Winning the Ecumenical Battle
For the Common Good
by Lyndon H. LaRouche, Jr.
We face at this point a turning point in history. The story is, that the Secret Service of the United States wanted to get a dummy to use for security purposes, as a duplicate for President George Bush. To get the dummy with the exterior appearances was not too difficult; but to get a dummy who would function with a certain amount of verisimilitude was more difficult. But, fortunately, Hewlett-Packard stepped in, and, together with Texas Instruments, they found some scrap, discard, from their production line, and by inserting these non-functioning components into the dummy, they made one that would sound and talk exactly like President George Bush.
Now, this is actually quite a serious business, because he is a dummy. He's obviously a mental case, and this was not a secret prior to the time he was elected. The question you have to ask is, when you look at the way the election was rigged--between two dummies, one a psychotic, and another, stupid and psychotic: Gore and Bush, both equally evil, one would have been as bad as the other. But, the fact that the election campaign, in the press, and by the leading parties, was limited to these two dummies, who said nothing about anything of importance that they were going to do, or that was going to happen to the United States or the world, they were put in the front position, and by an unconstitutional act by a bunch of fascists on the Supreme Court, one of them was selected--George Bush.
Did they know they were doing that? Did the group of wealthy financial powers, and the law firms associated with them in New York, Boston, Washington, D.C., Chicago, and Houston, know that these were a pair of dummies? Did the leading news media, which are controlled by this establishment, know this was a pair of dummies? Of course they did. Thus, therefore, you have to say, that George Bush is not the issue--he's the afterbirth. George was someone who was selected with malice aforethought, to become the President of the United States, under the worst condition of world financial collapse in all modern history--the biggest financial collapse of all human history, including pre-history, because they didn't have such big finances back then.
Therefore this was done. Why would this crowd put a cheap imitation Adolf Hitler into the White House at this time? Because they wanted the effect of having this kind of vicious, mad-dog dummy in the White House at this time. They did not wish to have a President who could think, because he might start thinking, and that might cause problems for them.
What is at stake at present, is the attempt by an international oligarchy--which is largely centered among the five thieves, that is, the four kingdoms controlled, major kingdoms, controlled by the British monarchy, the United Kingdom, Canada, Australia, New Zealand; and the associate member of the British Commonwealth, the United States--to have the oligarchical powers of these combined powers, establish a de facto world dictatorship by methods of terrorism, by methods of intimidation. By using the threat of what remains of military power in the world, to try to intimidate the world into capitulating to this kind of dictatorship. It was very much like the Hitler in the bunker, where George Bush went into the White House as Hitler in the bunker from the beginning; he didn't have to wait all those years to get in the bunker.
So, what you face, is an attempt to intimidate the world into submission to something that the world doesn't like, out of pure fear. And to understand what is going to happen in the United States, all those fools that thought that maybe they could deal with Bush, that maybe Bush was just a change for a different flavor from a Clinton Administration, were fools. And many parts of the world thought, we can work with Bush. Many people in Europe said, we can work with Bush. "Oh, we know Rumsfeld. We know Cheney, from the old days. We can reach them. We can influence them. Yes, Bush is crazy, but we'll work together with these people we know. They'll come around, they'll help us deal with this situation. Don't worry, it's going to be under control."
It's not going to be under control.
Bush is a perfect fascist. We don't have a fascist regime yet in the United States. But we have a fascist party in power, within the Republican Party, represented by a President who's an integral part of that. This man is a Nietzschean personality, and if you've watched some of the things that he's done, and his administration has done, they do not consider the consequences of their actions. What they have done, as financial emergency actions, were stupid. Absolutely stupid. What they have done will make everything worse. They will not control anything. They will make nothing better. They will control nothing. They're going to go from crisis to crisis, as you see the case of this Sharon phenomenon.
We are on the edge of what could become a nuclear war in the Middle East. This war--Sharon is deployed totally with the backing, personally, of President George Bush. The intention is to have a war in the Middle East. It's not a question of, somebody might provoke the Israelis into launching; they don't need to be provoked. They are already provoked to launch the war. It's like Hitler invading Poland; it was not something the Poles did that provoked Hitler into invading Poland. He intended to do it. It was not something the Soviet Union did that provoked Hitler into launching Barbarossa; he intended to do it when he wrote Mein Kampf! And his bosses intended it should happen.
We're in the period where this Nietzschean triumph of the will, like an Adolf Hitler Nuremberg rally, is the characteristic, the mental state, of the President of the United States, to the extent he has a mental state, and is the mental state of his Attorney General, or the Falwells, or the Robertsons--you know, these religious fanatics, who are not Christians or anything else, they're just fanatics.
This is a fascist movement. The theory of government, in the United States, as typified by the decision of the Supreme Court majority, is fascist. It is the mentality of the Carl Schmitt in Germany, whose influence on law designed the Notverordnungen [emergency decrees] that made Hitler a dictator in Germany. This is their mentality. Their mentality is that of Hegel, who was the first philosopher of fascism in modern Europe, who used the case of the Napoleon model, to write a theory of the state, which was then copied by Carl Schmitt, for Schmitt's doctrine.
Now, in the United States, as a friend of ours, now deceased, Professor von der Heydte, pointed out, the danger of fascism from the types like Bush and his father, in the United States, is worse than the danger of fascism from Hitler in Germany. Because, in the case of Germany, the Nazis were constrained by the powerful influence of a cultural restraint; they did not dare attack the German culture openly. And that imposed a limitation on Hitler's freedom for action. In the end, it didn't make much difference, but it was different. In the United States, the dominant ideology is radical positivism, which is the perfect ideal for fascism. Fascism in the United States would be worse than we have seen in any part of the world, unless we stop it. Because there are no constraints. There is no cultural constraint, no limit. And this group was put in to establish a Roman Empire of a new type: a globalized empire.
You see what they did in Peru, even before Bush was in there. You see what they're doing today, and have done, in the Philippines. You see what they're doing in various parts of the world. They're toppling governments! According to the law of Schmitt. We have a fascist government already in Venezuela, the Chávez government. The Chávez government is based on the philosophy of the same Carl Schmitt whose design of law was used to bring Hitler into power in Germany. And we have the Chávezes, and people that are alike throughout Ibero-America, among the followers of the influence of Savigny and Schmitt in law.
Worst Financial Crisis in History
So, this is what we face. We have the worst financial crisis in world history. We have a crisis in which the ruling financial powers of this world are doomed. There's nothing that can save them. There's nothing that can save this system--it's finished, it's over. But nonetheless, they're determined that if they die, everybody else will die first. And therefore, they will do what they can to enslave the world, into meeting their conditions, their financial and economic and other conditionalities, and to overthrow every government that they don't like. To manage the world by causing wars, and threat of wars, and incidents. Their policy is one of global crisis management, including the deliberate provocation and launching of wars.
Now, as you may have observed, most of the countries of the world, including those in which many people were foolish enough to believe they could work with George Bush, or work with the new administration, or that it won't be so bad, or that the collapse won't actually come, that somebody will control it--they were fools, and that illusion is essentially over.
You saw what happened at the United Nations, the repudiation of the United States on several issues in the Human Rights Commission and several other things this past weekend. There's a revolt, even among the traditional slaves of the United States and Britain in continental Europe, against this danger. They just don't quite know what to do about it. There's a sense of this in China. There's a sense of this in Russia. There's a sense of this in other parts of the world, that this is not an administration with which one can hope to live. You cannot marry this administration and expect to survive. This is the worst case of a bipolar personality, without much sweetness in it, that you can imagine. It's not the kind of person to marry, if you want to live. The axe may come down at night, instead of the loving.
So, that's the situation we face. And there's no way in which this is going to be worked out neatly. What this is going to do, is lead not only to an accelerated financial crisis. For example: During the past approximately one year, the U.S. financial market, in terms of indexes of market values, has actually lost, openly, $5 trillion, and has actually lost more than $10 trillion. That is, when the accounting is done, it will be seen retrospectively, that in the past approximate year, the United States financial markets have lost over $10 trillion.
Now, to see what $10 trillion means, is this. The total GDP of the United States, before this collapse came on, was estimated at $11 trillion a year. So, the amount of collapse, the financial collapse, of the U.S. markets, in the past year, approximates the total annual GDP income of the United States. The total GDP income of all nations of the world combined, is estimated at $42 trillion, which means that the collapse of the United States financial values in the past year, approximates 25% of the total GDP of the entire world. The amount of debt outstanding, if you include the off-balance-sheet debt, including derivatives debt, is in excess of $400 trillion--more than ten times the annual estimated GDP of the entire world. These debts are based largely on leverage. These are not simple debt. They're not debts at simple interest. They're debts based on value, which depend upon a compounded gain in financial values.
