Excerpts of the book Critical Path by R. Buckminster Fuller
St. Martin's Press, 1981 - hard cover, 1st edition
Chapter 3
Legally Piggily
I'M GOING TO REVIEW my prehistory's
speculative assumptions regarding the origins of human power
structures.
In a herd of wild horses there's a king
stallion. Once in a while a young stallion is born bigger than
the others. Immediately upon his attaining full growth, the king
stallion gives him battle. Whichever one wins inseminates the
herd. Darwin saw this as the way in which nature contrives to
keep the strongest strains going. This battling for herd kingship
is operative amongst almost all species of animal herds as well
as in the "pecking order" of flocking bird types.
I'm sure that amongst the earliest of
human beings, every once in a while a man was born much bigger
than the others. He didn't ask to be—but there he was. And
because he was bigger, people would say—each in their own
esoteric language—"Mister, will you please reach one
of those bananas for me, because I can't reach them." The
big one obliges. Later the little people would say, "Mister,
people over there have lost all of their bananas and they are
dying of starvation, and they say they are going to come over
here and kill us to get our bananas. You're big—you get
out in front and protect us." And he would say, "OK,"
and successfully protect them.
The big one found his bigness continually
being exploited. He would say to the littles, "Between these
battles protecting you, I would like to get ready for the next
battle. We could make up some weapons and things." The people
said, "All right. We'll make you king. Now you tell us what
to do." So the big man becomes king quite logically. He
could have become so in either a bullying or good-natured way,
but the fact is that he was king simply because he was not only
the biggest and the most physically powerful but also the most
skillful and clever big one.
Every once in a while along would come
another big man. "Mr. King, you've got things too easy around
here. I'm going to take it away from you." A big battle
ensues between the two, and after the king has his challenger
pinned down on his back, he says, "Mister, you were trying
to kill me to take away my kingdom. But I'm not going to kill
you because you'd make a good fighter, and I need fighters around
here to cope with the enemies who keep coming. So I'm going to
let you up now if you promise to fight for me. But don't you
ever forget—I can kill you. OK?" The man assents, so
the king lets him up.
But instinctively the king says secretly
to himself, "I mustn't ever allow two of those big guys
to come at me together. I can lick any one of them, but only
one by one." The most important initial instinct of the
most powerful individual or of his organized power structure
is, "Divide to conquer, and to keep conquered, keep divided."
So our special-case king has now successfully
defended his position against two or more big guys who are all
good fighters. He makes one the "Duke of Hill A," the
second "Duke of Hill B," and the third "Duke of
Hill C," and tells each one to "mind your own business"
because "only the king minds everybody's business,"
and he has his spies watch them so that they can't gang up on
him. Thus, our considered king is doing very well in his tribe-defending
battles.
However, there are a lot of little nonfighting
people who are not obeying the king regarding preparations for
the next fighting period. The king says to his henchmen, "Seize
that mischievous little character over there who is really being
a nuisance around here." To the prisoner the king says,
"I'm going to have to cut your head off." The man says,
"Mr. King, you'd make a big mistake to cut my head off."
The king asks, "Why?" "Well, I'll tell you, Mr.
King, I understand the language of your enemy over the hill,
and you don't. And I heard him say what he is going to do to
you and when he's going to do it." "Young man, you've
got a good idea at last. You let me know every day what my enemy
over the hill says he is going to do and so forth, and your head
is going to stay on. In addition, you're going to do something
else you've never done before. You're going to eat regularly
right up here in the castle near me. And I'm going to have you
wear a royal purple jacket (so that I can keep track of you)."
The king now has that little man under control and useful. Then
another little man makes trouble for the king. As he is about
to be beheaded, he shows the king that he understands metallurgy
and can make better swords than anybody else. The king says,
"You better make a good sword in a hurry." The man
makes a beautiful, superstrong, and sharp sword—there's
no question about that. So the king says, "OK, your head
stays on. You, too, are to live here at the castle."
Next, under the threat of beheadment,
another man making trouble for the king says, "The reason
I am able to steal from you is because I understand arithmetic,
which you don't. If I do the arithmetic around here, people won't
be able to steal from you." The king makes him court mathematician.
As each of these men are given those
special tasks to do for life, the king says to all of them, "Each
of you mind only your own business. You, Mr. Languageman, mind
only your own business; and you, Mr. Swordmaker, mind only your
own business; and you, Mr. Arithmetic, mind only your own business.
Each one minds only his own business. I'm the only one that minds
everyone's business. Is that perfectly clear?" "Yes
sir." "Yes sir." "Yes sir."
The king now has his kingdom operating
very well. He has great fighters, superior metallurgy, better
arithmetic and logistics, better spying and intelligence. His
kingdom is growing ever bigger. Years go by, and these experts
are getting old. The king says, "I want to leave this kingdom
to my grandson. Mr. Languageman, I want you to pick out and teach
some younger person about language. You, Mr. Swordmaker, I want
you to pick out and teach somebody about metallurgy. You, Mr.
Arithmetic, I want you to pick out and teach someone about arithmetic."
And his total strategy became the pattern for the ultimate founding
of Oxford University.
The way the power structure keeps the
wit and cunning of the intelligentsia—who are not musclemen,
who cannot do the physical fighting—from making trouble
for the power structure (if the intelligentsia are too broadly
informed, unwatched, and with time of their own in which to think)
is to make each one a specialist with tools and an office or
lab. That is exactly why bright people today have become streamlined
into specialists.
Nobody is born a specialist. Every child
is born with comprehensive interests, asking the most comprehensively
logical and relevant questions. Pointing to the logs burning
in the fireplace, one child asked me, "What is fire?"
I answered, "Fire is the Sun unwinding from the tree's log.
The Earth revolves and the trees revolve as the radiation from
the Sun's flame reaches the revolving planet Earth. By photosynthesis
the green buds and leaves of the tree convert that Sun radiation
into hydrocarbon molecules, which form into the bio-cells of
the green, outer, cambium layer of the tree. The tree is a tetrahedron
that makes a cone as it revolves. The tree's three tetrahedral
roots spread out into the ground to anchor the tree and get water.
Each year the new, outer-layer, green-tree cone revolves 365
turns, and every year the tree grows its new tender-green, bio-cell
cone layer just under the bark and over the accumulating cones
of previous years. Each ring of the many rings of the saw-cut
log is one year's Sun-energy impoundment. So the fire is the
many-years-of-Sun-flame-winding now unwinding from the tree.
When the log fire pop-sparks, it is letting go a very sunny day
long ago, and doing so in a hurry." Conventionally educated
grown-ups rarely know how to answer such questions. They're all
too specialized.
If nature wanted humans to be specialists,
she would, for instance, have given them a microscope on one
eye, which is what nature has done with all other living organisms—other
than humans. Each has special, organically integral equipment
with which to cope successfully with special conditions in special
environments. The low-slung hound to follow the Earth-top scent
of another creature through the thickets and woods . . . the
little vine that can grow only along certain stretches of the
Amazon River . . . the bird with beautiful wings with which to
fly, which bird however, when landed and in need of walking,
is greatly hampered by its integral but now useless wings.
Humans are not unique in possessing brains
that always and only are coordinating and storing for later retrieval
the integrated information coming in from each and all the creature's
senses—visual, aural, tactile, and olfactory. Humans are
unique in respect to all other creatures in that they also have
minds that can discover constantly varying interrelationships
existing only between a number of special case experiences as
individually apprehended by their brains, which covarying interrelationship
rates can only be expressed mathematically. For example, human
minds discovered the law of relative interattractiveness of celestial
bodies, whose initial intensity is the product of the masses
of any two such celestial bodies, while the force of whose interattractiveness
varies inversely as the second power of the arithmetical interdistancing
increases.
The human mind of Bernoulli discovered
the mathematical expression of the laws of intercovarying pressure
differentials in gases under varying conditions of shape and
velocity of gas flow around and by interfering bodies. The Wright
brothers' wing foils provided human flight, but not the information
controlling the mathematics of varying wing foil conformations.
Bernoulli's work made possible the mathematical improvement in
speed and energy efficiency of various wing designs. Human mind's
access to the mathematics of generalized scientific laws governing
physical phenomena in general made possible humanity's production
of its own detached-from-self wings to outfly all birds in speed
and altitude, while being able to loan one another those wings
and modify them to produce even better wings.
I'm sure our human forebears went
through quite a period of giants and giant-affairs evolution.
These probably led to all sorts of truth-founded legends from
which fairy stories were developed, many of which are probably
quite close to the facts of unwritten history. Then humans developed
to the point at which a small man made a weapon, a stone-slinger,
such as in the story of David and Goliath, with which the little
man slays the big man by virtue of a muscle-impelled missile.
At the U.S. Naval Academy "ballistics" is defined as:
the art and science of controlling the trajectory of an explosively
buried missile. After the sling and spear we got the bow and
arrow with which a small man could kill a big man at much greater
distance than with spear or sling. So skill and human-muscle-impelled
weapons ended the era of giants.
Discovery of energetic principles, and
human inventiveness in using those principles, such as the invention
of catapults and mechanically contracted, steel-spring-coil arrow
impelment, advanced the art of weapons. The human power structures
that could best organize and marshal the complex of interessential
"best" weapons and support an army of best-trained
people with each of the special types of weapons were the ones
who now won the battles and ran the big human "show."
The discovery of gunpowder by the Chinese and the invention of
guns introduced the era of ballistics, or as the Navy terms it,
"explosively hurled missiles."
Going back to the stone-sling, bow-and-arrow,
spear, club, and knife era of weapons, we find that territorial
battles between American Indian nations were fought over the
local hunting and fishing rights, but the land itself always
belonged to the Great Spirit. To the Indians it was obvious that
humans could not own the land. There was never any idea that
the people could own land—owning was an eternal, omniscient
omnipotence unique to the greatness, universality, and integrity
of the forever-to-humans-mysterious Great Spirit. Until a special
human-produced change in the evolution of power structures occurred,
the ownership of anything being unique to the Great Spirit—in
whatever way that might be designated by local humans—was
held by all people around our planet.
