[GJM] #857, Dirk J. Bezemer, Wilhelm Lautenbach, And PROF. DR. HEINER FLASSBECK On The Optimum Policy (TOP)

[wesburt at juno.com]

Hi Folks,

I am deep in debt to Dirk J. Bezemer 
for inviting our attention to two German 
economists who have pretty well brought 
to completion my understanding of how 
the three decade "economic miracles" 
of post war Japan and Germany were 
terminated in the 1970s.  They both 
misapplied the thirty centuries old J., C., 
M., P., and Atheist principal of Subsidiarity 
(decentralization) to their public policy on 
human development.  Just as U.S. business 
men have, since 1895, misapplied the 
same principle to US public policy on 
human development.

Please enjoy Dirk's introduction, the 
"principle of subsidiarity," and the EIR 
interview of DR. HEINER FLASSBECK.

I have not talked with Lyndon H. La Rouche 
about this subject since we were class mates 
at Northeastern U. in 1947.  His thinking on 
this subject got him: into the Federal Pen 
under Bush I, pardoned by Bill Clinton, and 
ever since, a low profile working on his 
Executive Intelligence Review.  

~~~~~~~~ Insert #1 of 3 ~~~~~~~~~~~

From: "D.J.Bezemer" d.j.bezemer at rug.nl
To: gang8 at yahoogroups.com
Date: Mon, 04 Feb 2008 21:32:44 +0100
Subject: [gang8] Lautenbach and Flassbeck

Dear Gang,

Reading today an uNCTAD report I got 
to know its excellence. This snowballed 
on to Wilhelm Lautenbach, '30s German 
economist in the Listian tradition, who 
argued on the brink of the move to 
Hitlerism for "generating productive 
credit" to solve the unemployment crisis.

I include links to a Flassbeck interview 
and a talk on Lautenbach - Unfortunately, 
they are both from sites by the nutty 
La Rouche movement. Flassbeck's own 
site www.flassbeck.de is also good 
though mostly in German.

Any thoughts on these kindred spirits?

Dirk

http://larouchepub.com/other/2003/3015wil_laut_bad_sch.html

http://www.larouchepub.com/other/interviews/2004/3144dr_h_flassbeck.html

~~~~~~~~ Insert #2 of 3 ~~~~~~~~~~~

Economic Justice For All, 1986,
(Pastoral Letter On Catholic Social 
Teaching and the U.S. Economy)
On page 55 we read:

"The need for vital contributions from 
different human associations --- 
ranging in size from the family to 
government --- has been classically 
expressed in Catholic social teaching 
in the "principle of subsidiarity":"

        "Just as it is gravely wrong to take 
        from individuals what they can 
        accomplish by their own initiative 
        and industry and give it to the 
        community, so also it is an injustice 
        and at the same time a grave evil 
        and disturbance of right order to 
        assign to a greater and higher 
        association what lesser and 
        subordinate organizations can do."

