dehumanization of modern civilization and a new

8/13/2019 Dehumanization of Modern Civilization and a New

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power and many politicians who rely on experts!) to solve properly and fully the urgent problems

of our time.

Even worse, the same taboo in recent decades, through the experts affiliated with the

international monetary fund (IMF), has moved from the national scene to the international stage,

i.e. the "globalization" of the problem conception. For those who want to see the patented failureof the traditional macro-monetary and fiscal policies, it is enough to look at what happened during

this century in the West as well as in the East when the major economic financial and social

problems really were not solved but merely postponed with all the ill effects for the next

generation and, who knows, perhaps even for generations to come. With all the evidence of a

failure, available to any objective observer, the economic experts in question close to the seat of

power (already in or aspiring to it) instead of stopping for a moment the recommendation of false

or at least debatable policies and having second thoughts, on the contrary, they insist on every

occasion to praise and recommend further application of discredited policies and in addition, they

now work hard to transplant these policies at the international level on a global basis[1].

What are the stumbling blocks? There are two basic problems which in the monetary and financial

environment of today have become insoluble. First, we have no adequate, reliable and objective

instrument to measure the exact time of intervention with a monetary and/or fiscal policy.

Because of this we are forced to wait until a large part, if not the entire, economic and financial

environment is contaminated with disequilibrium bugs. Consequently, as a matter of system, the

policies used are either too late or too early and in both cases the problem in question is not

solved at the right time.

The second question is to determine the correct proportion of the intervention. It is easy to say

that we have inflation and therefore we must raise the official discount (rate of interest), but in

practice the question is by how much: 1/4, 1/2, 3/4 ... 1, 2, 3 percent?

We must be aware of the fact that in our case a rise of 3 or 4 percent of the rate of interest could

ferment confusion, with the result of little or no real investment and in inevitable high rate of

unemployment immediately.

We have no reliable instrument to measure the correct proportion of the intervention and thus

the application of the traditional monetary and fiscal policies becomes ipso facto an operation of

gambling, a shot in the dark to hit an invisible point.

Can we abandon, in the name of the science of economics and finance, the daily life and wellbeing

of millions on millions of industrious and innocent people in the USA and the rest of the world to

the mercy of a gambling practice embedded in the traditional monetary and fiscal policies? Has

not the time come to reexamine seriously the theoretical foundation of these policies and if we

find deficiencies, to look for a better alternative before we reach a critical point of no return when

the patience and the suffering of the innocent masses are exhausted? People feel that something

is wrong in the system but they do not know exactly what.


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Do not the traditional monetary and fiscal policies actually appear to be the causes of a strange

dehumanization of a modern mixed economy and society in the sense that those macro policies

bypass or ignore the individual person with his or her needs and aspirations by creating a social

environment of uncertainty and insecurity as in any form of gambling? The reader can draw his or

her own conclusion.

Part I. The great transformation or modern civilization on trial

The major problems of the twentieth century in regard to modern society and economy were

actually not solved but by using all sorts of gimmicks and compromises were simply passed on to

the next generation. This situation, however, cannot go on indefinitely. Sooner or later a critical

point will be reached of a social explosion or such political decisions as may bring about conditions

of more and more government regulations and controls, culminating with a new form of

communitarian social and economic order similar to that envisioned byMarx, this time in a

democratic fashion. How about a new type of a more perfect social and economic order based on

conditions of general stable equilibrium and less and less government regulations and controls,

leaving for the government only those functions which are really social, i.e. they cannot be solved

properly by individuals or associations of citizens, and of course the social duty to restore and

preserve conditions of general stable equilibrium?

The history of the future is always an open book where the unexpected may play a significant role.

In any case the scenario is dual and the actual state of affairs cannot remain in the present day

situation. It is possible that we may move toward more centralization under the slogan of

"globalization" with more regulations and controls under the aegis of the International Monetary

Fund (IMF), World Bank and other international financial organizations, including the United

Nations.

It is, however, also possible that the new political trend of purification of the welfare state

doctrine and practice, not only in the USA but also in Europe, may open the eyes of the masses of

voters that neither a social explosion nor a communitarian-type of society and economy with more

controls and regulations is to their advantage. Consequently, they may turn their attention to a

revival of another trend toward more decentralization combined with more privatization and a

restructuring of the existing economic, monetary, financial, social and political institutions

according to a new, fully democratic regime guided by conditions of general stable equilibrium at

the micro and macro level.

Let us review in a brief form the subject of dehumanization in the context of modern civilization.

1. Arnold Toynbee; Civilization on Trial or challenge and response

The well-known British historian and philosopher, Arnold Toynbee, in his monumental work, The

Study of History, analyzed the rise and fall of civilizations in history by using a special methodology

he called "Challenge and Response". Challenge is composed of unsolved big problems of the time


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and place, and the response is the answer of the living generation - positive, negative or passive -

which will determine the outcome. As he put it:"

And thus, if the working of challenge-and-response explains the otherwise inexplicable and

unpredictable genesis and growth of civilisations, it also explains their breakdowns and

disintegration[2]."

