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Oeuvres de Lonergan |
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Interview with Bernard Lonergan Interviewers Eileen de Neeve, Stan Machnik
EdN: Welcome to this special session of our course “Affecting Good in History”, Part III – The Dynamic in the Ground of Action. And especially, we’d like to welcome our guest this evening, Father Bernard Lonergan. Professor Lonergan really needs no introduction to this group. I think he is best known for his major contributions of Insight. A Study of Human Understanding and Method in Theology. Professor Lonergan is in Montreal on this visit for the publication of a French edition of some of his other papers1 and to complete a series of interviews to be published in TMI Papers in the next year2, and thirdly, and most important to us, he’s come to enrich our understanding of his essays on Circulation Analysis in particular, and of the issues in our course “Affecting Good in History” in general. The interview will be followed by an open question period when course leaders and participants and guests can raise questions if they like. S.M.: It was agreed I should pose the first question, Father Lonergan, and to ask the question, the wondering that I’d like to address to you is, why should we study economics? We have some ideas about why we should study philosophy, or why we should study psychology, but, you know, not many of us are economists. And yet, reading your work, one begins to get an intimation that those who are interested in understanding things should really get to it. How did you come to it? B.L.: Well, I was puzzled! See? No. I was in England from 1926 to 1930. A professor of ethics I had, published a book on capitalism and morality and at the time it was a topic that was not accepted. They believed in the iron laws of economics still and they remained in vigour on through the great depression and the statement by Keynes that economics is a moral issue, a moral science. This is what he meant by “the further question” but at least he brought out the idea it involved introspection and soma. It was a human science at least. And there were three things that struck me when I got back to Canada in 1930. First of all, that the poor didn’t have jobs and the rich were, a lot of them were selling apples on the street, and there were economic theories floating in the air, speculations. And the most prominent was Major Douglas, who’d studied the costs of various things that were being sold on the market at the present time for consumer goods, and the amount of money that these people could earn. And there was no proportion between them. There was bound to be ineffective demand. And he had his solution for it. Keynes had the same idea, ineffective demand, involuntary unemployment and so on, there just weren’t the jobs to be had. And that gives you Keynes’ theory of unemployment. If jobs are available for everyone, you don’t have unemployment. If there is shortage of jobs and you have more people that jobs available, you have unemployment. It’s a very simple solution, but something quite different from marginal analysis. We won’t go into that. So I became interested in the theories. Douglas’s weakness was that his solution was that the banks donate $25.00 to every household a month to supplement their income. Well, the banks can’t do that. It would be straight inflation all the time. But Keynes did have a solution, namely, when the economy was in the point where there was unemployment and no hope of eliminating it, the government would have to create jobs by deficit spending and just as you created new types of employment during a war by government pending, issuing bonds and all the rest of it, and that idea has been very influential, especially in England and the United States more and more ever since. The deficits are fantastic. The percentage of gross national income in Japan that is invested is about 45%, according to a recent book I have seen. In Germany, it’s about 35%, in France it’s about 23% and in the United States about 3% and in England about 2%. I think there are decimal points after these. But why is the United States and England far behind the others, well, they have these welfare programs! And welfare programs don’t enable people to buy more than they can afford. They stop the need and so on. E.dN.: You mention in Circulation Analysis that the welfare state is somehow an aberration. B.L.: Well, it’s necessary under the circumstances. E.dN.: Oh, OK. B.L.: But it hasn’t got the dynamism, eh? of the other side of the economy. We may have to go back to the stationary state. But the stationary state doesn’t mean that we’re producing below the level of our capacity. It means that we’re not producing beyond our current capacity. S.M.: The non-investment, then, is like generating a stationary condition, or perhaps even a deterioration of the… B.L.: Well, deterioration is a further question, but the stationary state means an economy that keeps doing the same thing indefinitely. The economy of the Physiocrats was stationary. The key element was the surplus produced by agriculture, that would take care of people for the next year. You had to have that surplus coming over from the previous year, for this year, to people to live and that was their key idea on it. And it was simply having the same thing repeating. And they would distinguish different classes of people and so on, and the way they supported one another. S.M.: There is another place you say that there is an ethical character to proper economic consideration or that you cannot separate economy and ethics. B.L.: Well, you can’t separate rules for driving a car from the way a car is constructed. You can tell anyone that he’s foolish if he steps on the breaks and the accelerator at the same time, and most people will believe him. And when you get that type of precepts in your economy, you have to have it analysed on the analogy of a system and be able to have conclusions like that just talked right out! And that’s the way you can develop economic precepts that are not problems to implement, because it makes the machine work better. S.M.: So that there is a… B.L.: Morality in economics is good business. But you have to know the economics first. S.M.: And it is in that direction that you take us when you take us into an understanding of velocities and circulatory flows and basic and surplus periods. We have some problems with understanding the language of it, and in talking with you just before we came in you were saying how important it is to move away from the static and to focus on the velocities and accelerations. Could you tell us a little bit of the history of viewpoints that economists have taken and where you find yourself in sharp disagreement. B.L.: Well, the weakness of economics is that it’s apt to be content with descriptive categories as people were content with botany at the time when it was a matter of descriptions. Subsequent to Darwin, botany became more and more a matter of explaining: where this flower came from, what were its antecedents. And similarly with regard to the species of trees, and animals, and so on. And an understanding that has been recently advanced by the double helix in the chromosomes. But the thing about the dynamic is the moral questions: What are we to do about it? And to know what to do about it, you’d have to know what you’re working with and what you’re working with has to be something that works. Otherwise you’ll not know what you’re working with. A velocity is a standard of living. It’s so much per annum. And everyone needs so much per annum. It’s not some strange notion. An acceleration is another velocity that increases other velocities. The cotton was transformed, the production of cotton goods was transformed when there were added the cotton gin for cleaning the cotton. It wasn’t a matter of washing or anything else, it was a machine that cleaned the cotton, eliminated extraneous matter. The excavation machines, moving the earth, taking out iron ore and coal from the earth, the best furnaces to use the coal and the iron ore to get the pig iron. The steel mills, to transform the iron into steel, and the machine tools to make the series of implements needed by the cotton industry! Spindles to change the cotton that had been cleaned into thread, looms to change the thread into cloth and sewing machines to change the cloth into garments. And when you had this more remote, more round-about way, of producing cotton goods, the volume