In 1851 Seattle, chief of the Suquamish
and other Indian tribes around Washington's Puget Sound, delivered
what is considered to be one of the most beautiful and profound
environmental statements ever made. The city of Seattle is named
for the chief, whose speech was in response to a proposed treaty
under which the Indians were persuaded to sell two million acres
of land for $150,000.
How can you buy or sell the sky, the warmth of the land? The idea is strange to us.
If we do not own the freshness of the air and the sparkle of the water, how can you buy them?
Every part of this earth is sacred to my people. Every shining pine needle, every sandy shore, every mist in the dark woods, every clearing and humming insect is holy in the memory and experience of my people. The sap which courses through the trees carries the memories of the red man.
The white man's dead forget the country of their birth when they go to walk among the stars. Our dead never forget this beautiful earth, for it is the mother of the red man. We are part of the earth and it is part of us. The perfumed flowers are our sisters; the deer, the horse, the great eagle, these are our brothers. The rocky crests, the juices in the meadows, the body heat of the pony, and man—all belong to the same family.
So, when the Great Chief in Washington sends word that he wishes to buy our land, he asks much of us. The Great Chief sends word he will reserve us a place so that we can live comfortably to ourselves. He will be our father and we will be his children.
So we will consider your offer to buy our land. But it will not be easy. For this land is sacred to us. This shining water that moves in the streams and rivers is not just water but the blood of our ancestors. If we sell you land, you must remember that it is sacred, and you must teach your children that it is sacred and that each ghostly reflection in the clear water of the lakes tells of events and memories in the life of my people. The water's murmur is the voice of my father's father.
The rivers are our brothers, they quench our thirst. The rivers carry our canoes, and feed our children. If we sell you our land, you must remember, and teach your children, that the rivers are our brothers and yours, and you must henceforth give the rivers the kindness you would give any brother.
We know that the white man does not understand our ways. One portion of land is the same to him as the next, for he is a stranger who comes in the night and takes from the land whatever he needs. The earth is not his brother, but his enemy, and when he has conquered it, he moves on. He leaves his father's grave behind, and he does not care. He kidnaps the earth from his children, and he does not care. His father's grave, and his children's birthright are forgotten. He treats his mother, the earth, and his brother, the sky, as things to be bought, plundered, sold like sheep or bright beads. His appetite will devour the earth and leave behind only a desert.
I do not know. Our ways are different from your ways. The sight of your cities pains the eyes of the red man. There is no quiet place in the white man's cities. No place to hear the unfurling of leaves in spring or the rustle of the insect's wings. The clatter only seems to insult the ears. And what is there to life if a man cannot hear the lonely cry of the whippoorwill or the arguments of the frogs around the pond at night? I am a red man and do not understand. The Indian prefers the soft sound of the wind darting over the face of a pond and the smell of the wind itself, cleansed by a midday rain, or scented with piñon pine.
The air is precious to the red man for all things share the same breath, the beast, the tree, the man, they all share the same breath. The white man does not seem to notice the air he breathes. Like a man dying for many days he is numb to the stench. But if we sell you our land, you must remember that the air is precious to us, that the air shares its spirit with all the life it supports.
The wind that gave our grandfather his first breath also receives his last sigh. And if we sell you our land, you must keep it apart and sacred as a place where even the white man can go to taste the wind that is sweetened by the meadow's flowers.
You must teach your children that the ground beneath their feet is the ashes of our grandfathers. So that they will respect the land, tell your children that the earth is rich with the lives of our kin. Teach your children that we have taught our children that the earth is our mother. Whatever befalls the earth befalls the sons of the earth. If men spit upon the ground, they spit upon themselves.
This we know: the earth does not belong to man; man belongs to the earth. All things are connected. We may be brothers after all. We shall see. One thing we know which the white man may one day discover: our God is the same God.
You may think now that you own Him as you wish to own our land; but you cannot. He is the God of man, and His compassion is equal for the red man and the white. This earth is precious to Him, and to harm the earth is to heap contempt on its creator. The whites too shall pass; perhaps sooner than all other tribes. Contaminate your bed and you will one night suffocate in your own waste.
But in your perishing you will shine brightly fired by the strength of the God who brought you to this land and for some special purpose gave you dominion over this land and over the red man.
That destiny is a mystery to us, for we do not understand when the buffalo are all slaughtered, the wild horses are tame, the secret corners of the forest heavy with scent of many men and the view of the ripe hills blotted by talking wires.
Where is the thicket? Gone. Where is the eagle? Gone.
The end of living and the beginning of survival."*
| *Chief Seattle's speech was submitted by Dr. Glenn T. Olds at Alaska's Future Frontiers conference in 1979. |
In my prehistory accounting I talk
about the time when each ice age is engaging an enormous amount
of the oceans' water, lowering the waterfront and bringing together
the islands of Borneo, the Philippines, and others, all to become
part of the Malay Peninsula. I also spoke of the ice cap pushing
the furry animals southward until they were suddenly pushed into
the land of the previous islands now formed into the new peninsula—into
land they could never before reach. This is how animals like
tigers got out to now-reislanded places like Bali. Human beings
suddenly confronted with these wild animals learned how to cope,
hunting some and taming others. In following the evolution of
human power structures we are now particularly interested in
the humans who found themselves confronted with a tidal wave
of wild animals. Those who were overwhelmed became aggressive
hunters, and those who were not overwhelmed became peaceful domesticators
of the animals. Some of the most aggressive men mounted horses,
moved faster than all others, and went out to seek the beasts.
We have learned in the last decade from
our behavioral science studies that aggression is a secondary
behavior of humans—that when they get what they need, when
they need it, Old are not overwhelmed, they are spontaneously
benevolent; it is only when they become desperate that they become
aggressive because what they have relied on is no longer working.
There are two kinds of social behavior manifest today around
the world—the benign and the aggressive. It is probable
that this dichotomy occurred in the human-versus-animal confrontation
in the ice age time.
When an ice age starts to recede, the
horsemen start north—hunting with clubs and spears. At the
same time, moving much more slowly, we have the beginnings of
great tribes of humans following their flocks of goats and sheep
as the latter lead them to the best pastures—sometimes high
on mountainsides, sometimes on great plains. With the big
man as king—the head shepherd—we have humanity
migrating off into a wilderness that seemed to have no limits.
The land belonged to the Great Spirit. The people lived on the
flesh of their animals and the encountered fruits, berries, nuts,
and herbs. They kept themselves warm with clothing made of the
skins of the animals and also with environment-controlling tents
made of local saplings and the animal skins.
We have a king shepherd, from the day
of the giants, tending his people and his flock, when along comes
a little man on a horse, with a club hanging by his side. He
rides up to the king shepherd and, towering above him, says,
"Well, Mr. Shepherd, those are very beautiful sheep you
have there. You know, it's very dangerous to have such beautiful
sheep out here in the wilderness. The wilderness is very dangerous."
The shepherd responds, "We've been out in the wilderness
for generations and we've had no trouble at all."
Night after night thereafter sheep begin
to disappear. Each day along comes the man on the horse. He says,
"Isn't that too bad. I told you it was very dangerous out
here. Sheep disappear out in the wilderness, you know."
Finally, there is so much trouble that the shepherd agrees to
accept and pay in sheep for the horseman's "protection"
and to operate exclusively within the horseman's self-claimed
land.
No one dared question the horseman's
claim that he owned the land on which the horseman said the shepherd
was trespassing. The horseman had his club with which to prove
that he was the power structure of that locale; he stood high
above the shepherd and could ride in at speed to strike the shepherd's
head with his club. This was how, multimillennia ago, twentieth-century
racketeers' "protection" and territorial "ownership"
began. For the first time little people learned how to become
the power structure and how thereby to live on the productivity
of others.
Then there came great battles between
other individuals on horses to determine who could realistically
say, "I own this land." Ownership changed frequently.
The ownership-claiming strategy soon evolved into horse-mounted
warfare as each gang sought to overwhelm the other. Then the
horse-mounted gangs, led by a most wily leader, used easily captured
human prisoners to build them stone citadels at strategic points.
Surrounded by prisoner-built moats rigged with drawbridges and
drawgates, they would come pouring out to overwhelm caravans
and others crossing their domains. "Deeds" to land
evolved from deeds of arms. Then came enormous battles of gangs
of gangs, and the beginning of the great land barons. Finally
we get to power-structure mergers and acquisitions, topped by
the most wily and powerful of all—the great emperor.
This is how humans came to own land.
The sovereign paid off his promises to powerful supporters by
signing deeds to land earned by the physical deeds of fighting
in shrewd support of the right leader. Thereafter emperors psychologically
fortified the cosmic aspect of their awesome power by having
priests of the prevailing religions sanctify their land-claiming
as accounted simply either by discovery or by arms.
In another set of events that opportuned
the power structure the land barons discovered the most geographically
logical trading points for caravaning: a place where one caravan
trail would cross another caravan trail; where, for instance,
the caravaners came to an oasis or maybe to a seaport harbor
and transfer some of their goods from the camel caravans to the
boats. The caravaners would say, "Let's exchange goods right
here. Fine. You need something; I have it."
One day they're exchanging goods when
along comes a troop of armed brigands on horseback. The head
horseman says, "It's pretty dangerous exchanging valuable
things out here in the wilderness." The caravaners' leader
says, "No, we never have any trouble out here. We have been
doing this for many generations." Then their goods begin
to be stolen nightly, and finally the merchants agree to accept
and pay for "protection." That was the beginning of
the walled city. The horse-mounted gangsters brought prisoners
along to build the city's walls and saw to it that all trading
was carried on inside the walls. The lead baron then gave each
of his supporters control of different parts of that city so
that each could collect his share of the "taxes."
This is how we came to what is called,
archeologically, the city-state, which was to become a very powerful
affair. There were two kinds: the agrarian-productivity-exploiting
type and the trade-route-confluence-exploiting type. These produced
all the great walled cities such as Jericho and Babylon.