The United States Is Bankrupt
You look at the employment in the United States. Most people don't work any more, especially people that are employed. They're employed in services which contribute essentially nothing to the economy. They're make-work. Instead of cooking hamburger in your kitchen, if you still eat one these days, you go to a McDonalds or someplace like that, and you have somebody working at cheap slave labor, processing that for you. This is typical of everything in the United States. The great majority of people are employed in professions which, from a strict economic standpoint, in terms of priorities, are useless. The number of people who actually produce anything of value is diminishing constantly.
What has happened is a number of things. The social program, since 1963, but especially since 1972, has been a social program of trying to buy off the population, by creating service employment, unskilled personal services, financial services and so forth, as a way of keeping the population reasonably unemployed, in terms of income, by increasing the number of jobs they work in order to get this income, and reducing constantly the number of people who are actually producing wealth.
Now, most of the wealth of the United States in the recent period comes from several sources, which are interesting. First of all, the United States has shipped its employment out of the United States, into cheap-labor markets around the world. Of which China is an example, South America--Mexico, in particular. So, the United States no longer produces its consumer goods. Many of its other goods are no longer produced in the United States. The industries which used to produce these categories of production, have been largely shut down. People kicked out of these employments, have gone into services, as gas station attendants, or whatever, just to give them something to keep them going. They've been offered the chance to invest in markets which have been boosted with financial speculation, with mutual funds, in stock markets, and other forms. They put their pensions, and their savings, into those forms. As long as the stock markets and other financial markets were inflating, they thought their savings were increasing. They were given the opportunity to borrow on credit, with credit cards or other devices. They were given the opportunity to take the equity they had in a house, which was already mortgaged, and to go to a second and third mortgage, in order to pay their bills, and to finance new purchases, as part of their essential income. And this comes in the order of 15%, at 23%, borrowing costs, for this kind of thing.
People have been living on income they didn't earn. The United States as a whole, in terms of its income, the current-account deficit rate, toward the end of last year, was reaching levels as high as $600 billion annually. That is, the United States was spending, from the world, $600 billion more than it was earning, and that was being leveraged.
On top of that, through this speculation, nations of the world have been relying on the U.S. market, to dump their goods--China, and other nations, which are all going to suddenly take a depression; they're going to collapse. Because the imports into the United States have been collapsing, and will continue to collapse, at an accelerating rate, which means that countries which have depended for a large part of their national income on the margin of exports to the United States, are going to lose the greater part of that income.
At the same time, the world has been investing in the United States, both in direct investments and markets, and into other forms of flows of capital into the United States. For example: One of the biggest sources of subsidy for the United States, is Japan. Japan loans money overnight, at virtually zero percent interest. The people borrow from Japan at zero percent interest, or relatively near that. The yen they borrow, they then use to buy dollars, or euros, or other currencies. They then invest those other currencies, chiefly in the U.S. market, or the London market. This amounts to trillions of dollars a year flowing into the United States in the form of financial inflows, which is part of the leveraged effort to support the U.S. dollar, and the U.S. financial markets.
The United States is bankrupt. Without going into other details, I can tell you that every leading bank of the United States is hopelessly bankrupt. The Federal Reserve System as a system, is hopelessly bankrupt. So you've come to the point, that to try to preserve this system, you could no longer do it by management methods. It can be done only with bayonets, or similar devices, and terrorism. And that is what is happening.
For example, as you'll note, in another panel in this conference, there'll be a large reference to a fight around D.C. General Hospital, the effort to save it. What is happening throughout the United States, especially since 1997, is a shutting down of essential health-care facilities, such as hospitals throughout the United States. Whole categories of people are being triaged, will no longer receive medical care, while diseases, infectious diseases, are spreading around the world. The death rates among vulnerable sections of the population, those over 50 and so forth, will increase. Those who are impoverished, at higher rates. So what we face here, is a social crisis, both within nations, and among nations, where the attempt of the Bush Administration to keep a system which is unsustainable together, by dictatorial methods, runs into headlong collision, in the form of social crises, with nations, other nations, with other parts of the world, and inside the United States itself.
We have two major points of vulnerability in the United States, and social crisis. One is the energy crisis. There is now scheduled, at minimum, about 120 to 150% increase in average energy costs, for all U.S. families, in the coming year. There will be a global hyperinflation in energy costs, under present conditions, throughout the world, including here in Germany. Hyperinflation in energy prices is part of the package. Collapse of essential services--health care, other forms, pensions, these things--are about to be looted, and to be collapsed, throughout the world, at differential rates in different parts of the world.
The most vulnerable parts of the world, will be the ones most looted.
Where Do We Find a Solution?
So, therefore, we come to a point of crisis. What is the alternative to sitting back, and either pretending this isn't happening, or to simply complain about it's happening, and protest wildly?
Now, humanity is different than animals. Animals, under these conditions, would simply go crazy. But, except for some of my opponents, human beings are not animals.
Human beings are cognitive, and the characteristic of history is that, when mankind uses his brain, his mind, and exchanges concepts with others, which define an alternative to an impossible situation, mankind will adopt an intention, a governing intention of action, to make some innovation in institutions, to try to solve the problem. Therefore, the most essential thing at this point, is ideas. Ideas are the distinction between man and beast in any case. The cognitive powers of mind are the distinction between man and beast. And it's by addressing, in times of crisis especially, confronting mankind with the crisis, encouraging it to face the reality that the impossible is about to descend upon them, making it clear. But that's not enough. You also have to provide a clear image of the feasible alternative. What do we do instead?
Once we have a population whose leadership, organic leadership, has a clear idea of what to do about the crisis, then the fact that the majority of the human race has an interest in those ideas, gives leaders who represent those ideas, the ability to transform institutions, especially institutions which are controlled by a tyrannical minority, whose actions are contrary to the vital interests of the human species.
And therefore, the most important concept at this point, is not exactly a new concept, but a fresh vision of an old one. This is a concept which Helga will address in her address tomorrow, on the source of the idea of the modern nation-state. And the characteristic feature of the modern sovereign nation-state, for which there was a long struggle in Europe, and which came into being for the first time in the Fifteenth Century, was the notion that there is no legitimate government, except government which is efficiently committed to what is called the common good, or the general welfare. This is the principle on which the United States Constitution is based, the principle of the general welfare. It's a concept which is reflected in the leading three paragraphs of the U.S. Declaration of Independence. It is a concept for which man has fought. It is the concept which His Holiness Pope John Paul II, has affirmed in the past two weeks, in a new statement on the anniversary of an old papal decree.
The concept of the general welfare, that man is a special creature, unlike the animals, given a cognitive power, a creative power, and that man must be defended, in principle, because man is of this quality.
And there is no alternative to defending that kind of human nature. It is the only basis of law on which we can be governed. It's the only basis in law, in concept, by which you can lead this aching, imperilled world out of the tragedy it's now embroiled in, and lead it to a place of safety.
Eurasian Development and World Recovery
There are some practical considerations in this, strategic ones. And you'll see that the two focal points of this conference, will turn out to be, at the end, as they are at the beginning, the issue of Eurasian recovery, Eurasian development, as the pivot for world recovery, including the role of Russia as a very special part of any such recovery effort, and the relationship of this Eurasian commitment, to the contrasting situation of Africa. In other words, to understand the world as a whole, in the simplest terms of reference, look at the possibility of what we can do in Eurasia, and then look at the needs of Africa, in order to see humanity in its wholeness. Those who have the means to lift themselves up, and those on whose behalf, in the larger term, they must act, to lift them up too. Because the idea of the general welfare, while it's a notion of government of each nation, also must be a notion of the relationships among nations of the world. We must find a community of principle in the notion of the general welfare, to unite nations for a common good. The common good is the general welfare of the nations, of the people in each, and of the community of nations as a group. It's the only chance for this planet.
Now, to go to the question of what is the role of Russia. I addressed this yesterday in a forum we had, a seminar yesterday. And I shall restate it again here.