For him the challenge of his time (1948 when he published Civilization on Trial) was determined by

two factors - war and class warfare - and two countries - the USA and the Soviet Union, two

irreconcilable social and political ideologies. In his view, "Class has now become capable of

irrevocably disintegrating Society and War of annihilating the human race"[3].

Toynbee is very much concerned about the fact that the advance of modern technology did not

change human nature which in addition to a good life (materially conceived), deep in its soul

wants also social justice in the distribution of the wealth created by the technological innovations.

"Modern civilisation," he wrote, "has created a privileged minority (the Western middle class) and

implicitly an underprivileged majority, an 'intolerable injustice' with the masses." A revolt of the

masses was Toynbee's fear.

Interpreting the voice of his generation, he wrote:"

We are thus confronted with a challenge that our predecessors never had to face: We have to

abolish War and Class - and abolish them now - under pain, if we flinch or fail, of seeing them win

a victory over man which, this time, would be conclusive and definitive[4]."

The great Toynbee did not tell us why explicitly modern civilization has come to this critical point,

and how specifically we can abolish war and class warfare, without creating other problems. In

other words, he did not point out the adequate structural, economic, monetary, financial, social

and political reforms that would lead to the realization of peace and harmony in modern society

and civilization. His warning in the above quotation, however, discloses his early perception of the

coming "Great Transformation", which for good or bad is now on its way to materialize by the end

of the century or shortly thereafter.

Toynbee as a great historian and philosopher has fulfilled his moral duty to warn us about the

challenge of modern civilization which in fact is the challenge of modern capitalism again on trial

toward the end of the twentieth century.

2. Ortega Y. Gasset: dehumanization of art and modern civilization

It was not Toynbee but rather Ortega Y. Gasset, a Spanish thinker and philosopher, with his book,

The Dehumanization of Art and Other Writing on Art and Culture (1956), from whom I got first the

term "dehumanization" and the inspiration to extend the phenomenon of dehumanization from

the arts to modern civilization, modern capitalism, modern socialism and, implicitly, modern

economy and society.


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Gasset did not see or explore the complex of socio-economic problems linked to the phenomenon

of dehumanization. As he confessed:"

I do not propose to extol the new way in art or to condemn the old. My purpose is to characterize

them as the zoologist characterizes two contrasting species. The new art is a worldwide fact. For

about twenty years [written in 1931] now the most alert young people of two successivegenerations - in Berlin, Paris, London, New York, Rome, Madrid - have found themselves faced

with the undeniable fact that they have no use for traditional art; moreover, that they detest

it[5]."

He wanted to characterize the new modern art as the zoologist analyzes two different species, and

that is exactly what he did.

Gasset dealt with the problem of modern art strictly aesthetically. He started in music with

Debussy, Stravinsky; in drama Pirandello; in painting Picasso; and he could have added Eugene

Ionesco (Theatre of the Absurd), Kokoschka, Kandinsky and many other modern artists. He reaches

the conclusion that modern art "divides the public into two classes, of those who understand it

and those who do not"[6].

This classification of the two groups is not something new since it applied to classical art also. The

actual difference is that in the case of classical art, going back to ancient time, the artist had

something to say or express a message which was not said before. At least that was the spirit and

the attitude of the classical artist.

In the case of modern abstract art the situation is quite different. Here the artist refuses or ignores

the rule to present a message and thus modern art has only form, and the content is supposed to

be in the eye of the beholder who has the choice to give or not to give it a meaning.

One might also consider defining classical art as the equilibrium type of art in the sense that it is

based on the tendency of the artist toward achieving perfection, harmony, symmetry and

consistency as far as humanly possible, whereas modern, abstract art is the prototype of a

disequilibrium form of art inclined toward imperfection, disharmony, asymmetry and

inconsistency.

This characterization would evidently show that modern art is associated with, or may be the

cause of, a deterioration of moral values leading to nihilism or degradation of man and true

culture. In the USA there is already an argument about "counter culture". To dehumanize art,

therefore, means to allow it to assume a negative character. Gasset is not interested in furtheranalysis on the negative characters of modern art. He remains committed to describe the

phenomenon of modern art without reference to any values or value judgments. For him:"

Even though pure art may be impossible there doubtless can prevail a tendency toward

purification of art. Such a tendency would effect a progressive elimination of the human, all too

human, elements predominant in romantic and naturalistic production. And in this process a point

can be reached in which the human content has grown so thin that it is negligible. We then have


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an art which can be comprehended only by people possessed of the peculiar gift of artistic

sensibility - an art for artists and not for the masses, for "quality" and not for hoi polloi[7]."

