How to Save the World: The Case for a Global Flat Tax," an article in The Nation, by Sherle R. Schwenninger, May 13, 1996, shows how thick the disinformation can be piled in a respected and usually intelligent Left-wing journal. Schwenninger is the director of the World Policy Institute at the New School for Social Research, a Fabian-Socialist institution in Manhattan. He credits "U.S. generosity" for helping "rebuild Europe and Japan and create the United Nations, the World Bank, the World Health Organization and other international agencies dedicated to social and economic welfare." He says that "the institutional capacity of the IMF and the World Bank, especially their ability to provide adequate long-term assistance to developing countries, has not evolved to keep pace with the growing demands of the world economy." This in turn, "along with some ill-considered lending practices, explains why there are so few development assistance success stories."
Actually, it was the blind idealism of the Left, cultivated by the ruse of the Popular Front, that led the progressives of that era to be deceived by the ploys of the bankers, businessmen, and diplomats who framed the international institutions of the post-WW II era. Much of the Left enlisted on the side of the United Nations (read, the "Allies") in the Good Fight against Fascism. In the fervor of the immediate post-war period, the Left tended to believe the propaganda about the good-nap;turedness of the nascent World Bank/IMF, cloaked in internationalist "progressive" rhetoric, as it was. Schwenninger evidently thinks (probably correctly) that he can cash in on some of this vestigial Popular Front credibility. Well, children, the shit is deep, and while it is not in the scope of this article to counter all of the inaccuracies assembled in Mr. Schwenninger's article, I can recommend the classic left-wing treatise exposing the IMF-Cheryl Payer's The Debt Trap, Monthly Review Press, 1974. Readers may also contact Global Exchange of San Francisco, who can supply excellent, critical, contemporary references regarding the IMF.
The World Bank and the IMF are evil, neo-colonial institutions precisely because their whole premise and justification is that Third World nations cannot create their own credit monies to purchase goods from the First World. Instead, they must borrow at interest from "the big boys," the commercial bankers of the G-10 nations, whom Schwenninger euphemistically refers to as "the globe's financial and development community," portraying them as a truly "altruistic" bunch. Schwenninger ends his article by saying, "Perhaps a debate about new ways of financing global assistance would help clear some of the fog." I heartily agree, so let the debate begin.
One of the rare, enlightening books I have stumbled on is Beyond Victory by the late Jerry Voorhis, former Congressman from the 12th district of California. Published in 1944, the year the bankers and the diplomats drafted the charter for the World Bank/IMF at the Bretton Woods Conference in New Hampshire, it shows that some progressives were engaged in a lively debate about the nature of the post-war international institutions that should come. Beyond Victory proposed a blueprint for a post-war international institution that could supplant the Bank for International Settlements (BIS), the "World Bank" of that era. Voorhis envisioned an institution that would function systemically to benefit the developing nations and put an end to colonialism forever. It was the path not taken.
The BIS had been founded in 1930 as an adjunct to the Young Plan, to refinance German war reparations under the Versailles Treaty. One of the chief architects of the first "World Bank," Hjalmar Schacht, later became Hitler's Finance Minister. Another, Montague Norman of the Bank of England, was also keenly involved in putting Hitler in power in 1933. All during the War, the BIS was doing business as usual, functioning as the chief back-channel for financial transactions between the Allies and the Axis powers. On March 26, 1943, Jerry Voorhis, speaking on the floor of Congress, exposed the machinations of this sinister "World Bank," the first of its kind. Voorhis proposed that Congress should pull the plug and disenfranchise the BIS, which was in the power of Congress to do at the time.
According to Anthony Sampson, British author of The Money Lenders, it was John Meynard Keynes himself who interceded on behalf of the BIS to prevent Congress from dismantling it during the war. Set out to pasture in the immediate post-war period and allowed to continue in a dormant state for a number of years, today the BIS is more powerful than ever and functions symbiotically with the Keynesian institutions, the World Bank, the International Monetary Fund, the General Agreement on Tariffs and Trade (GATT), and the World Trade Organization (WTO) that have developed out of Bretton Woods. All of these institutions could be dismantled and replaced by one streamlined institution, the International Clearing House (CH'I) that Jerry Voorhis outlined.