increased tremendously and the cotton trade was the first trade that led to the big boom in England. And, a point made by Schumpeter, that when a new boom is starting, there is a bit of a depression because existing things are at a discount and the other thing isn’t really started. E.dN.: Why are existing things at a discount? People don’t… B.L.: Well they’re not going to count on that way anymore, eh? E.dN.: Horse whips and… B.L.: Yes. Whatever. E.dN.: Whatever. S.M.: If you could continue with the train of thought so we see that velocities are the rate of consumption of households and the change of those velocities is the acceleration, and you’ve described now a change in those velocities being made by the invention of tools and the making of those machineries. Now, where do you find that your insights, your perception, have been sort of not seen, have not been operative in economic theory? B.L.: Instead of talking about basic and surplus, eh? Velocities and their acceleration, you talk about wages and profits. You’re using two big bookkeeping concepts easily underscored by anyone. And they have no implications except social implications. You can start up a class war on that basis. But the economic implications are in terms of velocity and acceleration. And those transform, they determine, then, your exchange process. E.dN.: To go on with the use of terms, when you use the term “surplus expansion” or “surplus phase” and then there is a basic phase. Are they the same as investment and consumption or are they different? B.L.: They have to do with investment and consumption. The surplus also is concerned with the maintenance of the present equipment. But it’s maintaining the velocity that you have already, eh? Preventing the velocity from dropping. The language, surplus, existed with the Physiocrats before the industrial revolution. Marx took it in a different sense, the difference being that the wages the worker received and the capitalist taking the rest of the value of his labour for himself. Exploitation. And I prefer to go back to the original meaning of the word surplus, because that’s just feeling and thinking. E.dN.: So you say that surplus is… B.L.: More than what you’ve got at the present time. It’s what accounts for the increase in the economy. But you have an increasing economy, you need more than just the surplus, you need surplus at a certain level, a level beyond maintenance. E.dN.: So that surplus is used to maintain your means of production. B.L.: Yes. And increase them. E.dN.: And it’s the increase. S.M. You speak of a point to point in the basic phase and point to line, point to surface and other relationships in the surplus phase. Am I right in that? B.L.: Hmmm. S.M.: Why are there cycles? That characterize the process? B.L.: Well, that’s a leap ahead. The point to point is that a shoemaker, for every shoe he makes, he sells a shoe. But if you get up a factory of making shoes, it stands for a flow of shoes. And his surplus that builds the factories gives you a flow of factories and consequently a flow of flows of shoes. And when you get to the flow from the single instance, you have first a velocity, when you get to the flow of flows you have an accelerator, if you have a higher level, you have a higher type of acceleration, that spreads out more. And these differences are all reflected in the payments that are made to carry this process on and it’s within the payments and the change of velocity to acceleration that you get into cycles. S.M.: So the monetary function has to be introduced before we can talk about the cycle. B.L.: Before you can talk about exchange, eh? S.M.: Exchange, yes. And once we have exchange, then we have stages of cyclic movement. B.L.: Well, it doesn’t follow that easily. You can have exchange without any money in a barter economy. S.M.: Yes, yes. B.L.: And you have no unit to count (unit of account). S.M.: But in a barter economy, you don’t have money. You have exchange. So you have to have the money that then facilitates the movement that can be recurrent. B.L.: Yes. If you have a barter economy, you may like having something else better than what you have, and offer what you have in exchange, but you don’t like what you have anyway. But you think his will be more helpful. And you have to search out, find out, who the people are that would like to have that, eh? If you have money, you can go anywhere and get what you want. It speeds up the exchange process. But it complicates it if you go further than that. E.dN.: And in… one of the things that it seems to me we’ve worried about since the 1930’s was the adequacy of demand and that’s why governments then were constantly using deficit spending to make sure people… the demand was kept up, keep the economy going, you had to spend and so forth, and then when we’re reading Circulation Analysis, it’s hard to find the concern with demand. Am I right? And there is more concern with productive profit. Is that a needed correction? B.L.: Well, it’s that that will increase the demand, eh? E.dN.: OK, so you think that surplus creates its own demand, as Say’s Law applies. B.L.: Well, it’s simpler to consider the development of the process. Now, this is… if you were to imagine a baseball diamond and you distinguish four points of reference and home plate will be outlay to produce outlay consumer goods and services, the outlay for consumer goods and services, basic outlay. And second base, it will be surplus outlay, producing the means of production and the services needed for means of production. And both outlays are income. And the surplus outlay goes to third base and the basic outlay goes to first base. Now. 
The top (H) is basic outlay. Outlay for the provision of consumer goods and services. And that outlay becomes income (b1 in diagram), which becomes basic expenditure, and it goes in two directions (a1, a2 in diagram). Part of it goes back up here to basic goods and services and that goes for spending part of their income on consumer goods and services. And finally comes down here a2 to surplus goods and services. There are capitalists also in the basic production. And where does this surplus come from? It comes from the fact that this money coming, oh no, we haven’t come to it yet. Over here (c; d1 in diagram), surplus basic outlay : surplus outlay also goes to consumer goods and services for workers and everybody else… for the standard of living (d1). E.dN.: and also consumer spending. B.L.: And some of it goes to surplus income and spending (d2 in diagram). Now. E.dN.: Surplus income and surplus spending, eh? B.L.: Yes. E.dN.: I don’t know if I’m helping. B.L.: Yes. It’s a little too much written on, but there is more to it than this, you see. You have a crossover. This is from basic (a1 in diagram) to surplus. This is from surplus (d1 in diagram) to basic. This is the workers getting their standard of living (a1; d1 in diagram) out of the basic. And they’re giving to the basic producers more than they are spending on their workers and sources. This is all money out of the surplus. So you get a price spread in basic goods and services and that gives the “basic” capitalist money to invest. E.dN.: Does the price go up in the basic sector because there is a demand for goods but there aren’t more goods. B.L.: It’s demand for goods as yet there are not more consumer goods and services. E.dN.: So prices go up. B.L.: Yes. And you see the money spent there on the workers for surplus goods and services has to go to standard of living and that standard of living is in addition to all the costs the basic producers have. So they get a price spread. And the function of that price spread is, its primary function is, to increase their capital investment. And there is a further thing balancing the crossover, eh? This is a crossover from the surplus to the basic (d1 in diagram). There is a crossover from the basic to the surplus (a2 in diagram) and the two have to be equal, otherwise one circuit will be robbing the other. S.M.: Could I try to repeat what I understood you to say just here? The crossover is the money saved, for example in the basic, the money saved in the basic, people earning in the basic productive process and they get salaries and there is money left over besides their standard of living. B.L.: They get profits and interest too. S.M.: Yes. Profits and interest. So there is money left from keeping the household going or keeping your business going. There is money left over. B.L.: Right. S.M.: And that can go into the surplus outlay. B.L.: Yes. S.M.: From the surplus outlay, there is money that is paid to keep the business of making machinery and building factories and there is… B.L.: That’s surplus investment, eh? S.M.: Yes, right. So. There is surplus spending… well, wait a minute now… from the surplus activity, that is the factories that make machinery and the building companies that build factories, you have an income that can keep the factories going or keep your industry of building going. But more than that, you can have money that pays the workers to live as well as everyone else. So. That which is moved into the basic from the surplus has to… E.dN.: Crossover from their basic… B.L.: From the surplus to basic. The wages of all the people who are working in the surplus. E.dN.: Ok. But then wouldn’t you have to have the 45% flowing back? B.L.: Oh, yes. But it will come back through the basic producers E.dN.: … who want to invest. B.L.: If they don’t want to invest, then you have the redistributional centre, eh? And they just put it in the bank or insurance or bonds or whatever you please and people there use that money to invest. E.dN.: Somebody else will borrow to invest. S.M.: So when you were describing the dip in proportions of the G.N.P. that the different countries direct into industrial expansive enterprise, you’re also implying that there was a prosperity that was a rise in the standard of living of people too, or would the 45% that you attributed to Japan, they would not be in a balanced situation where the basic would balance out with the surplus. B.L. Yes. That’s where the difficulty arises. Because any expansion is a matter of new ideas, any big expansion. And new ideas do not grow on trees. There are ideas that can be very fruitful and you can keep repeating the dodge over and over again. You can build canals and have barges, transportation, improving your transportation enormously. And then you can get stationary steam engines, and running mills, and so on, where you have no water power. And then you can have locomotives pulling trains and freight trains. And then you can go on to internal combustion engines and have motor cars and cement highways all over the country and so on. The thing just keeps on moving and there is no let up. But when the only new prospect is the computers, well, what are you going to do with your steel mills? And your railways? And your motor cars? And so on, eh? You’re into a different field, sort of discontinuity. It’s expanding the function of the white collar worker, not of the blue collar worker. Except in so far as the computers involve a certain amount of manufacturing. It’s largely a matter of getting highly intelligent people to design better computers, more efficacious ones. It’s when that let-up occurs in the surplus phase, its expansion cools down, that you stop getting this flow from the surplus outlay to the basic income. That means the price spread has to contract. When the price spread begins to contract, well it doesn’t contract equally all over. They’re sheltered businesses. And they don’t go under. And there are businesses at the margin and they take the full impact of that shrinking price spread and they’re driven out of business. And when they’re out, well then it’s the next lowest group that goes out. And then the next and then the next and then the next, and you stop that insofar as you can persuade the sheltered people to share it up. And that’s a very hard idea to put across. And if they don’t want to do it, well, we’ll end up with socialism. And that’s where we are. They’ve got socialism in France. And Mitterrand, I’ve been told by people who have been to France (I have fairly good sources), that he’s had to nationalize the banks so that banks would loan money not only to people who could pay enormous rates of interest, but to people generally. In other words, to end the dual economy, an economy that’s governed by supply and demand and an economy of oligopolists, where the trade unions are very rich and very well entrenched, where businessmen can have the trade union leaders come and tell them: we know that you control your sources and your markets and you can give us the 13% increase across the board. We want 39% and if you don’t want to give it to us, we’ll go on strike. And the businessmen think it over and say: well, if they go on strike- our income stops and the directors will think that we are doing a poor job. However, there is no difficulty about raising our prices sufficiently to give them 39%. Well, increasing inflation, all we have to do is square ourselves with the Federal Reserve Board. Because a failure like a powerful strike at a central industry can do an enormous amount of damage, not only to that industry, but to the country as a whole. You see, they call that accommodation of the Federal Reserve Board and as long as you have accommodation, and this sort of business going on, there’s growing inflation. And you have the growing inflation again on the post Keynesian view: inflation arises insofar as there isn’t enough saving to cover the loans that are being made by the banks. Now when you haven’t got enough saving to cover the loans made by the banks, then you have a change in prices to cause involuntary savings. Things cost too much for you to buy them. And you save willy-nilly. And that brings the amount of savings, adds involuntary to voluntary savings, to balance the credit, the volume of credit that’s being made. E.dN.: So an increase in money and credit as they say now does lead to an inflation. B.L.: It can. The thing is, the rule discovered when the Bank of England first ended convertibility with its Bank of England notes. In 1797, they had been quietly loaning money to government during the Napoleonic wars. And they started handing out, you know, refusing to exchange for gold the Bank of England pound notes or five-pound notes or whatever they were. And after a bit, there was a very slight inflation, nothing that would concern us at the present time but something very strange at that time at the end of the 18th Century England. And cracks started to flow discussing this and there was one man, I think the name is Taunten but I’m not certain of that, I forget it at the moment. And he wrote a tract and explained that the rate of interest, the condition of equilibrium between credit and money is that the expected rate of profit on investment has to be equal to the rate of interest. If it’s lower than that, people will be borrowing freely because everything they borrow is to their advantage and if it goes lower than that, I mean if it goes higher than that, well they won’t be borrowing enough to keep things going. And that is an equilibrium condition. But what you have to enforce that equilibrium condition, you have to have an unstable situation and the unstable situation arises when you don’t get supply of people willing to lend balancing the offer of people who want to borrow and when you get that equilibrium at the right place, you’re safe again. And that idea held up to after John Stewart Mill. And then it went into eclipse and then at the end of the century, towards the end of the 19th century, it rose again to prominence. I am quoting Schumpeter, History of Economic Analysis, at least referring to him, I’m not using his words. E.dN.: I’d like to find out a little more about the basic expansion. I understood you to say in Circulation Analysis that, well business or the economy has learned how to manage a surplus expansion… B.L.: Everybody’s making money, eh? E.dN.: Hmm. B.L.: And you don’t have to be smart. You just have to be where the gravy’s flowing. But as the surplus expansion winds down, you have different phases. In the first phase, it’s not really changing the situation seriously. Then it reaches a point where marginal people in the basic begin to feel the squeeze. You begin to get a few bankruptcies and when bankruptcies come to the point where the banks begin to crash, you’re in a real depression. (And to pull out of that, insofar as it disrupts the routes of trade). When you have a crash, people no longer know just where they can get what they want to carry on their business. The routes of trade have been broken. The people they used to get things from are out and that’s why it took so long to pull out of the depression at the beginning of the 1930s. They were out of it at the end of the 2nd World War really. E.dN.: So do we need a way of preventing this kind of bankruptcies from occurring? B.L.: Oh, yes! E.dN.: But there will be… are you suggesting that there needn’t be