It does not make much sense to talk about a "sociology of modern art" because there is no social

message to be shared with the public in general, except for a small minority. No doubt modern art

was born as a revolt against classical art oriented toward perfection. The modern artist felt that allpossible combinations toward perfection were exhausted. As Gasset observed:"

In art repetition is nothing. Each historical style can engender a certain number of different forms

within a generic type. But there always comes a day when the magnificent mine is worked out[8]."

In order to achieve that peculiar new artistic sensibility, he wrote further:"

It would be simpler to dismiss human forms - man, home, mountain - altogether and to construct

entirely original figures. But, in the first place, this is not feasible. Even in the most abstract

ornamental line a stubborn reminiscence lurks of certain "natural" forms. Second - and this is the

crucial point - the art of which we speak is inhuman, but also because it is an explicit act ofdehumanization[9]."

Gasset does not connect modern art to modern civilization which, we shall see in more detail later,

also runs in the same direction of becoming inhuman or dehumanized.

Up to this point Gasset, the aesthetic commentator, has spoken. Now comes Gasset, the

philosopher: from a lecture delivered in Buenos Aires, Argentina, in 1939, published in the same

volume, he was concerned very much with the future of humanity and implicitly correlated it with

that of modern civilization. He thinks that the final results will depend on the relationship between

pure meditation (thinking) and human action. And the picture, as he saw it in 1939 when World

War II started, was not bright at all. Gasset's approach of pure meditation versus human action is

actually a substitute for Toynbee's challenge and response, or in any case, complementary. Here is

the voice of Gasset in 1939:"

Almost all the world is in tumult, is beside itself and when man is beside himself he loses his most

essential attribute: the possibility of meditating, or withdrawing into himself to come to terms

with himself and define what it is that he believes and what it is that he does not believe; what he

truly esteems and what he truly detests. Being beside himself bemuses him, blinds him, forces him

to act mechanically in a frenetic somnambulism[10]."

In continuation, he describes animal life which is exposed always to "other than itself pulled and

pushed and tyrannized over by that other"; in other words, living a life "beside itself". Finally he

asks:"

But...does man perchance not find himself in the same situation as the animal - a prisoner of the

world, surrounded by things that terrify him, by things that enchant him, and obliged all his life,

inexorably, whether he will or no, to concern himself with them? There is no doubt of it[11]."


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In short, man is losing opportunities to withdraw into himself to meditate about his own destiny.

Modern technology, respectively modern civilization, does not cooperate to make human nature

enjoy more freedom of thought, even about daily necessities. Indeed, modern technology restricts

such opportunities by the process of mechanization of daily life which deprives the individual of

his or her legitimate right to decide on his or her preference. Computers and macro economic

policies make the big decision collectively and the individual is left with empty hands, losing the

habit of meditation or that critical spirit needed to judge how far the socio-economic order is right

and legitimate and how far it is wrong and illegitimate.

Gasset does not mention the coming Great Transformation, but the two alternative scenarios are

very clearly identified. About the negative, pessimistic alternative he wrote:"

History tells us of innumerable retrogressions, of decadences and degenerations, but nothing tells

us that there is no possibility of much more basic retrogressions than any so far known, including

the most basic of them all: the total disappearance of man as man and his silent return to the

animal scale, to complete and definitive absorption in the other. The fate of culture, the destiny of

man, depends on our maintaining that dramatic consciousness ever alive in our inmost being, and

on our feeling, like a murmuring counterpoint in our entrails, that we are only sure of

insecurity[12]."

This reminds us of the play by Eugene Ionesco, "The Rhinoceros", where an epidemic of a sort of

"rock and roll" spiritual sickness has evolved in a total animalization of man. However, one single

man, the hero of the play called Berenger, refused to believe in the existence of the epidemic and

he alone saved man and humanity from a new barbaric age.

About the positive, optimistic alternative, when man is holding onto the humanistic, organic

relationship between meditation and human action, Gasset wrote illuminating thoughts:"

From this inner world he emerges and returns to the outer, but he returns as a protagonist, he

returns with a self which he did not possess before - he returns with his plan of campaign not to

let himself be dominated by things, but to govern them himself, to impose his will and his design

upon them, to realize his ideas in that outer world, to shape the planet after the preferences of his

innermost being... Man humanizes the world, injects it, impregnates it with his own ideal

substance and is finally entitled to imagine that one day or another, in the far depths of time, this

terrible outer world will become saturated with man, that our descendants will.be able to travel

through it as today we mentally travel through our own inmost selves... I do not say that this is

certain...but I do say that it is possible[13]."

