Miscellany

 

© 2004 Joseph George Caldwell.  All rights reserved.  Posted at Internet web sites http://www.foundation.bw and http://www.foundationwebsite.org .  May be copied or reposted for non-commercial use, with attribution.  (14 May2004)

 

Recently, it seems that I have little time for writing.  This page presents a number of ideas I have had for articles.  If I get the time, I will “flesh out” some of them at a later date.  Otherwise, they will remain simply as “sketches” – passing observations, without critical consideration or analysis.

 

Contents

 

A Cultural Difference (An African Perspective) 1

The Frog and the Pot of Water 2

The Prophecy of the Eagle and the Condor 3

US Department of Agriculture Endorses Complete Destruction of American Farmland. 4

Apply John Nash’s Nonzero-Sum Game Theory to Solve the World’s Environmental Problem.. 5

Who Killed Cock Robin?: The Case for War against Brazil to Save the Rain Forest 6

The Role of Compound Interest 8

 

 

A Cultural Difference (An African Perspective)

 

(14 May 2004)  A few weeks ago (April 25, 2004), I attended a dinner sponsored by the Lusaka Wine and Food Society, and had the pleasure of sitting next to a young lady – a white lady in her twenties – who had been born in Zambia.  I asked her what changes she had noticed in Zambia over the years.  She told me the usual things – that when she was young, forests and animals were abundant.  The drive from her farm in Northern province passed over roads that were lined with trees, often forming a canopy over the road.  Much of that was gone, now.  The few remaining animals existed only in game parks or private farms.  The forest was gone in many places, replaced by large bags of charcoal for sale along the road.

 

We got to discussing cultural differences, and she told me an interesting story about local attitudes toward trees.  When she was young, an old Catholic priest lived nearby.  He told her that one thing that he had done to try to stop the destruction of trees was by bringing in a very large number of fruit trees, for distribution to villagers to plant.  After the trees arrived, he met with the local people to discuss planting and raising them.  To his amazement, they refused the trees!  He asked for an explanation of why they did not want the trees, and what they told him was very surprising.

 

They explained that if they planted a tree and cared for it, it would grow to maturity and produce fruit.  That was fine.  The problem was that someday they would die, and the tree would be left to someone else!  They did not want for this to happen.

 

I expressed my amazement at this.  I told her that in my experience, I had noticed a very strong tendency for Africans to keep information to themselves.  After attending a training workshop, for example, typically none of the information or training materials were shared with work colleagues.  But it seemed to me that part of the motivation for this was that jobs were hard to come by, and it did not make sense to provide skills to people who might compete with you for the few available jobs, or even your current job.  But then I also recalled that at the time of independence (1964), Lusaka was nicknamed “The Garden City.”  Since then, many trees have been cut down, and in many places, the city is a disaster.  I observed that it seemed to me that trees, once cut down, were never replaced.  Sensing that I thought that she had ended her story, she asserted, “I haven’t finished my story!  There’s more.”

 

She recounted that when she was young there were very few fruit trees near her home, and they used to get tangerines (called “nartjies” here) from a nearby village.  An older man owned the single tangerine tree in the village.  It was quite large, and produced a lot of fruit.  When in season, they would trade some of their farm produce for lots of tangerines.

 

One year, when they visited the man to get some tangerines, the tree was gone!  It had been chopped down.  The old man was still there, and they asked him what had happened.  He explained that he would die soon, and he did not want anyone else to have the tree and its fruit.

 

The Frog and the Pot of Water

 

(14 May 2004)  Did you know that if you drop a frog into a pot of hot water, he will immediately jump out, but that if you place a frog in a pot of cool water, he will remain there while you slowly raise the temperature, until he dies from scalding?

 

Human beings are very much like frogs.  When I was young, the population of the US was about 150 million, and the population of Canada was about 14 million.  National and state parks were quite empty, and it was easy to buy a lot on a lake or at the beach, in places where there were lakes, for considerably less than a lot in town.  Pollution of the air, of the rivers, of lakes, and of the land was at low levels in most places (LA had “smog” even then!).  Local crime was unheard of.  Under the age of ten, my sister and I would walk downtown to the movies every Saturday, without fear or danger.  We rarely locked our house, except when going out of town.  On a 1955 Chevrolet, it was possible to turn the ignition key to an “unlocked” position, and never use the key again.  This was often done.  Small children or women could walk in most parts of town, at any time, without fear of mugging or rape.