The agrarian-supported city-state works
in the following manner: For example, we have Mycenae in Greece,
a beautiful and fertile valley. It is ringed around with mountains.
You can see the mountain passes from the high hill in the center
of the valley. At the foot of the high central hill there is
a very good well. So they build a wall around the citadel on
the top of that mid-valley hill and walls leading down to and
around the well so that they can get their water. When they see
the enemy coming through the passes, the Mycenaeans bring all
the food inside their walls and into their already-built masonry
grain bins. What they can't bring inside the walls, they burn—which
act was called "scorching the fields." The enemy enters
the fertile valley, but there's nothing left for them to eat.
The enemy army has to "live on its belly"—which
means on the foods found along their route of travel—and
is hungry on arrival in the valley. The people inside have all
the food. The people outside try to break into the walled city,
but they are overwhelmed by its height and its successfully defended
walls. Finally the people outside—only able to go for about
thirty days without food—get weaker and weaker, then the
people inside come out and decimate them.
This was the city-state. It was a successful
invention for a very long period in history. At the trade-route
convergences city-states operated in much the same way but on
a much larger scale with the siege-resisting supplies brought
in by caravans or ships. The city-states were approximately invincible
until the siege of Troy. Troy was the city-state controlling
the integrated water-and-caravaning traffic between Asia and
Europe near the Bosporus. It had marvelous walls. Everything
seemed to be favorable for its people.
Meanwhile in history, we have millennia
of people venturing forth on the world's waters—developing
the first rafts, which had to go where the ocean currents took
them; then the dugouts, with which they paddled or catamaraned
and sailed in preferred directions; and finally the ribbed-and-planked
ship, suggested to them by the stout spine and rib cage of the
whales, seals and humans—stoutly keeled and ribbed, deep-bellied
ships. With their large ships made possible by this type of construction,
sailors came to cross the great seas carrying enormous cargoes—vastly
greater cargoes than could be carried on the backs of humans
or animals. Ships could take the short across-the-bay route instead
of the around-the-bay mountain route.
The Phoenicians, Cretans, and the Mycenaeans,
together, in fleets of these big-ribbed and heavily planked ships,
went to Troy and besieged it. Up to this time the besiegers of
Troy had come overland, and they soon ran out of food. But the
Troy-besieging Greeks and Cretans came to Troy in ships, which
they could send back for more supplies. This terminally-turned-around
voyaging back to the supply sources and return to the line of
battle was called their "line of supply." The new line-of-supply
masters—the Greeks—starved out the Trojans. The Trojans
thought they had enough food but had not reckoned on the people
besieging them having these large ships. The Trojan horse was
the large wooden ship—that did the task of horses—out
of whose belly poured armed troops.
At this time the power structure of
world affairs shifts from control by the city-state to the
masters of the lines of supply. At this point in the history
of swiftly evolving, multibanked, oar- and sail-driven fighting
ships, the world power-structure control shifts westward to Italy.
While historians place prime emphasis on the Roman legions as
establishing the power of the Roman Empire, it was in fact the
development of ships and the overseas line of supply upon which
its power was built—by transporting those legions and keeping
them supplied. Go to Italy, and you will see all the incredibly
lovely valleys and great castellos commanding each of those valleys
such as you saw in the typical city-states, and you can see that
none of those walls has ever been breached. Also in Italy—in
the northeastern corner—is Venice, the headquarters of the
water-people. The Phoenicians—phonetically the Venetians—had
their south Mediterranean headquarters in Carthage in northern
Africa. In their western Mediterranean and Atlantic venturings
the Phoenicians became the Veekings. The Phoenicians—Venetians—in
their ships voyaged around the whole coast of Italy and sent
in their people to each castello, one by one. The Venetians
had an unlimited line of supply, and the people inside each castello
did not. The people inside were starved out. Thus, all of the
regional masters of the people in Italy hated the Venetians-Phoenicians-Veekings
who were able to do this.
There being as yet no Suez Canal, the
new world power structure centered in the ship mastery of the
line of supply finally forcing the Roman Empire to shift its
headquarters to Constantinople some ten centuries after the fall
of Troy. The Roman emperor-pope's bodyguards were the Veekings-Vikings,
the water-peoples' most powerful frontier fighters. The line
of supply from Asia to Constantinople was partially caravan-borne
and partially water-borne via Sinkiang-Khyber Pass-Afghanistan
or via the Sea of Azov, the Caspian and the Black seas. From
Constantinople, the western Europe-bound traffic was rerouted
from overland to waterway routes. Because the Asia-to-Constantinople
half of the trading was more land-borne-via-caravans, whose routes
were dominated by the city-state-mastering Turks, Constantinople
in due course was taken over by the Turks who established the
Byzantine Empire in the Aegean Sea and Asia Minor.
Before leaving the subject of the great
power-structure struggle for control of the most important, greatest
cargo-tonnage-transporting, most profitable, Asia-to-Europe trade
routes, we must note that the strength of the Egyptian Empire
was predicated upon its pre-Suez function as a trade route link
between Asia and Europe via the Indian Ocean, the Red Sea, overland
caravan to the Nile, and then water-borne to Alexandria, or via
Somaliland, overland to the headwaters of the Nile, and thence
to Alexandria. The latter route was not economically competitive
but was the route of travel of the ship-designing and -building
arts that in due course brought the stoutly keeled, heavily ribbed,
big-bellied ships into the Mediterranean.
We have seen the Greek Alexander the
Great crossing Persia and reaching the Indian Ocean, thus connecting
with the Phoenician trading to Asia. A thousand years later the
Crusaders—ostensibly fighting for holy reasons—were
the Indian Ocean-Phoenician-Venetian-Veeking water-borne power
structure fighting the older overland-Khyber Pass power structure
over mastery of the trade route between Asia and Europe.
In our "Humans in Universe"
chapter we spoke about the 600-200 B.C. Greeks' discovery that
our Earth is a sphere and a planet of the solar system. This
was the typical scientific product of a water-navigation people.
We witnessed also the originally horse-mounted Roman Empire's
destruction of such knowledge, as their earlier grand strategy
sought to reestablish the Asia-to-Europe trade pattern via Constantinople
and the inland, overland, Khyber Pass route. This explains why
the power structure saw fit to Dark-Age-out the mariners' spherical
concept. It explains Ptolemy's 200 A.D. conic map's cutting off
the around-Africa route mapped by Eratosthenes 400 years earlier.
With the world three-quarters water the
bigger ship-producing capability was the beginning of a complete
change in the control of human affairs. Bigger and better engineering
was developed. The rival power structures were focused on the
water supply lines. The Romans' overland road to England became
obsolete. The Phoenician ships sailing out through Gibraltar
into the Atlantic outperformed them. This shifted the battles
among the world trade-route power structures from on-the-land
popular visibility to popularly unwitnessed seascape. Long years
of great battles of the corsairs, the pirates of the Barbary
Coast, and so forth were unwitnessed and unknown to the land
people. Who the power structures might be became popularly invisible.
Finally, bigger ships got out of the
Mediterranean and into the Atlantic, around Africa to the Orient,
and then around the World. Thus, "those in the know"
rediscovered that the world is a sphere and not an infinitely
extended lateral plane. Great battles ensued—waged under
the flags of England, France, and Spain—to determine who
would become supreme master of the world's high-seas line of
supply. These great nations were simply the operating fronts
of behind-the-scenes, vastly ambitious individuals who had become
so effectively powerful because of their ability to remain invisible
while operating behind the national scenery. Always their victories
were in the name of some powerful sovereign-ruled country. The
real power structures were always the invisible ones behind the
visible sovereign powers.
Because the building of superior fleets
of ships involved a complex of materials to produce not only
the wooden hulls but the metal fastenings and the iron anchors
and chains and the fiber ropes and cloth sails, and because woods
from many parts of the world excelled in various functions of
hull, masts, spars, oars, etc., large money credits for foreign
purchase of these and other critical supplies brought control
of the sea enterprising into the hands of international bankers.
The building of invisible world-power-structure
controls operates in the following manner. Suppose you know how
and have the ambition, vision, and daring to build one of these
great ships. You have the mathematics. You have the positioning
of numbers that enables you—or your servants—to calculate
the engineering data governing the design of hulls, spars, rigging,
etc., and all the other necessary calculations for the building
of a ship capable of sailing all the way to the Orient and returning
with the incredible treasures that you have learned from travelers
are to be found there. One trip to the Orient—and a safe
return to Europe—could make you a fortune. "There are
fabulous stores of treasures in the Orient to be cashed in—if
my ship comes in!"
The building of a ship required that
you be so physically powerful a fighting man—commanding
so many other fighting men as to have a large regiment of people
under your control—that you must have the acknowledged power
to command all the people in your nation who are carpenters to
work on your ship; all your nation's metalworkers to work on
the fastenings, chain plates, chains, and anchors of your ship;
all those who can make rope and all the people who grow fibers
for your rope; all the people who grow, spin, and weave together
the fabrics for your sails. Thus, all the skilled people of the
nation had to be employed in the building and outfitting of your
ship. In addition you had to command all the farmers who produced
the food to feed not only themselves but also to feed all those
skilled people while they built the ship—and to feed all
your army and all your court. So there was no way you could possibly
produce one of these great ships unless you were very, very powerful.
Even then, in building ships, there were
many essential materials that you didn't have in your own nation
and so had to purchase from others. You also needed working cash—money
to cope with any and all unforeseen events that could not be
coped with by use of muscle or the sword—money to trade
with. It was at this stage of your enterprise that the banker
entered into the equation of power.
Up until 1500 B.C. all money was cattle,
lambs, goats, or pigs—live money that was real life-support
wealth, wealth you could actually eat. Steers were by far the
biggest food animal, and so they were the highest denomination
of money. The Phoenicians carried their cattle with them for
trading, but these big creatures proved to be very cumbersome
on long voyages. This was the time when Crete was the headquarters
of the big-boat people and their new supreme weapon—the
lines-of-supply-control ship. Crete was called the Minoan civilization,
the bull civilization, worshippers of the male fertility god.