Gasset as a philosopher has done his moral duty. We, as economists, also have a moral obligation

to identify the requirements for this ideal performance of human action to become reality. And

this, in my view, cannot be anything else but the introduction of structural reforms of a stable and

equitable institutional and legal framework according to a model of general stable equilibrium, as

inherited from Walras but in a more complete form.


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3. Sir Charles P. Snow: the two cultures and the scientific revolution

Sir Charles P. Snow was both a scientist and a writer. For 30 years he had a government position

dealing with scientists. As a writer he also mingled daily with nonscientist intellectuals. He noticed

a problem that he called "two cultures". He observed that there are two groups which he

identified:"

Literary intellectuals at one pole - at the other scientists, and as the most representative, the

physical scientists. Between the two a gulf of mutual incomprehension - sometimes (particularly

among the young) hostility and dislike, but most of all lack of understanding. They have a curious

distorted image of each other. Their attitudes are so different that, even on the level of emotion,

they can't find much common ground[14]."

The scientists do not read contemporary prose or poetry and thus they do not share what is

known as traditional culture. The literary intellectuals think that there is only one traditional

culture and they ignore completely the very foundation of modern science.

On top of all this, the traditional culture, according to Sir Charles, seems to manage the Western

world whereas the scientists, the principal promoters of modern civilization, are left on the

sideline and an animosity between the two groups thus becomes inevitable and incorrigible. As Sir

Charles put it:"

The feelings of one pole become the antifeelings of the other. If the scientists have the future in

their bones, then the traditional culture responds by wishing the future did not exist[15]."

Sir Charles mentions in a footnote George Orwell's book 1984 as "the strongest possible wish that

the future should not exist", but he gives no explanation at all for such an attitude or that Orwell's

book was a warning for the modern man on how modern civilization was running into danger, and

this book shows how not to be!

He considers that the lack of understanding between the two groups is a great loss to modern

society and constitutes an impediment for further progress of modern civilization, for the benefit

not only of England but also for the rest of the world. In one sentence, he thought that only his

side of the story was a problem for the West.

The two cultures

The appearance of Sir Charles' book, The Two Cultures and the Scientific Revolution (1959), ignited

an international discussion of the issue in question, some favorable and others not favorable[16].

One message from Sir Charles' contribution was the historic necessity that both modern science

and the traditional culture have to be imparted equitably to the younger generation of students

during their normal educational process in colleges and universities. This was a good idea, but

there was an impediment in this direction provided by a deeply seated tradition in keeping

separate the natural sciences on account of "specialization".


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Before anything else, the first thing to be clarified is the use of the term "two cultures". Are there

really two cultures? Is the side of the argument exposed by Sir Charles the only or the true cause

of the conflict between scientists and nonscientists?

To be sure, the conflict between the two groups no doubt exists and Sir Charles was right to raise

the problem. But the problem in itself is in need of more clarification. I do not think that heprovided sufficient evidence to validate using the term "two cultures". To repeat, the conflict

exists but for much deeper reasons, respectively socio-economic roots which Sir Charles did not

see and in all probability he could not perceive because he was looking only at what was visible:

the conflict and the animosity between the two groups.

Actually, the conflict that he observed had its roots much deeper in history, more precisely in the

kind of modern society and economy created by the Industrial Revolution with the help of initial

bankers and technical inventors. This was the first part of the Industrial Revolution which was

continued with the second period of applied science in industry and agriculture, culminating with a

true scientific revolution of electronics in the new atomic age of the twentieth century. It is a

process of a new artificially rapid development of modern civilization not yet closed but associated

with some negative, cumulative side effects, leaving behind serious social and economic problems.

That is one part of the problem that Sir Charles did not see: technological progress or modern

civilization with social and economic problems.

The other part refers to the literary men of traditional culture who during the Renaissance period

rediscovered the spirit of wisdom of the ancient world.

With this heritage of the ancient world (Roman and Greek civilizations and culture), a more refined

form through the works of new philosophers and men of letters (Dante Alighieri, 1265-1321;

Thomas Aquinas, 1225-1274; Francis Bacon, 1561-1621; Rene Descartes, 1596-1650; Erasmus,1466-1536 et al.), modern, traditional culture emerged. This in turn projected a different, more

perfect type of society and economy, where in addition to personal freedoms, social justice with

financial stability and peace also were considered as a common good of civilization.

In reality, the conflict is not between two different cultures or between scientists and

nonscientists - as Sir Charles envisioned - but between modern civilization and modern culture, a

clash of perception of the two entities developed parallel under the aegis of modern capitalism.

The economic profession in general is not aware of this conflict, but the literati of the traditional

modern culture up to the present, feel more by intuition than scientific observation, that

something is missing, is wrong in the relationship between modern society and moderncivilization, even though they do not have a clear explanation. In this respect, the economic

profession was in the past, and still is in the present, deficient in the sense that it failed to provide

such a clear explanation.