losses? If people shared the basic price spread the difference might just go to zero. B.L.: Right! But you have to teach too that the stationary state is not a misery! The stationary state doesn’t give the kind of profits that a surplus expansion does. But it gives the standard of living you’re accustomed to. Because you’re always paying for that! E.dN.: And provide enough jobs for people? B.L.: Well, that’s a more complex problem. For instance, you have the number of people involved. And… E.dN.: And people would have to move from industries in a surplus expansion. B.L.: Yes. That’s the thing. And it’s very difficult to arrange. But the people can find a way. The thing is… to sell this idea more generally, you need a terrific propaganda machine, like selling war bonds eh? Except that the reasons why someone ought to sell isn’t so clear! The old shibboleths, you know, like maximization of profits. Well, its crude! Like it makes sense perhaps in a surplus expansion when it’s a high galloping-horse stage, but maximizing profits is taking one of the simplest little dodges in elementary capitalism, maxima and minima and applying it to a curve of your income and making profits to reach the maximum point, that is, when the curve goes up, and begins to turn down. And in a very simple way you put your dy/dx or ds/dt at zero and you’ll have the tangent flat where the curve is beginning to turn down. That’s the place for a maximum. And you know when you get there because after that you start making less money. But to apply a mathematical idea to business generally, as though this were a precept of economics, is not something that follows from any analysis that I know of. There are firms that make a maximum, but across the board, in any industry, there are firms of high competence, and firms of very low efficiency and so on. The machinery they use will vary and all the rest of it. S.M.: So for the shift that Eileen is talking about, from the surplus where people begin to go into basic services and… B.L.: If they can get the jobs! S.M.: If they can get the jobs, that shift you say would require a massive selling job for people to accept. But then to recognize that we’re in that stage, you say, those productive processes that are protected give wrong signals, those that… B.L.: Well, those not feeling the pinch yet, eh? They don’t begin to feel it until people stop buying from them, and sales begin to drop. Inventories begin to increase. S.M.: So the reading of those signals, the signals that would give good results, is being blocked by the sheltered situations as well as those that escape the economic unit that we’re talking about, escape the national boundaries… B.L.: Hmmm. S.M.: If they escape that, then the signals will not be read. So how could we expect that people… B.L.: Oh, you’re asking about an international economics, eh? S.M.: Yes. B.L.: I’m not talking about that. You have to start from the simplest case and you just make it more complex by going to the international. S.M.: No, but you see, my question is then: How do people know, how can they recognize that we should really be entering into a basic phase moving out of a surplus? B.L.: Well, when it occurs and the signs of that, eh? The selling of the surplus. They’re beginning to offer to give you $300 if you’ll buy a motor car, eh? And still more if you’ll buy a steel mill. The Montreal Gazette this morning was enthusiastic I believe about the Bombardier Company that got a big market for streetcars somewhere in the States? S.M.: Which is indicative of what though? B.L.: Oh, it’s indicative of the shortage of cash in Canada, isn’t it? At least the enthusiasm. I don’t know whether Bombardier is going to leave any money in Canada, though. I don’t know who they are. Even if they are Canadians they may move to Bermuda. E.dN.: So it’s going to require a learning of new kinds of behavior. B.L.: Right. E.dN.: To handle the… B.L.: Right. Right. And a change of mentality, eh? E.dN.: Hmm. B.L.: And that’s the fundamental thing. And it means in such a way that you won’t be irritating people and having everyone against you, eh? It’s very hard to write on economics in a very serious fashion without getting into that. E.dN.: One of the things that has come up in a previous interview related to economics, there was a suggestion that what we needed was moral economists. In a way it sounds unattractive, but could you? B.L.: Well, the thing is, you have moral makers of motor cars who explain you are not to step on the brake and the accelerator at the same time, and anything else that’s important about running your car and conserving it. E.dN.: They can be very authoritarian about that. B.L.: Yes and they can be authoritarian because you know they know their business. And when you meet economists that know their business, mainly, that they’re talking to human beings and to have to motivate them if you have something you think they should do and the motivation to give them is an economic motivation. The thing can’t be more, under certain circumstances, the expansion is going to stop. E,dN.: Just as profit is a motivation. B.L.: Profit is simply the matter that if you don’t make a profit, you go out of business. But it’s enormous profits, eh?, that are the problem. Because the enormous profits exist to enable either the man making these enormous profits, the outlay people (enable them to expand, or buy expansion for their own part). And without profits, you can’t maintain the expansion. You’ll start tightening it up, closing it down. And if the people who receive those profits just shoot them into redistributional area, well unless there is someone who will want to use them for investment, the economy will go down. E.dN: But when you say that economics has to do with human beings… B.L.: Well I’m talking about human beings all the time! And you have to make them understand what the implications of their deeds are. E.dN.: So they’re motivated by understanding. B.L.: Yes. S.M.: Is there a precondition of… you say at one point: A society of love or a society of self-seekers. You’re not expecting a society of love. What you are saying is: We need a society of informed people. B.L.: Well that’s a minimum. B.L.: But once you have that, what would you want? B.L.: Well, you could think of something better. S.M.: Where does the research and development commitment fit into this circular… B.L.: Well, mainly on surplus outlay, eh? But also from basic outlay insofar as they’re improving their equipment; buying computers. S.M. And the initiative. Well where does government fit into your picture? What does government do? Does the economy just move on its own? Or… B.L.: That’s the way the laissez-faire economy was conceived. Keep the politicians out of it and let the business run their show. S.M.: That’s not your a…? B.L.: Keynes said if the businessmen aren’t running their show, something has to be done about it. That’s the only argument, I never heard something else. Because a person who is trained in politics is not trained in business. He hasn’t got much know-how in business. But as the economies develop like the… All the development with economics has come from people who are working in the concrete. For when you get into complex situations well then you start having writers of tracts and then professors of economics and disputed questions and so on. E.dN.: When Adam Smith, to think of moral economists, when Adam Smith was saying that if we, you know his invisible hand notion was that if we pursue our own interests, we’ll achieve the good of society. B.L.: Yes. Well, they have to know what their interests are! You have to eliminate the egoist who is only interested in his own interests. He thinks he can get along better, even if he’s destroying everyone else. E,dN.: So Smith was wrong! B.L.: Well, no. One’s true interests, eh? An embezzler isn’t serving his own interests, his true interests. E.dN.: And true interests in economics are related to know how the economy works. B.L.: The common good is the working economy! Just as the common good in education is a working educational system. E.dN.: So it doesn.t necessarily imply that Smith’s perception is wrong as long as you understand how the economy works. B.L.: Well, he was relieving people from mercantilism, which had meant that the government alone had initiative. E.dN.: Under mercantilism. Yes. B.L.: And it established fiefdoms, eh? The East India Company, the Hudson’s Bay Company, and so on. Then they had big debates in parliament about the behaviour of these