Germany, like the rest of Western Europe, and Central Europe, is also bankrupt. This is a condition which was installed immediately in 1989 through 1991, when the Soviet system collapsed--and was collapsed. At that point, since there was no credible adversary, the Anglo-American powers, led by Margaret Thatcher, who was made Prime Minister out of the wreckage of a green-grocer's daughter; George Bush, a mental case, the old George Bush (the young George Bush came by his mental infirmities honestly; it's only their money that they got dishonestly); and François Mitterrand. And these people set up a plan, to prevent Germany from surviving the reunification of Germany, and set up a plan to destroy Eastern Europe, especially Russia. That was their plan. And if you look at the history since 1989-1990, you'll see the result. That's exactly what happened; it was intentional.
The plan was tht they launched globalization, to destroy the last vestige of the sovereign nation-state on this planet, through globalization. To set up a modern financier oligarchical form of the Roman Empire, this time on a world scale, in which there would be one world government, run out of London and Washington, in concert with Canada, Australia, and New Zealand. That's what has been happening.
NATO is a joke, nobody takes it seriously. NATO is nothing but an appendage of the Anglo-American facility, sometimes with French cooperation, sometimes not. There is no NATO, there is no sovereignty in Europe. A world empire is emerging, with pagan Roman characteristics and fascism to boot. After all, fascism is nothing but Caesarism revived in the modern age. That is the intention.
Under these conditions, Germany is being ruined, and you see it with the Chancellor, or Eichel: Every time they turn around, they're cutting more and more. The situation is desperate, the budget is unbalanced. The French budget is unbalanced. In Italy, they're used to it, it's always unbalanced, so they put up with it better. Other countries' budgets are unbalanced, they're cutting and cutting, but already they're long below breakeven. These nations cannot survive on their present budgets; physically, they are headed towards Hell, with no way out, no exit in sight.
Germany used to be the pivot of the European economy. Since they got rid of de Gaulle in France and so forth, and crushed Italy, most of Western Europe couldn't earn its own living. The way it survived was through the margin contributed from Germany, a Germany able to contribute to support the rest of the poor nations of Europe. They were all living on the German dole, from Germany's high-technology export capabilities. And as long as those capabilities were maintained, and they were up until about 1989 and the assassination of Herrhausen, then Germany could sustain Western continental Europe. But what was done to Germany, in the process of reunification, the way the process was handled in the assimilation of the former East Germany, destroyed Germany from within too. And thus, Germany is at a point that it cannot survive, and Western Europe cannot survive, the way things are going.
So, there is an obvious solution. There is a great potential market under the proper conditions in Asia: in China, in India, other countries, which represent the largest portion of the human population. In a great area of particularly Central and North Asia, which is one of the great frontiers of growth of all humanity, an area of tundras and deserts and general underdevelopment. Through the mediation of Russia, which has the peculiarity, historically, of being a Eurasian nation per se, as a result of the aftermath of the Mongol occupation--through that mediation, it is possible for Europe to unite with Russia and nations in Asia to set up a long-term system under which, instead of consumer goods markets and investments for these countries, you set up long-term development of the productive powers of labor in these nations.
So, you're talking about a generation or more. That means a system of long-term credit issued by those nations which are producing the greater part of the technology, to the nations which need that supplement in order to get out of the mess they're in. This means a system of long-term credit, interest rates of the order of 1% per annum, simple interest, no compound interest, long-term agreements under which the great markets in South Asia, Southeast Asia, East Asia, now come into a partnership with Europe, with Russia, with Japan, in order to create a great economic boom with some of the same features used to rebuild Western Europe in the immediate postwar period, through the Marshall Plan and other plans.
A program for a generation of recovery, a generation of progress, a generation of development. In order to make this work, as has been understood for more than a century, almost a century and a half, the only way this could work, was to develop a system of infrastructural development which would effectively link the Atlantic Ocean to the Pacific Ocean across Eurasia. This is not railroads, this is not Silk Roads, these are corridors of development, which run a range of, let's say, up to 100 kilometers in width, from the Atlantic to the Pacific, going in various directions. Along these routes, as we did in the United States with the transcontinental railroad, the area on either side of the transportation axis becomes immediately, in and of itself, a sustainable area of economic development. By that means, you can branch out from the main corridors into subsidiary corridors of development and capture the area. If we can make that kind of link, one interesting kind of change occurs immediately.
For as long as we know, mankind's economy has been dominated by the oceans. Contrary to all these theories that the British Biblical archeologists tell you, civilization did not come from England and march down the rivers and the seas, it went the other way. What we know from especially information on the internal characteristics of ancient astronomical calendars, shows that they were predominantly calendars used by a trans-oceanic maritime culture, functioning over a long period of time when most of North Eurasia was under a giant glacier, for about 100,000 years. During that period, most of what later became civilization, was running around the oceans. From the time that these maritime cultures came back into Eurasia following the melting of the glacier about 20,000 years ago, when that began, they began to move inland. The first direction was to move along the great riverways inland, to move along the coastways, close to the seas and to maritime traffic. If you look at the map of the world, you find the characteristic of long development is the lack of the ability to utilize the inland areas, the land-locked areas, of the world, with the same degree of efficiency and productivity that was used in the coastal areas and chief riverways.
Look at Asia today. In China, you have the coastal areas which reflect this, they are more highly developed, relatively speaking, and the inland is poorly developed, the population has a poorer standard of living and poorer opportunities for development. This extends then into Central and North Asia as a whole. Therefore, if we conquer this area, what happens? Take transportation alone. People who don't think, think that ocean freight is the cheapest way to move freight. That is not true. The cheapest way is across land, but not by truck; trucks running up and down the highway tell you that the economy is being dismantled. It costs too much, it's intrinsically bad. Railways are much better. Integrated transport systems, featuring railways, especially magnetic levitation systems, are excellent. Magnetic levitation systems move passengers more rapidly, but those same systems for moving freight, that is really a wonder. That's where the payoff comes. If you can move freight from Rotterdam to Tokyo at an average rate of 300 kilometers per hour, without much stopping along the way, and if for every 100 km of motion across that route, you are generating the creation of wealth through production as a result of the existence of that corridor, then the cost of moving freight from Rotterdam to Tokyo is less than zero. What ocean freight can do that? Did you ever see a large supercargo ship producing wealth while travelling across the ocean? And at what speed?
A Turning Point in Technology
Therefore, we have come to a turning point in technology, where the development of the internal land-mass of the world and the great typical frontier is Central and North Asia. That is the greatest single opportunity before all mankind for development. This requires some revolutionary changes in the way we think about things. This means that we would be engaged in the greatest change in the environment in the history of mankind. This single project, say a 25-year or more development of Central and North Asia in this direction, including the conquest of the tundra. (The Arctic tundra is one of the great frontiers to be mastered, and it can be done.) That would be a great change in the environment. How are we going to decide what is good or bad about changing the environment? What people think today about the environment is pretty stupid. It doesn't make any sense, people don't know what they're talking about, and when you see the kind of education they get, it's no wonder they believe that nonsense. Especially those with physics degrees.
The great theory of the environment was established by a Russian of Ukrainian credentials, Vladimir Vernadsky, with his concept of geobiochemistry. The problem is that what you're taught in most universities about science is nonsense--it's a damn lie, to put it frankly. What you're taught as basic physics is mostly a lie. Because, as Vernadsky demonstrated this in his own way, and as others have shown, there are actually three principles involved in man's physical relationship to the Earth and the universe. Three categories. One is what we call non-living processes, what most call physical processes. The second, which those in molecular biology refuse to understand, is the principle of life; you will never get life out of a non-living process. Life is, as Pasteur insisted, a principle unto itself, a universal physical principle which, as Vernadsky demonstrated with his biogeochemistry, the oceans and the atmosphere were produced by living processes, down several kilometers below the Earth's surface. Most of the Earth that we are in touch with as humanity was created was a by-product of living processes, with what Vernadsky calls the "natural products of the biosphere." We can measure the power of the biosphere over the non-living processes, we can measure it!
Living processes are superior to non-living processes; they are more powerful, they are apparently weak, but their long-term effects are more powerful than the short-term effects of non-living processes.
The Need for Revolutionary Discoveries
There is a third thing, which Kant won't let you know--that's why they call him Kant, because he can't do anything. The essential nature of man is that we are capable of making discoveries of universal physical principle, discoveries we can validate in known experimental ways. By applying these principles, we increase our power in the universe, in ways that can be measured physically, per capita and per square kilometer. We can measure this in terms of the demographic effect of this kind of action. That is, does the human species improve its life expectancy, its power to exist in the universe, as a result of this? If it does, that is good. Mankind's primary mastery of nature has occurred in terms of his mastery and development of the biosphere. So actually, the biosphere, including what we call basic economic infrastructure such as waterways, power systems, transportation systems, the development of good cities--these are natural products of cognition which are reflected as improvements in the biosphere. The biosphere is weak, it is stupid, it does not know how to deal with the deserts it has, or the tundras, or other problems, but we, as human beings, can come to our poor, stupid slave, the biosphere, and say, "We will educate you and we will make you stronger and better."