Even though Sir Charles is aware and mentions the distinction between "individual" and "social

condition of man", he nonetheless does not understand what it really means when "the

nonscientists have a rooted impression that the scientists are shallowly optimistic, unaware of


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man's condition"[17]. George Orwell in his novel 1984 was correct to be frightened of what might

happen with technological progress if it continued in the same tempo as after World War II and if

it is manipulated by unscrupulous scientists and politicians who feel no moral responsibility

toward the future of humanity.

There should be no confusion on this very sensitive but little understood issue. First, we shouldmake a clear distinction between:

- (1) pure science in theory, whose purpose it is to explain realities in a larger context, i.e. actual

and potential realities; and

- (2) applied science or technology concerned with the application of scientific principles or rules

derived from experience on a large scale to resolve practical problems.

There is nothing wrong per se in or with technology if it is financed only through voluntary savings

of the people and the fruits of the increase in productivity are equitably shared among inventors,

entrepreneurs and the people who provide the necessary capital. Unfortunately, the story ofmodern technology is quite different. Under modern capitalism, even more under modern

socialism as known in this century, the introduction of new technology is financed not through

voluntary savings of the people but through "forced savings" when the same people are

dispossessed of a fraction of their real income through the inflationary effect produced by the

monetization of credit issued by private banks (under capitalism) and public banks (under

socialism).

Of all the great economists, to our knowledge, only Schumpeter (who was also a banker) explained

clearly the phenomenon of "forced savings" as a source of real capital accumulation. He called

forced savings the "capitalist function of money" even though he did not investigate further social

implications of this practice of modern banks, both in capitalist and socialist regimes.

Snow, and no less the economic profession, pay no attention to this fundamental problem. If there

is an excuse for Sir Charles, there is none for the professional economist. Snow insists throughout

that a conflict exists between the two cultures (in his sense) but he gives no reason except one he

calls not a reason but a "correlative"; for example:"

If we forget the scientific culture, then the rest of the Western intellectuals have never tried,

wanted, or been able to understand the industrial revolution, much less accept it. Intellectuals, in

particular literary intellectuals, are natural Luddites[18]."

What can be said to clarify this criticism? First, the literary intellectuals understood by intuition

that there was something wrong with the Industrial Revolution even though they did not know the

cause for that deficiency. Second, the Luddites were those workers who during the first phase of

the Industrial Revolution felt that there was something unjust in the introduction of machines

which, they complained, replaced their work and ruined their source of livelihood. We have to

understand that at the time there was no unemployment compensation or a government willing

to intervene! The industrial captains were the heroes of the time.


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The industrial revolution, to be sure, has created social benefits for many generations to come, but

the method of financing through "forced savings" by using paper money and monetized credit has

produced a host of social and economic problems also for many generations, including the

present.

The rich and the poor countries

In the last part of the book Sir Charles attacks the much debated issue on the situation of rich,

developed, highly industrialized countries versus poor, undeveloped or developing countries. After

he presented the conflict between the two cultures with specific reference to his own country,

Great Britain, and not in glowing colors but with some comfort that the Americans were much like

the British between 1850 and 1941, he added:"

Nevertheless, that isn't the main issue of the scientific revolution. The main issue is that the

people in the industrialised countries are getting richer, and those in the non-industrialised

countries are at best standing still: so that the gap between the industrialised countries and the

rest is widening every day. On the world scale this is the gap between the rich and the poor[19]."

Sir Charles did not see that this is not the end of the story. He thought that more and accelerated

industrialization - and the majority of economists and social scientists share this view - spread over

the undeveloped or developing countries would automatically solve the problem of poverty in the

world. But this view, under the assumption of status quo of modern capitalism, does not seem to

be correct. Indeed, after World War II there was a flurry of foreign loans and investments in the

so-called "third world" but half a century later these countries ended with an immense foreign

debt and unable to pay even interest for these foreign loans, let alone to return the capital, so the

problem of poverty or the social question remained by far unsolved 50 years later.

In addition, Sir Charles did not notice that the same problem of a gap between the rich and the

poor existed within the boundaries of highly industrialized countries. Then the question can be

raised: If the problem of poverty in a highly industrialized society under a regime of modern

capitalism cannot be solved properly, how in the world, by following the same practice, can we

have success in a developing country. And the same question can be raised for the International

Monetary Fund, the World Bank and other international organizations together with the UN which

now are the champions for the same cause under the new slogan of "globalization". A keen

observer might murmur to himself: "There is something rotten", as Hamlet would say, not in the

State of Denmark but rather in the ambiguous, mixed two-faced regime called "modern

capitalism" or "welfare state", which offers, on the one hand, marvels in the application oftechnology, including trips to the moon and feeding millions of people receiving welfare and doing

nothing but procreating, that is perpetuating poverty.