In other words: "Taxes are theft and no 
family subsidies except twelve years of 
public education and welfare."  That 
sounds familiar!!!!!!!.  Where have we 
heard that?

~~~~~~~~ Insert #3 of 3 ~~~~~~~~~~~

http://www.larouchepub.com/other/interviews/2004/3144dr_h_flassbeck.html
This interview appears in the November 12, 2004 
issue of Executive Intelligence Review. 
INTERVIEW WITH PROF. DR. HEINER FLASSBECK
German Economist Backs FDR,
Calls for New Bretton Woods
The economist Prof. Dr. Heiner Flassbeck 
was Germany's deputy finance minister in 
1998-99, during the early phase of the first 
Schröder government, and is now chief 
economist of the United Nations Conference 
on Trade and Development (UNCTAD), 
based in Geneva. Flassbeck has become 
known for his strong attacks on the European 
Union's deflationary Maastricht Treaty, now 
strangling Europe's economies, and his 
public calls for a "New Bretton Woods," a 
"multilateral international monetary system 
with fixed exchange rates." He also proposes 
huge infrastructural investment programs in 
order to boost the world's real economy. 
That is not at all surprising, since Flassbeck 
studied in the tradition of the famous German 
economist Wilhelm Lautenbach, who, in 1931, 
had proposed the German version of President 
Franklin D. Roosevelt's "New Deal," a 
government-steered investment program to 
overcome the Depression of the 1930s by 
creating real wealth and jobs. On Oct. 21, 
Flassbeck was interviewed in his Geneva office 
by Michael Liebig and Hartmut Cramer. The 
interview has been translated from German.
EIR: Mr. Flassbeck, where do you see the 
main components of the systemic cluster-
risk in the present worldwide financial and 
economic system?
Flassbeck: The main current risks I see are 
"in the immense American current-account 
deficit on the one hand, and the refusal of 
the Europeans, on the other hand, to 
contribute to the growth of the world economy. 
Therefore, a very severe crisis of the 
international financial system is preprogrammed. 
Without exaggeration: The Europeans in the 
last 20 years—actually already since the 
beginning of the '70s, when they were "released" 
from the Bretton Woods System—have 
systematically refused to play any role in the 
growth of the world economy. But without 
expansion, the world economy cannot function 
reasonably.
EIR: How do you evaluate the Maastricht Treaty, 
which prevents, and even strangles economic 
growth? What is, in your view, the background 
to "Maastricht," and its so-called "Stability Pact"?
Flassbeck: Basically, Maastricht is the logical 
continuation of the policy of the Bundesbank 
[Germany's central bank] in the 20 years before 
this treaty was signed. After 1971, when the 
Bretton Woods System was ended, the Bundesbank 
completely lost sight of the world economy and 
practiced a primitive "monetary nationalism," as 
von Hayek called it back in the '30s. And this 
basic national monetaristic direction was then 
tranferred to Maastricht. This is naturally deadly. 
In principle, the European Monetary Union and 
the euro represent a big opportunity, because 
we now no longer have any speculative financial 
flows inside Europe, and the inner-European 
currency casino was closed down. But on the 
other hand, the present monetary constitution of 
Europe is absolutely not adequate for solving the 
problems of the European economy. Quite the 
contrary; it contributed to causing them. With 
Maastricht, the national monetaristic dogma 
was imposed upon the whole of Europe.
EIR: In the meantime, the failure of the Stability 
Pact has become evident, as can be seen in 
black and white, in the falling investment 
figures and rising unemployment figures. 
What possibilities do you see, to eliminate 
this corset of the Maastricht Stability Pact?
Flassbeck: Presumably this will only happen 
with the full outbreak of the present crisis. 
Also in the '20s and beginning of the '30s it 
was, unfortunately, only after the climax of 
the world economic crisis, that a shift in 
thinking was possible. By way of Maastricht, 
we in Europe were forced to pursue a 
deflationary policy. I fear that this will be 
continued—up to the point that, to quote 
the economist Wilhelm Lautenbach, even the 
entrepreneurs or the neo-classical ideologues 
have to grasp the fact that it cannot go on 
this way. Only then will people see the need 
to shift to an expansive economic policy.
Maastricht has destroyed the decisive option 
offered to us by the market economy: to 
overcome economic crises and other 
structural disparities by way of an expansive 
credit policy. In the U.S., this was done. 
This outlet was closed by Maastricht. 
Therefore, we Europeans are now condemned 
to go the wrong neo-classical, or neo-liberal 
way, called: "Tighten your belt!" But this 
wrong path leads deeper into the crisis, 
because with that approach you cannot 
solve the problem, but instead, you strangle 
the economy ever more.
