Crash, crash, crash
von Heinz Gupta
In a large German weekly newspaper several authors claimed, that we are currently in the third stage of the crash rocket:
- first stage bank crisis,
- second stage corporate crisis,
- third stage national crisis.
In the article, the authors then examined very different ways in which budgets could be brought back into balance: with a vigorous savings policy (austerity), or with a generous increase in the money supply to boost private demand.
However, in this representation no detailed course of action could be given.
What was not addressed, was the question of how it could ever come to these crashes.
Although the speculation out of greed is always mentioned. But that is only partially correct. During speculation the amount of money is transferred from losers to the profiteers, however the money supply in the economic cycle remains the same. Just as in the German children’s song “Taler, taler you must wander, from the one hand to the other.
In my opinion, only three real economic crash reasons come into question:
- real value destruction,
- †a goods consumption of the population that is higher than their amount of earnings (here comes the social “hammock” into play) and
- a rapidly growing world population to be alimented.
Let us only deal with the real value destruction in the following.
If lives and goods are destroyed, such as recently in Haiti by an earthquake or by a tsunami, then this value destruction is unavoidable by us. However we have other value destruction scenarios, which are subject to our control, i. e. arms and war. The military theorist von Clausewitz (1780 – 1831) sees war as a “mere continuation of politics by other means”.
This is nonsense!
War is a declaration of bankruptcy of politics.
Weapons are made with high costs to destroy values and people’s lives. They produce nothing, they just demolish. And everything they destroy must later be rebuilt expensively. At this point I will not further mention the great human suffering, that was once again severely criticised by the recent Easter marches. No, I will only examine the economic consequences here.
So far, the Iraq war has cost only the USA, according to official estimates, about USD 79 billion in pure material values (the lives, the amputated arms and legs, the psychological damages and their follow-up costs not taken into account).
The American economist and Nobel laureate Joseph Stiglitz estimates the true costs however at USD 3,000 billion. Compared to this, the sub-prime bankruptcy of Lehman Brothers, with a loss of approximately USD 70 billion, was just peanuts. This means, with the money that has been used in Iraq, many, many Americans could have kept their houses.
And these are just the USA. There are so many large and especially small states, which use an enormous amount of money on armaments. Admittedly, the arms industry, including the governments’ active private armies, is a strong economic power providing many jobs, and is blessed with a powerful lobby.
But why don’t we start there to save money for beneficial uses?
If Mr. Obama and Mr. Medwedjev now have signed an agreement to reduce nuclear weapons, this is a good, but only a small step. Conventional weapons offer worldwide a much larger savings potential.
After the last World War a German company that had manufactured steel helmets, changed their production to the manufacture of cooking pots.
Couldn’t this be the way?
Sincerely Yours
Heinz Gupta