 

Today, things are very different.  The price of lots on lakes near towns is very high – out of reach of most people.  Commutes to work take hours from each day in many places.  Crime is endemic.  Pollution has destroyed many rivers and lakes.  The lakes and bays that I used to fish in Ontario are now mercury-poisoned.  You can catch fish, but you can’t eat them!  Whole lakes and forests in Eastern Canada have been destroyed by acid rain.  In most towns and cities, it is absurd to think that children might walk around town alone.  If you do not lock your car, its contents will be stolen, and it may well be, also.

 

All of this change has taken place because of a massive increase in population.  Most of the population growth in recent years has been from immigration.  The rate of increase may seem small – about one percent per year – but over time, the change is dramatic.  All of this has taken place just in my lifetime.  The changes in my parents’ time and grandparents’ time were even more dramatic – the decimation of most wild animal life and many virgin forests from most parts of the United States.  The cultural and linguistic composition of the US has also changed radically in recent years.  In many places, people who speak Spanish as well as English have a much better chance of getting a job as a teacher or policeman or city clerk or salesperson than a native English speaker.

 

Overfishing has decimated many species of fish.  Large areas of the Caribbean have been made virtually lifeless from pollution.  Global warming is now noticeably destroying habitat in cold regions.  All of this change was hardly noticed from year to year.  But looking back over fifty years, the changes are massive.  Modern civilization (large human population, global industrialization) has caused the extinction of perhaps a million species over the last half century – the normal rate of extinction is maybe a dozen species per century.

 

Just like the frog in the pot, we are in the process of destroying our habitat, and hardly noticing it.  And just like the frog in the pot, we are simply standing still and letting the destruction continue, until the death of the planet and the extinction of the human species.

 

Unless….

 

The Prophecy of the Eagle and the Condor

 

(14 May 2004)  I read an interesting article by Lynne Twist, called “Ancient Wisdom for a New Millennium.”  The article is posted at Internet web site http://solutions.synearth.net/2004/04/28 .  Here is the text of that article:

 

There is an ancient and sacred prophecy in South America called the prophecy of the eagle and the condor. This prophecy foretells of a time when the people of the eagle and the people of the condor will fly together-wing to wing-in the same sky, and the world will come into balance.

The people of the eagle are the people of the intellect and aesthetic-the people on earth who will have developed technology to such an extraordinary level that it will have brought them material wealth beyond their wildest dreams. They will also find themselves spiritually impoverished to their peril.

At the same time in history, the people of the condor, people who live from their heart and experience live through their five senses, will have an unparalleled depth of intuition, spirit and wisdom that is an expression of the profound integrity of the natural world. Those people will be spiritually rich beyond their imagination, but materially impoverished to their peril.

The people of the eagle represent those of us living in the modern, technological world. The people of the condor represent the indigenous people of the world living close to the land with the heart and wisdom that come being attuned to the natural world.

Lynne Twist, one of the founding executives of The Hunger Project, vice-chair of the Institute of Noetic Sciences, and trustee of Fetzer Institute, is also the co-founder with her husband of The Pachamama Alliance, an organization dedicated to the fulfillment of this prophecy. (Pacha means Earth or nature, and Mama is the nurturing Goddess of wisdom and spirit). The Alliance is dedicated to preserving the Earth's tropical rainforests and its indigenous cultures, and to the creation of a new global vision of sustainability for us all.

Lynne says, "I am privileged to work with indigenous people and modern-world people in the fulfillment of this great prophecy. I believe that new and profound wisdom is available to be heard as never before-wisdom that heals the wounds of the modern world and complements our extraordinary knowledge. In parallel, the nearly unbounded technological knowledge of the modern world is critical to indigenous people in complementing the extraordinary depth of their ancient wisdom. This is a time of great transformation, possibility, and truth. This is the time of the fulfillment of the prophecy. This is the time for the eagle and the condor to fly together in the same sky, wing to wing."  (End of quoted article.)

