The Government Doesn’t Want to Solve the Economic Crisis

By Arian Forrest Nevin, J.D.

Many obstacles to human progress stem from natural causes over which man has little or no control. Other obstacles, which are far more numerous, are entirely the result of man’s ignorance, stupidity, superstition, and greed. Once recognized, and if the people are determined, human made obstacles can be overcome. Unemployment and poverty are two of the most unnecessary manmade obstacles. If it really desired, any intelligent and honest government could overcome these twin obstacles to progress.

This begs the question: If the problems of unemployment and poverty are so easily solved, why has no solution yet been given? Solutions have been given. Effective answers have existed for over 100 years. However, these solutions can only become effective through their adoption by the government. It rests with the government to decide whether unemployment and poverty shall continue or whether they shall not, and there is reason to believe the government is not eager to find or adopt any of these solutions.

North Dakota Senator Byron Dorgan admitted the government does not understand what is wrong economically, nor does it have a solution: "[N]one of us have been here before. And nobody in the country really understands what is the right medicine to fix what is wrong with this economy [CNN Feb 10, 2009]." Yet the government makes no attempt to understand the problem or to solve it. If the government truly desired to resolve the economic crisis, one would expect it to thoroughly explore every possible avenue which promised salvation.

The government offers rewards for information leading to the arrest of criminals. If the government offers rewards to catch criminals, why not offer even larger rewards to anyone discovering the means to resolve the crisis? Since the government does not understand the crisis or have a solution, it should seek outside advice. If it is profitable for private firms to offer prizes for inventions that overcome technical difficulties in their business, surely it would benefit any government to discover a panacea for the economic crisis. Already the crisis has caused more damage than a hundred Al-Qaedas ever could. Yet since remedies have been offered and remain neglected, the inference is plain: So far as the government is concerned, it has no wish to explore or try them.

Our government “experts” have stated the economic crisis is incapable of being resolved, and the people should simply wait for the crisis to pass. We may be certain these “experts” are not likely to swallow their own words, no matter how plausible a remedy may be offered. They would never acknowledge fallibility in their economic pronouncements. No matter how serious our economic affairs become, no remedy will be permitted to interfere with the current order so long as we are governed by the present set of officials.

The orthodox school of economics has shown itself to be bankrupt. It has nothing to offer as a remedy or preventative for economic disasters. What solution do they propound? They suggest we all tighten our belts and endure a period of poverty until, hopefully, the economic storm passes and prosperity returns. This is no solution at all. The most amazing feature of their pronouncements is the lack of desire on their part to find a remedy for our present problems. On the contrary, they make it a principle to denounce, ignore, or throw contempt upon any proposed remedy. Orthodox economists represent the interests of the financial classes, who are quite satisfied with the system under which they reap enormous profits regardless of the state of the economy. In times of crisis, such as now, the government protects the financial classes and casts all the risk and cost onto the public’s shoulders. There is no reason why the economists should advocate any change. But, a change is inevitable. Our present situation is transitional, and we shall witness shortly either a radical change of policy or a complete collapse of the financial and economic system.

The subject of economics occurs to most people as hopelessly complicated, but it is not. It only appears to be. As Nobel laureate Frederick Soddy said, “Straightforward problems described by cork-screw terms demand for their apprehension cork-screw minds, whereas if described in plain terms they are hardly problems at all. There is today no problem in real economics unsolved.” So let us state the economic problem in simple terms. The real economy, consisting of agriculture, mining, and manufacturing, is engaged in producing and distributing goods necessary for human existence and comfort. Thanks to science, discoveries, and inventions we are able to produce goods of all types in abundance and with little effort. Yet these goods, which we are capable of producing in such abundance, cannot be sold. At all times wealth-producers find greater difficulty in selling goods than in producing them. We have vast amounts of unsold goods and an even larger unused productive capacity. Yet huge numbers of the populace are in want of these very goods, which cannot be sold. This is the paradox of poverty amidst plenty.

The employment of labor and productive machinery depends on constant supplies of raw materials, energy, and, most importantly, on the ability of the public to purchase goods as fast as they are produced. If the rate of consumption falls below the rate of production, a decrease in production and employment will result. The ability of the public to purchase goods primarily depends upon wages, salaries, and dividends which are paid in the process of producing goods. Any reduction in the rate of production must therefore tend to reduce the effective demand for goods.

The limiting factor to production and effective demand is money. Money is ultimately the means by which we distribute the wealth produced by the nation. It is also an artificial human construct that has no intrinsic value, but has tremendous value as a means by which we all agree to exchange goods and services. For historical political reasons, the creation and flow of money is not directly controlled by the government, but rather by the private financial industry. While not what the public commonly believes, it is true and has been written about extensively. It is, of course, not in the interest of the government or the private financial industry to inform the public of the true situation.

The main reason we cannot distribute the wealth of the nation and are in economic crisis is not due to a reduction in the nation’s ability to produce and consume wealth. It is in our inability to distribute wealth, i.e., a constriction in the flow of money. Unfortunately, the creation and flow of money is in the hands of private financial interests. Hence, private financial interests have inordinate power over the economy. The government can either confront these interests or protect them. Since we have the best government money can buy, the government protects them at the public’s expense. And the traditional economic schools of thought are based on the current system of private financial control. Therefore, neither the government nor the “experts” will ever develop or adopt a solution to these recurring economic crises that are caused by a constriction in the flow of money.

It must not be forgotten that the consumption of goods is essential to production and should be regarded as equally important to the economic system as production itself. As we have the physical part of economics down pat, production, the non-physical social aspect of distributing our great productive capacity should be a small effort in comparison. It is like the economy is a train with 300 seats. However, only 100 people can ride the train, though its capacity is much greater, because the ticket office is only allowed to issue 100 tickets to ride. Thus, the real economic problem is to discover a method of selling and consuming goods as fast as they are produced.

It is towards this end that all nations, governed by traditional economic theory, are clamoring to capture new markets. It is for this reason international commercial competition is so fierce. This creates a situation where companies, not guided by concerns over national economics, utilize outsourcing and other techniques to reduce their cost of labor and thereby create job losses. Job losses result in a decrease in the standard of living for the affected countries. Since this happens globally, the war over markets leads to a global race to the bottom of the standard of living. Unless a correct solution is found and adopted, the race to the bottom to reduce cost and future wars created to sustain traditional economic interests are inevitable.

Although we are capable of doing more economically, we do not because the current private financial system does not allow it. Simply and fundamentally this is at the heart of the world’s economic crisis. If governments truly desired to resolve the problem, they could do so, and if they did resolve the problem, the economic crisis along with poverty and unemployment would disappear.