The pair of joined bull's horns symbolized
that the particular ship carried real-wealth traders—that
there were cattle on board to be exchanged for local-wealth items.
The Norsemen with their paired-horn headdress were the Phoenician,
Veenetian, Veeking (spelled Viking but pronounced "Veeking"
by the Vikings). Veenetians, Phoenicians. (Punitians, Puntits,
Pundits. Punic Wars. Punt = boat = the boat people. Pun
in some African Colored languages means "red," as in
Red Sea.). The Veekings were simply the northernmost European
traders. The Veekings, Veenitians, Feenicians, Friesians—i.e.,
Phoenicians, Portuguese—were cross-breeding water-world
people.
Graduating from carrying cattle along
for trading in 1500 B.C. the Phoenicians invented metal money,
which they first formed into iron half-rings that looked like
a pair of bull's horns. (Many today mistake them for bracelets.)
Soon the traders found that those in previously unvisited foreign
countries had no memory of the cattle-on-board trading days and
didn't recognize the miniature iron bull horn. If metal was being
used for trading, then there were other kinds of metal they preferred
trading with people—silver, copper, and gold were easy to
judge by hefting and were more aesthetically pleasing than the
forged iron bull horn symbols.
This soon brought metal coinage into
the game of world trading, with the first coin bearing the image
of the sovereign of the homeland of the Phoenicians.
This switch to coinage occurred coincidentally
at just about the same time as the great changeover from city-state
dominance to line-of-supply dominance of the power-structure
group controlling most of world affairs. This was the time when
the Phoenicians began trading with people of so many different
languages that, in need of a means of recording the different
word sounds made by people around the world, the Phoenicians
invented phonetic spelling—Phoenician spjelling—which
pronounced each successive sound separately and invented letter
symbols for each sound. With phonetic spelling human written
communication changed very much—from the visual-metaphor-concept
writing of the Orient, accomplished with complex idea-graphics
(ideographs), several of which frequently experienced, generalized
cartoons told the whole story visually. It was a big change from
ideographs to the Phoenicians' phonetic spelling, wherein each
letter is a single sound—having no meaning in itself—and
whereby it took several sounds to make a whole word and many
such words to make any sense—i.e., a sentence. This is the
historical event that Ezra Pound says coincides with the story
of the Tower of Babel. Pound says that humanity was split into
a babble of individually meaningless sounds while losing the
conceptual symbols of whole ideas—powerful generalizations.
You had to become an expert to understand the phonetic letter
code. The spelling of words excluded a great many people from
communicating, people who had been doing so successfully with
ideographs.
This gradual alteration of world trading
devices from cattle to gold brought about the world-around development
of pirates who, building small but swift craft, could on a dark
night board one of the great merchant ships just before it reached
home, richly laden after a two-year trip to the Orient, and take
over the ship and, above all, its gold. With the gold captured,
the pirates often burned the vanquished ship.
As already mentioned in our Introduction,
it was in 1805, 200 years after the founding of the East India
Company, that the British won the Battle of Trafalgar, giving
them dominance of all the world's lines of supply. They now controlled
the seas of the world. It was said by world people that the British
Empire became the first empire in history upon which "the
sun never set." In order to get their gold off the sea and
out of reach of the pirates, the British made deals with the
sovereigns of all the countries around the world with whom they
traded, by which it was agreed from then on to keep annual accounts
of their intertrading and at the end of the year to move the
gold from the debtor's bank in London to the creditor's bank
in London to balance the accounts. In this way they kept the
gold off the ocean and immune to sea pirate raiding. This brought
about what is now called the "balance of trade" accounting.
The international trading became the
most profitable of all enterprises, and great land-''owners"
with clear-cut king's "deeds" to their land went often
to international gold moneylenders. The great land barons underwrote
the building of enterprisers' ships with their cattle or other
real wealth, the regenerative products of their lands, turned
over to the lender as collateral.
If the ship did come back, both the enterpriser
and the bankers realized a great gain. The successful ship venturer
paid the banker back, and the banker who had been holding the
cattle as collateral returned them to their original proprietor.
But during the voyage (usually two years to the Orient and back
to Europe) the pledged cattle had calves, "kind" (German
for "child"), and this is where the concept of interest
originated, which was payable "in kind"—the cattle
that were born while the collateral was held by the banker were
to belong to the banker.
When the Phoenicians shifted their trading
strategy from carrying cattle to carrying metal money, the metal
money didn't have little money—"kind"—but
the idea of earned interest persisted. This meant that the interest
was deducted from the original money value, and this of course
depreciated the capital equity of the borrower. Thus, metallic
equity banking became a different kind of game from the original
concept.
In twentieth-century banking the depositors
assume that their money is safely guarded in the vaulted bank,
especially so in a savings bank, whereas their money is loaned
out, within seconds after its depositing, at interest payable
to the banker which is greater than the interest paid to the
savings account depositor and, since the metal or paper money
does not produce children—"kind"—the banker's
so-called earned share must, in reality, be deducted from the
depositor's true-wealth deposit.
The merchant bankers of Venice came to
underwrite the Venetians' (the Phoenicians') voyaging ventures.
Such international trade financing swiftly became the big thing
in the banking game. The "Merchant of Venice"—Shylock
and his "pound of flesh forfeit" of the debtor—was
Shakespeare's way of calling attention to the fact that the bankers'
"interest" was in reality depleting the life-support
equity of both the depositors and the borrowers.
It was the financing of such international
voyaging, trading, and individual travel as well as of vaster
games of governmental takeovers that built the enormous wealth-controlling
fortunes of early European private banking families. It was under
analogous circumstances of financing inter-American-European
trade that, in the late nineteenth century, J. P. Morgan became
a man of great power. By having his banking houses in Paris and
London, Philadelphia and New York, he was able not only to finance
people's foreign travel, all their intershipment of goods, and
to give letters of credit, but also to finance and control major
"new era" railroading, shipbuilding, mining, manufacturing,
and energy-generating enterprises in general.
Such powerful banking gave insights regarding
the degrees of risks that could be taken. The people doing the
risking came to the banker for advice. In such a manner J. P.
Morgan developed the most powerful financing position in America,
as society went from wooden ships to steel ships and the concomitant
iron mining, blast furnace building, and steel rolling mill development,
as well as the making of boilers and engines, electric generators,
and air conditioning systems.
To better understand the coming of world
power structure into North American affairs, we will switch back
from the nineteenth to the seventeenth and eighteenth centuries,
to the opening up of North America and the American socioeconomic
scene. The European colonization occurred in several major ways.
The Spanish way was accomplished with
vast haciendas—grants from the king to powerful supporters.
The hacienda development began in Central America and Mexico
and expanded northward into California.
The British king also gave vast plantation
grants to royal favorites on the North American southeastern
coast, below the freezing line.
The French came to two parts of North
America: (1) to the Gulf of Mexico-Mississippi delta, where exiled
prisoners were dumped, and (2) to the St. Lawrence area of Canada,
whence they moved westward via the Great Lakes, then southward
on the Mississippi to join with these lower Mississippi colonists
exploring northward and westward on the Mississippi.
British sovereign grants were also being
given on the northeastern coast, where it was much colder and
where existence was much more difficult. Because it was much
more difficult to colonize, the royal favorites who received
large land grants from the British king in the north did everything
they could to encourage colonization of any kind by others, who
bought their land from their landlords. The Pilgrims and other
people of religious conviction found the freedom of thought-and-act
to warrant hazarding their lives in that cold-winter wilderness.
On the northeast coast of North America the individuals who did
the colonizing were not the landowners, who remained safely in
Europe. In the south the royal-favorite landowners themselves
occupied and personally operated many of the great plantations.
Though motivated by distinctly different
northern and southern reasons for doing so, we have the east-coast
North American British-blood people breaking away from the Old
World through the American Revolution.
In our tracing of the now completely
invisible world power structures it is important to note that,
while the British Empire as a world government lost the American
Revolution, the power structure behind it did not lose the war.
The most visible of the power-structure identities was the East
India Company, an entirely private enterprise whose flag as adopted
by Queen Elizabeth in 1600 happened to have thirteen red and
white horizontal stripes with a blue rectangle in its upper lefthand
corner. The blue rectangle bore in red and white the superimposed
crosses of St. Andrew and St. George. When the Boston Tea Party
occurred, the colonists dressed as Indians boarded the East India
Company's three ships and threw overboard their entire cargoes
of high-tax tea. They also took the flag from the masthead of
the largest of the "East Indiamen"—the Dartmouth.
George Washington took command of the
U.S. Continental Army under an elm tree in Cambridge, Massachusetts.
The flag used for that occasion was the East India Company's
flag, which by pure coincidence had the thirteen red and white
stripes. Though it was only coincidence, most of those present
thought the thirteen red and white stripes did represent the
thirteen American colonies—ergo, was very appropriate—but
they complained about the included British flag's superimposed
crosses in the blue rectangle in the top corner. George Washington
conferred with Betsy Ross, after which came the thirteen white,
five-pointed stars in the blue field with the thirteen red and
white horizontal stripes. While the British government lost the
1776 war, the East India Company's owners who constituted the
invisible power structure behind the British government not only
did not lose but moved right into the new U.S.A. economy along
with the latter's most powerful landowners.
By pure chance I happened to uncover
this popularly unknown episode of American
history. Commissioned in 1970 by the Indian government to
design new airports in Bombay, New Delhi, and Madras, I was visiting
the grand palace of the British fortress in Madras, where the
English first established themselves in India in 1600. There
I saw a picture of Queen Elizabeth I and the flag of the East
India Company of 1600 A.D., with its thirteen red and white horizontal
stripes and its superimposed crosses in the upper corner. What
astonished me was that this flag (which seemed to be the American
flag) was apparently being used in 1600 A.D., 175 years before
the American Revolution. Displayed on the stairway landing wall
together with the portrait of Queen Elizabeth I painted on canvas,
the flag was painted on the wall itself, as was the seal of the
East India Company.