The vision of Beyond Victory shows that a better world is possible. Monetary reform on a world-wide basis (divesting banks from the control of credit) is a vital step along the path. Here follows, in his own words, excerpted from Beyond Victory (only the subtitles are mine), Jerry Voorhis' blueprint for world peace, a world beyond warfare, imperialism and neo-colonialism. I submit his proposal to finance global development as an entree in the debate that Schwenninger proposes.
First, Nationalize Credit
Congress [should] provide for governmental pur-chase of the capital stock of the 12 central Federal Reserve Banks from the member banks which now own it. .. This would cost $144,000,000 in round figures and would correct the present anomalous situation of a privately owned bank of issue. The Federal Reserve Banks could then create money in the form of "Federal Reserve Bank credit" entries on their books just as they do now. A "National Credit Account" (in contrast to present national debt) could be established on the Central Banks' books in favor of the United States Treasury. To such an account would be credited each year .. amounts of newly created "Reserve Bank credit" [to] provide the increased purchasing power needed to maintain economic balance and a stable price level.
The Treasury would draw checks against this account and pay them out to those to whom the government owed money, thus getting it into the purchasing power stream. In this way the whole nation would derive the benefit from the creation of the additional supply of money which its own growth had made necessary. No interest-bearing debt would be incurred... only a bookkeeping transaction between two public agencies. Should inflation threaten [making it necessary] to reduce the volume of money in circulation, the process could be reversed and the Treasury could transfer a portion of its tax revenues to the central banks for cancellation and retirement of the requisite amount of money to restore stability.
Banks Should Not Create Money
It is ethically wrong for any private person or agency to enjoy the privilege of creating money .. for the same reason that it [is] wrong to give one citizen the right to levy a tax upon another one. The power to create money, either in the form of currency or credit, pocketbook money or checkbook money, is the precise equivalent of the power to tax. Anyone exercising the power to create a new dollar can ... require a dollar's worth of the labor or the property of a fellow citizen without giving anything of equivalent value in exchange.
Banks should be paid honestly for their services. By and large we do not now so pay them. We expect them to service our accounts, including government accounts, free of charge, and then we make the very bad ... ethically wrong bargain of letting them make their profit by creating and ... destroying the very medium of exchange upon which all the business of the nation depends.
Developing Nations
Should Create Their Own Credit
The essential economic basis for world peace is for the nations to so "keep their books" as to enable their people as a whole to pay for and consume goods and services equivalent to what they themselves can produce.
This one reform in national bookkeeping is ... a cor-nerstone upon which ... economic improvement [and] world peace itself can be constructed.... A rise in the standards of living of the people in all types of nations is bound to follow the fearless application of this principle. Once it has been applied, each nation will be in a position to go to work in earnest. And as all peoples devote themselves to the vigorous development of their own natural resources and their industrial possibilities...under this principle, [there will] be... created a home market equivalent to the value of the goods and services produced...
Problems connected with fair distribution of national income, of equity for agriculture, of improved health and educational standards [would remain]...
Nothing in the field of world economics which could be done by a peace conference of the nations would create greater confidence between those nations than a mutual pledge that they would each one maintain, within its borders, the purchasing power of its people at a level [equal] with their power to produce...
The Root of Colonialism
The main drive that has pushed the highly indus-trialized nations to...stake out "possessions" for themselves in various parts of the world and to fight wars in defense of their trade, has been the fact that their own people at home have had insufficient purchasing power to increase their standards of living rapidly enough to form an effective market for the goods they themselves were producing. This...has been due to the faulty system of creation and distribution of the medium of exchange...total prices of goods produced always tend to be greater than the amount of money distributed as income to would-be purchasers of goods.... Under the system of financial balance here proposed nations would not have vast " unsalable surpluses" of goods...to "dump" abroad.
