Nipawin - Monday, August 27, 2001 - by: Mario deSantis


"The behaviour of a system arise from its structure" -- John D. Sterman




Conrad Black has sold the National Post to CanWest and our media has become more concentrated, more uniform, and more powerful to preach the gospel of neoclassical economic directions of changing the central banks' interest rate, less taxes, less government, free market, and welfare for corporations.




We have known for a long time that the only constant in our society is change, and the understanding of societal changes has contributed to the definition of different economic theories to assist governments in directing their economies. So, for example, at one time we needed the keynesian theory of governmental over spending to alleviate unemployment, and at another time we needed monetary policies to control our economy so that it wouldn't grow too fast, or because it wouldn't grow at all. What I want to stress is that our society is becoming more complex and what is very important is to learn how to make sense of the world we live in.




But our neoclassical economists have stopped learning and they have become obsessed with the continuing fight against inflation. If the economy is growing there is the fear of inflation because of too much money being pumped by the banks for business expansion; therefore the central banks raise their interest rates. If the economy is slowing down, the central banks cut down their interest rates to stimulate growth. So we have the central banks playing up and down with their setting of interest rates, and we have our economists being busy in producing statistics to check if the economy is growing too fast or too little.




As the central banks and economists keep going with their work and their fight against inflation they forget that our society is changing and they forget that we need structural economic changes rather than changes in interest rates. James K. Galbraith has highlighted the stupidity of continuously changing interest rates by referring to the inertia and time delays intrinsic in our economic system. James Galbraith states:


"What I oppose is a policy that will wreck, rather than sustain, full employment without inflation. As an expansion matures, care must be taken to keep bubbles from developing. Investors should be encouraged to diversify their asset holdings, not to concentrate them. The policy we have, of fostering bubbles only to pop them, is silly. Also dangerous, destructive, and irresponsible, not only on the national but on the global scale. Of all the policy measures we have, moving the interest rate up and down may be the most convenient. It can be done in secret by an unaccountable cabal. But it does not have magic effects on prices or the growth rate. It works only when interest rates go high enough for long enough that businesses start to fail in large numbers, people get laid off, and credit demand falls on that account. That is why, on general principle, raising the interest rate is the policy instrument we should use the least. That we use it so much - that we use it first and foremost - is evidence of weak minds, weak institutions, and poor economics. And also of too much uncritical adulation of the very modest talent on and around the Federal Reserve Board."




Bravo James Galbraith! Full employment without inflation is a key for our societal well being, and the raising or dropping of interest rates is nothing else but an indication of our economic gambling casino.
  Related social and economic articles published by Ensign
  Business Dynamics, by John D. Sterman, 2000, page 107
  James K. Galbraith, Professor of Public Affairs and Government, Lyndon B. Johnson School of Public Affairs, University of Texas at Austin
  9.5 Theses for the Padinha Door, by James K. Galbraith