Naturally, you can compensate for a 
deflationary economic policy, as is being 
done now, with increased competitiveness, 
at least for a certain time. But this then 
results in extreme current-account balances: 
high surpluses in Europe, and the record-high 
American deficit, which in the end can only 
be compensated for by a strong devaluation 
of the dollar. Only then, will the European 
delusion, that problems can be solved by 
means of deflation, evaporate.
EIR: Could you be more precise concerning 
American financial policy? You say it is 
credit-expansive, but obviously, in a quite 
undifferentiated way. It is not investments 
into the physical economy that are being 
stimulated, but rather the financial system 
as such, and consumer spending. Can you 
explain, what, in your view, is going wrong 
in the U.S. economy?
Flassbeck: The American policy of credit 
expansion was not always merely 
consumptive and unstructured. During 
the '90s, investments increased enormously, 
even if many of these investments were 
made in the field of electronics and computer 
equipment. But for sure, not all of these 
were wrong investments.
I see the problem in the fact that, since 
the "stock bubble" burst three years ago, 
we have not had any significant dynamic 
of investment in the U.S. any more. At the 
same time, we have a high consumption 
dynamic, which is not justified by anything, 
and therefore can't be sustained. Incomes 
didn't increase, and consumption was 
promoted primarily by the monetary policy 
of the Fed and other measures by the 
government. This policy should be now 
replaced by one where the market generates 
increasing investments and incomes, as 
well as through an orderly savings rate, 
since the savings rate in the U.S. is 
dangerously low. Any additional shock, 
no matter whether caused by high oil 
prices or rising interest rates, could 
now lead to a situation whereby America's 
consumers normalize their savings quota 
"overnight," so to speak—and that would 
be a catastrophe for the American, and 
therefore, the world, economy.
EIR: Recently, you have repeatedly warned 
that the present international monetary 
system harbors the danger of a grave 
crisis, for example a big devaluation of 
the U.S. dollar. Could you, in this light, 
explain again your estimate of the present 
state of the world financial system, and 
your strong public call for a New Bretton 
Woods system?
Flassbeck: Paradoxically, we see right 
now the emergence of a highly curious 
"Bretton Woods System." By that I mean 
the emergence of a huge dollar bloc, in 
which Asia, and also large parts of Latin 
America, are pegging their currencies 
unilaterally to the U.S. dollar. This is 
being done in a unilateral way, without a 
multilateral system, and therefore, it is 
not the New Bretton Woods system which 
I am calling for.
The reasons for the emergence of this 
dollar bloc are easy to understand, as 
we have documented in the just published 
UNCTAD annual report: For many developing 
and threshold countries, the unilateral 
pegging to the dollar is the only means 
to create stable currency relations and 
thereby create reasonable conditions of 
investment. But this means, at the same 
time, that the entire burden of the present 
imbalance, and clearing it up, falls on those 
parts of the world whose currencies are still 
floating versus the dollar—and that is 
mainly Europe.
In a very short period of time, Europe, 
therefore, has to face the choice of either 
living with a massive up-valuation of the 
euro—and thereby massively endangering 
its export markets—or, paradoxically, 
intervening against an up-valuation of 
the euro. This is what the Asians did, and 
of course Europe can do this too, in order 
to prevent an up-valuation of the euro. But 
in that case, this curious "Bretton Woods" 
would emerge—but one without multilateral 
rules. In fact, we then would have a worldwide 
dollar bloc. But this would only end up in 
America's practicing stronger protectionist 
measures, because otherwise it could not 
bring down its current account deficit, and 
could not even prevent a further increase of 
this deficit.
EIR: That then forces the argument, that 
Europe should actively pursue the creation 
of a durable New Bretton Woods. In the U.S., 
this is being done by the economist and 
politician Lyndon LaRouche. In Italy, the 
Parliament over the last two years, several 
times—and in a non-partisan way—has 
urged the government to actively pursue 
the creation of a New Bretton Woods. You, 
Mr. Flassbeck, have clearly and publicly 
called for a New Bretton Woods—a multilateral, 
international monetary system with fixed 
exchange rates. How is it that the debate 
for a New Bretton Woods has not yet reached 
"critical mass"?
Flassbeck: I believe that Europe, since the 
"liquidation" [an East German ironical 
metaphor for destruction] of the Bretton 
Woods system at the beginning of the '70s, 