We allow ourselves to be mesmerized by technological innovations with so many gadgets - some

usable but many completely superfluous - and space-trips and space-stations and close our eyes to

the social question by giving the poor people hand-outs instead of helping them to recover their

economic independence. And we call these palliatives "social policies" and "social programs".


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All these show there is evidently something wrong or deficient in the method of analysis and mode

of reasoning we are using to solve economic and social problems of our time. By all this

description I do not mean to turn around and recommend a more regulated capitalism or welfare

state, but first to find out the reasons why we reached this critical point of significant pockets of

poverty and social injustice in the midst of the highest civilization known in history. We have to

eradicate the causes which brought humanity to this ambiguous state of affairs. More and

accelerated technology evidently is not an adequate or complete solution.

Sir Charles, however, remains on the side of those who believe that what we need to solve the

problem of poverty is more and accelerated technology all over the world. He is an optimist that

the rate of social transformation will come in decades to follow. That was in 1959. In his view, "the

West has got to help in this transformation". For this purpose he recommended a vast

international program with a transfer of capital and trained scientists and engineers from the West

to the developing countries over a period of ten years. His vision and prognosis did not prove to be

realistic when he wrote:"

Since the gap between the rich countries and the poor can be removed, it will be. If we are

shortsighted, inept, incapable either of good will or enlightened self-interest, then it may be

removed to the accompaniment of war and starvation: but removed it will be. The questions are

how and by whom[20]."

On the next page he continues:"

The second requirement, after capital, as important as capital is men. That is, trained scientists

and engineers adaptable enough to devote themselves to a foreign country's industrialization for

at least ten years of their lives. Here, unless and until Americans and we (British) educate

ourselves both sensibly and imaginatively, the Russians have a clear edge. This is where theireducational policy has already paid big dividends. They have such men to spare if they are needed.

We just haven't, and the Americans aren't much better off....[22].

For, though I don't know how we can do what we need to do, or whether we shall do anything at

all, I do know this: that, if we don't do it, the Communist countries will in time[23]."

All this is just for the record to show that Sir Charles proved to be a false prophet, in view of what

happened in the East in the 1980s and 1990s. The Russians and the Chinese were not that good in

1959 to change the Third World. They were not able to solve their own problems efficiently and

effectively.

As to the thesis of the two cultures it soon died, in our opinion, because the real conflict was and

still is not between two cultures but rather between modern society and economy, respectively,

modern civilization; implicitly modern technology and the traditional modern culture.

4. Maurice Hindus: Humanity Uprooted (1931)


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In this book we can find a detailed description of the attempt made in the Soviet Union for a

complete dehumanization of modern society and economy through forced industrialization,

another example of modern civilization and modern technology on trial. We know now by the

events of 1985 and thereafter that this experiment was not nearly a success, even though many

Western intellectuals and scientists believe that here was fermenting a new man and a new

civilization.

Maurice Hindus succeeded in writing an interesting book. It is a description of the Soviet

experiment from 1923 to 1931 when the forced collectivization of agriculture was in full

expansion. It is indeed a most interesting book, first because of its content - a rather detailed and

comprehensive description of social, economic and cultural realities of that time, and second

because of the philosophy of the author who, on the one hand, seems to sympathize with the

Bolshevik Revolution, but on the other hand, refrains from being an activist, that is, one who

promotes the Revolution by any means and on every occasion. Instead, Hindus kept his position as

a neutral observer whose task it is to describe the realities of the time in the Soviet Union as they

were - with great expectation and great sufferings but no illusion.

For some readers the book may appear as a prologue to the great drama of the Soviet experiment

and for others who could project into the future, it was already an epilogue to the same drama.

The preface of the book mirrors the philosophy of the author and the approach he used to provide

the reader - in his own words - with a "picture of the results of the revolutionary effort to uproot

ancient institutions and to refashion the ways of man".

In order to have an idea about the content of the book, it is worthwhile to quote more from the

preface, the confession of the author, born in the pre-revolutionary era and returned to the USSR

in 1923 where he found:"

Everywhere it was the same story - humanity in a state of feverish agitation, convulsed with

thought and feeling. Life in Russia is so violent an experience, so painful a trial and to him who

bursts with the new faith so glorious an ecstasy, that one can not remain simply passive. One must

react somehow to the heaving turbulence, with fervour, with fury, with hope, with despair, with

madness or even with death.

For good or for evil Russia has plucked up the old world by its very roots and the party in power is

glad to see these roots wilt and turn into dust. Hardly an institution - property, religion, morality,

family, love - has escaped the blasts of the revolution[24]."

The book must have been well received by the American public since from the first edition in 1929,

14 printings were on the market until April 1931. But after that we do not know whether more

printings or editions were offered.

