Tuesday, September 6, 2011

A Spiritual View of the Recession and Economy -II


 Note: Please read first the earlier article: http://someitemshave.blogspot.in/2009/02/spiritual-view-of-recession-and-economy.html

According to Sumerian mythology as well as ancient Indian one the great city of Dwarka/Atlantis was destroyed by the gods when greed and sin increased tremendously. The message of the story is applicable even today.

Although our planet is beautiful, some of the cities on our planet especially in the developing world are incredibly messy and dirty. My spiritual interpretation of this phenomenon is that we are all children of the universe and mother earth – kind parents who allow their children to play and mess about in the play yard. Just as the play room of a naughty child can become very messy, we too as children of mother earth have messed up some of the spaces we have to play about in. Charged by greed, lust and pride, we have trampled on the flowers and gardens of Nature. We suffer as a consequence of it. Father Universe permits that so that we may learn from the suffering. It is time we grew up and co-operated with Nature in creating the same sort of beauty in our living areas as Nature does in parts of the planet where we have not yet had a chance to play and destroy. The developed parts of the world are facing a serious economic challenge. In order to overcome the crisis, causes of this recession have to be properly understood. Some of these are:

1. The resources of the earth have been exploited and this has resulted in an increase in the prices of commodities such as petroleum products. This directly impacts growth

2. Governments have developed the habit of running deficit budgets and incurring debt in the hope that future growth would make debt repayment easy. If growth does not take place as is happening now this very debt becomes a burden impeding growth.

3. Essential institutions such as banks have been allowed a free hand to run on pure greed as against rational thinking and governments are now finding themselves at a loss as to how to deal with this.

The US government has been talking of restoring the middle class through job creation. The proposed plans are not likely to work. Some of the reasons for this are:

1. The new situation with high commodity costs (which will become even higher with time) is a new one. The old era of low energy costs has gone.

2. The new World trade arrangements are different.


3. Large stimulus and infrastructure spending as is being proposed by President Obama once again will increase deficits and debt and thus prove to be counter productive.

One may wonder as to what the possible solutions to the economic crisis should be in the changing world. To this authors mind some of these are:

1. It has been said the protectionism is harmful. It is so, if it is done in a non-intelligent manner. There is a need for selective protectionism to increase jobs in developed countries. One tentative proposal is that when a trade deficit for goods and services, with any single country of the world is more than five percent of the total trade volume (with all countries) during a year, a prohibitory duty on products from that country should be imposed for the following three years beginning with 100% in the first year, 50% in the second year and 25% in the third year. If during the three years of prohibition the trade deficit is once again in excess of 5% (of total trade volume with all countries) then a new cycle of a three-year prohibition beginning with 100% duty interrupting the old cycle. The effect of this scheme would be that trade will continue freely with countries that do not cripple the economy and would get restricted with others that do. Things like garments would be made once again in the US and more jobs will be created

2. The future of mankind lies with diminishing size of cities and a partial return back to the land. The days of ever larger and larger cities is numbered. It was an unnatural phenomenon fuelled by low energy costs and a low earth population that will die its natural death in the coming centuries. The governments can facilitate this process by creating small farm holding of about ten-acre size with a small two-room cottage ( that may be expanded by the owner) on the dwelling and with roads, electricity and irrigation leading to these farms. A loan and knowledge may be provided to begin intensive farming operations with the farmland as collateral (that can always be allotted to a new farmer if need be).

3. Constitutional amendments need to be made to permit future deficit financing and debt only after a referendum and not as a routine. National budgets must be adjusted so that governments live within their means. The easiest way to do this is to divide the budget cut across all heads by the desired percentage. Monetization of existing debt, leading to inflation, will be necessary in future but it may be spaced over a ten or twenty year period to ease the pain. Such a monetisation may be permitted by constitutional amendment that is simultaneous to the earlier one.

4. There is an urgent  need for government to control corporate barons and chief bankers to run away with the profits that belong to shareholders and the public.  Top executive numerations must be capped and things like severance pay scrapped.


The proposals  need to be debated and refined before implementation. For a proposal on how to cap benefits of executives see the post:
http://someitemshave.blogspot.in/2012/02/rule-of-ten-way-to-strengthen-democracy.html



PS: My book - The Babaji Affair - contains accounts of how man may create beauty and prosperity in co-opeartion with nature. Both are avialbale at Amazon.com.

4 comments:

John Myste said...

Point 1: Regarding trade deficits: Good idea, but we are going to infuriate other nations if we do it. Also, many businessmen would consider engaging in a global relationship a risky proposition of the government could suddenly sever the ties because of a trade deficit. However, those are costs. The rewards would be great also, so it is something to consider.

Point Two: The future of mankind lies with diminishing size of cities and a partial return back to the land.