simply has not understood its international 
role, and the enormous opportunities which 
a stable international monetary system 
offers to promote economic growth. Whoever 
was in power in the European countries did 
not recognize the significance of a functioning 
international monetary system for the growth 
of the entire world economy, and that of their 
own countries. I also don't have the impression, 
that presently the "established" politicians, 
who like to quarrel about almost everything, 
understand in any way, what is at stake here—
not only economically, but also politically.
In addition, the European central banks, above 
all the Bundesbank and now the European 
Central Bank [ECB], are completely refusing 
to cooperate internationally. They suffer under 
the delusion that they can conduct an 
"autonomous" monetary policy. But this 
is not possible in a globalized world. Nobody 
can presently pursue an "autonomous" 
monetary policy, not even the U.S. Federal 
Reserve, which, in my experience, did a 
better job at that than the ECB.
EIR: Could one therefore say, that the 
European central banks, and the ECB, 
by way of Maastricht, are forcing the 
countries of Europe to conduct a policy 
of deflation domestically, and externally, 
are blocking a rational reorganization of 
the world financial and monetary system?
Flassbeck: Yes, you could say that. By 
being absent in the field of economic 
policy, and with their pressure in the 
direction of a restrictive financial policy—
especially concerning the real economy—
the central banks are pursuing a 
deflationary course of action. Consequently, 
the national governments see no other 
chance than to undercut each other, 
concerning the level of their costs and 
taxes. And that must lead to an impasse. 
I have to stress here, that the governments 
"see" it this way, which does not mean 
that they don't have the chance to act 
differently. With Maastricht, all possibilities 
for a credit-expansion policy on a European 
and national level are, in effect, "forbidden." 
This absurd mixture, taken together with the 
refusal to assume international responsibility, 
will push Europe, as I believe and have 
written about several times, into an extremely 
severe situation: Europe will be confronted 
with the devaluation of the U.S. dollar and 
the up-valuation of the euro.
EIR: Do you think that, at the point that in 
Europe, the economic, social, and political 
effects of the crisis, which we monitor daily, 
become fully manifest, there will be a chance 
that people will finally realize that things 
cannot go on this way?
Flassbeck: In Germany, too, people will stop 
discussing secondary and tertiary political 
questions, and will finally also take into 
account the entire world and the realities 
of the world economy. But presumably, this 
will happen only—it's sad, but true—when 
the crisis has gone so far, that people have 
to recognize: It cannot go on this way!
EIR: Do you see the possibility that other 
actors, like the United States, but also Asia—
China, Japan, East Asia, India—Russia, or 
Brazil could take initiatives in the direction 
of a New Bretton Woods?
Flassbeck: I think that practically all those 
countries are rather open to a New Bretton 
Woods. In principle, they are ready to go in 
this direction. There are already regional 
initiatives everywhere; in Asia, there is an 
intensive debate going on about monetary 
policy, because it is clear that cooperation 
is necessary. In Latin America, too, the 
discussion of a new monetary system is 
beginning, because it is being recognized 
there that the unilateral pegging to the U.S. 
dollar cannot work in the long run, and that 
multilateral regulation is required. And then 
we have the big euro bloc.
In fact, there are only three or four currencies 
left. Obviously there are also other bills of 
paper money being printed, but they don't 
have any real significance for the world 
economy any more. Besides the Swiss 
franc and the British pound, none of the 
"small currencies" has any real significance. 
Almost all "small currencies" are pegged to 
the few "big currencies." That's the trend in 
a globalized world economy.
EIR: But you certainly don't mean this in 
terms of the proposals of Robert Mundell 
and his circles, who propagate a strange 
"world currency." Isn't the present trend, 
after all, going more in the direction of the 
former European Monetary System [EMS], 
but this time on a worldwide scale?
Flassbeck: Yes, that is exactly what we need. 
I regard the EMS definitely as a model for a 
new world monetary order. In the next 100 
years, presumably we will not have a "world 
currency," but nevertheless, right now, we 
do need multilateral cooperation in currency 
questions. We need the mutual obligation 
of all states—not only the unilateral obligation 
of weak states toward the strong ones, but 
also the willingness of the strong states to 
help the weak ones.