 

What I found extremely interesting in this article is that the population that Lynne Twist describes is exactly the “minimal regret” population that I described in my book, Can America Survive?  The minimal-regret population consists of two subpopulations: a single-nation high-technology population of five million (“the eagle”), and a low-technology hunter-gatherer population of five million distributed over the globe (“the condor”).  With a low level of population, the ongoing destruction of the planet’s biodiversity (the “Sixth Extinction”) will end, and mankind will once again inhabit a Garden of Eden pollution-free planet teeming with diverse plant and animal life.

 

US Department of Agriculture Endorses Complete Destruction of American Farmland

 

(14 May 2004)  I read somewhere recently where the level of farmland in the American Midwest has fallen about five feet from the level at the time when the first European pioneers arrived, less than two hundred years ago.  If you step away from those places that have never been farmed, you literally drop five feet into the ground!  The topsoil has been destroyed over the years by unsustainable (“modern”) farming practices (ploughing; use of chemical fertilizers, insecticides, herbicides; monocropping of large areas; and refusal to lay the land fallow until it recovers).

 

Rather incredibly, the following statements appeared in an article posted as a news release at the US Department of Agriculture’s Internet web site http://www.usda.gov/Newsroom/0138.04.html .  The statements are part of remarks presented by Agriculture Secretary Ann M. Veneman at the National Press Club in Washington, DC, on 6 April 2004.  It appears that the continued destruction of American topsoil is a desire, policy, and primary objective of the US Department of Agriculture.  Conservation of the remaining topsoil is not a consideration.

 

But the result is that our country’s capacity to produce has often far exceeded our demand.  In recent years, we have produced as much as two-and-a-half times the food we need to meet our domestic demand.

And, with 96 percent of the world’s consumers living outside the United States access to international markets for U.S. agricultural products is all the more critical.

Today, we export the product from one in every three harvested acres from this country or a projected near-record $59 billion this year alone in export sales. Those exports solidly underpin farm income and account for nearly 900,000 American jobs, which pay better than average and are largely in rural areas where they are sorely needed.

Recognizing the importance of market access to our agriculture and to our entire economy, this Administration has embarked upon the most ambitious trade agenda in our country’s history.

It includes first and foremost the Doha Development Agenda of the World Trade Organization as well as several bilateral and regional agreements. The bilateral and regional agreements we have already completed since this Administration took office will give our agricultural producers increased access to 119 million consumers in those countries with a combined income of $820 billion.

A very bright spot on the trade horizon is China.  We forecast U.S. agricultural exports to China this year to reach $5.4 billion. This is triple the amount in 2002, and accounts for 9 percent of our total agricultural export sales.

China now is our number-one market for soybeans and cotton and our sixth largest market for wheat, increases that, of course, have coincided with China’s accession to the WTO in 2001, which this Administration strongly supported.

Non-food uses of farm commodities are also expanding market opportunities.

For example, environmentally friendly ethanol and biodiesel are increasing demand for farm products while providing for energy needs.

Ethanol use now accounts for about 10 percent of the U.S. corn production, and with considerable capacity expansion already underway in the ethanol industry; this number can only grow larger.

USDA encourages finding additional uses for many products now with only limited usefulness such as energy systems powered by animal waste and byproducts.

I visited a plant, at one point, that converts corn into a polymer film that is used in a range of products, from candy wrappers to kitchen utensils, and this company even made all the plastic cups for the Salt Lake City Winter Olympics out of this corn-based product. A version of this plastic is now being provided to manufacture biodegradable CDs and eventually DVDs.  (End of excerpt.)

 

Despite the fact that the western prairie has been largely destroyed, Secretary Venenam expresses a passion and a delight for charging ahead to complete the destruction of all remaining topsoil.  She states that agricultural production levels are up to two and a half times what is required to satisfy domestic demand.  Driven by greed, the US continues to push production even higher, to the maximum level possible, selling what we do not eat ourselves to the world’s exploding population.  If demand for food is not sufficient, then convert the topsoil to nonfood products, such as ethanol and biodiesel.  Find as many additional uses for the topsoil, such as candy wrappers, kitchen utensils, and plastic cups.  Convert the remaining topsoil into dollars, at the maximum rate possible.  Rape nature.  Destroy all of the topsoil.