This is a hypothesis, nothing more. It certainly should not be a pivot point for economic strategy.

The days of ever larger and larger cities is numbered. I suspect they are just beginning. This is a hypothesis.

Without more evidence, I respectfully reject this hypothesis (and I am a liberal!)

Constitutional amendments need to be made to permit future deficit financing and debt only after a referendum and not as a routine.

This is a very interesting idea. The problem I have with referenda in general is that most voters don’t understand economics or politics. Dire economic measures are taken on the recommendation of cabbies and waitresses.

National budgets must be adjusted so that governments live within their means.

I agree with this. The thing I strenuously disagree with is that the level for adjustment should be cuts to social programs. Top marginal tax rates should be adjusted to keep the budget balanced. We should not ask the poor to pay more in times of dearth, which is their permanent condition. I do fairly well and I am more than willing to pay my share and to have a tax system that asks that we progressively contribute the more we make.

Also, I am strenuously against a balanced budget amendment to the U.S. Constitution in any form it has been presented. What that means is that if a nation were to invade America, we could not finance a resistance. Also, if a hurricane ravages a state, we cannot “bail the state out,” and if our elderly are suddenly without healthcare, we cannot make sure they are taken care of.

Fiscal responsibility begins with the acknowledgement that those who have means to keep America operating, must be the ones who are responsible for doing it. We cannot charge those who do not have the means with task, and we should not want to. We provide a platform for their prosperity and in return, they should support the platform. The platform should represent everyone, regardless of how we evaluate their contribution. I want to live in a nation where everyone has a right to survive.

The easiest way to do this is to divide the budget cut across all heads by the desired percentage. I am probably just slow, but I don’t know what this means.

Monetization of existing debt, leading to inflation, will be necessary in future but it may be spaced over a ten or twenty year period to ease the pain..

The U.S. economy has been virtually deflationary for a long time. Any radical, and largely untested solution, would be a complete gamble and should not be done. The U.S. is not in the situation Greece was in. The difference, and this is huge, is that our debt crisis was completely fictitious. We had a debt problem, which we have had for years, even in the 90’s when the budget was balanced. We have never had a debt crisis until the “Tea Party” refused to allow us to pay for goods and services that we had already purchased, using the same method we always use to pay them, raising the debt ceiling. To balance a budget, you do not refuse to pay your debts. Instead, you stop incurring new debts. The Tea Party knows this, but the waitresses and cabbies don’t, which is what allowed the Tea Party to take the nation hostage and to help destroy its credit rating.

[To Be Continued … ]

John Myste said...

[Continuation …]

We would have eventually become insolvent, so I agree it was a problem. We could have balanced the budget and began paying down the debt by simply collecting the tax rates we currently claim. Our top marginal rate was 35%, but no human being paid that tax on their top marginal income. In fact, the top marginal income is taxes at an effective rate of between 14% and 19%, depending on who you ask. Additionally, near 50%, more like 40% of income is earned via long term capital gains, which are taxed at a top marginal rate of 15%, which is the 34,000.00 tax bracket, poor by American standards.

All we have to do is enforce a fair progressive tax policy and there is no crisis, ever. Our economy is in great danger, but not because of debt.

I read a blogger commentary the other day where Blogger Tom put is very well. Here is what he said:

We only have a spending problem, if we do not want, or need what we are paying for. Since Americans do want their Social Security, Medicare, etc., then we have a revenue problem.

This was a very interesting post. I like it when you get all political.


[THE END]

ashok said...

Thanks John for your thoughtful comments.

I agree with your emphasis on fair taxation and the ideas you have detailed about it (unlike the ultra conservatives who like to disagree with that). Warren Buffet feels he should be taxed more and cannot understand why the goverment does not - guess its the republicans. They probabaly want the economy to suffer so that Obama looses the next election.

There is much more to my thoughts on returning back to the land and living off it than I have been able to explain in the post. The fundamental fact is that the way the US and other developed economies are organised presently, they are dependent on more consumption for more growth. This is something that cannot go on and must decline after a peak (the earths resources are not as infinite as sunshine) The peak has already been reached in my view and the future is declining consumption resulting in lesser jobs in cities. The alternative is a return to the land.

"What that means is that if a nation were to invade America, we could not finance a resistance."

That is a valid point and exceptions can be built into a constitution for over-ruling a referendum in such cases, but it should only be if America is invaded not Kuwait, Somalia or Afghanistan.

I think you are undervaluing the intelligence and common sense of cabbies and such others- at times I think it is greater than that of politicians whose minds are clouded by partisan issues.

ashok said...

John, by monetisation implies here just printing more money (or adding the eqvivalent on paper without any earning for it to increase national funds.