So, mankind intervenes in the biosphere to make it better. So the principle of discovery applied to the environment creates natural products of cognition in the biosphere which improves the biosphere, which increases the potential for human life. This is not a mysterious, arbitrary area, it is an area of science, of scientific precision. Which means the job to do is not to ask whether it is good or bad to tamper with the environment: It's very good to do so if you know what you're doing. But you have to develop the science of water management, the science of transportation, the science of reforestation, the science of how to change and control the atmosphere and the climate. You can't make big mistakes, they will live with you for a quarter of a century or more; therefore, you have to have competent groups of people determining how to do this. But by changing the biosphere of Central and North Asia, and changing the biosphere in the arid regions of China, and so forth, we will create the greatest boom for humanity on any part of this planet.
What we need is a mission-oriented task force to undertake the policy planning for precisely this. And it must be international.
The Pivotal Role of Russia
Now, the peculiar part of this is the case of Russia. Russia has gone from communism to liberalism, without passing "Go," and certainly without getting $200. It got nothing, it lost money on the deal. The problem in Russia is to define itself--once again, intention: This will work, if Russia adopts the intention of playing that role for itself in a Eurasian development program. That means, leading Russians must adopt such a perspective, and the Russian people must increasingly participate in that vision of the role of Russia in changing the situation in Eurasia and in Russia itself.
Under those conditions, the role of Russia as a pivot, with other parts of Eurasia, is crucial. How? First of all, there are conflicts of an historical and cultural nature along most of the nations of Asia. China and India, for example. China and Japan, Korea with China and Japan, and so forth. So that, on a bilateral basis, long-term agreements among these nations are very difficult to manage. However, if you have a common mission, with a common interest, which involves a number of these nations together, then you can bring them together in a system of cooperation. This is the natural role in which Russia can play a mediating part throughout Eurasia.
This is what came up when Primakov was Prime Minister, on the triangular cooperation, which we boosted very much, and pushed for, between China, Russia, and India. That is a viable idea. It has to be given more legs to walk on and a mind to direct it, in that sense. In Western Europe, where we could potentially revive the kind of high-technology export potential which once existed here. But Western Europe has to adopt a mission, and Central Europe has to adopt a mission, of participating in this development of Eurasia, as a group of sovereign nation-states, through instrumentalities which they create among themselves, to facilitate this cooperation.
The object would be to bring the United States in to cooperate with that great venture.
And if you look at Africa, as we shall discuss here, it has no chance, it has been too looted, unless it has help. The help it requires is of the same nature. The primary needs from the outside for Africa are in the area of basic economic infrastructure, particularly large-scale extensible systems of infrastructure: transportation links, power grids, water management, the redistribution of water in Africa, could make a revolutionary difference. Africa needs assistance on this.
If Africa is allowed to have the room to undertake its own development, with that kind of assistance, Africa can develop. This assistance must come from viable other parts of the world. A prime case is Eurasia: If Eurasia is developing prosperously, then it will help Africa. But, if the Americas and Eurasia are not developing, there will be no help for Africa. And the penalty of what has been done to Africa, like an infectious disease, will continue to destroy Africa, internally and otherwise.
Therefore, we should see this connection in this world: Eurasia is the great center of human population. The conquest of the inner space of Eurasia is a great focal point for a mission out of this process. When we then turn to Eurasian development to look to Africa, and see the misery there, then we see a larger mission which exemplifies humanity as a whole. That is our chance.
FDR Fought for the General Welfare Principle
In the United States, we find, as around the D.C. General fight, which we have not won, but which we are fighting as nobody thought we could, or in the fight against deregulation of energy supplies, we are finding a great response from within sections of the American population that have been disregarded and cast aside, the lower 80% of family-income brackets, who have been out of politics, essentially, for much of the past quarter of a century or longer. They are responding. Why? Because my friends and I are intervening with people in the Democratic Party, all kinds of people, to bring them together around the idea of establishing the general welfare as a general principle. The reference to that is easy. The general welfare principle, as Helga will indicate on Sunday, is an old principle in European civilization. It is one of the characteristic benefits of European civilization to all of humanity. The idea of the sovereign nation-state as the alternative to empire. That is the great contribution.
But in a recent period, which is most comparable, in immediate recollection, to that of now, in the Great Depression of the 1930s, when stupidity similar to that which rules the United States today, the stupidity of Theodore Roosevelt, that fascist, of Woodrow Wilson, that Ku Klux Klan racist, the stupidity of Coolidge, who got himself into trouble every time he opened his mouth, so he didn't talk, at least not in public, these people, along with Mellon, destroyed the United States and destroyed a good part of the world.
Then Franklin Roosevelt came in. He had poliomyelitis, he was crippled, he fought against the crippling effects of polio. During this period, he restudied his own roots. He was the descendant of a collaborator of Alexander Hamilton some centuries before. He found again his roots in the American Revolution. And he brought forth, as governor of New York and as candidate for President of the United States, a conception which transformed that traditionally ultra-racist party, called the Democratic Party.
Remember, the Democratic Party was conceived as a racist, treasonous party, and remained so until Roosevelt became President, even though there were some decent people in it from time to time. Roosevelt changed that. He changed that party from the party of racism and treason into a party committed to the promotion of the general welfare. Not that he was able to enforce, with a sweep of the hand, the general welfare, but he fought to establish the principle. Most important, he fought to establish the principle in the minds of the American citizens.
See, we are not emperors; we can not, with a wave of the hand, declare a principle and then impose it by our will, on people. The way we convey a principle is as philosophers, philosophers in action, who convince people that that principle is the way in which they ought to live and act. When a people is aroused to act for that principle, then the great good comes. No man is a god, no man can decree by a wave of the hand and give the world something according to principle. What a man can do, an individual human being, is to transmit ideas, utilize ideas, convey them to others. The function of leadership is essentially that of a philosopher, which few politicians seem to understand. It is the philosopher who conveys and implants ideas in people, ideas of principle, like a scientist who conveys discoveries. It is the implanting of those ideas in the social process, the creation of political and other institutions around ideas, which mobilize humanity to do a great work.
That is the lesson for today. We are in the worst crisis of world history, and the good side of it is, there is no way you can cheat. You either do it my way or you're doomed. The other good side is that we can win. But to win you have to think of philosophers in action, not as agitators, but as philosophers in action who take people who are living in a depraved mental state, who are being selfish--
Let me give you an example of the principle involved. It may have occurred to you that we have each been born. And it has occurred to most of you that all of us are going to die, even George Bush, who may already be dead. So when somebody talks about my self-interest, what is that? If you're going to die, what becomes of your self-interest the minute you die? Your self-interest in pleasure, in gluttony, in riches--What happens to them? They go! Your self-interest is in having lived, and having your life mean something to humanity. You live for your self-interest. Now, most people are not capable of doing that, not yet. Given the education system, that is not surprising. But, when people are inspired to rise to that sense of their personal self-interest, that what they can do for mankind while they are alive is their self-interest, then they are capable of exerting leadership. If they can do that, they can arouse in people, who all have this potential, at least for a moment, the ability to see that in themselves.
In the old times, when people used to believe in having babies, people would express that in a very simple way. They would say, "Okay, I'm living, I'm sacrificing for our children and grandchildren." And children and grandchildren gave a way of focussing concretely on what your life meant. And you would joyfully sacrifice for the sake of the future of these children and grandchildren. You would vote, and support actions by society; soldiers were ready to die to save it, not because they wanted to die, but because they were ready to take the risk, because they had a sense there was something more important than their mortal life itself. It's what they do with it that's important. Like a scientist. How do you measure a scientist? By what they contribute to humanity. People whose names we know from thousands of years ago, what was their self-interest? To be what they were: great discoverers who benefitted all humanity after them, great artists who uplifted all humanity after them. A few of us have that developed commitment. In former times, more people had that kind of commitment, which they expressed in terms of their obligations to improve society, their family, and so forth. Those values have more or less passed away, during this decadent cultural period in which we have lived. We have come to a time when people suddenly realize that "My money, my money, my money!" is not the essence of humanity or life. the essence of the ability to buy is not the essence of life. It is being human that is the essence of life.