For the information of the reader, here is the full table of contents:

Institutions IX. Family - the new family


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I. Religion - collapse XII. Communist

II. Religion - cause of collapse XIII. Youth

III. Religion - substitutions XIV. Intelligentsia

IV. Property XV. Cossak

V. Man XVI. Jew

VI. Sex - the new morality

VII. Family - test and trials

VIII. Love Quests

XVIII. England

People XIX. Revolution

X. Peasant XX. War

XI. Proletarian XXI. America

The book is also valuable because it has an Introduction written by the famous American

philosopher and educator, John Dewey.

Whether Dewey, who also was sympathetic to the Russian Revolution, helped or guided Hindus to

undertake this project of returning to the USSR and write this book, is not known to this author.

But from the Introduction we can see how Dewey, the master, felt about the Russian experiment.He quotes from the Hindus book, Chapter XIII on youth:"

Often - confesses Mr Hindus - when I would tell Russian youth that I was a writer they would

immediately ask what was my political orientation. What they really meant was whether I was for

or against the class struggle. They could not conceive of a writer being apolitical and indifferent to

political viewpoints[25]."

And Dewey comments:"

The passage is intended to tell something about the attitude of Russian youth. In fact, it

communicates even more about the point of view from which Mr Hindus has surveyed the Russiansituation.

To take sides, to find something to praise or to blame, and then follow the purpose of blame or

praise to control all one's ideas of a social situation is almost as natural to humanity as it is to

breathe ...


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When the conflict is actual and is human, when it includes within itself forces and interests

wherein the spectator is already committed by education, prejudice and aspiration, impartiality of

observation and report is well nigh beyond human power[26]."

It is interesting to see how Dewey is judging the spirit of the time in the 1930s, a value judgment

which is not less valid for the 1990s, in fact for all time, when he wrote:"

It is not merely Russian youth who find it hard to conceive that a writer should be interested in

what is going on in their country simply as something to behold and if possible to understand.

All over the world, it is assumed that a person must of necessity be interested in the scenes as one

who is for the new regime or is against it.... To see for the sake of seeing and to tell others so that

they may vicariously share the seeing: - that is beyond the reach of imagination of most men in

respect to Soviet Russia. To them it is not a scene to behold; it is a battle to take part in. Failure to

be an open partisan is itself suspect.

To my mind the striking thing about this book by Mr Hindus is that with the most intimatesympathetic response to all the human issues involved in the revolutionary transformation, he is

nevertheless content to see and to report[27]."

These are words of wisdom and they have to be judged not only by their content but also by the

person who spoke who was a leading personality in US philosophy of pragmatism and US

education. In continuation, referring to the same book, Dewey wrote:"

There is a picture of a large section of humanity uprooted, torn loose from its old bearings, and

striving with both fanatical madness and sublime fervour to create a new humanity rooted in a

new earth[28]."

The final result of the Russian experiment by far was not "a new humanity rooted in a new earth"

but the worst kind of society that history of modern times has known and which was described

later by Aleksandr I. Solzhenitsyn and others.

5. Herbert A. Simon: The Sciences of the Artificial

In this book, The Sciences of the Artificial, The MIT Press, 1969, The Fifth Printing 1988, Nobel

Laureate Herbert A. Simon undertakes the unusual project of developing the foundation of a new

branch of knowledge: The Sciences of the Artificial.

According to his own indication, the subject "has been central to much of my research, at first inorganization theory, later in economics and management science, and most recently in

psychology"[29]. He sounds to be successful in his undertaking, among other things because he

works only with modern, formal logic is dealt with where only the form, that is, the morphology of

propositions, and the syntax is omitted. Classical logic was concerned mostly with the content of

propositions and somehow neglected the form. The distinction between the two kinds of logic is

basic, and whether one is using classical or modern logic the results are quite different. For


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instance, pure mathematics can be applied in modern, formal logic but it cannot be easily applied

in classical logic. In fact, modern logic has become a sort of appendix to mathematics.

In a different place[30] it is shown that the classical and modern logic, after some purification, can

be united in what may be called "Integrated logic". We shall try now to apply the new integrative

type of logic which considers both the form and the content of propositions.

Nobel Laureate Simon defines his object of study as follows:"

The thesis is that certain phenomena are "artificial" in a very specific sense: they are as they are

only because of a system's being molded, by goals or purposes, to the environment in which it

lives. If natural phenomena have an air of "necessity" about them in their subservience to natural

law, artificial phenomena have an air of "contingency" in their malleability by environment[31]."

To say that certain phenomena - and we would add also objects - are artificial in a very specific

sense, i.e. because of a system being molded according to some goals or purposes and within a

given environment, may be clear as a formal statement but it is not clear if we add also therequirement of content of the proposition, which we should if we are not satisfied with the

modern half-logic.