How The International Clearing-
House Would Function
There will be a place in the making of peace for an international financial agency to facilitate the multi-lateral clearing of export and import balances between the nations, to promote stabilization of international exchange ratios, and...to extend short-term credits to certain nations for the stimulation of their trade and economies.
Such an international clearing house could... in the first place, maintain and publish accurate running records of the export-import balances of each of the nations... National governments [would] have knowledge of these matters, [and] the facts regarding them would also be available to people generally throughout the world. Nations would be constantly advised of their international trade and financial positions. Thus a powerful influence could be exerted to prevent any nation from piling up insupportable debt by importing far beyond its power to increase its exports and services...The people of a nation exporting beyond the point of balance with probable future imports, would continually be warned of the stubborn economic fact that they could only expect payment for their exports if they stepped up the volume of their import trade...
If all national currencies were valued by the clearing house in terms of their buying power over a selected list of basic commodities, and if exchange ratios were determined upon such calculations, a real parity for exchange purposes could be established. Adjustments could be made as the domestic buying power of currencies changed. Full statistics on these matters should be regularly published by the international clearing house. Whatever national currency a man was dealing in, he would ... always know the approximate amount of real wealth he could purchase with it....
The basic requirement for healthy international trade and financial relationships is that normal and ordinary transactions should balance accounts between the nations...Nations [should not] become so deeply indebted that they are forced virtually to "mortgage" their national economies to foreign countries, or...become creditors to such an extent that they cannot collect what is owing to them without completely destroying their foreign markets... Nations [should agree] that if one country exports in excess of its imports it would...acquire claims against the goods of other nations but nothing more. Debtor nations should be able to discharge their debts by giving to creditor nations (or depositing to their credit with the international clearing house) certificates of indebtedness which could be used for but one purpose-payment for goods or services. If the creditor nation...[wanted] to collect, it would have to do so by importing goods. Such a scheme would end the present deception of people all around the world who believe that they and their country are somehow getting paid for the real wealth they have shipped abroad if gold comes into their country or if some individual capitalist acquires ownership of a factory in a debtor country. Obviously neither of these types of "payment" can ever do the People of the creditor nation any good. Nor can they promote peace...A country which pays for imports by handing over to foreign ownership its resources must eventually come to the place where it can continue the process no longer....
The proposals here advanced do not give to the international clearing house any power to dictate or control the domestic monetary policy of any nation.
The Negative Course
of the IMF Foreseen
It would be highly dangerous and a fruitful cause of future war if an international bank were to be set up and given the power to compel nations to pursue internally the...monetary policy which such a bank might dictate. If...an international bank were to be given control of a considerable portion of the world's gold [as the BIS still holds] and if it were to insist upon the maintenance of the gold standard, or ... gold "reserves" in all the nations ... it would hold a more powerful control over the internal economic life of many nations than their own governments could exercise. Loans could be granted or denied depending upon whether governments were willing to restrict the supply of money in their countries to a certain multiple of the amount of gold available to them. Nations seeking to expand their domestic production could be stopped short in their tracks....Financially powerful nations like the United States and Great Britain, which...would have a great deal to say about the operations of such an international bank ... would be able to exert a telling pressure upon [the economic and political policies] of any government. The same situation which obtained between the American Colonies and Great Britain in the 18th century could be projected onto a worldwide scale in the 20th century.
Gold Should Not
Be The Basis For Credit
Money and its even flow are all-important in the life of the average person... It is only through the device of money that they are able to live at all...No nation [can] hope to be free or to live on a plane of equality with other countries if the domestic buying power of its people [is] dependent upon the financial dictatorship of any international bank or upon the possession of large reserves of gold... Nations must be free to promote economic health and activity within their own borders. All that should be asked of them by any international economic body is that they maintain within their domestic economies a stable buying power for their monetary unit whatever it may be.
MarkEvans
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