 

Apply John Nash’s Nonzero-Sum Game Theory to Solve the World’s Environmental Problem

 

(14 May 2004)  Early in my professional career (about 1970), I applied John Nash’s bargaining solution to a nonzero sum game to determine optimal strategies for waging global ballistic missile warfare.  A copy of an article that I wrote describing this application can be found in the paper, Conflict, Negotiation and General-Sum Game Theory, at Internet web site http://www.foundationwebsite.org/Conflict.htm .  Nash’s bargaining solution (or equilibrium solution) has been applied to solve problems in economics, and its significance is indicated by the fact that Nash was awarded a Nobel Prize in economics for this development.  (Professor John Forbes Nash was the subject of the book and movie, A Beautiful Mind.)

 

Nash’s bargaining solution is a very useful approach to solving nonzero-sum games.  (A zero-sum game is one in which one player’s gain is the other player’s loss.  A nonzero-sum game is one in which the two players have different payoff (or utility) functions.  That is, what is of value to one player may not be of value to the other player at all.)  I applied it to find useful solutions to global ballistic missile warfare, and others have found it useful in providing insight into problems in economics.  What I am proposing here is that someone take the time to apply it to the global environmental problem.

 

To my knowledge, this approach has not yet been applied to the problem of determining strategies for dealing with the environmental problem.  It should be recognized that the global environmental problem is not just a game – it is a resource-constrained game.  For this type of problem, the method of Generalized Lagrange Multipliers is very useful for finding solutions (the Generalized Lagrange Multiplier methodology was developed by Dr. Hugh Everett III, who also developed the parallel universe theory (to describe the behavior of subatomic particles in quantum theory)).  The environmental problem is a global, multidimensional problem, and the methodologies of Generalized Lagrange Multipliers and nonzero-sum games are ideally suited to determining useful strategies for this type of problem.  It is important to recognize that the global environmental problem requires the application of both the theory of nonzero-sum games (to reflect the quite different objectives of the two sides of the game (large human numbers and industrialization vs. biodiversity)) and Generalized Lagrange Multipliers (to reflect the many resource constraints and entities involved in a global representation of the problem).  Together, these methodologies can help determine global strategies for dealing with biodiversity loss.  (In the present context, the two “players” of the game are the forces that are destroying biodiversity (large human population, industrialization, free trade, globalization, economic development), and the forces that would stop the destruction of the biosphere and the ongoing mass species extinction.) 

 

Who Killed Cock Robin?: The Case for War against Brazil to Save the Rain Forest

 

(14 May 2004)  It is an amazing fact that the US would go to war in Iraq just for oil, which will be gone worldwide within 45 years, whereas it will not go to war with Brazil to stop the destruction of the Brazilian rainforest.  The Brazilians are destroying the Amazon rainforest – the greatest tropical rainforest in the world – at a rate of about 10,000 square miles per year.  To date, they have destroyed about 16.5 percent, or about 264,000 square miles of the Amazon rain forest.  The destruction continues at about two percent per year.

 

The enormity of this criminal action is not the holocaust-level killing of plants and animals.  It is the fact that the Amazon rain forest is home to the greatest density of plant and animal species on the planet.  Each year, the Brazilians are causing the extinction of tens of thousands of species.  The results of this will affect the quality of life for all human beings from now for as long as mankind inhabits the planet.

 

Politicians are put on trial for “crimes against humanity” if they cause the deaths of a handful of people – a killing of, say, 0.00000001 of the population.  The Brazilians have caused the extinction of tens of thousands of species, and yet the modern world praises their development.

 

Why is this?  The Brazilian rain forest is home to much of the world’s biodiversity, on which the human species is totally dependent for its survival and well being.  The oil does not matter a whit in the long term.  It will all be gone in 50 years anyway.  All that it brings is fuel for continued human overpopulation, industrialization, pollution, and global warming.  It is amazing that the US is spending billions of dollars, and sending its sons and daughters to die in battle, to obtain a resource that is causing the destruction of the environment and the extinction of mankind.  This irrational behavior is analogous to a drug addict who cannot stop even though it is destroying his life, to the smoker who is dying of cancer or emphysema and cannot give up smoking, or to the person dying of cirrhosis of the liver who cannot stop drinking alcohol.