This became very clear in Latin America, 
and also during the so-called "Asian crisis." 
Let's take the example of the uncontrolled 
devaluation of the Brazilian currency, the real. 
The exchange rate of the real was just being 
floated, instead of going for an orderly 
devaluation, which at a certain point, had to 
be stopped, in order not to ruin Argentina. 
But the Brazilian real was being floated freely, 
until it had dropped much too low, much 
lower than would have been justified by the 
data of the real economy. Therefore, a huge 
crisis in Argentina was unleashed—with 
worldwide repercussions. This, in my 
estimatation, is almost a classical example 
of how not to do it. The orderly devaluation 
of a currency, which sometimes may be the 
only way to solve a severe crisis, is totally 
different from the free floating of a currency 
after having given up the unilateral peg to 
the dollar.
EIR: Back to the New Bretton Woods, a 
model of which, in your opinion, could be 
the original EMS from 1979.
Flassbeck: Absolutely. But I think the "old" 
Bretton Woods was much better, since it 
defined more clearly, under what exact 
circumstances a currency should be 
devalued or up-valued; this stupidly was 
not done with the EMS. The EMS rather 
relied on the "financial markets," and it 
was argued that, in respect to exchange 
rates, something has to be done only 
when a currency comes "under pressure." 
That this is not correct, was shown in the 
case of France, which in 1992, despite 
considerable pressure from the financial 
markets, did not devalue its currency, in fact.
In a New Bretton Woods, one has to define 
very clearly, as was done in the old Bretton 
Woods from 1944, when, and where, external 
economic imbalances exist. Naturally, these 
imbalances have to be recognized officially, 
and to do so, we today have much finer 
instruments at our disposal. But, if there 
are indications of the fact that, after a strong 
real devaluation, a country has lost its 
competitiveness, that country must return 
to an exchange rate which corresponds to 
the state of its real economy. For that, there 
are simple and reasonable rules, which have 
to be used multilaterally, though. But if this 
multilateralism does not exist, we will get 
unilateralism, which is what we are seeing 
right now.
As I already mentioned, the developing and 
newly industrializing countries, in fact all 
countries that are weak, are trying to obtain 
current-account surpluses. It is only this, 
which gives them the strength to peg their 
exchange rates unilaterally to another 
"strong" currency. Since they understandably 
do not want to be engaged in free floating, 
they have to try, from a position of strength, 
to fix the exchange rate of their currencies. 
This is precisely what China is doing at the 
present time; other countries are doing it too. 
In one sense, this is a rather intelligent 
solution, since this way you prevent yourself 
from becoming a slave of the international 
financial markets. Besides, this way you 
create very favorable conditions for exports, 
as well as very favorable conditions for 
investments domestically. But this cannot 
be done in the whole world, since the world 
as a whole, obviously, cannot create current-
account surpluses.
EIR: Let's come back to the situation in 
Europe, and especially to Germany. You 
talked about a shocking repetition of the 
behavior of the '20s and early '30s, in 
respect to what has happened during 
the last years in Europe in general, and 
Germany in particular.
Flassbeck: With the dominant policy of 
"belt-tightening," we, in principle, are 
doing the same thing that, during the '20s 
and the early '30s, was considered to be 
the only means to overcome the economic 
crisis. Just by saving more and cutting 
expenditures anew, the governments 
believed then they would be better able 
to compete internationally, and in this 
way get out of the crisis by pulling 
themselves up by the bootstraps. That 
didn't function, and can't function. This 
approach can only and always lead to 
deflation. And it provokes a counterreaction 
of other countries or economic blocs—
as will happen today with 100% certainty. 
If it does not come in the form of a 
competitive devaluation, as in the early '30s, 
then it will come in the form of a massive 
up-valuation of one's own currency—we 
will see this with the euro.
A big, relatively closed region like Europe, 
has to have its own strength for growth. 
The domestic market has to flourish; there 
have to be investments in the real economy; 
people have to have money to buy; and 
there must be private consumption—only 
then does an entire economy grow. Just 
yesterday, the six German economic 
institutes presented their common report, 
in which they state that Germany's economy 
this year produced an export surplus of 30 
billion euro. Of course, this is a big "boost" 
for the economy, but even this has not 
sufficed to pull Germany out of the crisis.