companies. Edmund Burke spoke against the charter of these companies in the English parliament. But according to Schumpeter, Adam Smith is a synthesis of the economics that was known at his time. He put it all together. According to Lord Kaldor he paid too much attention to prices and nominal prices and real prices and missed out the economy as a whole, the conditions of that functioning. And because he left it out macroeconomics became important after Keynes. It isn’t very important yet. S.M.: If I could take the discussion back to something you had said earlier, but to look at another facet of the way that the shift from surplus to basic is frustrated, you had talked about on the one hand the welfare process. You also mentioned how war, and war on poverty and things like that can justify… B.L.: School children’s lunches. S.M.: Deficit spending and so on. And so we don’t get the signals, but you also outlined very impressively how in the history of colonial expansion in Britain between 1790 and 1870, there was no change in the salary, the wages of the worker; and you intimated, I thought at that point, that it was possible because the shift from the surplus to the basic was not forced on the economy because of the possibility of selling to colonies and making them indebted. Because… B.L.: Selling the surplus to the colonies and loaning them the money to pay for it. S.M.: Yes. Right. And so collecting then the interest and making them dependent. B.L.: And putting out of joint the English economy because when there is this surplus money flowing into England and, after the First World War, the economy was not able to absorb all the workers. They taxed the people who had the wealth from foreign sources to provide the money for the dole. S.M.: Do you think that if there had been better understanding, there would not have been recourse to those kinds of… B.L.: It wasn’t provided, eh? It wasn’t the businessmen’s fault and it wasn’t the economists’ fault, they didn’t have the S.M.: Insight B.L.: The set-up, eh? They didn’t have… It’s not just an insight. It’s the congeries of insights. You have to work at it for years to have them fit together! I started working at this stuff about 1930. I had a paper in 1944, I consulted economists in various places and: What’s this all about? So I put it aside for 32 years! And then I heard about Kalecki, a Pole, who came to England before the Second World War, became well known to the economists at Cambridge in England, mainly to Joan Robinson, and did an awful lot to running the war economy in England, because if you’re a socialist planner, you can help plan a war effort too, and how to finance it. And his remark that struck me was: “Workers spend what they get; capitalists get what they spend”. And it fitted in rather nicely with my analysis. It gave me the belief that perhaps I had something here. S.M.: When was that? In the 1940? B.L.: No. No. I saw this book about 1976. It was written in 1971. It was a collection of his papers written in Polish and translated into English, published by Cambridge University Press. Now this business of talking about the workers and the capitalists is a socialist approach, a social theory approach to economics. It isn’t using economic ideas. S.M.: It’s a startling thing to hear. I have difficulty seeing how people get what they spend. B.L.: Well, where does the surplus income come from? It’s the flow of investment into the economy that is not producing any consumer goods and services, and consequently cannot be put into consumer goods and services prices and consequently is surplus money, money to spend, keep the expansion going! Why can the expansion keep going? Because the money is coming back! As it is spent it’s coming back! And it’s coming back in the way of surplus income! E.dN.: Does it mean that the capitalists’ collect the surplus income and by investing it they’re spending it? B.L.: Yes. So it keeps coming back! But it doesn’t come back to the individuals necessarily. Any capitalist can lose his shirt! But it’s someone in the position of a capitalist that can get it. It won’t go into welfare, it won’t go to a salary. S.M.: I started on that tack with the hope of taking the discussion on to the underdeveloped countries, those that you speak of as the U.D.C.’s in the latter part of your paper. And you present a very complex picture of the difficulties facing the underdeveloped countries in following through on a commitment to industrialism, to join the other part of the world that is industrialized. Could I ask a general question of reviewing for us in your living voice, as it were, the problems that underdeveloped countries have? B.L.: Well, the key problem is that there are rich people who live in beautiful homes with Cadillacs parked in their grounds and a high wall around it all. And there are people outside, and they haven’t got electricity, sanitary water supply, very little income, if any, subsistence income. And why haven’t they got anything better? Because the people with the money won’t invest in their own country. They know it’s just a waste of money! Pouring it down a rat hole, because their country lacks the infrastructure. They haven’t got the roads. They may have the natural resources, but they haven’t got the equipment to collect the natural resources, they haven’t got the know-how to make money out of the natural resources, and so on and so forth. They are really undeveloped. And you can have an incipient development of industry in a country and usually, it will be foreign countries coming in and exploiting their resources. And while some of the citizens are well off, this just puts such an attraction upon the countryside that people are willing to go into the cities and starve rather than stay on the farm and starve. They haven’t got professional men, they haven’t got schools, and so on, eh? S.M.: And they don’t have unions? B.L.: Oh no. Or they haven’t got efficient unions. And you haven’t got efficient government either. S.M.: And the understanding of what’s at stake is… B.L.: Well you have to know an awful lot about other countries to think of that. And you have to be a very powerful salesman, to persuade the people in the country that have the money, to invest it in the country. They don’t see any hope of that. People aren’t trained! S.M.: And there isn’t the patience in the country to go through the process. B.L.: They haven’t got the ideas! Now the multinationals come in and they have all the successful TV shows dubbed in with all the various languages and a number of stations and hours provided of TV. You have Coca Cola that’s being sold at a terrific rate. It’s moving up to a higher class in the world. It isn’t desperate. In the National Review, oh perhaps a month ago, there was an article on what the Chicago economist… E.dN.: Friedman? B.L.: Friedman… did in Chile. Pinochet read Samuelson for months and concluded that would not work. S.M.: He’s the one who replaced Allende? B.L.: Well, it’s a Junta, eh? And they persuaded them first of all to cut taxes so that the people would invest, to cut down the inflation when Pinochet took over, the inflation was 1200% a year. It’s now down to 12% a year, to meet their balance of payments, and so on. Friedman compared it to the resurrection of Germany after the Second World War. And he could do that in Chile because there’s just one government. There isn’t a President who is all powerful and the Federal Reserve Board. Pinochet couldn’t have done this in Chile if interest was at 19%. An ordinary supply and demand company can’t pay interest like that to have the cash to carry on business, as Molina, the famous Spanish moralist, said: Money is the merchant’s tool. You can buy and sell if you have the money and the more money you have, the more buying and selling you can do. And if you’re paying 19% for having the money, you can’t make a profit that will enable you to live and pay that rate of interest. S.M.: So Allende couldn’t have succeeded where Pinochet did because Allende didn’t have the power that Pinochet was able to wrest out of the society. B.L.: I don’t know that he had the ideas either. S.M.: I see. So the right ideas and the power together. B.L.: As Keynes said: “Ideas in the long run run the world”. It’s at the end of The General Theory of Employment, Interest and Money. S.M.: Mind you, when one reads the suffering that many people underwent in Chile as described after the takeover, after the Junta, the coup, it took a fierce and violent assertion of power. B.L.: Well, I don’t know but, I’m just