A Global Partnership
For Economic Progress
by Lyndon H. LaRouche, Jr.
A transcript of Mr. LaRouche's videoconferenced speech to the Guatemalan Society of Economic Scientists on Nov. 13, 2001.
It is not unusual that the kind of crisis which we've been experiencing worldwide, since the 11th of September of this year, should have occurred at the same time as the greatest financial crisis in more than a century. That is, what is now happening on a world basis, as a financial crisis, is worse, in its implications for Europe and the Americas, than was the Depression of 1929-1933. Therefore, just as the Hitler coup in Germany of 1933, was, in a sense, a lawful expression of the economic-crisis conditions of 1929-33—just as was the attempted assassination on the incoming President of the United States, Franklin Roosevelt—we should recognize that there is a relationship between crises of the type we're now experiencing, and great financial economic crises. Also, we should recognize that the solutions to economic crises of the type we're now experiencing, as they affect the Americas, including Central America, will not be solved, except in the context of addressing the strategic crisis, which is going to determine the way that governments and other leading institutions make policy.
And I shall look at it from that standpoint. While we're sitting, waiting, in a sense, for the news from Buenos Aires, of the inevitable bankruptcy of Buenos Aires, which will cause a chain-reaction effect on Brazil; which will cause a chain-reaction effect on Spain and the Spanish banks, which are heavily involved in Chile, Argentina, and Brazil; and which will affect the hemisphere as a whole, including Mexico. So, we have to solve these problems, but we have to solve them in the context in which they are occurring.
If you go back to 1982, at the time of the Malvinas War, we find there've been changes in Central and South America, which have been, for the most part, disastrous in their effects on the economy. These have become systemically worse, than they were then. And, we all know the number of nations, which are friends of ours, which have collapsed, since 1982: Not only Argentina, which effectively has collapsed; but also Peru; Ecuador is dollarized; Mexico depends almost entirely upon its exports to the United States, for its margin of survival; Central America is affected so; Colombia is being torn apart by a civil war, a drug war; Venezuela is now on the verge of a new crisis; and so forth and so on.
And, this is typical of the situation in the world at large. Though there are differences in Asia, differences in the Middle East, differences in Europe, the crisis is worldwide, and we're going to require a worldwide solution. And countries, such as those of Central America, are going to rely upon trying to have their voice heard and their interests expressed, in terms of the international negotiations—especially the informal ones, as much as the formal ones—which will determine what kind of a financial and monetary system comes out of this crisis—a world system.
A System That Worked
It's obvious, that, from the period from 1945 through 1963 and slightly beyond, the kind of system that was set up, initially by Franklin Roosevelt, in 1944-1945 for the postwar system, was successful. There were important changes which were made immediately by the Truman Administration, removing many of the policies which Franklin Roosevelt had intended. But, nonetheless, despite the inequities, despite the errors and the abuses, the financial system, the international monetary system of 1945-1962, '63, worked. It worked to the extent that for Western Europe, for Japan, for most of the Americas, the conditions of life, relatively speaking, were improved; the productive powers of labor; to some degree, the degree of political freedom, and personal freedom, were improved.
From 1964-1965 on, there was a change. Beginning in 1966, with President Nixon's campaign for the Presidency, '66-'68, there was a major shift in U.S. policy. This shift in U.S. policy followed the fall of the Macmillan government in Britain, which led, a short, few months later, to the Wilson government in Britain. And the Wilson government in Britain, the first Wilson government, set the world pattern for a systemic destruction of the world's physical economy and trading relations. The Nixon campaign indicated similar changes in U.S. policy. Nixon's policy of August 1971 introduced a new monetary system, overturning the old one, a floating-exchange monetary system. And this monetary system, in effect, is now being destroyed, or self-destroyed. The present, international monetary and financial system will not live out the period immediately ahead, the weeks ahead. It is now being destroyed.