When people have taken away from them, some of the false values to which they have clung too ardently, sometimes they are forced to look and say, "What is really valuable?" Sometimes, for that reason, it is the poor who are the best fighters for freedom. Because they have the least to lose, and freedom means everything to them, because they have nothing else, except freedom. So, when we come to a time of great peril and depravity, the secret is leadership. The secret is the development and spread of ideas, sound ideas, which enable people to mobilize themselves about actions which will address the problem. In such a moment, when that occurs, suddenly the majority of people are able to decide on how to run this planet. And those few tyrants who dominate us, become pitiful wrecks running into places of refuge, or hiding or changing their identity.
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Reconstruction After the Financial Crash
by Dr. Sergei Glazyev
Dr. Glazyev is chairman of the Economic Policy Committee of the State Duma of the Russian Federation, Corresponding Member of the Russian Academy of Sciences. He delivered this address on May 4, 2001 at a conference of the Schiller Institute, held in Bad Schwalbach, Germany. Subheads have been added.
First of all, I would like to greet Mr. and Mrs. LaRouche and the Schiller Institute, and thank them for such an interesting and productive conference. I think that it is a very important event, which is taking place just in time, before the financial system collapses, when we still have maybe some months or so, to think about the future, and about what could be done in order to overcome those bottlenecks and dangers, which might appear in the nearest future. For me, it is a great pleasure and honor to participate in this conference and to share some ideas on the subjects, which Mr. LaRouche raised in his brilliant presentation.
I will concentrate on the lawful processes which determine modern economic development, and which we must take into consideration, when thinking about the nearest future and about the actions, which could be implemented to overcome a worldwide catastrophe, and to find the way out of the crises, which Mr. LaRouche described.
Mr. LaRouche showed that we are facing a crisis of the global financial system and the present global economic order. But how does this crisis change the global system? Whether the process of globalization stops, or if will it find new forms; or, perhaps the world economy will collapse into some regions, which will try to discover their own way out of the chaos; or, the world oligarchy will find new opportunities to create a new global order, based on war, terrorism, or worldwide dictatorship--what could happen? In order to answer all these questions, I think we should take into account certain important features of the present globalization process.
Looting Through Globalization
Usually, globalization is considered to be the process of creating a world market, which will afford more opportunities for each country to develop its own competitive advantages, to improve its efficiency, and to find new ways to cooperate with each other. And, according to mainstream economic theory, this creation of worldwide markets is also the creation of new opportunities and increased efficiency, not only of the world economy, but the efficiency of the economy of each country, participating in the globalization process. But this is, in fact, not the real truth.
These are some features which we see on the surface, where governments of even the most powerful countries diminish themselves, destroy themselves, in order to provide new opportunities for free trade, for free flows of capital, labor, and information, thinking that, in this worldwide free market, they will create new opportunities for their companies and their people. We must bear in mind the other side of the coin of the globalization process. In fact, it is not only the integration of the different countries into one world market; it is also the disintegration of the world, where we can see a very small number of highly developed countries, which concentrate wealth, concentrate power, and concentrate capital, information, and knowledge. And, the large periphery of this core of the world economy, where we see growing inequality, poverty, huge capital flight, huge brain drains, and so forth. And, finally, we see also the emerging set of so-called dead states and even dead countries, about which nobody cares what happens there.
So, the present globalization process includes lawful processes which lead to the polarization of countries by means of an unequal exchange of goods, capital, and information.
The core of the global system, which includes the North American and Western European countries, and Japan, as well as some newly industrialized countries, in fact concentrates the possibilities to extract rent from the rest of the world. These possibilities emerged from two main sources. The first is the leading role of technological change in worldwide development. The share of science and technological progress in economic growth accounts, in the leading countries at this time, for three-fourths--or even 95%, according to some calculations--of the growth of GDP.
This means that those countries and those companies, those structures in the world market, which concentrate the intellectual potential and are able to produce new technologies and new opportunities for production and for taking profits, in fact have the opportunity to obtain intellectual rent, through unequal trade with the rest of the world--with their partners. Those countries which are unable to be at the frontier of technological change, have to give in exchange, cheap labor and natural resources, so they have to finance the economic growth and further development of the core of the world economic system. And this creates huge inequality in economic exchange. If you look at present markets, you can see that intellectual rent comprises about 50%, or even more, of the price of science-intensive products. These are superprofits, which are derived from exchange on the market. This is the first source of inequality.
The second source is the privatization of the world monetary system, by at least part of those countries which constitute the core of the world economic order. In fact, it is not even countries, but we should speak about the American Federal Reserve System, which in fact has privatized the global currency. And those financial speculators, about whom Mr. LaRouche spoke, are lucky to have access to cheap capital and to a cheap source of the world currency, through the privatized money-creation center for the whole world.
This financial system leads to inevitable collapse, because of the lawful processes it embodies.
The financial speculators, who have access to--and even have the opportunity to create--money for nothing, and have opportunities to concentrate financial wealth on a worldwide scale, can easily undermine the financial stability of any country in the world, and obtain superprofits in this artificially created situation of disequilibrium. For instance, taking present Russian history as an example: We can see that from 1993 (when Russia opened its financial markets and gave financial speculators the opportunity to organize financial bubbles in the Russian economy) to 1998 (when we had a crash of the whole system), for each dollar invested in these financial pyramids in the Russian market, financial speculators made profits of about $30 in those five years. This is the scale, on which the national wealth of the whole country was caught and distributed by the financial oligarchy, using their unlimited financial wealth, due to their access to the privatized money-creation center.
So, as Mr. LaRouche has shown in his speech and in his papers, an economic order of this kind inevitably should collapse, for the obvious reasons which lead to the collapse of any financial pyramid. We see this not only in the Russian experience, but also in the financial crisis in Asia recently, the financial crisis in Mexico before, and so forth.
The question is: What will disappear, together with this financial bubble, and what will remain for the further economic development process?
In fact, we should consider two scenarios. The first, which Mr. LaRouche mentioned, is the scenario of worldwide, global financial collapse; and then, immediately, some kind of new order should replace it, or otherwise the world economy will go into chaos, and nobody knows what will be the way out of this chaos.
But there is another possibility. Perhaps, this collapse will not take place in one night. Perhaps, the present financial system will go onto a new trajectory of permanent financial crisis in different parts of the world, and we shall face some kind of turbulent, chaotic period of instability of the worldwide financial system. We should think, also, about how to deal with this instability, even if some mechanisms of the globalization process still continue to work.
If we think aobut what will disappear and what will survive this financial crisis, I think, first, that the financial system which is based on the privatization of the worldwide money-creation center--which is now the Federal Reserve System of the United States, which creates unlimited dollars for the whole world--this will go, for sure. Insofar as we are speaking about a new world economic order, we should also think about a new world financial system, which will either be based on a worldwide currency, not a private currency (which is the dollar, at the moment), or it will be based on something like a payments union--on some kind of mixture. In any case, to my mind, the present stage of globalization comes into strong conflict with the privatized global currency, which creates all these opportunities for the financial oligarchy to create such global instability, which inevitably leads to financial crisis.
But, at the same time, the other institutions which now play an important role in the globalization process and in worldwide development, will continue to work, and at least some of them will survive. I think a large number of transnational corporations, especially those working in the real sector, will continue to operate. We should think about how they will develop in the new macroeconomic environment. The global infrastructure and information network will continue to work also. Science and technology as the main engine of economic growth will also be in place, and we couldn't imagine further economic development without the growth of research and development, without innovation, without technological change, which, as I mentioned, is the main factor of modern economic growth.
What will happen with the world organizations, not only the IMF and the World Bank, but also the WTO and other international organizations? This is the question. In order to find our own answer, or our vision of how to answer this question, we must first think about what could be done in order to maintain global development after the financial crisis takes place, both at the national level and at the world level.
National Development Policy
At the national level, we have the good experience of how some nations were able to adjust to the turbulence of the world financial situation. Let's take the Malaysian example. The Malaysian government showed an example of how to introduce filters, which help the national economy to prevent shocks coming from attacks by financial oligarchs. Important filters of this kind, which help to prevent the attacks by financial speculators from disturbing and undermining the the national financial system, work. It works in Malaysia and and in some other countries, which have introduced this or that kind of currency control, and which prevent financial speculators from taking money out of the country whenever they want.