 

What should be done with Brazil?  Some people argue that they are a “sovereign nation,” and have a perfect right to destroy the rain forest, since it is “theirs.”  Some Brazilians take umbrage at criticism from the US, pointing out that the US has destroyed much of its virgin forest and most of its wild animals, in most of its territory (e.g., bison numbering in the millions used to roam the entire US, from the Atlantic to the Pacific; timber wolves were hunted to extinction).  So much for national sovereignty.  It was nice concept for a primitive, undeveloped world, in which mankind could not do anything to affect the planet’s biosphere on a macroscopic level.  Anyway, as we have seen in Iraq, national sovereignty means nothing to the US, if it perceives that its interests are at stake.

 

So why, since the US will invade foreign countries to preserve its perceived interests (e.g., Iraq), will it not invade Brazil, when its future is crucially at stake, and the biodiversity of the planet will be irreparably damaged for all future time by Brazil’s irresponsible action.  It appears that the answer is very simple: money.  The US has no objection to Brazil’s converting the rain forest into money, since that can be used to buy US goods.  Moreover, the US is pleased to use the hardwoods from the rain forest as raw materials, to make more money.

 

The US can relate very well to Brazil’s destruction of the Amazon rain forest.  At the present time, the US is allowing three million immigrants to enter the US (one million legal and two million illegal).  It has been estimated that for each new immigrant, one acre of natural land is permanently destroyed (to make room for more houses, roads, schools, hospitals, and other facilities).  So three million immigrants a year means that three million acres of natural land are destroyed every year.  Three million acres is about 4,400 square miles.  In other words, the US is destroying its natural land at a rate comparable to the rate at which Brazil is destroying its rain forest.  Birds of a feather, one might say.

 

The more immigrants we have, the greater the destruction of nature and the lower the quality of life for the average American (the quality of life has dropped tremendously for the average American since 1950, as the population has soared from about 150 million to close to 300 million).  Why would the US do this – destroy its natural land, and reduce the quality of life for the average citizen?  The only reason the US wants more immigrants is to increase its gross national product, i.e., to make more money for the wealthy.

 

Why would Brazil destroy its Amazon rain forest?  It is destroying the natural habitat on which its indigenous people once thrived.  Once again, the answer is the same: for the money.  Brazil is cutting down its rain forest to export lumber to the rest of the world.  Brazil is clear-cutting and burning what it doesn’t log, to plant crops that it sells for money.  The fact that it is destroying the habitat for its indigenous peoples, and causing the extinction of millions of species, is not a concern.

 

In both cases, the US and Brazil, the fact that species are made extinct is not a consideration.  The fact that the planet’s biosphere will be ruined for all time to come is not a consideration.  The fact that future human generations may be extinct, or exist forever on an impoverished planet, is not a consideration.  The only consideration is how much money can be made today.

 

Why is it that no one moves to “take out” Brazil, and save the rain forest?  They reason is that, to date, everyone in power is in the game just for the money.  And just for the money today.  This situation will not change until a significant number of people in power decide that they want to save their planet from destruction.  And the people presently in power are all for the money.  Not one national leader is calling for a reduction in gross national product, or in standard of living, or in population.  Not one head of a major corporation is calling for reduced production.  Not one head of a major international organization is calling for a reduction in consumption (material standards of living).  All are calling for more production, more industrialization, and higher standards of living.  The problem is that the current world order is committed to industrialization, globalization, and large human population.  Their god is Mammon, not Gaia.  Their god is civilization and economics, not nature.