saying what… this article in the National Review reported on Allende and about Friedman. Not on Allende, on Pinochet. But Friedman brought down to Chile a number of his bright boys to plan the whole thing for them. S.M.: I remember. The Chicago boys. B.L.: Yes. E.dN.: What I think I’m getting from you’re saying is that it isn’t easy to know how to affect good in history… that it’s not… well, that you have to have some right notions as you were saying earlier. B.L.: Bad notions just make things worse. And it’s a point, you know, excessive liberty overlooks. To do good, you have to know what good means. And the human good means a lot of different things. Chapter two in Method. S.M.: You speak of how they blame greed, but the main culprit is ignorance. And from all that you have read, you show an extraordinary faith that intelligence, seeing the ways in which matters work out, will be moved to making right decisions, right for the society as a whole. I ask myself: the people in the large multinational companies, their advice must be excellent in order to be able to maintain their very large growth. B.L.: Well, they can do it by mergers, eh? Increasing their assets. S.M.: Yes, Well, that is what it is that… B.L.: There was a cartoon in the New Yorker. The New York Merger Bank. S.M.: But they can hire the best brains; is it that makes that there is complaint against the operation of the multinationals? B.L.: Well, you can read Pauline Kael on what’s wrong with contemporary movies: when the multinationals will take over studio after studio after studio, put in a good advertising man as director of the studio and you get a very poor movie. S.M.: So there you say it’s not ignorance because they really want to know the right ideas. They could have it. B.L.: No. People don’t know what it is to want the ideas. I’d hesitate to ask many people what an idea is. S.M.: Could I press that just a little bit though. B.L.: Well, an idea is the content of a developed series of insights, developing accumulating series of insights. S.M.: And an explanatory process then would be? B.L.: Well, it’s when you have an explanatory system, eh? The system is a product of accumulative development of insights. S.M.: So what you are reaching for is the development of a system. B.L.: Oh yes, yes. In other words what’s a system, eh? What is meant by a system? In systematic thinking, there are no undefined terms. How do you know that the terms mean? S.M.: From the terms themselves as you have come to define them. B.L.: Oh! Well, how do you define them? S.M.: Using the terms and the relations and the relations to the terms. B.L.: Right. Right. And verifying both, eh? It’s a closed system. It can be an open system like the periodic table. E.dN.: In Circulation Analysis, you speak of the difference between classical laws in a science and statistical laws. In Circulation Analysis would you call those a classical explanation. B.L.: Yes, but… it’s not prediction, eh? E.dN.: No. B.L.: It’s not prediction. It’s understanding. What is inflation? What is unemployment? Is it something that you know about from marginal analysis? The marginal analysis of the discomfort of working and the pleasure of not working. Or Keynes’ statement eh? If you want to increase employment, create more jobs. And the simplest way to create more jobs is to increase the number of government employees. The hard way is to have more productive industries, eh? P.: I’m just wondering, when you mentioned that the stationary state is not so bad, this comment rang a bell, a very loud bell. I was recently in London, England, attending a seminar at the London School of Economics. And one of the guest speakers was a very young man, Joseph Kennedy, Jr., the son of Robert Kennedy. And he mentioned that he’s supplying, he has a small company that is supplying 200,000 elderly and poor people in the state of Massachusetts with inexpensive oil for heating. Now he has a small company, he’s buying the oil from the source, but instead of investing, instead of making large profits, and investing the money in finding new sources, xx30 and so on, he is satisfied with a small profit and he’s quite satisfied not to grow any further. He wants to continue supplying 200,000 poor people in the state of Massachusetts and he would like other people to form small companies like this and supply poor and elderly people in other states. This was his argument. Now the criticism was, and I was wondering if you could look upon it as a cliché, the criticism was that in business, you cannot stand in one place. You have to go up or down. And I’m just wondering how does this fit into your… B.L.: Well, the thing is that there are times when you can go up and there are times when you can’t. The idea is that the economy as a whole can keep expanding indefinitely. It presupposes that there is a constant supply of new practical ideas that will give innovations. When that dries up, you get a contraction. How far the contraction goes will depend on the resilience of the economy, the understanding it has of the causes of the contraction and the limitations of their powers to change the contraction. What you need is more new ideas because that is the source of the trouble, and if you’re set. If you don’t want to go into a real depression or a real contraction, you can settle for the stationary state and that’s better for all the miseries attached to a depression. And there are people… there is a man at the New School of Social Research, a rather elderly man, Lowe is name is, German, who designs an economy that will not have any expansion except insofar as the labour force increases. He’ll avoid unemployment by the control of the economy’s expansion. It’s not a novel idea, but I don’t go so far as he does. I’ll admit that if you can’t do better than a stationary state, ok. That is better than a depression. But if you can do better than a stationary state and you can run it, you know, without all the miseries of wild capitalism, then, going ahead is not bad, eh? E.dN.: I’d like to open the discussion to questions (following Eric Poznansky). P. If you were Prime Minister of Canada going to the Economic Summit in Europe, how would, using your theory, what would your response be to the… B.L.: I’d like to have the previous hundred years to instruct them in my ideas. P.: So we’re talking conversion in teaching and training, and the whole process of Insight and Method. B.L: Yes, but that’s a long process, eh? If my ideas are accepted seriously in a hundred years’ time, I’ll be satisfied. The process of changing people’s minds, there are so many clichés in favour of liberal capitalism that you’re running into blocks all the time! P. Which is not deliberately what you’re talking in The Human Good, is it? B.L.: Oh, well, the human good is the whole human good, eh? This is just talking on economics. P. But even liberty in the sense of economics. B.L.: Liberalism is a different thing from liberty. P. Yes but I mean to get even that one concept in an organization not alone on a global scale C.T.: Why is your model concerned with equilibrium rather than disequilibrium? B.L.: Well it is concerned with disequilibrium too, equilibrium is the opposite. To be concerned with one is to be concerned with the other. C.T.: But wouldn’t you say that anything that is creative, there is a certain disequilibrium that has to be involved. B.L.: Yes. Capitalism is an ongoing state of disequilibrium simply because it’s changing. There is such a thing as changing for the better and changing for the worse. C.T.: It seems to me, if you’re using biology though, you’re dead if you’re in equilibrium. B.L.: Well, that may be the justification for this… economics. But the growth process, eh? Development process, normally, reaches a certain level and then it cools down. Yes, Roberta. R.M.: In the book “Food First”, I haven’t read it, but I wonder if, as you use it as a reference in this paper, is it dealing with economics in any way as theory, or is it an informational… B.L.: Mainly informational. They travelled all over the world. They had a number of writers, writing up reports and so on. And the conclusion was that there is no country that of itself cannot feed all its people. But all the people do not possess all the resources. And there are powerful things preventing the people from getting to the resources. I have heard of places in the Caribbean where a person who comes in and teaches the poor to raise chickens is assassinated. They don’t want them to become too powerful. P.P. You’re dealing