A very important part of a successful national-level economic policy, is seeking one's own development perspectives. The point is, that if you look at world economic development, you can see that it is unequal, not only in space, but also in time. From time to time, worldwide technological paradigms, or technological modes, change. From time to time, the world economy switches to a new technological basis. This mechanism was described by Professor Kondratieff in the 1920s, and now we have a whole school of the long waves, or so-called economic paradigms, which describes how long-term economic development proceeds as an unequal process, an uneven process of changing technological modes or technological paradigms.
What does this vision mean for national development policy? It is quite obvious that, considering the scarcity of resources that each nation has, it is important to concentrate resources on those industries and that those types of production that are on the upward part of their trajectory. It is senseless to invest in obsolete industries. Those countries and those companies, which can forecast where the new opportunities are and which of the emerging new technologies are the new locomotives for economic growth; those nations, which are able to concentrate resources on the development of these new opportunities--are fortunate to be able to use the new long wave of economic development, to improve their economic situation.
This was the story of Japan's development, for instance. The American administration in Japan tried to establish their own economic policy. They thought that Japan would, at least for several decades to come, specialize in labor-intensive textile industries. But the Japanese government was clever enough to understand where the new possibilities of growth lay, and to invest exactly in those industries which started to grow at a speed four or five times greater than average economic development.
Now, even in a situation of financial chaos, we could find those new opportunities and those industries, which will grow not at 3 or 4% [per annum], which is the average rate of world economic growth, but at rates of 20%, 30%, 50%, or even 100%, as we see in the case of biotechnological industries and information infrastructure.
So, it is obvious that for successful national policies in a turbulent financial environment, we need clever and active government policies, which use not only their good forecasts of the further development of the world economy, but also find a comparative advantage in the national economy for further economic growth, and which could create development institutions which can attract capital from the West into these new opportunities. I do not have time to speak about the experience of various countries that are trying to find their way in this difficult situation, but I am sure that each country could contribute to this.
In Russia, too, we are discussing what future economic policy will be. Either we shall continue the policy which caused the crash of the Russian economy--the Washington Consensus policy, without any active role for the government, which is a policy of self-destruction of the government, and in this case the Russian economy will collapse, together with the financial crisis--or, we shall find a way out, by trying to find our own alternatives and to propose to other nations to participate in mutually beneficial programs, including those Mr. LaRouche mentioned in his very interesting description of the Eurasian corridor developments, and so forth.
A New World Economic Order
Finally, coming to worldwide issues: If we speak about the new world economic order after the financial crisis, we should think of how to overcome those injustices and inequalities, which were created under the previous economic order. Here, the key question is the question of the distribution of rent. First of all, financial rent, which at the moment is controlled by the Federal Reserve System, together with speculators. Then intellectual rent, which at the moment is concentrated in the leading nations--actually, in transnational corporations; then natural rent and monopoly rent, in various branches of the world economy.
To overcome polarization and growth of tensions in the world social and economic system, we should find new ways to distribute this rent. I already mentioned the necessity to switch to a new financial order. This could be done in various forms: in the form of a payments union, where each country collects its own financial rent and uses the national currencies for trading with one another; or, the establishment of a new worldwide currency, which would be the core of at least part of the world economy. In this case, countries participating in the creation of the new world currency, should share national sovereignty with this financial community. For sure, they will have to limit the possibilities to create their own money, or they will have to switch to a currency board system. I'm sure that very few countries are ready to do this. So, we should think about some kind of mixture of various kinds of international financial mechanisms to promote world trade, world investment, and world development.
In terms of intellectual rent, we should think about more just mechanisms of technology transfer. The transnational corporations, which, at the moment, take intellectual rent from other countries and distribute it according to their own private interests, should understand the necessity for more just economic development. Each country has the right to establish its own barriers against capital flight. Let transnational corporations develop production in countries all over the world, but I think we should insist that the intellectual rent they collect should be reinvested in these countries, in order to overcome the inequalities and to create new technological opportunities.
Of course, it goes without saying that various kinds of offshore zones, which provide opportunities for illegal monetary transactions and undermine the whole world economic order, must be eliminated.
As for natural rent, according to the constitutions of most countries and, I think, according to worldwide moral principles, it should belong to those countries which have those natural resource deposits. Here, we must think, maybe, about some kind of international cartels among nations, which will try to keep the natural rent, and to prevent unequal distribution of rents between developed and underdeveloped countries, through transnational corporations or other mechanisms of world trade.
Concerning infrastructure development, I fully support those ideas which Mr. LaRouche has laid out in his speech about the necessity to develop worldwide infrastructure, based on new technologies. It should include not only new transport infrastructure, but also information infrastructure--telecommunications, research and development institutions active on a world level, and world social infrastructure as well. I think the leading nations should bear common responsibility for the supply of basic food, water, heat, and so forth, to the population of the whole world. It doesn't matter where people live.
A New Financial Architecture
The final question, is what will happen to the world organizations? At present, the majority of the world organizations, excepting maybe scientific organizations and some social non-commercial organizations, use obsolete technology to plan and develop their activities. They are based mainly on contributions from countries participating in these organizations; and that obviously means, especially for the main financial organizations, that their policies are determined by the countries that are the main contributors of capital and opportunities. It is not a secret, that the IMF, in fact, is a branch of the American Treasury Department, or the Federal Reserve. The situation is the same with the World Bank. The WTO also is not an organization of independent countries; we know who plays the key role in it. And this is the common picture.
When we speak of a new economic order, we should think about a new architecture of world organizations, which must have opportunities to work at a worldwide level, as a task force. If a worldwide money-creation center appears, it means that world trade facilities will appear together with it. It is very difficult to speak about cheap credits for the whole world, in different countries, if you do not have a world financial system. So, when a world currency is established, it means that the world organization, in charge of this currency, should be under the control of the nations, which organize this mechanism, and also have the opportunity to create and organize cheap credit, all over the world.
Of course, such ideas could not be implemented immediately; I think it is a step-by-step process. But in any case, we should think about creation of international investment opportunities which will be controlled by the nations, but will be based on their own economic activity. For instance, we could think about a worldwide tax on transnational corporations. Or a worldwide tax on currency speculation. And this taxation, at least on speculative operations, could be used to finance the infrastructure projects, necessary for all of mankind.
In order not only to think about all these opportunities, but to implement them, we need political will, and I hope that this conference will contribute to it. I totally agree with Mr. LaRouche that Russia could play--and perhaps will play--a very important role in establishing this new world architecture, but unfortunately the Russian President is not among the participants in our conference. So, we have a lot of problems in all countries. I hope this conference will help us to solve these problems and to find the way out of the financial catastrophe. Thank you.
Russia Prepares for the Financial Crash
by Prof. Stanislav Menshikov
Professor Menshikov is from the Central Mathematical Economics Institute of the Russian Academy of Sciences. He resides in the Netherlands. He delivered this address on May 4, 2001, at a conference of the Schiller Institute in Bad Schwalbach, Germany.Subheads have been added.
Thank you very much. It's a pleasure to be here again. I have been here a few times. I don't even remember how many, exactly. Starting with Bonn, Bad Schwalbach, now for the second time. Then there was another conference around here. I think it's the fifth or sixth time, and I hope there will be many more occasions. As I noticed, the substance and the effect of this conference is increasing. It's not decreasing, not going downhill; you are going uphill.
After all the discussions about these global problems, let me say a few words on what I think might happen to Russia when the great crash comes. I think that the situationas far as it concerns Russiais dangerous, but not fatal. Why?
Number one: Two years ago, we still had an evil dummy in the Kremlin, Mr. Yeltsin. This was our Bush, in a certain way. Because a lot of things he did, led to the destruction of the Russian economy. If he were still around, I would say there wouldn't be any hope. If a crash came, Russia would certainly crash, together with the whole world. Nothing would help it. But, he is not there anymore.
And Putin is not a dummy. He has his weaknesses, but he also has a vision of reviving Russia, which is very important. And he is supported by the people. Remember, when Yeltsin was running for his second election in 1996, he started with an 8% popularity rating, and it was only the "free" press and the "free" television that boosted his popularity to the point of winning. Putin has now a popularity of 70%, and he is keeping that popularity, in spite of all the difficulties and problems that the Russian people encounter.
Yesterday, one of our African colleagues was complaining that, in his country, people are living on $1 a day, I think he said. Well, $1 a day is $30 a month. That's the average pension in Russia. That is, 30% of the Russian population are living on $1 a day. That is the result of that dummy that was in the Kremlin for a long time. But it also shows, that our problem is a common problem with some of the poorest nations in the world, including Africa. We understand those problems, yes. We have a lot of poverty in our country, and we understand that. So when we say, "Eurasian"and I shall come back to thatwe also always think, yes, of course, also of Africa, and also the other countries of the Third World. So, we can't have a dummy anymore, and have to prepare now.