 

So who killed Cock Robin?  Was it the Brazilians, who destroyed “their” own rain forest, by selling the lumber from it and the crops from it for money?  Or was it the people all over the world who bought Brazilian hardwood trees, Brazilian coffee, and Brazilian airplanes?  Who is the guilty party: the one who sells his heritage for thirty pieces of silver, or the one who pays thirty pieces of silver for the lumber and the crops?  Does it matter?  No.  Both the buyer and the seller share in this evil transaction to permanently destroy Earth’s biodiversity.  All that really matters is that the species, once extinct, are lost to us (and the rest of the planet’s web of life) forever.  If we should “take out” Brazil (and Guyana and Gabon and Cameroon and Congo and Uganda and the Central African Republic, and any other country harboring large, threatened forests) for selling its forest, then we should “take out” the rest of the civilized world, for buying it.  [NOTE:  As I have stated on many occasions, I am not suggesting or encouraging or promoting war.  I believe that global war will occur, and within this decade, as global oil production starts to decline; and that the destruction of the Earth’s biodiversity will stop at that point.  See many of my other writings for more on this.  This sketch is concerned with moral arguments, not with promoting war.]

 

No, no one will move to take out Brazil to save the rain forest.  The powers that be want to continue to destroy it – to convert it to money – as fast as possible.  The US will continue to convert its topsoil to money, and the Brazilians will continue to convert their rain forest to money.  Japan will continue to decimate global fish stocks.  The current world nations are all complicit in this destruction of nature.  The problem is the current system of planetary management, which is based on industrial production and economics.  The destruction will stop when this system is replaced, and not before.

 

The Role of Compound Interest

 

(14 May 2004)  Over the years, many people have pointed out a fundamental problem associated with economic systems that allow compound interest.  A good summary of the problem is presented in Herman Daly’s book, Beyond Growth.  The Nobel-prize-winning chemist Frederick Soddy was evidently the first person to publicize this problem.  In brief, the problem is that no physical process involving exponential growth can continue for very long.  In an economy that allows compound interest, physical wealth cannot grow exponentially for very long, whereas debt – a nonphysical quantity – can.  Eventually, in an economy that allows compound interest, debt grows to astronomical levels.  Eventually, the system must eliminate the debt, either by debt forgiveness (e.g., the Jewish Jubilee year, or the Highly Indebted Poor Countries’ initiative), or by death of the debtor, or by revolution or war.

 

Why is this subject of interest?  It is of interest to me because it is an example of one way of introducing change into a social system – to create disturbances, inequities, instabilities and hardships into the system to make it more challenging and interesting.  Overpopulation is another such change agent, leading inevitably to war.  Climate change and plague are other examples.  The interesting thing about compound interest is that it can create instability in a social system even though the population is stable and has adequate resources, and is free of plague or natural disasters.  It reminds me of the saying, “If evil did not exist, then God would have had to create it,” to make life interesting, challenging, meaningful, and significant.  Compound interest is a very useful tool for introducing inequity and inequality (and as a result, change) into a social system, when all else fails.

 

The following article, by the late John Hotson, Professor of Economics at Waterloo University in Ontario, was originally published in 1984 in Policy Options Politiques Vol.5 No.2, and reproduced in 1997 in The Social Crediter Vol.76 No.6.  I read it on the SynEarth website at Internet web site http://solutions.synearth.net/2004/04/16 .

 

The article below is written from a Christian point of view.  Christianity and Judaism forbade interest until about a thousand years ago.  Islam still forbids charging of interest (“Islamic Banking”).  It is interesting to contemplate why all three Abrahamic religions started out, when people were materially poor (relative to today’s standards), with the same viewpoint on this issue, but only Islam holds fast to the principle today.  The accumulation of massive amounts of wealth (and the massive levels of poverty that accompany it) are tremendously facilitated by charging of interest.  Why is it that only Christianity and Judaism are committed to this, and Islam is not?

 

Interest push is a prime cause of inflation; our policy direction should be towards an interest-free and therefore more equitable world.

Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury. (Deuteronomy 23:19)

The rich ruleth over the poor, and the borrower is servant to the lender. (Proverbs 22:7)

Why is the Bible so down on the charging of interest (usury)? Why did Moses and the prophets of ancient Israel men who felt empowered to write, “Thus saith The Lord” forbid the taking of interest, considering it so great a crime as to be worthy of death? …

Why did the Catholic Church for more than 1,000 years forbid interest taking, declaring usurers unworthy of receiving Christian Communion or Christian burial after death? ...