with a tremendous paranoia. B.L.: That’s the report I heard, eh? But a woman went down as a nun to one of these countries and that was her report. P. Would this be in any way similar to the Chinese until recently, in the People’s Republic of China they would take an experienced pilot or a physician and send him to a restaurant to wait as a waiter because they didn’t want him to sort of acquire this… B.L.: They wanted them to have the great advantage of the proletariat mentality. F.L.: You have a number of equations that constitute a mathematical model of economy. How would you see going about validating the model and seeing how feeding in the data to see whether it has any predictive power. B.L.: Well it isn’t a predictive model and it isn’t interested in prediction and the symbols are general simply because they are not the data in our own country. Mrs De Neeve did a book connected with my stuff, but she went to the Eastern European countries where surplus is collected by the government and used to carry out the five-year plan. And what’s left over after the government has collected what they considered surplus goes to the life of the country and the people. And that way you have a straight division of these two accounts. Now you can calculate from our sources of information, you know, on the Keynesian C and I, consumption and investment. And from the GNP say that this proportion is investment, you see, but that’s remote approximation. How big is your I? And you’re dealing simply with indices. Well if you read any critique of the defects of indices, you don’t have too much confidence, you see, and you’re not going to prove anything by it. But what my thing does is provide people with an understanding of what’s happening as far as I can see. If people knew what caused inflation and what causes unemployment, and all the rest, what causes recession and depression and crash and so on, they would come to an agreement that there is something in what I am saying. And in time perhaps form groups and let things quietly develop, not too quietly otherwise it would be like Fabianism, eh? R.: You’re not recommending a stationary condition, or is it a permanent condition? B.L.: Oh, no. It’s a phase, eh? Where Keynes recommended deficit spending, because the economy was in a hole, eh? It was suffering from unemployment and it had no hope of getting out of it, as far as the ordinary laws of economics went, or the conventional views on that government could spend money on. And suggesting this was a novelty. They had agreed, you know, in wartime, you have to have deficit spending. Either in the sense of issuing bonds or in the sense of taxation. But no, a stationary state is a state in which everyone can have their customary standard of living, and the economy would be running smoothly. It will keep on reproducing itself, as it was in France, which was a very rich country in the course of the 18th century. And it has remained agriculturally a very rich country. P.P.: Don’t you need to have a theory of this, if I understand it properly, and I haven’t really read your work very carefully… don’t you need to have some notion of content first of all to be predictive? B.L.: Oh yes! P.P.: And doesn’t it need to be associated with a social system’s theory as well? B.L.: If it is going to be completely predictive, certainly. But how are you going to get the two systems and combine them? Social theory usually is not too tight. P.P. Well what I’m wondering though is, what is the use of this description? B.L.: Intelligence. People are mystified by the state of the economy at the present time. And that mystification is a block because you can’t sell them anything. They don’t know! The first step is getting them to understand something. P.: But if it’s so abstract… B.L.: Understanding is not an abstraction. Understanding is understanding of a trouble shooter. And a trouble shooter is dealing with the concrete and I am talking about concrete machines in the various phases that they can be in, and the ways they can go wrong. P. P.: But concrete machines or this kind of machine rather than that kind, and this kind of person controlling this kind of machine rather than that kind, and, you know, for me that’s real understanding. B.L.: Well, that’s a different idea of understanding. My idea of understanding is when you catch on! When you get the point! When you grasp what you didn’t grasp before. When you can say: That’s it! Like Archimedes: I got it! Eureka! Understanding is relevant, not only to basing an abstract system, but also to dealing with the concrete. The only way from an abstract system you can get to the concrete is going from the universal to the particular. P.P.: That’s one way of reasoning. B.L.: Yes, but you don’t know how relevant universals are to the particulars. Aristotle objected to universal laws. Universal laws could be inequitable when applied to the concrete because there can be in the concrete further intelligibilities not envisaged by the law-giver. It’s just the opposite of a country with a code of laws. Does it settle for all time, eh, until you have a reform of the laws. And the judge-made law, the judge considers precedents, how does it differ from the present case? Understand what the difference is. You know, make the difference in the decision. And you may say it’s wishy-washy, but it’s human and we’re dealing with human affairs! P.P.: I guess I’m looking for a level of theory. Somewhere in between… of the kind you have described. And the very very concrete which was behind my question. I don’t know if that makes any sense. B.L.: Oh, sure! But the mathematicization of economics insofar as the Post-Keynesians are correct, in rejecting neoclassical economics, is a rejection of abstract theory in economics. E.dN.: I don’t know if it’s quite your question, but is it: “Can economics be understood aside of a political context?” B.L.: Well, you need the political context to know how to apply it. What you can do in that situation. E.dN.: It has political limits, or there are political constraints, and social constraints. B.L.: Oh yes, sure. E.dN.: But then in what sense does economics stand alone? B.L.: It doesn’t. But it has to be understood in itself before you can understand it in conjunction with something else. In that case, you need two systematic understandings. And a way to bridge them. And that’s a systems theory. S.M.: So the theory here could apply equally to the Soviet system and to the Canadian or… B.L.: Oh, no. Not quite. Systems theory expressed in the last article by Professor Eichner in A Guide to Post-Keynesian Economics. Within the context of systems theory, an economy is the set of social institutions that attend the material needs of man, of a society. Because you’ve got social institutions you have a fit in with other things. But systems theory will enable you to shift from one to the other and so on. It’s the thing that’s been developed by the cybernetics, in the States. And Bertalanffy, a Hungarian, and Weiner, developed cybernetics. P.P.: C. West Churchman has popularized a bit systems theory, introduced it. M.F.: I was wondering… you say that the multinational corporations are concerned about political legitimation. Is it simply that it’s going to make life a lot simpler for them? It’s a channel? Are you talking about… B.L.: Well, it depends, like there are various views on the multinational corporations. Like the view given in Barnett and Muller is that they feel that they’re going to run well thing all over the world, that they alone have the instruments and the techniques and the know-how to run a world economy. And it’s time for these little democratic and imperialistic economies to close up shop and let them take over. However, there are other times when they sing a different tune quite plainly, when the governments are not helping them enough. And like the Japanese industry is known in the States as Japan Incorporated. It all works together. M.F.: Is it that Cabinet meet with companies? B.L.: Yes. And in the German industry, the workmen are among the directors. S.M.: Is there not an exigency that whatever the range of the operation of companies becomes, and if it is global, then there needs to be global controls in order to make sure that societies in general, their interests are safeguarded; or, in other words, is there not a parallel requirement for what the economic units become, that also the political unit should expand into as authority. B.L.: Well. As far as I can see at the present time, no country wants