This shows, as I see it, how deep we are 
already in the deflationary crisis. Despite 
this "boost," income expectations of the 
overwhelming majority of Germans have 
not increased. People don't believe that in 
the foreseeable future their incomes will 
rise again—and as long as they don't 
believe in that, there will be no way out 
of the crisis.
EIR: In 1931, in the very midst of the 
world depression, the economist Wilhelm 
Lautenbach in Germany proposed a 
program for boosting the economy, with 
very big infrastructure projects as its 
top priority. Today, similar ideas, 
concerning present national and 
transnational infrastructure projects 
exist in form of the "Delors Plan," the 
"Tremonti Plan," and the "Eurasian 
Land-Bridge," none of which, however, 
has gotten off the ground. What 
chances do you see for a way out of 
the crisis, if such public investment 
programs, which clearly create real 
wealth, productive jobs, and are not 
merely comsumer-oriented, were to 
be realized?
Flassbeck: Eventually, the realization of 
such projects will be the only measure 
which will work. There simply is no other 
way—today, as also then, at the time of 
the worldwide economic crisis. At the 
point the deflation has manifested itself, 
one has to become active in the economy 
in a credit-expansive way—according to 
the rule: The stronger the policy of 
deflation was before, the more expansive 
the policy has to be now—in order to turn 
the deflationary powers around. Right now, 
we see in Japan how difficult this is: Only 
China's huge economic growth—a gigantic 
program for promoting the exports of the 
Japanese economy—prevented Japan from 
falling into a very big crisis—but it has not 
rescued Japan yet. In overcoming deflation, 
therefore, one has to think and act in huge 
dimensions. As I said, the 30 billion euro 
export-surplus in Germany this year was 
not sufficient to transfer the spark of the 
exports to increased domestic demand.
In such a deep crisis as the present one, 
more is required than an infrastructure 
program financed by the state, although 
there is no way around that. At the same 
time, there has to be a normalization of 
income-expectations—i.e., the return to a 
reasonable wage policy. We have to turn 
away from the deflationary wage dumping 
that we see now in Germany, be it in the 
form of longer working hours—which is 
nothing but wage cutting—or many other 
forms, for instance, the cuts in the social 
system. All of this is promoting deflation. 
The more strongly such a deflationary 
policy is pushed, the more hopeless it 
appears to be to get out of the crisis.
EIR: You are obviously calling for an 
expansive economic policy like 
Lautenbach's, or like Franklin D. 
Roosevelt's New Deal, for Germany 
and Europe now. How do you see, in 
this context, recent proposals to use 
Germany's Stability Law of 1967 as a 
lever, since this law not only contains 
a whole series of potential actions, 
but also of obligations to act?
Flassbeck: When the present export 
boom is gone—and it will evaporate—
the conditions under which the 
Stability Law for state-sponsored 
measures to initiate economic 
growth can be used, will emerge 
in a much stronger way than now. 
Because after the export boom is 
over, we will again fall down to zero 
growth, and unemployment will 
increase even more. Therefore it 
will be mandatory then to use the 
Stability Law. But we have to 
recognize that Germany's 1967 
Stability Law today is in contradiction 
to the Stability Pact and the Maastricht 
Treaty.
EIR: Then it is merely a question of 
mobilizing the political will to 
change this?
Flassbeck: Yes, certainly. In the end, 
one can always do what is necessary, 
if one has the political will to do so. 
But today, the hurdles are set much 
higher with a Europe which, in my 
eyes, has a wrong monetary 
constitution, since it blocks an 
active autonomous economic policy 
of a country. Therefore, it is much 
more difficult for a single European 

country today, even if, like Germany, 
it is one of Europe's biggest, to 
"break out."
EIR: The alternative therefore, would 
be either: Stability Law, or Stability Pact?
Flassbeck: Yes, you could see it that way. 
The Stability Law was ignored for a long 
time. Honestly speaking, the European 
Stability Pact is also being ignored right 
now. Eventually, politics has to be 
pragmatic, and neglect these "juridical 
hurdles"—and that is what will happen.
EIR: In order to stimulate the discussion 
about an active anti-deflationary policy 
of promoting growth and development, 
the already mentioned economist Wilhelm 
Lautenbach is of key significance. You 
are one of the few experts on Lautenbach 
in Germany. How was Lautenbach unique?
Fassbeck: In my eyes Wilhelm Lautenbach—
one doesn't know if before Keynes, after 
Keynes, or together with Keynes—saw 
with an unbelieveable clarity (and sometimes 
with an even greater clarity than Keynes 