The supreme leaders of the American Revolution
were of the southern type—George Washington and Thomas Jefferson.
Both were great land-owners with direct royal grants for their
lands, in contradistinction to the relatively meager individual
landholdings of the individual northern Puritan colonists.
With the Revolution over we have Alexander
Hamilton arguing before the Congress that it was not the intention
of the signers of the Declaration of Independence that the nation
so formed should have any wealth. Wealth, Hamilton argued—as
supported by Adam Smith—is the land, which is something
that belonged entirely to private individuals, preponderantly
the great landowners with king-granted deeds to hundreds and
sometimes thousands of square miles, as contrasted to the ordinary
colonists' few hundreds of acres of homestead farms.
Hamilton went on to argue that the United
States government so formed would, of course, need money from
time to time and must borrow that money from the rich landowners'
banks and must pay the banks back with interest. Assuming that
the people would be benefited by what their representative government
did with the money it borrowed, the people gladly would be taxed
in order to pay the money back to the landowners with interest.
This is where a century-and-a-half-long game of "wealth''-poker
began—with the cards dealt only to the great landowners
by the world power structure.
Obviously, very powerful people had their
land given to them by the king and not by God, but the king,
with the church's approbation, asserted it was with God's blessing.
This deed-processing produced a vast number of court decisions
and legal precedent based on centuries and centuries of deed
inheritances. Thus, landlord's deeds evolved from deeds originally
dispensed from deeds of war. Then the great landlords loaned
parcels of their lands to sharecropping farmers, who had to pay
the landlord a tithe, or rent, and "interest" out of
the wealth produced by nature within the confines of the deeded
land. The landlord had his "tithing" barn within which
to store the grains collected in the baskets (fiscus is
Latin for "basket"; thus the fiscal year is that which
winds up within the basketed measuring of the net grains harvested).
The real payoff, of course, was in regenerative metabolic increments
of the botanical photosynthetic impoundment of Sun radiation
and hydrocarbon molecules' structuring and proliferation through
other hydrogenic and biological interaccommodations. Obviously
none of this natural wealth-regenerating and -multiplying process
was accreditable to the landlords.
When I was young, there were people whom
everybody knew to be very "wealthy." Nobody had the
slightest idea of what that "wealth" consisted, other
than the visible land and the complex of buildings in which the
wealthy lived, plus their horses, carriages and yachts. The only
thing that counted was that they were "known to be"
enormously wealthy. The wealthy could do approximately anything
they wanted to do. Many owned cargo ships. However, the richest
were often prone to live in very unostentatious ways.
Of course, money was coined and the paper
equivalents of metallic coinage were issued by the officers of
banks of variously ventured private-capital-banking-type land
systems. Enterprises were underwritten by wealthy landowners,
to whom shares in the enterprises were issued and, when fortunate,
dividends were paid. "Rich" people sometimes had their
own private banks—as, for instance, J. P. Morgan and Company.
Ordinary people rushed to deposit their earnings in the wealthy
people's banks.
For all the foregoing reasons nobody
knew of what the wealth of the wealthy really consisted, nor
how much there was of it. There were no income taxes until after
World War I. But the income tax did not disclose capital wealth.
It disclosed only the declared income of the wealthy. The banks
were capitalized in various substantial amounts considered obviously
adequate to cover any and all deposits by other than the bankers
involved in proclaiming the capital values. These capital values
were agreed upon privately between great landowners based on
equities well within the marketable values of small fractions
of their vast king-deeded landholdings.
"The rich get richer and the poor
get children" was a popular song of the early 1920s. Wages
were incredibly low, and the rich could get their buildings built
for a song and people them with many servants for another song.
But, as with uncalled poker hands, nobody ever knew what the
"wealthy" really had. I was a boy in a "comfortably
off" family, not a "wealthy" family—not wealthy
enough to buy and own horses and carriages. To me the wealthy
seemed to be just "fantastically so."
This brings us to World War I. Why was
it called the First World War? All wars until this time
had been fought in the era when land was the primary wealth.
The land was the wealth because it produced the food essential
to life. In the land-wealth era of warring the opposing forces
took the farmers from the farms and made soldiers of them. They
exhausted the farm-produced food supplies and trampled down the
farms. War was local.
In 1810, only five years after Malthus's
pronouncement of the fundamental inadequacy of life support on
planet Earth, the telegraph was invented. It used copper wires
to carry its messages. This was the beginning of a new age of
advancing technology. The applied findings of science brought
about an era in which there was a great increase of metals being
interalloyed or interemployed mechanically, chemically, and electrolytically.
Metals greatly increased the effectiveness of the land-produced
foods. The development of nonrusting, hermetically sealed tin
cans made possible preservation and distribution of foods to
all inhabited portions of our planet Earth. All the new technology
of all the advancing industry, which was inaugurated by the production
of steel in the mid-nineteenth century, required the use of all
the known primary metallic elements in various intercomplementary
alloyings. For instance tin cans involved tin from the Malay
straits, iron from West Virginia mines, and manganese from southern
Russia.
The metals were rarely found under the
farmlands or in the lands that belonged to the old lords of the
food-productive lands. Metals were found—often, but not
always, in mountains—all around the world, in lands of countries
remote from one another. Mine ownerships were granted by governments
to the first to file claims.
It was the high-seas, intercontinental,
international trafficking in these metals that made possible
the life-support effectiveness of both farming and fishing. The
high-seas trafficking was mastered by the world-around line-of-supply
controllers—the venturers and pirates known collectively
as the British Empire. This world-around traffic was in turn
financed, accounted, and maximally profited in by the international
bankers and their letters of credit, bills of exchange, and similar
pieces of paper. International banking greatly reduced the necessity
for businessmen to travel with their exported goods to collect
at the importer's end. Because the world-around-occurring metals
were at the heart of this advance in standards of living for
increasing numbers of humans all around the world, the struggle
for mastery of this trade by the invisible, behind-the-scenes-contending
world power structures ultimately brought about the breakout
of the visible, international World War I.
The war was the consequence of the world-power-structure
"outs" becoming realistically ambitious to take away
from the British "ins" the control of the world's high-seas
lines of supply. The "outs" saw that the British Navy
was guarding only the surface of the sea and that there were
proven new inventions—the submarine, which could go under
the water, and the airplane, which could fly above the water—so
the behind-the-scenes world-power-structure "outs"
adopted their multidimensional offensive strategy against the
two-dimensional world-power-structure "ins." The invisible-power-structure
"outs" puppeted the Germans and their allies. The invisible-power-structure
"ins" puppeted Great Britain and her allies. With their
underwater strategies the "outs" did severely break
down the "ins' " line of supply.
J. P. Morgan was the visible fiscal agent
for the "in" power structure, operating through Great
Britain and her allies. The 1914 industrial productivity in America
was enormous, with an even more enormous amount of untapped U.S.
metallic resources, particularly of iron and copper, as backup.
Throughout the nineteenth century all
the contending invisible world power structures invested heavily
in U.S.A.-enterprise equities. Throughout that nineteenth century,
the vast resources of the U.S.A. plus the new array of imported
European industrial tooling, the North American economy established
productivity. The U.S.A. economy took all the industrial machinery
that had been invented in England, Germany, France, and Europe
in general and reproduced it in America with obvious experience-suggested
improvements.
In 1914 World War I started in the Balkans
and was "joined" in Belgium and France on the European
continent. The British Isles represented the "unsinkable
flagship" of the high-seas navy of the masters of the world
oceans' lines of supply. The "unsinkable flagship"
commanded the harbors of the European customers of the high-seas-line-of-supply
control. If the line of supply that kept the war joined on the
European continent broke down completely, then the "outs"
would be able to take the British Isles themselves, which, as
the "flagship" of the "ins," would mean the
latter's defeat.
In 1914, three years before the U.S.A.
entered the war, J. P. Morgan, as the "Allies' " fiscal
agent, began to buy in the U.S.A. to offset the line-of-supply
losses accomplished by the enemy submarines. Morgan kept buying
and buying, but finally, on the basis of sound world-banking
finance, which was predicated on the available gold reserve,
came the point at which Morgan had bought for the British and
their allies an amount of goods from the U.S.A. equaling all
the monetary bullion gold in the world available to the "ins'
" power structure. Despite this historically unprecedented
magnitude of the Allied purchasing it had only fractionally tapped
the productivity of the U.S.A. So Morgan, buying on behalf of
England and her allies, exercised their borrowing "credit"
to an extent that bought a total of goods worth twice the amount
of gold and silver in the world available to the "ins."
As yet the potential productivity of the U.S.A. was but fractionally
articulated. Because the "ability to pay later" credit
of the Allied nations could not be stretched any further, the
only way to keep the U.S.A. productivity flowing and increasing
was to get the U.S.A. itself into the war on the "ins' "
side, so that it would buy its own productivity in support of
its own war effort as well as that of its allies.
By skillful psychology and propaganda
the "ins" persuaded America that they were fighting
"to save democracy." I recall, as one of the youth
of those times, how enthusiastic everyone became about "saving
democracy." Immediately the U.S.A. government asked the
British and their allies, "What do you need over there?"
The "ins" replied, "A million trained and armed
men, and the ships to carry them to France, and many, many new
ships to replace the ships that have been sunk by submarines.
We need them desperately to keep carrying the tanks and airplanes,
weapons, and munitions to France." The "ins" also
urgently requested that the U.S. Navy be increased in strength
to equal the strength of the British Navy and therewith to cope
with the German submarines, "while our British Navy keeps
the German high-seas fleet bottled up. We want all of this from
America."
America went to work, took over and newly
implemented many of the U.S. industries, such as the telephone,
telegraph, and power companies, and produced all that was wanted.
For the first time in history, from 1914 to 1918, humanity entered
upon a comprehensive program of industrial transformation and
went from wire to wireless communications; from tracked to trackless
transportation; from two-dimensional transport to four-dimensional;
from visible structuring and mechanical techniques to invisible—atomic
and molecular—structuring and mechanics.
