DRABIK, 26. 08. 2009
Europaische Metall-Union (EMU) in Hungary