Sage Advice - What are the True Principles for Making the U.S. National Budget? (6/6)

We Did This in World War II

In this final installment of key parts of Lyndon LaRouche’s, The Lost Art of Capital Budget paper, he situates the political meaning of the dollar as a reserve currency and outlines the types of great projects which should be the target of new credit.

Since these projects historically have dramatically increased labor productivity, they are inherently anti-inflationary. Here’s the summary excerpts:

The FDR Paradigm

Such a program requires a return to the kind of thinking associated with a "fair trade," rather than "free trade" economy, and to thinking about physical and financial capital as we did under Franklin Roosevelt’s war mobilization.

The principle on which the success of such a program depends, is the principle of fostering the increase of physical productivity, per capita and per square kilometer, through science-driven technological progress in the improvement of the productive powers of labor. This means technological progress as expressed by emphasis on a science-driver economy of the type which brought the U.S. and its allies to victory over Hitler et al. in the preparation for, and conduct of World War II. . . .

Had Franklin Roosevelt lived, the freeing of the world from the imperial legacy of colonialism and the like, would have created a vast capital market for the products of a converted U.S. war production buildup, the reinvestment of the war debt margins in new capital formation, here and abroad, although it would have been associated with the combination of a temporary austerity, but a healthy accumu­lation of real capital. Our experience during the period of the Truman Administration, contained significant evidence in support of this benefit of a continued Rooseveltian, rather than a pro-colonialist Churchillian policy; but, under Truman's mistaken policies, the proportion of the benefit was just not enough. . . 

Monetarist dogma assumes that the lending of money generates what monetarism regards as economic value. In fact, as the late John Kenneth Galbraith once said of the money lost in the 1929 crash and its aftermath: it is only paper. Under the U.S. Constitutional system, which is essentially a physical-economic system, rather than one premised on usury, the value associated with money is what a government is capable of making money do. . . 

The New U.S. Dollar

Contrary to monetarist dogma, in reality, the value of the U.S. dollar since 1945 has been premised chiefly on the perception that the future value of the dollar is more or less fixed. So, at the close of World War II, the U.S. dollar was virtually the world's only stable currency, a dollar whose value was pegged to the assurance of a fixed-exchange-rate system tied, not to a gold standard, but to a far different proposition, a gold-reserve standard.That system was undermined, chiefly by the combination of the effects of the ill-conceived U.S. war in Indo-China, and the wrecking of the physical economy of the United Kingdom.. . .

The ability to make, and, even more delicate, to keep such promises, demands the erection of a system of protectionist agreements and measures among leading nations typifying the relevant regions of the world as a whole. State to state, and multi-state to multi-state agreements, especially long­ term agreements, especially pro-protectionist agreements, would be the bulwark on which the prevention of a presently onrushing general collapse of the current system depends.

The onrushing weakening, and threatened loss of belief in that worldwide U.S. dollar's role as an implicit reserve currency, threatens the rather immediate, chain-reaction-like collapse of an already rotted-out North American and European system; with the collapse of those sectors, the entire planet falls into a global new dark age. However, the actuality of that threat can be controlled, if the perceived stable value of the U.S. dollar, over the medium to long term, can be maintained. It is not the monetary value of the dollar which is to be consid­ered; but the political perception that the U.S.A., in concert with other partners, is committed to keeping that dollar at parity, functioning as a virtual world reserve currency, for purposes of scheduled settlement of accounts, over a generation or more to come. The nominal value of the U.S. dollar is therefore its political value, based on the reasonable confidence that accounts can be spread for settlement over the span of that forward period ahead. . . .   

This form of protectionism does not imply a reduction in world trade; it requires a new physical-capital structure for an expanded, capital­ intensive emphasis in technologically progressive, hard­ commodity world trade.. .

Creating New Credit

The initial surge in any Federal program for economic recovery will be concentrated in investments in basic economic infrastructure, with emphasis on capital-intensive categories, such as power, especially nuclear-fission power, water management, mass transportation, rebuilding the infrastruc­ture for technologically progressive family farming in what had been traditional agricultural regions, and reshaping urban regions. Drastic cuts in the cost to students of higher education will be required, and reorientation of primary and secondary education toward a science-technology, and Classical­ culture-driven mode in classrooms of what had been traditionally moderate size a generation or two earlier. . .

The rebuilding of infrastructure, especially capital-inten­sive modes, will be the initial driver for reversing the preceding trend from an agro-industrial to a "services"-and-unemployment economy. The stimulation of recovery of private contracts and related support for the installation of infrastructure, will move the process toward a resumption of the U.S.A.' s former mission as a leading agro-industrial economy of the world.

The general, longer-term perspective of recovery and development will be premised on the impact of very large-scale use of nuclear fission, plus an orientation toward the oncoming of thermonuclear-fusion-related technologies. These leading-edge technologies are essentially expressions of "high energy-density" effects in technology, and are, when employed in that mode, the upper end of productivity per capita and per square kilometer in the economy as a whole.