Within one year the million armed and
trained U.S.A. soldiers were safely transported to France without
the loss of one soldier to the submarines. Arrived in France,
they entered the line of battle. With the line of supply once
more powerfully re-established by the U.S. Navy and its merchant
fleet, it became clear that the "ins" were soon going
to win.
J. P. Morgan, now representing the "allied"
power structures' capitalist system's banks as well as serving
as the Allies' purchasing agent, said to the American Congress,
"How are you going to pay for it all?" The American
Congress said, "What do you mean, pay for it? This is our
own wealth. This is our war to save democracy. We will win the
war and then stop the armaments production." Morgan said,
"You have forgotten Alexander Hamilton. The U.S. government
doesn't have any money. You're going to pay for it all right,
but since you don't have any money, you're going to have to borrow
it all from the banks. You're going to borrow from me, Mr. Morgan,
in order to pay these vast war bills. Then you must raise the
money by taxes to pay me back."
To finance these enormous payments Mr.
Morgan and his army of lawyers invented—for the U.S. government—the
Liberty Loans and Victory Loans. Then the U.S. Congress invented
the income tax.
With the U.S. Congress's formulating
of the legislation that set up the scheme of the annual income
tax, "we the people" had, for the first time, a little
peek into the poker hands of the wealthy. But only into the amount
of their taxable income, not into the principal wealth cards
of their poker game.
During World War I, U.S. industrial production
had gone to $178 billion. With only $30 billion of monetary gold
in the world, this monetary magnitude greatly exceeded any previously
experienced controllability of the behind-the-scenes finance
power structure of the European "Allies."
World War I over, won by the Allies,
all the countries on both sides of the warring countries are
deeply in debt to America. Because the debt to the U.S.A. was
twice that of all the gold in the "ins' " world, all
the countries involved in World War I paid all their gold to
the U.S.A. Despite those enormous payments in gold all the countries
were as yet deeply in debt to the U.S.A. Thereafter all those
countries went off the gold standard.
All the monetary gold bullion paid to
the U.S.A. was stored in the mountain vaults of Fort Knox, Kentucky.
International trade became completely immobilized, and the U.S.A.
found itself having unwittingly become the world's new financial
master. Swiftly it arranged vast trading account loans to the
foreign countries. This financing of foreign countries' purchasing
by the U.S.A. credit loans started an import-export boom in the
U.S.A., followed by an early 1920s recession and another boom;
then, the Great Crash of 1929.
The reasons for the Great Crash go back
to the swift technological evolution occurring in the U.S.A.
between 1900 and the 1914 beginning of World War I and the U.S.A.'s
entry into it in 1917. Most important amongst those techno-economic
evolution events are those relating to electrical power. Gold
is the most efficient conductor of electricity, silver is the
next, and copper is a close third. Of these three gold is the
scarcest, silver the next, then copper. Though relatively scarce,
copper is the most plentiful of the good electrical conductors.
Copper is also nonsparking and therefore makes a safe casing
for gunpowder-packed bullets and big gun shells. As a consequence
of these conditions, in the one year, 1917, more copper was mined,
refined, and manufactured into wire, tubing, sheet, and other
end products than in the total cumulative production of all the
years of all human history before 1917.
With the war over all the copper that
had been mined and put into generators and conductors did not
go back into the mines nor did it rot.
World War I was not an agrarian, but
an inanimate-energy and power-driven, industrial-production war—with
the generating power coming from Niagara and other waterfalls
as well as from coal and petroleum. For the first time the U.S.A.
was generating power with oil-burning steam turbines.
When the war was over, all this power-production
equipment was still in prime operating condition. There was enormous
potential productivity—a wealth of wealth-producing capability
that had never before existed, let alone as a consequence of
war. The production capacity that had been established was so
great as to have been able to produce, within a two-year span,
all those ships, trucks, and armaments. What was the U.S.A. economy
going to do with its new industrial gianthood? It was the vastness
of this unexpected, government-funded production wealth and its
ownership by corporate stockholders that generated many negative
thoughts about the moral validity of war profiteering.
There were many desirable and useful
items that could be mass-produced and successfully marketed.
Young people wanted automobiles, but automobiles were capital
equipment. In 1920 capital equipment was sold only for cash.
There were enough affluent people in post-World-War-I U.S.A.
to provide an easy market for a limited production of automobiles.
In 1920 there were no bank-supported time payment sales in the
retail trade. The banks would accept chattel mortgages and time
payments on large mobile capital goods, such as trucking equipment,
for large, rich corporations. Banks would not consider risking
their money on such perishable, runaway-with-able capital equipment
as the privately owned automobile.
Because the banks would not finance the
buying of automobiles and so many money-earning but capital-less
young people wanted them, shyster loaners appeared who were tough
followers of their borrowers when they were in arrears. Between
the ever-increasing time-payment patronage and the affluent,
a market for automobiles was opening that could support mass
production.
In 1922 there were about 125 independent
automobile companies. They were mostly headed by colorful automobile-designing
and -racing individuals for whom most of the companies were named.
They survived by individually striving each year to produce an
entirely new and better automobile, most of which were costly.
Many accepted orders for more than they had the mechanical capability
to produce. Their hometown financiers would back these auto-designing
geniuses so that they could buy better production tooling and
build larger factories. Wall Street sold swiftly increasing numbers
of shares in auto companies. More and more of them went broke
for lack of production, distribution, and maintenance experience
on the part of the auto-designer managements.
In 1926 the Wall Street brokerage house
of Dillon, Read and Co. made a comprehensive cost study of the
auto-production field. They found that 130,000 cars a year was,
in 1926, the minimum that could be accounted as mass production
and sold at production prices. Any less production had to carry
a much higher price tag. To warrant the latter, the cars had
to be superlatively excellent. The English-built Rolls-Royce
brought the highest price on the American market. There was fierce
competition among Packard, Peerless, Cadillac, Pierce-Arrow,
Locomobile, Lozier, Leiand, and others for the top American car.
All of those premium cars' frames, bodies, engines, and parts
were manufactured within their own factories. There were several
in-between classes, such as that of the Buick. Most of the 100
or so cars in this intermediate range were assembled from special
engines, frames, and other parts made by independent manufacturers.
The mortality in auto companies was great.
Dillon, Read led Wall Street out of its dilemma by buying several
almost bankrupt companies, closely located to one another, such
as those of the Dodge family, whose joint production capacity
topped the 130,000 units per year mass-production figure. They
named their new venture the Chrysler Company. Dillon, Read fired
the auto company presidents, who were primarily interested in
new-car-designing, and replaced them with production engineers.
Wall Street followed suit and put in production engineers as
presidents of all the auto companies—except Ford, who owned
his company outright and had no obligation to Wall Street and
its legion of stock buyers. Old Henry himself was already the
conceiver, initiator, and artist-master of mass production.
Because the American public was in love
with the annual automobile shows, the Wall Street financiers
who had thrown out all the colorful auto-designer presidents
started a new game by setting up the Madison Avenue advertising
industry, which hired artists who knew how to use the new (1920)
airbrush to make beautiful drawings of only superficially—not
mechanically—new dream cars. They made drawings of
the new models, which required only superficial mudguard and
radiator changes with no design changes in the hidden parts.
Parts were purchased by the big companies from smaller, highly
competitive parts manufacturers operating in the vicinity of
Detroit.
This was the beginning of the downfall
of the world-esteemed integrity of Yankee ingenuity, which was
frequently, forthrightly, and often naively manifest in American
business. Big business in the U.S.A. set out to make money deceitfully—by
fake "new models"—and engineering design advance
was replaced by "style" design change.
In the late twenties first Ford and then
General Motors instituted their own time-financing corporations.
The bankers of America said, "Let them have it, they'll
be sorry—autos, phew! We don't want to go around trying
to recover these banged-up autos when the borrower is in default."
The bankers said, "It is very immoral to buy automobiles
'on time.' They are just a luxury."
What the bankers did like to support
in the new mass productivity was tractor-driven farm machinery.
Farm machinery was easy to sell. As the farmer sat atop the demonstration
plowing or harvesting equipment, with its power to go through
the fields doing an amount of work in a day equal to what had
previously taken him weeks, he said to himself, "I can make
more money and also take it a little easier." So the bankers
approved the financing of the production and marketing of the
farm machinery. They held a chattel mortgage on the machinery
and a mortgage on the farmland itself and all its buildings.
The bankers loved that. There was enthusiastic bank acceptance
of the selling of such equipment "on time" to the farmers.
The bankers did not consider this "immoral." The farmer
was "producing food wealth." The automobilist was "just
joy riding."
Then there came a very bad hog market
in 1926. Many farmers were unable to make the payments on their
power-driven equipment. The local country banks foreclosed on
the delinquent farmers' mortgages and took away their farms and
machinery. The bankers had assumed that the farms were going
to be readily saleable. It turned out, however, that there were
not so many nonfarmers waiting to become farmers, and most of
the real farmers had been put out of business by the bank foreclosures
so they couldn't buy back their own farms. There were no city
people eager to go out and buy one of those farms. "How
you gonna keep them down on the farm, after they've seen Paree?"
were the words of a popular World War I song.
So the dust bowls developed as the upturned,
unsown soil began to blow off the farms. It is relevant to note
that, in 1900, 90 percent of U.S.A. citizens were living and
working on the farms; in 1979 only 7 percent were on the farms,
mostly as local supervisors for big, absent-ownership corporations.
The owners of the farmlands today are no longer "farmers"
or even individual humans—they are the great business conglomerates.
What began in 1934 as government subsidies and loans to farmers
for farm machinery, later to keep acreage out of production,
would by 1978 result in President Carter making enormous payments
to appease big corporations for cutting off vital grain and other
strategic shipments to Russia. Next, the U.S. government would
make enormous subsidies to bail out large corporations such as
Lockheed and Chrysler, which as basic military suppliers the
U.S. government could not allow to go bankrupt. Eventually the
U.S. taxpayers will be asked to make "free-of-risk"
bail-outs of "private" enterprises, corporations with
initial physical assets worth over a billion dollars classifed
as risk enterprises.