Why too has “modern” opinion changed? Economists write long books on how bankers create the money they lend us “out of nothing,” without the slightest hint of tongue clucking or denunciation.

Indeed, most economists could hardly imagine a world without a positive rate of interest. How could we discount future income flows to “present values” without an interest rate?

But how did this great transformation in the opinion come about? Did God change His mind?

As one who is not well versed in theology or moral philosophy, I hesitate to go too far into the questions of the morality of interest taking. However, as an economist ... on grounds of practical workability and, yes, morality, I believe I can show why Moses, the prophets and the fathers of the Church were wholly correct to condemn the charging of any interest. I believe I can also show why, with the rise of Protestantism and Capitalism, some relaxation of this condemnation was supportable. I also believe that I can show why in the long run Moses, the prophets and the fathers, are right and the “moderns” are wrong.

Interest on loans introduces an exponential element of limitless growth into a finite economic and social system. The result is always increasing injustice and eventual breakdown. There is nothing more powerful than compound interest (exponential growth) if it has lots of time to work.

To illustrate, suppose one cent had been borrowed at 1% compound interest in the year zero (at the birth of Jesus Christ). Picture Mary and Joseph as being able to save one cent from the gift of the Magi if you will. Supposing they could find a bank that could stay in business for 1,991 years and would accept such a long-term deposit, how much would be owed in the year 1991?

We may answer by using the doubling time formula, the so called “rule of 70”; 2T = 70/i, where 2T is the number of time periods it takes for anything (T, thus money, population, prices) growing at the percentage rate i, to double. If i is 1% per year, the doubling time is 70 years; if i is 2%, the doubling time is 35 years; if i is 20%, the doubling time is only 3.5 years.

Let us use the “rule of 70” to calculate the Christ Child’s savings account balance in 1991. At 1% interest, Jesus’ cent doubles 1991 /70 = 28.44 times to $4,016,568, (or about 4 x 106 in scientific notation) and would be increasing $110 a day.

Suppose instead that our hypothetical bank was willing to pay a more attractive 6% interest on the Christ Child’s savings account. How much money would be owed on one cent at 6% in 1991? (Test your intuition here: How much larger do you think the answer will be? Will it be six times larger, or about $24 million? Or will it be larger? About how much larger?)

Using our formula, we have 70/6 = 11.67; 1991/11.67 = 170.61 doublings or $2.2645 x 1048. This is an almost unimaginably huge amount of money, $2 followed by 48 zeros!

The reasons our modern economy of legalized usury works at all have to do with such facts as the following: no one lives long enough to leave money in the bank for many years; lenders spend their interest rather than merely compounding it; banks fail and borrowers repudiate their debts through bankruptcy or by raising the prices of the things they sell (inflation), thus partially repudiating their debts; and finally, in recent centuries per capita real income has also been growing exponentially.

Let us examine this last point carefully. Luigi Pasinetti has recently shown that the only sustainable or “natural” rate of interest is the rate of growth of the productivity of labour. If the “market” rate of interest exceeds the natural rate the share of the rentier will grow and the share of labour (and by extension of Pasinetti’s model, the entrepreneur) will shrink.

If, on the other hand, the market rate falls below the natural rate the money lenders’ share of total income falls, at least if we assume that total indebtedness is growing no faster than total income.

Pasinetti demonstrated his conclusion only for a “model” world of a pure labour economy. However, if we extend his argument to a world of money and prices we can see why John Maynard Keynes, unlike his “Keynesian” disciples, put such great emphasis on the need to drive down the rate of interest if we are to avoid cyclical instability and secular unemployment.

The “natural” rate of interest in an economy is the rate of growth in “total factor productivity,” that is, real output per head. Only in recent centuries has this been a significant, though small, positive number. Throughout the long centuries when the Bible was being written and the “middle ages,” productivity gains were virtually zero. Thus the “natural” rate was also zero, so the Bible was on this point “scientifically” correct!

How do we know? By the same arithmetic we used above for the Christ Child’s supposed cent. If per capita income in A.D. 1 was $100 (Which is probably not far wide of the mark) and it grew only one percent a year we would all have a per capita income in 1991 of $40 billion (4 x 1010), or far more than the total wealth of the richest human being or indeed of many countries.