Putin is open to advice from various sources, including the right sources. He is also open to the wrong sources, unfortunately, but he is also open to advice from the right sources.
Number two: We don't have any bubble anymore inside our country. See, when you have a bubble, the bubble is bound to burst. You have the Nasdaq bubble that bursts. We had a double-bubble, I would say: the government domestic debt bubble and the foreign speculation bubble, which Dr. Glazyev referred to. Both bubbles burst in 1998. It created a lot of trouble for the economy. We are fortunate to have this in the past.
Number three: After a long crisis under Yeltsin, Russia has now started to recover and grow economically. Starting with the Primakov government, and then with the Putin government. Growth in 1999 was 3.2%not very much. In 2000, it was around 8% Gross Domestic Product growtha very respectable growth rate. And this year, it will be probably about 4%. So, Russia is growing. And the answer to the great crash, is continued domestic economic growth in all countries. Countries should concentrate on their own possibilities for domestic growth. Domestic growth, that's the answer.
Some people believeand this is spread through the media, particularly the international mediathat the Russian boom last year was based exclusively on oil money, i.e., the petrodollars coming into Russia. Yes, the prices for oil and gas were high, that is right. We also were exporting a lot of aluminum last year, and various other metals, and it is true that Russia had a very substantial surplus in its balance of payments, in its trade balance and balance of payments. And this surplus still continues this year. But this factor is overblown, as a factor of growth.
Why? Because the money that was earned, the petrodollars that were earned, were not spent in the domestic economy. They were not spent to promote the domestic economy. They were not used for capital investment in the domestic economy. They were used for repaying debts to the IMF [International Monetary Fund] and the Paris Club of the leading Western nations. They were also used for stashing money away in other countries, by our oligarchs. Capital flight in our country last year was estimated at $28 billion. And this is a very large amount of money, particularly for Russia. This is about 40% of all capital resources, created in the country. Out of 100% of all capital resources created in the country, 40% leave the country. They are not spent in the country, but stashed abroad. By whom? By the large oil companies, which belong to the oligarchs, by Gazprom, which only nominally is controlled by the state, but really is controlled by another of the private oligarchical groups. This money didn't really go into investment. It should go into capital investment. It should be used in the country. But it was not used. So, this factor is overblown. And it is an important point, because people say: If the crash comes, oil prices will fall, and Russia will fall into a new crisis, because there would not be any source of growth.
That, of course, is not a correct assumption. Why?
Russia Is Not Capital Deficient
First of all, I want to repeat what I just said, that Russia is not a capital-deficient country. It is not a country that really needs very much foreign investment. It is not a country that couldn't provide sufficient recources for capital investment of its own.
And, providing that capital investment, it can use it to support economic growth. In fact, that idea is the key element of Mr. Putin's economic plan that he announced in his speech to the Parliament about a month ago. He pointed to the super-profits, earned in the export industries. He said that this money was spent not for economic development, but for the purposes I just mentioned. It should be spent inside the country.
How to do it? He asked the government to prepare new legislation, that would tax the super-profits and introduce other measures, that would channel that money, through taxes and otherwise, into manufactures, into developing the high-technology industries which are, in Russia, mainly associated with the military-industrial complex. But, that should be turned into a highly developed, high-technology complex with a big export potential. We shouldn't be exporting so much raw materials and oil. We should be exporting high tech. Russia is in a perfect position to do that, if it develops these industries on the basis of capital investment. That is the key issue in Mr. Putin's economic program. Now where did he get that idea? He is no economist. Although, isn't Mr. Putin also a Ph.D. in economics?
[Sergei Glazyev: "Yes, he has his Ph.D. from the well-known Petersburg Mining Institute."]
This is the mining institute, right. So, he is a kind of economist. But, of course, he has not got the macroeconomic vision. He got this idea from Academician [Dmitri S.] Lvov. Academician Lvov is co-chair, with me, of the organization Economists Against the Arms Race (ECAAR), i.e., for the reduction of armaments. But he is also head of economic department of the Russian Academy of Sciences. This idea was developed in the Russian Academy of Sciences. And, despite the liberal advisers that surround Mr. Putin, the idea got into this crucial speech [Putin's Presidential Message, delivered April 4]. So, this is understood, and Russia is trying to do that.
Budget Based on Pessimistic Assumptions
Now, the government and Mr. Putin are fully aware, of course, that some kind of crisis, or some kind of crash, is coming in the world. Look at the way the Russians draft their budget for the years 2001 and 2002. They proceed from the assumption of a pessimistic forecast of the world economy. They don't actually proceed from a crash, from a downturn in the GDP of the U.S.A. But they proceed from the basically pessimistic assumption of a substantial slowdown in growth in the American and probably the world economy. They also proceed from the assumption of falling oil prices. The oil price that is used in calculating revenues in the Russian federal budget, is $21 per barrel for the year 2001, compared to $25-30 per barrel last year. So, it is a substantial reduction. Why is this so?
The philosophy is, that we should base our basic budget on a pessimistic assumption. If things turn out to be better, fine. We can earn more that way. We can receive more revenue. But we will not spend that revenue immediately. We will put it in a stabilization fundthis is a new idea, again promoted by Mr. Putinwhich will be used partly to repay debts, and partly to finance the country in the bad years. Whether this will be enough to overcome the coming LaRouche crash, I don't know. But, at least, the government is thinking in that way, and that is very important. They are very cautious.
What is the main domestic danger? It is political. I pointed to it a few times. The main domestic danger is the liberal advisers and liberal economists, the liberal political figures who are surrounding Mr. Putin and giving him wrong advice. Why are they so dangerous? Because, number one, their basic philosophy is the do-nothing philosophy. Contrary to what Lyndon LaRouche has been suggesting: You don't wait for the crash to come, you prepare for the coming crash, to fight it if you can, with the means that are in your possession.
What the liberals suggest, is: Wait for the investment environment to improve automatically, more or less, without using any special measures to promote that environment. The tax issue that I just described, is not their idea, as I said. It got into the Putin program in spite of them; they tried to cross it out. What they are doing now, is trying to sabotage it by pretending that they are introducing new taxes on the oil industries, when in fact they are introducing very low taxes, which are not much higher than they were before. And they refused to put a tax on the super-profits of that industry.
Now, I don't know what Mr. Glazyev is going to do about those people, because he is sitting in the Parliament, and he should castigate them. I am writing about this twice a week in the Russian journals, but he is in the Duma, he has all the power, he is chairman of the Economic Committee. And I know he is doing a lot. I could even quote him. The word "sabotaging" is probably a thing that he is saying all around.
As he said, these people came to the point, that they are ignoring Mr. Putin's direct orders. Mr. Putin says, do this and that. They pretend that they are all for it, but actually are against. That is what is happening. When will he get rid of all these people? This is a tricky political issue. We can't predict that very much, but that's the problem. And these people are also looking, of course, with an open mouth to the IMF, they are looking with an open mouth to the Paris Club, and they are looking also and saying every minute: "Our best hope is foreign investment, the investment from the West." They know perfectly well that the West is not investing anything.
Last year, the West invested $3 billion in Russia, while they are investing $48 billion in China this same year. They invested more in Hungary; in the Czech Republic, they invested $5 billion last year, if I am not mistaken. This is much more than what is being invested into Russia. With those figures, you can't expect the West suddenly to turn around. Now, if the crash comes, does anybody think the West will start to invest in Russia? On the contrary, there will be even less opportunity for investments coming from the West.
On all counts, the liberal approach is extremely dangerous. We take Russia alone, so to say. If we assume that Putin manages to overcome the liberal opposition, then Russia will not look so bad in the coming crash.
Russia Thinks in Terms of Eurasia
But, we are not alone, and so we have to think about what happens in the world in general. Here I agree generally with what Mr. LaRouche said about Russia being the natural bridge. But, I don't understand why he said that Russia should start thinking in a Eurasian way. Russia always was thinking the Eurasian way. Russia is a Eurasian nation. Look, what is the Russian Federation? It is a federation of maybe a hundred different nations, living in the northern part of Eurasia. That's what modern Russia is. It's a conglomerate of all those peoples, and they do not necessarily live far away from Moscow. Some of the ethnic republics are very close to Moscow, just a few hundred kilometers away. So, they are very close. That is an accident of history. You can't change that accident.