So, in this period, we have to consider the establishment of a new financial and monetary system. In my estimate, the order which could be agreed to quickly, is a return to the kind of monetary system we established in 1946 through 1963. That kind of highly protectionist monetary system, based on fixed exchange rates; a large degree of regulation in world trade, of a protectionist nature; the promotion of credit, extended from the United States in particular, to other countries on long-term credit at low prices, for infrastructure projects, for investment, for industrial investment, agricultural improvement: These kinds of policies worked then. They worked very well, despite the inequities in the political features of the system. And they will work again.
Therefore, I think that, today, in trying to reach an early emergency agreement, among governments, to establish a monetary system, to lead the world out of the present economic crisis, that the agreement that would be most readily reached [would be], in terms of using the model of 1945 through 1963, in particular. The policy of the period from the time of Roosevelt to the assassination of President John Kennedy. Those policies would work. They wouldn't work perfectly: They're not perfect policies. There are very few perfect systems in the world. But, it's something with which we could live, and could be the basis for a general economic recovery. With other things, as well.
Let me indicate what recovery measures are: First of all, the conditions of life, of the world, today, are far worse than they were over the period 1929-1933. During the period, prior to the end of the First World War, the nations of the Americas and Europe—or parts of them—had engaged, from the middle of the 19th Century, that is, from the time of the Lincoln victory over the Confederacy, you had the spread of the so-called "American System of political economy" as an influence in Mexico, throughout South America. The American System of political economy, of List, Carey, and Hamilton, was very popular. And countries adopted elements of those policies, with success. This was continued in Europe. It continued in Japan. There was, from the period of the middle of the 1860s, through 1932 approximately, a large buildup of the industrial and agricultural capacity of the world. So, that, when the Depression hit, 1929-1933, there were tremendous reserves—partly idled—in agriculture, industry, and infrastructure, which could be mobilized to create an economic recovery. That was the basis of Franklin Roosevelt's successes, in mobilizing an economic recovery, in the United States, over the period from 1933 into the beginning of the war.
The Crisis Is Worse Than Today
Today, it is now nearly three and a half decades, since the change in policy occurred. Since the Wilson government in Britain, and since the Nixon campaign for the Presidency. Over this period of time, we've undergone a great, so-called Malthusian process, of destruction of agriculture, industry, and technology generally. This has been aggravated by the so-called "outsourcing," the export of employment from the United States and Europe into developing countries. While this has resulted in what many of these countries feel was a benefit, because industries came in and provided some employment, there was a lack of development of infrastructure, a lack of development of the autonomous basis in the economies, for a stable economy.
So, therefore, we see now, at the beginning of this year, we saw a collapse of the United States' role as the importer of last resort, for many countries of Asia, South America, and so forth. That is, China must expect, for example, a 50% cut in its exports to the United States—or more. Japan is being crushed by a collapse of the U.S. market. Mexico is being crushed, though the effects are not yet fully felt, by the collapse of the role of the United States, as the importer of last resort. You are being hit in Central America, by a collapse in the role of the United States, as the importer of last resort. South America is affected by this. In the meantime, the infrastructural development, which should have occurred, has been destroyed. The agricultural development has been adversely affected, in general, especially in northern Brazil: Brazil has a crisis, in agriculture. Brazil has a crisis, in terms of power. Brazil is dependent upon water-power, largely, for its electricity, and the international NGO organizations have come in and demanded that Brazil not use and not develop its Amazonian and other water systems. And, Brazil has been denied the right to develop other sources of energy, to meet its needs. And Brazil is the most powerful country in Central and South America, in terms of economy. And, we know what the rest of the country looks like, as well, on this basis.
So, therefore, the problem is, that we have to recognize, the United States is a weak economy. Its infrastructure has been destroyed, over 35 years. Its industry has been destroyed; the productive capabilities of its population have been destroyed. The generations available for employment today, are not as intelligent as they were, say, 30 years ago, because of a collapse of the educational system, a collapse in culture, in the United States. People do not have the ability to think as clearly, as they did, say, 35 years ago, in the United States. You have similar affects in Western Europe.
So, therefore, we're starting from a much worse condition, today, in dealing with a world depression, which is now onrushing, than we faced in 1932-1933.
The Potential Eurasian Development
But, there's a good side.