We now return to the 1926-'27-'28-'29
sequence of events developing from selling the farmers' machinery
on the bankers' drop-dead terms (mortgage means "on
death terms"). In 1927 and 1928 the bigger Western city
banks began to foreclose on their local country banks that had
financed the farm machinery sales and had been borrowing from
the bigger city banks to cover their unprecedentedly expanded
loaning. First the little and then the successively bigger banks
found that they had foreclosed on farmhouses that had no indoor
toilets, many with roofs falling in, barns in poor condition,
with the replevined farm machinery rusting out in the open—and
no customers.
Word of the bad news gradually went around;
small bank "runs" began; and in 1929 came the Great
Crash in the stock market. All business went from worse to worser.
Unemployment multiplied. Prices steadily dropped. Nobody had
money with which to buy. Bigger and bigger banks had to foreclose
on smaller banks, until finally in early 1933 there came one
day in which 5000 banks closed their doors to stop "the
run" on their funds.
People were dismayed and both individually
and collectively helpless to do anything to combat the economic
collapse. The economy had gone to pieces. People did not parade
and protest. They became so low in spirit and listless that they
just sat around silently in their homes or in public places.
The New York subway stations were filled with people sleeping
on the concrete platforms and stairways. No religious organizations
were willing to let people sleep in their churches.
There came a "pecking-order"
point when the central Chicago banks foreclosed on all the other
big Western city banks—followed by the big New York City
central banks foreclosing on Chicago's central banks. Finally
came the denouement, when the big New York banks found themselves
about to close because they were already behind-the-scenes insolvent.
This occasioned the U.S. Congress voting to accelerate by four
months the presidential inauguration of Franklin Delano Roosevelt
who, minutes after taking his oath of office, signed the Bank
Moratorium, which momentarily suspended the acknowledgment of
the death of the wealthy landowners' banking system that had
lost all or much of its depositors' money. About a month later
Congress voted to the President of the U.S.A. the ability to
control all money. Months later again the U.S. Supreme Court
upheld that legislation. The U.S.A. citizens themselves and their
government had become the wealth resource "of last recourse."
The underwriting wealth belongs to all the people and not to
the few. That happened also to be the description of socialism.
The 150-year-long "infinite wealth"
poker hand and its uncalled blufimg was over. The called hands
were suddenly down. It turned out that the "wealthys' "
wealth was nonexistent. Their marble-walled, steel-barred, visibly
vaulted banks had been psychologically attractive to the depositors,
who preferred to have their earnings and savings deposited along
with the wealth of the powerfully rich. What the banks had been
doing was to loan the people's deposits to other people. The
banks had no money themselves. What they had done was to capitalize
their land at their self-asserted value and had been credited
with that value of stock in the bank's ownership.
In 1933, for the first time ever, the
hands of the U.S. American wealthy were exposed (and by inference,
all land-based capitalism everywhere around the world)—most
were money empty. Their land and multiservanted mansion values
dropped to almost nothing. Nobody had the almost-nothing amount
of money to buy those richly housed estates. There was one exception
to the last statement—the Vatican-administered Roman Catholic
Church's world organization, which for a pittance acquired many
extraordinary properties at that time, which it converted into
monasteries and convents, colleges and schools.
The game of "deedable land wealth"
had been a bluff from its very beginning—multimillennia
ago, when that little man on a horse, armed with a club, first
rode up to the giant shepherd leader of a tribe and said, bluffingly,
"It's very dangerous out here in the wilderness for beautiful
sheep such as yours," and the shepherd leader's ultimate
coercion into accepting "protection" from the claiming
and proclaiming "owner" of the land.
Landownership did not go back to an act
of God. All the kings always had their priests present when the
land claimage was made by their explorers. The priests planted
their crosses to confirm that the king's ownership was blessed
by God. The Roman Catholic Church, starting in its emperorpope
days, has been in the deeded-land business for "going on"
2000 years. It is as yet the world's largest real estate owner.
Real, a Spanish word, means "royal"—the
succession of king-deeded estate lands.
With the bluff of wealth over in March
1933, almost all business in America stopped. On the inauguration
of Franklin Delano Roosevelt the emergency was so absolute that
Congress voted unanimously for whatever corrective measures the
New Deal administration prescribed.
Roosevelt and his advisors said, "One
thing is clear. Despite the emergency America abhors socialism.
Americans don't like the assumption that everybody is equal.
Americans are so independent, they don't feel at all equal. They
don't like socialism, but," said the New Deal leaders, "the
fact is that we, the American people, are going to have to guarantee
our own bank accounts. People don't like to keep their money
under their mattresses and prefer to put it into a bank, so we
will have to do what we can to rehabilitate the banks. We the
people acting unanimously through our government are going to
have to guarantee the safety of each deposit in the banks to
a convincingly substantial amount—$5000. We will leave the
bank in ownership of the management of the stockholders of those
banks that, by virtue of the presidential moratorium, are as
yet theoretically alive, and hope that, with our guaranteeing,
regulation, and supervising, many of them will reopen and will
be able to progressively accredit their depositors with some
percentage of their original deposits.
"But let us not deceive ourselves.
With the government of the people guaranteeing the bank accounts,
it becomes, in operating fact, socialism. On the other
hand people themselves know so little about banking, credit concepts,
and the history of power structures that they will not know that
they have adopted socialism, since the government has not taken
'possession' of the banks. Society will think well of 'we the
people' as the government, guaranteeing the new deposits in the
banks up to $5000."
Society likes the idea of a bank as a
safekeeping device. People have always believed that when they
put their money in the bank, it stayed there. They had no idea
it went out on loan within minutes after it came in. They were
completely hoodwinked by the appearance of the banks as safe,
fireproof, and robberproof depositories of their earnings. Even
today, in the last twenty years of the twentieth century, people
know little more about banks than they did during the 1929 Crash
or at the depth of the Depression in 1932, when all they knew
was that they had lost their deposits in most of them.
In 1933, '34, '35, and '36 the New Deal
and the U.S. Congress diligently investigated the banking system
and the practices of its most powerful leaders. They found many
malpractices, which we will discuss later. Most prominently they
found the banks loaded with worthless mortgages on properties
that were unsaleable because uninhabitable—mortgages on
buildings without roofs, bathrooms, etc.
The government said, "The first
thing we must do is make those mortgages we've inherited worth
something." At this point the American government dictated
the banking strategy and started refinancing of the building
industry. The so-called building "industry" was already
2000 years behind the arts of building ships of the sea and sky,
which ships of the sea and sky are, in fact, environment-controlling
structures in exactly the same sense that land buildings are
environment-controlling structures.
While the design of the seagoing and
airgoing environment controls are floatably and flyably weight-considerate
and semiautonomous because they generate their own power, desalinate
their own water, etc., there is no weight consideration in the
designing of the land-anchored environment controls. They don't
have to float or fly. They are utterly dependent on sewers, waterlines,
electric lines, highway maintenance. They are utterly controlled
by the prime landowners, their building codes and readily imposable
legal restrictions—all based on the real estates' ownership
and control of the highways-sewers-waterlines—the metabolic
"guts" of all U.S.A. towns and cities.
When the government owns the wealth and
controls the issuance of its money, it is socialism. The New
Deal was not trying to deceive the people but was engaged in
a rescue operation of the first order and was hopeful of not
irritating the people psychologically by what it seemed was critically
mandatory to accomplish.
Paradoxically, the first people they
irritated—greatly—were yesterday's rich, in particular
those who were as yet living on the dividends and interest of
as yet solvent industrial corporations' stocks and bonds. In
fear of the New Deal they sought to discredit Roosevelt by a
word-of-mouth campaign. From 1933 to 1940 individual members
of rich gentlemen's clubs of New York were ostracized from membership
in the rudest manner by "the members" if they were
not heard to speak frequently of "that son-of-a-bitch in
the White House."
Franklin Roosevelt and his advisors said,
in effect, "We've got to do what we feel is best for the
people by whatever name the 'best' may bear. We've got them depositing
again in the banks and are rehabilitating all those mortgaged
properties which we have inherited by loaning the new owners
of the properties funds at negative interest provided they will
rehabilitate the property—reroof or put in a bathroom, etc."
To those who understood some of its intricacies,
everything was now out in the open about the world of banking.
The New Deal said it was going to prohibit usurious rates of
interest—"the banks must earn enough to keep themselves
going, but only can charge 1 1/2 percent for interest."
Banks were regulated just like the Post Office. No banker had
authority beyond that of a postmaster. The New Deal completely
separated from banking what Morgan and many of the private banks
had been doing—taking deposit money and putting it into
common stocks and even into the bankers' own highly speculative
private ventures. Thus came the New Deal's Securities and Exchange
Commission and the complete separation of banking and initial
risk financing—or, at least, supposedly so. Banks' trust
departments could as yet buy and sell corporate venture stocks
for clients' accounts however.
There were a number of individual bankers
who went far beyond unwise banking practices and who, as individuals,
took personal advantage of the information they had of individual
depositors' affairs and of their privilege as top bank officers
to do truly inimical things to enrich their own positions. Few
today remember that a half-century ago a number of New York and
Chicago's top bankers were sentenced into penitentiaries—the
New Yorkers into Sing Sing—the senior partner of J. P. Morgan
and Company, the president of the National City Bank, the president
of Chase Bank. Every one of them had been found to be doing reprehensible
financial tricks. They were selling their own friends short.
They were opening their friends' mail and manipulating the stock
market. They were manipulating everybody. They were way overstepping
the moral limits of the privileges ethically existent for officers
in the banking game, so a great housecleaning was done by the
New Deal.
The banking story is best told by a poem
that was, at that time, allegedly composed by Ogden Nash but
was never to my knowledge formally published and copyrighted.