himself), the connections within an economy 
as a whole. This applies especially to the 
save/invest paradox. In principle, Lautenbach 
understood the entire economic system 
much better than 99.9% of all the economists 
in Germany who came after him. It is fatal 
and tragic, that the discrediting of Lautenbach 
already started in the '50s; at that time, it was 
said that there was no longer a time of crisis, 
and therefore, Lautenbach was no longer 
needed. He was called the "German Keynes," 
and together with Keynes, Lautenbach was 
also ruined.
But Lautenbach's thinking can absolutely 
not be reduced to the complex of an economic 
crisis. In reality, he developed an economic 
theory which is valid for all economic conditions, 
not only for times of crises. His theory is simply 
able to explain the dynamic development of an 
economy, investment, much better than the 
neo-classical, neo-liberal theory.
EIR: In addition, Lautenbach's memorandum 
of September 1931, The Possibilities for 
Boosting Economic Activity by Means of 
Investment and Expansion of Credit, is not 
only unique in respect to analyzing a crisis 
correctly, but also to overcoming it effectively. 
What about stimulating a real debate about 
this question today, a debate which was 
strangled for a long time, but which is being 
forced upon society in this time of crisis?
Flassbeck: We will get this debate, I am 
totally sure. It cannot be blocked. But in 
Germany right now, because of the existing 
conditions imposed by the media and 
scientific community, one cannot conduct 
this debate without being immediately 
branded as an esoteric outsider.
How many relatively well-known economists 
representing my position still exist in Germany 
today? You can count them on the fingers of 
one hand. In this climate, such an economic-
political debate cannot emerge, let alone be 
conducted in a competent way. But I am sure 
that this will change, because otherwise, 
there is no way out of the crisis. Very clearly, 
this was shown by the developments of this 
year in Germany. If you get such a huge 
expansive promotion of exports to foreign 
countries, and even that is not enough to 
put the country back onto a path of growth, 
then you know how serious the situation 
really is. In such a situation you definitely 
need much more than a mere program of 
credit expansion; then you need a complete 
shift in the thinking of the political class 
and its accompanying media.
EIR: How do you explain this paralysis, 
dogmatism, and complete one-sidedness 
of the economic-theoretical debate in Germany?
Flassbeck: This has a lot to do with the 
fact that Lautenbach was systematically 
ignored in Germany. Remains of Keynesian 
thinking, which still existed at the end of 
the '70s, were eradicated by the uncritical 
takeover of monetarism. This, in turn, is 
connected to the fact that Germany's 
university system does not at all favor 
"maverick thinking," "outsider-thinking," 
or "other-thinking," but exactly the opposite. 
The principle of cooptation in German 
universities has the effect of always 
reproducing just the same schools of thought. Thinking goes only in one
direction, instead of promoting an open, broad debate. Additionally, the
associations in Germany, especially those of the entrepreneurs, are
permanently pumping a lot of money into society, in order to steer the
discussion in a certain direction. They seem not to notice the fact that
in this way they are only damaging themselves in the end.
EIR: Are you thinking in this connection of well-financed organizations
like the "Initiative for a New Social Economy," or the "Convent of
Citizens"?
Flassbeck: These are only two of the many initiatives, which are all
pushing in the same direction. They want to suppress any alternative
thinking in Germany, and cover it with a mainstream, which only reflects
something that one could call "pre-Keynesian thinking," or "thinking of
the '20s." What is really astonishing about this is, that the
entrepreneurial associations, which are promoting this thinking with a
lot of money, are ultimately doing harm to themselves. Because it is
their membership, above all the middle-sized entrepreneurs, who, in the
end, suffer the consequences of this thinking. Just as the workers are
suffering from the effects of the present deflationary policy.
~~~~~ End Dr. FLASSBECK ~~~~~

The following monetary time line could be charted 
only by the model of an industrial economy shown 
in Figure 4&8 attached to note #856 to John Gelles. 
>From 1776 to 1895, the USA was indeed the "last best 
hope of mankind."

~~~~~~~ Insert Figure 2-3h.gif ~~~~~~~~~~~~~~

~~~~~~~~~~~~~ End Figure 2-3h.gif ~~~~~~~~~~~~

Kind regards,

Wes Burt

   TOP and TWP are cognoscible by sixth graders from
         Fig. 7-9.gif on Dr. W. Curtiss Priest's web site:
          <http://www.epie.org/cyber-soc/default.htm>
 TOP = 100% Capitalism --- TWP = 0 to 50% Capitalism
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