On the positive side, although the collapse of the Soviet system, has been a failure, because of the policies in dealing with Eastern Europe and dealing with Russia—that is, economically, it has been a failure. There's been more freedom for people, there's freedom from some of the problems of the Soviet system, but, otherwise, economically, biologically, culturally, it's been a disaster.
However, since, in the recent period—and I've been involved in some of this—there's been a change. Back in 1988, I gave what is now, perhaps, a rather celebrated television address in Berlin, on Columbus Day, Oct. 12, 1988; in which, as part of my campaign for the U.S. Presidency, which I stated there, in Berlin, that Berlin should be seen as the prospective, early, new capital of a united Germany. The basis on which I said that, was the indications that the Eastern European and Soviet economies were in a process of disintegration. That the collapse of these economies in Eastern Europe—the Comecon—and the Soviet Union, would result in a political change, which should be used as a great opportunity, for change, in the economy. That, the United States and Western Europe should offer, and participate in, large-scale projects of development, in the area of the former Comecon and Soviet system.
We've proceeded with that policy, in what was called the European Productive Triangle, in 1989-1990. We extended that in 1992-1993, to a proposal for a Eurasian Land-Bridge. That is, to use the modern types of transportation-infrastructure networks, from the Atlantic Coast to the Pacific Coast, across Eurasia, to open up Eurasia for a great development, and reaching out to China, India, the other great population centers of East and South Asia, and to use that as a basis for expansion of the world economy. Since that time, especially since 1998, since the Russian GKO crisis of 1998, since that time, there have been major steps along the lines I've proposed, to bring together Russia, China, and India, as partners in bringing together the nations of Asia and Europe. There have been successes in involving Western Europe, in this partnership. I have been campaigning to have the United States included in this partnership. This can be the great basis for the revival of the human race, of the human economy.
For example: The characteristic of China, Southeast Asia, and India, is that they have the great population concentrations of the world. They have some areas, which are highly devleoped. China's coast is not poorly developed. India has about 350 million of its population, which lives in urban life, although most of them are extremely poor—perhaps poorer than they were when Rajiv Gandhi was alive, and Mrs. Gandhi, before him. But, nonetheless, they have some quality of technology. Japan, of course, is an economy-driver, a technology-driver for Asia. Korea is potentially a technology-driver for Asia. So, these countries—Western Europe, the United States, and these countries in Asia, like China and so forth—each have the ability to generate the kind of technology, which is needed to lift the poor populations of Central Asia, the poor populations of China, poor populations of India, of Southeast Asia, to begin to lift them out of their misery, and to create the basis for a successful, modern economy. These countries can not possibly meet the needs of their growing populations, without such technology infusions. The sources of these technologies must be countries which have labor forces and skills, and are able to become technology-producers, for the kinds of technologies needed by these countries.
Therefore, we can envisage a global partnership, within countries and among countries, based on the development of infrastructure—large-scale infrastructure developments; based on the development of modern agriculture, in a modern form; based on the development of new kinds of technologies; based on development of new cities, new towns, new centers; based on uplifting the productive powers of labor; based on increasing the amount of education, given in the poorest parts of the world, so that the children of these families can become productive members of society on a modern basis. This partnership requires a 25- to 30-year, long-term set of agreements. It will require the creation of a new monetary system, somewhat like that of the 1945-1963 period: the old Bretton Woods system, in which the prevailing interest rates, on long-term credits—that is, 25-year credits, for example—among nations, would be 1 to 2% simple interest on long-term, with infusion and mixture of many grants, and so forth, for poorer countries and special projects.
On that basis, we could build up, in our countries which have technology potential, build up, again, our industries, to become suppliers, not only for our own countries' needs, but for the countries of Asia, for example. In cooperation with Egypt, and we can have peace in the Middle East. This would mean that all of Africa would be opened up for this kind of improvement. We have, to the south of where you're sitting now, in South America, we have a vast continent, with vast resources, which are largely undeveloped. Very much underpopulated, in terms of the potential of the area. One of the richest potential areas of the world. As a part of this kind of project, from Patagonia north, the entirety of South America and Central America can be developed.