to interfere with its own multinationals. They’d be competing with their own balance of trade. So you’re not going to get a country to deal harshly with its own multinationals. And anyway, the governments usually are not equipped to deal with it. I have read that training given accountants in the universities are about five years ahead of the training the people in Internal Revenue Service are given. I was told by a person in the Income Tax Department in Ottawa that the little fellow can’t get away with anything, but if we have a man that can figure out what the big companies are doing, the big companies will offer him twice the money we’re paying. S.M.: Do you want to talk anymore about the possibility of expanding. In other words, you say: “Well, the government is going to…” B.L.: At the present time. S.M.: Yes, yes. But it is only because people as such don’t understand what is at stake. B.L.: That’s true enough. But I’m modestly being content with providing ideas for economies one by one, but you have to know the one by one before you can relate the many to one another. And it’s very difficult to get data on these relations except perhaps twenty, thirty, forty, fifty, sixty years afterwards. And that requires a terrific team of researchers to get you the data, and so on and so forth. It’s, perhaps I might repeat Keynes: “Economics is a moral science”. You have to give… that was the basis of mercantilism, they gave their reasons! And that’s the basis of “laissez-faire”, they gave their reasons. And if “laissez-faire” is not working, well we have to get another set of reasons and sell it. P.P.: This is not too serious a question, but it’s one nonetheless that worries me. The late professor Postan who is a historian of economics at Cambridge, he wrote an article probably fifteen years ago and what he said disturbs me particularly now, in view of what you’ve said about the 100 years training for Mr Trudeau et al.. Postan set upon reflecting on the efficacy of the advice of Mr Kaldor and all the economic advisors to the British government from the last war to ten years ago. He had decided that the only adequate collective noun for economists was a plague of economists. How would you reflect on his statement? B.L.: Well, it was a playful statement, but Leontief in his presidential address to the American Economics Association pretty much said the same thing, you know… P.P.??: If I may interrupt, he said that today in the United States a knowledge of High School algebra plus the ability to spell correctly and use correctly about a dozen words was all you needed to publish economic articles in the most prestigious economic journals. He went further and suggested that somebody not be allowed to write an article on the economics of housing until he’d actually gone and had some existential experience with houses, their operation, their building, their role and purpose, etc. The Nobelist’s jury seems to think that economists hadn’t done all that well, I would infer from the fact that the first Nobel Prize in economics was given to a psychologist, a computer man, Herbert E. Simon. Are these things indicating that economics is still at a very primitive stage? B.L.: Well. I’m extremely interested by the Post-Keynesians and I’ve got a lot of help from them, but two of the people who contributed to this book in an American university, I believe, were excluded from teaching graduates a year ago. And I can see why! It’s like trying to persuade professors of English to admit that the seventeenth earl of Oxford wrote Shakespeare. It would mean them giving up all the intellectual capital that took them fifty years to acquire! These are the little miseries of life. P.P.: Vested interest in other words. B.L.: They could feel of course it would be a shame to ruin graduate minds, you know, with something that they didn’t understand. S.M.: Could I come back to the question that Charlotte Tansey was asking a little earlier? In the crossover, and the equilibrium, in your paper you speak of a slight disequilibrium. When does a slight become critical? B.L.: When it’s cumulative. S.M.: Could you… B.L.: In other words, if it means that there is a shift from surplus to basic, due to the crossover at this moment, eh? And there is a shift on the opposite direction afterwards, that’s relatively a stable equilibrium. An unstable equilibrium is when it’s cumulative. It keeps getting worse and worse and worse. S.M.: That’s where you have the motor on the accelerator and just keeping accelerating and accelerating… B.L.: Well, it’s just the same block, eh? Repeated. It’s cumulative. It adds up. But that isn’t the only equilibrium condition. There are all sorts of equilibrium conditions. In the expansion, if you want to have the expansion continue, you have an equilibrium condition, namely, that the income from previous investment be reinvested and the additional new money be added to keep the rate of expansion up. And when you’re not doing that, the surplus will begin to cease to be surplus, and at least the expansion will come to an end. And similarly the basic expansion, you have to have that and the longer it continues, the more difficult it becomes. S.M.: Is it ideas or money that come to an end when a surplus stage comes to an end? In other words, what would it do… B.L.: Oh, it may be any adaptation, eh? But this is the one that is built in. You can see it happening, you know, every ten years, or at intervals, you can have periods when surplus expansion, one just follows on another, the development of power: water power, steam, petrol, electricity. P.P.: Do you see now, though, relating theory to the practical again in the current economic global situation, do you see it as being different now from what it was, say, in the last thirty years or so? B.L.: Well, problems have become much more acute. We have sustained inflation and increasing unemployment and the Post-Keynesians attribute it to the remedies proposed by the neoclassicals. They disagreed. The fine-tuning of the economy … raise the interest rates that cut down investment; cut down investment, you increase unemployment. P.P.: It hasn’t taken care of Reagan’s deficit though. B.L.: Reagan wants to have armaments as well. And that excludes the investment and increases the interest rate, part of the increase of the interest rate is the amount of borrowing that Reagan will have to do all this rearming. In 1934 the Prime Minister of England was up for reelection, he knew that the Germans were rearming, he didn’t want to introduce the idea of rearmament in the election because he knew that in that case Labour would win the election and they’d do nothing about rearming. Well at least that was his opinion. And this is where you get into the surd, eh? In human affairs. L.M.: What about that, Father, is that the only way economy can run, on a war economy? I’m thinking of the Report from Iron Mountain that I read sometime in the 1970’s where a group of people in the United States, experts, met and discussed the possibility of another type of economy functioning in the United States and they concluded that the only type of economy that could function was a war economy. Is that the surd you’re talking about. B.L.: Well, no. That’s just deficit spending, isn’t it? L.M.: Yes, it’s the same thing. I know that, but… It’s more of the same thing. And Keynes did not propose deficit spending as a universal remedy for a slumping economy. He proposed it when unemployment was in a trap. And you had large numbers of unemployed and with no way except government financing that was going to increase the number pf employed. But when you generalize it to health and education and all the do gooders we can think of, and then the army of people that administer all this do-gooding, you’re not talking Keynes anymore. In Canada we have an old-age pension and there are no enforcers to make sure that you’re really sixty-five, it’s just your birth certificate. And there is no army of people that write out cheques, there is a computer that writes out the cheques, I suppose a machine that puts them in the envelopes and the post office takes care of them, the banks, and there you are! It’s a relatively cheap old-age pension. It costs far less than if you had the army of people making sure that everyone getting it was really qualified: shortage of means to take care of a decent standard of living. E.dN.: I think the time has come to say “Thank You”. B.L.: I thank you very much for your attention.
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