No such incomes are available to us, of course, because only in the 19th century had the industrial revolution proceeded far enough in a few countries for per capita real output to rise as much as l’% a year sustainably. Only in the present century did the pace quicken to 2 or more percent per annum, thus doubling real income in 35 years or less. In the 1960s and 1970s, Japan and Singapore have been able to raise “productivity” by as much as 7% a year which is thus also the world’s highest “natural” rate of interest. However, moneylenders have seldom been satisfied with even 7%; much less are they willing to receive only 2% or 1%. Thus the market rate of interest has a chronic tendency to rise above the natural rate.

What happens when the market rate of interest exceeds the natural rate? This depends upon other social arrangements. In the “good old days” of metallic money it quickly became impossible for debtors to repay; all they could do was sink deeper into debt as they mortgaged first their land, then their animals, then their wives and children and finally the debtor himself was sold into slavery.

In a world of metal money and zero productivity gains the exaction of any positive market rate of interest had one inevitable result: a society of a few rich moneylending landlords with every one else their serfs and slaves.

Such a result was the downfall of the Greco-Roman, and other ancient civilisations. To avoid this result ancient Israel had the year of Jubilee: every fiftieth year all debts were cancelled, all slaves set free, and all land returned to its original owners. (See Leviticus 5:914)

Ever since World War II, total debts public and private have increased even faster than money GDP and interest rates have increased fourfold. As a result, interest income has increased far faster than any other form of income and has thus been the most inflationary type of income distributed.

By 1988 Canadian money GDP had increased to $598,732 million, from a mere $13,473 million in 1947, or 43.4 times the 1947 level. However, real, or constant dollar, GDP had increased only 4.6 times over the same period.

Inflation is often blamed on “wage push,” and it is true that total wages in Canada increased to roughly 46 times their 1947 level, or somewhat faster than money GDP. Corporate profits rose 34 times from 1947 to 1988, or too fast for price stability but too slow to maintain the “corporate profit share,” which fell from 13.8% of GDP in 1947 to 10.8% in 1988.

Unincorporated business did far more poorly: non-farm unincorporated business rose only 21.3 times, so that the small business share fell from 11.2% to 5.6% of GDP. Farm income increased only 3.7 times, slower even than the increase in real GDP, so that farm income plummeted from 8.2% of GDP to 0.9% of GDP.

Interest on private debts plus dividends rose from $194 million in 1947 to $45,784 million in 1988, or 235 times; so that interest and miscellaneous income rose from 1.4% of GDP in 1947 to 7.6% in 1988. Another way of putting things is as follows: in 1947 interest and dividend recipients received only 17.6% as much income as did farmers. In 1988 “rentiers” received almost nine times as much income from the private sector as did farmers.

Moreover it was interest, not dividends, that had increased most rapidly. Thus, from 1972 to 1988, interest increased roughly three times as rapidly as did dividends. In addition to this explosive rise in private debt interest, interest on public debts in Canada grew from $559 million to $50,506 million, or by 90 times.

In light of the above facts it is indeed strange that the government and the Bank of Canada have tried to stop inflation by raising interest rates! Not only is this policy unjust, in that it raises the incomes of the relatively well-to-do who lend money (and own banks) faster than it does the incomes of ordinary citizens who borrow money; it is irrational, as it adds to the costs of every business, and it adds greatly to the government’s own interest payments and deficits. Indeed, in recent years the government deficit and interest on the national debt have been of roughly the same magnitude. This is perhaps the greatest irrationality of all, for if the government would take money-creation back into its own hands, a subject to be explored elsewhere, it could quickly pay off the national debt while greatly lowering taxes.

A government policy and financial system that results in money GDP increasing by twice the square of the increase in real GDP, total debts increasing even faster, and interest income increasing by more than twice the cube of the rate of increase of real GDP can only result in accelerating inflation and eventual breakdown through over-indebtedness.

So it was with the prophets of old who knew what they were talking about, not the moderns; or, in summary: exponential growth of interest income at a higher rate than real income can grow, leads to accelerating inflation and economic breakdown. If that’s not sin, what is?  (End of article.)