So, the mentality of the people is Eurasian, for all practical purposes. These people are not all Russians; it is a mixture, not a melting pot. Because every ethnic group preserves its culture, more or less. It's not a colonial empire. You can't call them stupid. The Russian majority created all those elites, who finally destroyed the Soviet Union, because they wanted to be independent. Instead of melting them all, the Russian majority promoted their development. That's the way Russian mentality is. They are thinking of themselves as being a part of that conglomerate. Maybe that's not the right word, but still it's true.
Yesterday I was sitting next to a lady who is the head of the Diplomatic Academy in Tbilisi, Georgia. I never thought of her as a foreigner. Not because I am a Great Russian and am looking down at these former colonies. Nowe were brought together with the Georgians and the Armenians and all the others. My first wife, deceased, was an Armenian of Jewish extraction. We are all international. That's the way we are born, that's the way we developed in the country.
It's not easy, of course. Everybody knows, ethnic relations are not easy at times.
So, the thinking is Eurasian, and we have a number of organizations which call themselves Eurasian, and they have their controversies among themselves, because there are different ways of Eurasian thinking, as it turns out. It's not just one way.
And there is a strong opposition to Eurasian thinking, coming from those same liberals who say: "No, no, no, we should really shed the Eurasian tradition, we should look to the West, that is our natural ally." Starting with Mr. Kozyrev, who was the first minister of foreign affairs [of independent Russia], before Primakov. He said China was our foremost possible enemy. "The danger is coming from there. We should look to West for help." That's the idea.
The Eurasian spirit is developing in Russia. The triangle you are talking about, Russia-China-Indiaunfortunately, it is being developed more as two-way relationships: between Russia and China, on the one hand. This is progressing, especially under Putin. They found a common language with the Chinese leadership, very nicely. Just now, they are preparing a visit of the President of China. It turns out, that for the first time we will conclude a treaty ofit's kind of an alliance; it's not called an alliance, but it's a treaty that will constitute a very close relationship between the two countries.
Our relations with India are also developing very productively under Putin. But the relations between China and India are not developing very well. That part of the triangle is not developing. The Chinese foreign minister, in the Kremlin the other day, underlined this. He said that our relations with Russia are improving, but they are not aimed at any other country. Which means they are not aimed at the United States, not aimed at somebody else, and we are not thinking of it as a strategic military alliance. And I know that relations between China and India are not that easy.
But I would prefer not to speak of this triangle. Of course, it is a very good idea. Primakov revived it. Actually, the first man who talked about this triangle was Vladimir Lenin, far back in the early 1920s. Anyhow, I would rather think of creatingI don't know what you call this geometrical figure with five points; I don't want to use the word "Pentagon." What do you call itor pentagram, pentangle? In any case, Russia-China-India, but let us not forget Europe, and Japan. This is all one big mass of a continent, a supercontinent.
A New Approach Toward Russia
Why are they important? I think LaRouche said why they are important; it's obvious why they are important. I slightly differ with him, in thinking that Germany is that hopeless. I don't think he even meant that. Just the way it acted, up to now, it's a hopeless policy. I agree with that. But, recently, I am seeing signs of revival in Europe. There's a new approach towards Russia. [German Chancellor] Herr Schröder showed it, coming to St. Petersburg. This was his second visit. He and Putin speak the same language; Mr. Putin, accidentally, by being an agent in East Germany, came to know German very well. It helps, they understand; they have a lot of common mentality. It doesn't mean that he is making Schröder a Russian agent, I hope. That would be a disaster. You know how it is. What happened to one of your former chancellors, whose adviser turned out to be a Russian agent? It was Willy Brandta nice fellow, but it turned out that one of his advisers [Gunther Guillaume] was a Russian agent. So, I hope Putin doesn't entice him. Of course, that's just a joke!
What I mean is, of course, there is a strong party inside Germany that doesn't like that, including in the German government. There is the second man in the [German] Finance Ministry, [Cajo] Koch-Weser, the man who said that Russia should be thrown out of the G-7. Schröder never said such a thing. Schröder's approach is, he said: Russia has to pay its debts, but let's be realistic; if there are difficulties, we will help restructure these debts. Because the debt to Germany is quite large. It includes also the debt to the G.D.R. [former East Germany]. (Somehow or other, Gorbachov couldn't go without eliminating that debt, and that debt is with us, as well.)
In any case, there is a new approach to Russia. Schröder says that he welcomes Russia's new European, as he said, orientation. I think that's a good sign. But there are other signs, that European policies are becoming a little bit more independent from America. You [Mr. LaRouche] are, of course, the most un-American American that I have seen. You are very American, of course, because you are traditionally American. You are from the best part of America, and the best roots of America. But you are a singular person. As my wife said, "Where do you see an American who knows so much?" For example, who knows that the Renaissance in Italy came at the same time when the Mongols were thrown out of power in Russia?
Who in America knows that? They hardly know that you can go west or east to [get to] Russia, and you will get there. This is a fact. I have been in a family, an intelligent family, where the ladies were really surprised when I said, you don't have to go across the Atlantic, you can go by way of the Bering Strait. That kind of thing. You are an exception, of course. You are not provincial. And you know your history, your philosophy. You are a great man. As I said in one of my articles about you, in Russian, a story about when you were running for President, I said: Well, they will not let him in, because he is too large for the Presidency of the United States. He is like an elephant in a china shop, who breaks all the American china.
Where are other signs of this? Look at what is happening. From Holland we see very much, because we know that the president of the European Central Bank is a Dutchman, Mr. [Wim] Duisenberg. The pressure on him from America, all the time: "Change the interest rates, lower the interest rates, why don't you follow America, why don't you follow the Federal Reserve, why don't you look at what the guy in the Federal Reserve is doing?" It is a continuous chorus. But this guy says, "Well, I don't see that this is necessary, I don't see that the European economy is falling right now, this is not the time. We know better what is good for the European economy." He may be mistaken, but he doesn't follow orders from the Federal Reserve. That is an important sign. Because if the consensus in Europe were different, he would have to follow a different policy. But, the consensus obviously supports him.
Then you mentioned this exclusion. I was shocked. Going down the street in Wiesbaden today, I said, let's look at the papers. International Herald Tribune, front page: The United States has been excluded from the UN commission on what? Human Rights! What do you mean? The beacon of human rights has been excluded, by whom? And the European nations have joined this resolution. It was a kind of an honest article, because it said: This is the backlash to Mr. Bush's appearance in the White House and his attitude towards Europe, in part. So there was this backlash. We talked about it yesterday. The dummy is doing something wrong for the United States, even for Lazard Frères, because they are very close to Europe. These are all international groups. But these are all signs of differences.
Talking about Eurasia, we shouldn't forget the other continents, of course. That is true, and our colleagues yesterday rightly corrected us on that. They said, "You are talking about Eurasia. What about us? What about Africa, what about Latin America?" It is important to realize that we have an international problem. We have a global problem, and all continents are involved. Look at what Putin is doing. Just the other day, he was receiving one of the Presidents of a black African republic. Another day he was receiving the President of Egypt, [Hosni] Mubarak. He is doing something Yeltsin never did: He is reviving the internationalist approach of Russia to world issues. I think that's very important. Also concerning Latin America, he made a point of going to Cubawhich didn't create any friends for him in Washington, you know. They said, "This guy is spitting in our eye by going to Fidel." Now, I don't understand: How can they write such things, what is their business? Fidel has been there for ages. They haven't been able to throw him out. The Bay of Pigs, everybody knows. They have agreed to keep him for a while, or at least as long as he lives. Why can't a President of a sovereign nation visit another President of another sovereign nation, without Washington being concerned about this? When Mr. Bush goes to Budapest, will we say, that he is spitting in Russia's eye? Stupid kind of imperialist ideology. Not internationalist, but imperialist ideology. I can't say it differently.
Anyhow, the gist of what I am saying is that the coming crash, if it comes, is not fatal to humanity. I think of what Mr. Glazyev saidthat there are many ways of fighting it, many projects to be pushed, without waiting for the crash to happen. It may happen, in spite of the fact that we prepare for it. But we don't have to wait for it.
We also are in a need of wise and concerted action for the common good. And here I agree, it's not just the common good inside the countriesa new variation of the old theories of a common good, inside the country, i.e., help the poor, and so on. The common good is common, concerted actions of nations in the world, aimed at creating a just order. Not the kind of order that we have now, but a just kind of order. By that actionand I agree with LaRouche herewe shall overcome, we shall win. And that's it.