For example, concretely: What is now on the table, among other projects—and it's now being negotiated between people in Russia, and the United States and Canada—is the development of a tunnel system and bridge system, linking Siberia to Alaska. The idea is, that you will be able to move through a transportation system, move freight, as well as passengers, from Siberia, through Asia, through Alaska, down through Canada, down through the United States, through Central America, into South America. Then we can integrate, effectively, economically integrate the economies of Asia, and Central and South America, and North America. So, this is one of the great projects, which stand before us.
A Political Question
So, we have, on the one hand, great opportunities; on the other hand, great catastrophes, and great problems. I believe that they can all be solved. It requires a political decision.
Now, on political decision: As you look around the world today, as I do, with the exception of this new President of Russia—Putin—who has shown good imagination and competence, we have very poor governments, generally. Very weak, compared to those we remember, say, from the 1970—or 1960s, or early 1980s. The politicians are, generally, of a much poorer quality. The populations are more poorly educated. Their moral character is weaker. They think less in terms of the long term; they think very much about tomorrow, or the next day, and their immediate opportunities. They don't think about the future. They don't think about one or two generations ahead. So, we have very poor politicians, generally; very poor political parties; very poor political classes.
But, nonetheless, we have a desperate situation: And when we think about the 2 million or more years, the human race has lived on this planet, and when you consider all the foolish things that human beings have done to themselves and others, over known history and before, the remarkable thing to us, is the goodness of mankind, such that, from all of these disasters, which mankind has brought upon itself, something has often come forth to create the equivalent of a renaissance in culture. And, sometimes, by the very nature of man, what causes the greatest advances in culture, the greatest improvements in the human condition, are the worst crises. A crisis so bad, that they say to mankind: "You have been behaving, Mankind, as a collection of fools. Therefore, you must do something to stop being foolish." And sometimes that confrontation with folly, prompts and encourages people to find in themselves the capacity of reason, of goodness, to stand up and do something good, to move the world in a better direction.
That's essentially what happened with Roosevelt, in the United States, in 1932-1933. We had a desperate situation. A desperate moral situation; you should know the morality, as some of you, perhaps, do, who are my age. The immorality of the United States, in the 1920s. It was disgusting! Then came the Depression: And all the illusions and disgusting things that people were doing, suddenly were thrown into crisis. And, Roosevelt came along, in 1932, and gave a speech in West Virginia, when he was running for President. (Franklin Roosevelt, that is. Not Teddy!) And, he said, we must consider the forgotten man. The forgotten man, was the typical American, who was suffering, as a result of the conditions of the 1920s, as continued under the Depression. Roosevelt's address, and his campaign, captured the imagination of the American people. His initial efforts as President, beginning March 1933, inspired the nation more and more, to undertake great works, on which this civilization has depended, to a large degree, ever since.
And, you see the same thing in postwar Germany, immediately. Germany, which had come out from under the Hitler dictatorship, during the early period, under Adenauer, rebuilt the nation with a great moral effort. With a good educational system, which was subsequently destroyed. You saw things like that in de Gaulle of France. You saw things like in De Gasperi in Italy. You saw similar kinds of things in the Americas, at various points—in Brazil and elsewhere.
So, that, sometimes, great catastrophes bring forth leaders, who find a response in the population. And, I think we're in such a time, now. We have to look at things that way. We can not sit back, like a man in a foxhole, hoping to avoid battle, and waiting for a hand-grenade to be dropped on him. We must think like leaders. We must hope, that we can reach the people, and find ways to reach them. We must inspire them, and inspire them by the very fact that they have no choice in life, except to take a new course of action. And, perhaps, when people see that they need to take a new course of action—now, as in previous times of renaissance—we can have a great renaissance.
I think our job, now, is to think clearly; accept the fact that the crazy monetary system, which has ruled us over the past 35 years, especially since 1971, was a disaster. We have to abandon the change in values, which occurred 35 to 30 years ago. We have to go back to the basic values, of physical economy, saying that, money is important, but only as a medium of accomplishing something. The objective of economy, is to increase the productive powers of labor; to improve the conditions of life; to create a future for a larger population; to realize the potential for this planet, for its development, under the human genius. Go back to that kind of thinking.
And, I think some of you, know what I mean.