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Let’s get real

Alan Ecob

One glance at Steve Keen’s Figure 1 (ERA Review, Vol 4, No 5, p.25) brought to mind the significance of WWII in getting us through the trough following the action peak of 1932 to the peak of 2009. And similarly, no doubt, with WWI in the previous period through to 1932. The post-war stimuli in terms of new/increased commercial/economic prospects were essentially three-fold:

1). The vast destruction of physical assets such as property and infrastructure created an immediate and obvious opportunity for replacement, as with Marshall Aid, etc. with what Herman Daly (ERA Review, Vol 4, No 1, p.3) calls ‘bankable concrete projects’.

2). Major new technologies developed under the pressures of conflict offered massive market opportunities.

3). The previous order of national economies inhibited by excessive debt was replaced by visions of an unlimited future.

If Steve Keen’s sense of timing is right, what we need now is WWIII. The problem is, it would be so destructive. Yet purely financial stimuli cannot possibly match the conjunction of the three outcomes we have noted. Bernanke’s idea of $100 notes dropped from helicopters is physically impracticable. Perhaps one hundred billion notes? A million helicopters? No way! Steve Keen’s six categories of ‘handout’ is more sophisticated, yet still only money. Obama (as quoted by Keen, 2009, p.3) was evidently hoping, by paying money bailouts to the banks, to take advantage of the multiplier effect. But for realization, this required the funds to be invested in bankable concrete projects. The projects didn’t and don’t exist. And the banks preferred to invest in derivatives anyway for their better returns.

Perhaps the practical question becomes – if not from WWIII, from whence may come the next boom? Perhaps it’s a bit like Charles Lamb’s story about roast pork. Perhaps to get it, we don’t have to burn the house down. But for a solution, we’re going to have to get real. It’s going to have to be a ‘burster’ if it’s to do the job!

Alan Ecob is an ERA member living in NSW

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