It was, however, memorized and widely recited from copies often
typewritten by those who remembered it:
I'm an autocratic figure in these democratic states,
A dandy demonstration of hereditary traits.
As the children of the baker bake the most delicious breads,
As the sons of Casanova fill the most exclusive beds,
As the Barrymores and Roosevelts and others I could name
Inherited the talents that perpetuate their fame,
My position in the structure of society I owe
To the qualities my parents bequeathed me long ago.
My father was a gentleman and musical to boot.
He used to play piano in a house of ill repute.
The Madam was a lady and a credit to her cult,
She enjoyed my father's playing and I was the result.
So my Daddy and my Mummy are the ones I have to thank
That I'm Chairman of the Board of the National Silly Bank.
CHORUS: Oh, our parents forgot to get married. Our parents forgot to get wed. Did a wedding bell chime, it was always a time When our parents were somewhere in bed. Then all thanks to our kind loving parents. We are kings in the land of the free. Your banker, your broker, your Washington joker, Three prominent bastards are we, tra la, Three prominent bastards are we! In a cozy little farmhouse in a cozy little dell
A dear old-fashioned farmer and his daughter used to dwell.
She was pretty, she was charming, she was tender, she was mild,
And her sympathy was such that she was frequently with child.
The year her hospitality attained a record high
She became a happy mother of an infant which was I.
Whenever she was gloomy, I could always make her grin,
By childishly inquiring who my daddy could have been.
The hired man was favored by the girls in Mummy's set,
And a traveling man from Scranton was an even money bet.
But such were Mother's motives and such was her allure,
That even Roger Babson wasn 't absolutely sure.
Well, I took my mother's morals and I took my daddy's crust,
And I grew to be the founder of the New York Blankers Trust.CHORUS: Oh, our parents forgot, etc.
In a torrid penal chain gang on a dusty southern road
My late lamented daddy had his permanent abode.
Now some were therefor stealing, but my daddy's only fault
Was an overwhelming tendency for criminal assault.
His philosophy was simple and quite free from moral taint;
Seduction is for sissies, but a he-man wants his rape.
Daddy's total list of victims was embarrassingly rich,
And one of them was Mother, but he couldn't tell me which.
Well, I didn "t go to college but I got me a degree.
I reckon I'm the model of a perfect S.O.B.,
I'm a debit to my country but a credit to my Dad,
The most expensive senator the country ever had.
I remember Daddy's warning—that raping is a crime,
Unless you rape the voters, a million at a time.
CHORUS: Oh, our parents forgot, etc.
I'm an ordinary figure in these democratic states,
A pathetic demonstration of hereditary traits.
As the children of the cop possess the flattest kind offset,
As the daughter of the floozie has a waggle to her seat,
My position at the bottom of society I owe
To the qualities my parents bequeathed me long ago.
My father was a married man and, what is even more,
He was married to my mother—a fact which I deplore.
I was born in holy wedlock, consequently by and by,
I was rooked by every bastard who had plunder in his eye.
I invested, I deposited, I voted every fall,
And I saved up every penny and the bastards took it all.
At last I've learned my lesson, and I'm on the proper track,
I'm a self-appointed bastard and I'M GOING TO GET IT
BACK.
CHORUS: Oh, our parents forgot to get married. Our parents forgot to get wed. Did a wedding bell chime, it was always a time When our parents were somewhere in bed. Then all thanks to our kind loving parents. We are kings in the land of the free. Your banker, your broker, your Washington joker, Three prominent bastards are we, tra la, Three prominent bastards are we! * * *
To accomplish their restartings in
all areas of the U.S.A. economic system the New Deal also set
up the Works Progress Administration (to get people jobs) and
the Reconstruction Finance Corporation (to get the big industries
going).
Amongst the first of the New Deal's emergency
acts of 1933 was the establishment of the Works Progress Administration,
which provided jobs for approximately anyone who wanted them—artists,
mathematicians, etc., as well as all white- and blue-collar workers
and, of course, all day laborers and such.
Then, pressed by the labor unions and
the political urge to avoid the characteristics of socialism
and get the heretofore unemployed millions off WPA—the New
Deal's Works Progress Administration—the government financed
new buildings and granted mortgages for longer and longer periods
to encourage people to undertake the production of much-needed
homes and other buildings. It must be noted that the rejuvenated
building industry was reset in motion as a concession to the
building trades and a move to increase employment, not as a much-needed
evolutionary advance in the art of human environment controlling.
The unions were so strong as to be able to push the New Deal
very hard in the direction of resuming only yesterday's multifoldedly
inefficient "one-off" building design techniques and
materials as the activity in which they could establish maximum
employment. Technically ignorant bank officers became the authorities
who alone judged the design validity of the structures and architectural
acceptability of the building projects, funds for the building
of which they authorized as mortgage-secured loans of their bank
depositors' money.
The New Deal went on to rationalize its
strategic acts by arguing to itself, "In order to continue
as a nation we must have our national defense. Since it is established
that there is nowhere nearly enough life support to go around
in this world, if we don't have a formidable national defense,
we're going to be successfully attacked by hungry enemies. Our
national defense can't carry on without steel and the generation
of electricity, the production of chemicals, and other imperative
industrial items."
The FDR team soon concluded that the
industries producing those absolute "defense" necessities
were to be called our "prime contractors." The prime
contractors must be kept going at any cost. "So we'll
give war-production orders to the prime contractors to produce
such-and-such goods. The contractors with signed government contracts
can then go to the banks and borrow the money to pay their overhead
and to buy the materials and power and to pay the wages to produce
the goods. Then we the government will pay the producers for
those finished goods and services, and they can pay off their
loans from the bank. The money paid by the prime contractors
as wages will give people buying power, which will allow them
to start other economic production systems going." This
became a monetary irrigation system (still in use today in 1980
U.S.A. affairs), which works at a rate providing about ten recirculations
in a year following upon each major war order initiated by and
paid for by the government.
In the depths of the Depression in 1932,
when you could buy a meal for five cents and the finest of shirts
for one dollar, the Reconstruction Finance Corporation went much
further. It gave U.S. Steel $85 million worth of new rolling
equipment (in 1980 U.S. currency that would be close to a billion
dollars), etc., etc.
The U.S.A.'s Reconstruction Finance Corporation
had a secondary government machinery-owning outfit that loaned
all these prime contracting companies new equipment with which
to fill their government orders. What the New Deal did in fact
was to socialize the prime contractor corporations instead of
the people. This hid the fact of socialism from the world in
general. Socializing the prime contractor corporations indirectly
benefited the people themselves. In this way the New Deal seemingly
didn't give money to the corporations—just orders.
The U.S.A.-established and -financed RFC loaned the prime contractors
all the money they needed to buy all the equipment. But in the
end the government rarely collected on the loans and finally
just forgave the machinery borrowers altogether, selling them
the equipment for very low "nominal" sums.
The New Deal had also pledged itself
at outset to take care of the "forgotten man." The
government voted minimum-wage limits of a substantial magnitude.
The economy was going again. People were getting more and more
jobs—how many depended upon how many prime contracts the
government gave out. World War II was clearly looming ahead.
The New Deal said, "We have to be prepared" . . . and
their "preparedness" ordering increased. Jobs increased
rapidly. Empty buildings filled.
There were a number of great corporations
whose businesses had practically stopped by 1933, but those businesses
had now been set in healthy motion once more under the New Deal's
socializing of the prime contractors. Franklin Roosevelt said
to the heads of the great corporations that had not gone "bust,"
"Every one of you has a large surplus that you held on to,
in fear, through the Depression. We want you to spend your surpluses
in research and development of new equipment. Since the early
clipper ship days, it has always been a function of a 'fundamental
risk enterprise' that the enterprise use some of its profits
to buy itself new and better equipment—a new and better
ship—with the enterprise that is doing the prime risk-taking
by investing in the new equipment, thereby requalifying for the
privileges and rewards granted by governments for wise risking,
daring execution, and good management."
FDR said, "We want you enterprisers
to 'modernize.' " But U.S.A. big corporate management said,
in unison, "We won't do that. It is much too risky a time
to use any of our surplus." They knew the oncoming World
War II was forcing the government to see that their plants were
modernized, so by holding out they forced the government to take
over both the risk and cost of modernizing. Heretofore in the
history of private enterprise research and development—of
more efficient new plants and equipment—had been funded
from the enterprise's "surplus" earnings—i.e.,
from earnings prudently withheld from distribution to stockholders
to ensure the continuing strength of the enterprise.
Then FDR's U.S.A. Treasury, with all
FDR's lawyers' advice, ruled that the large private-enterprise
corporations could make their new plant expansion and
equipment improvements and charge the costs to operating
expenses, which expenses were then to be deducted from new
earnings before calculating income taxes. This amounted, in fact,
to an indirect subsidy to cover all new-equipment acquisition.
The U.S.A. Treasury next ruled that all research and development—"R
and D"—was thereafter also to be considered by the
U.S.A. Treasury Department as "an operating expense"
and also to be deducted from income before calculating income
taxes. The U.S.A. thereby eliminated almost all the "risks"
of private enterprise.
Next Henry Luce, representing news publishers
in America—the newspapers and magazines—went to Roosevelt
and said, "Your democracy needs its news. You have to have
some way for the people to know what's going on." "Yes,"
said FDR. Luce went on, "We publishers can't afford to publish
the news. The prices people are willing to pay for the news won't
pay for the publications. The newspapers and magazines are only
paid for by advertising, and the New Deal has no allowance for
advertising in its operating procedures." The New Deal then
ruled that advertising was henceforth to be classified as research
and development, therefore deductible from gross income as an
operating expense before calculating taxes. Thus advertising
became a hidden subsidy of very great size—about $7 billion
a year at that time—hidden in tax-calculation procedures.
The subsidy was so great as to cover the founding of what has
come to be known as "Madison Avenue."
While the government was doing all this,
the Congress passed strict and comprehensive rent controls, bank-loan-interest
controls, and price controls of every kind. It was pure socialism.
It had to be done that way. There was no question.