Anything done by man, starting with the collecting of wild berries, catching a fish by hand or

scratching the soil with a sharp end of a stone or by using the plow in order to plant a seed with

the hope that it will bear fruit, all this is the result of "molding a system" by following some goals

or purposes. But there is nothing "artificial" in such attempts to mold the system by using human

brains and hands for the purpose of extracting some visible benefits which are useful, conceived

both individually and socially. In fact, this is a natural thing to do and it is the basis of every

civilization that ever was developed. Professor Simon's definition is liable to produce confusion if it

is not further clarified. Indeed, his definition of the "artificial" includes also natural things and

phenomena.

We can now say that certain phenomena or objects are artificial because of two economic

characteristics:

- (1) first, they are not natural, in the sense that they are not "scarce" by their nature; and

- (2) second, they are relatively cheap, much cheaper than the usual natural things or phenomena.

Regarding the environment, respectively human society, we can add the third characteristic-that

artificial things or phenomena, including services, from the social point of view may be:

either socially or individually beneficial; or

harmful.


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By applying further the simultaneous equilibrium versus disequilibrium approach we can make a

distinction between two different categories of artificial things and phenomena, including services,

as follows:

those which are consistent with or bring about equilibrium conditions with no additional

problems; and

the others which are inconsistent with stable equilibrium or produce disequilibrium conditions,

with additional problems. With the latter category we are touching our problem of

dehumanization of modern civilization.

We have now a scientifically clear and systematic concept of the "artificial" which includes both

form and content. Professor Simon's definition is deficient in terms of content, having no clear

border line between natural things provided by mother nature and/or as a result of human activity

in cooperation with nature and purely artificial things, outside of the realm of natural things.

Professor Simon's distinction between "necessity" in the sense of "subservience" to natural lawand "contingency" in the sense of "malleability" to the environment is correct and useful but only

within the context of the three or four characteristics given above. To repeat, "artificial things"

are:

- (1) not scarce in the usual economic sense of the term;

- (2) relatively cheap compared with natural things;

- (3) may be socially beneficial or harmful; and

- (4) their use may be consistent with stable equilibrium conditions or it may produce

disequilibrium conditions.

With such a clear definition or concept which has form and content, we can dispose of many

difficulties. For instance, it is not "contingency", as Professor Simon writes, but the lack of a proper

definition which explains why artificial things or phenomena "have always created doubts, as to

whether they fall properly within the compass of science"[32]. The same is true that it is not these

doubts, again as Professor Simon wrote, but rather the lack of a clear concept which explains the

"difficulty of disentangling prescription from description"[33].

With the help of our definition the matter is very simple. If we deal with disequilibrium things -

phenomena, services, or institutions - these have to be repudiated in the name of social science,whereas the equilibrium type can be affirmed without any difficulty. This can be said in regard to

"prescription", or practical problems belonging to matters of policy or social regulations. As to

"description" there is no difficulty since this belongs to a different kind of problem; it belongs to

history where no value judgment is needed.

Perhaps for more clarification, it is necessary to mention as a part of the methodological aspect,

the existence of five different categories of problems which we have to keep separate:


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- (1) Economic history;

- (2) Economic theory;

- (3) Economic ethics;

- (4) Economic policy; and

- (5) Economic doctrine or history of economic thought.

It is a more comprehensive concept of Science which we call "Quinta Methodica".

According to Professor Simon "the real difficulty or the genuine problem is to show how empirical

propositions can be made at all about systems that, given different circumstances, might be quite

other than they are"[34].

In this case too the difficulty disappears when using our methodological novelties. Once we have a

clear concept about the artificial thing or phenomenon and we know and respect QuintaMethodica, there is no difficulty at all in constructing empirical propositions of one type or

another: affirmative or negative, description or prescription, theoretical or practical, ethical or

unethical. And if we have "different circumstances", that means that we are dealing with different

economic or social systems or models. Consequently, the same artificial things or anything else

may appear "quite other than they are", as a matter of fact and principle, following Einstein's

concept of relativity, as shown elsewhere[35].

Professor Simon mentioned in continuation that some 40 years ago he encountered the problem

of artificiality in almost its pure form:"

...(A)dministration is not unlike play-acting. The task of the good actor is to know and play his role,

although different roles may differ greatly in content....The effectiveness of the administrative

process will vary with the effectiveness of the organization and the effectiveness with which its

members play their parts[36]."

There is nothing artificial in this subject matter unless we point out precisely that we assume the

investigation in a system in disequilibrium (minor, major or neutral) when the solution to the

problem is indeterminate. But Professor Simon did not identify his model. If we want to know the

image of the optimum system of administration and the optimum behavior of actors, respectively

citizens, public employees and workers, then we must be aware that those goals require the

fulfillment of general stable equilibrium conditions, both at micro- and macro-level. It isunderstood that good (optimum as far as humanly possible) acting on the part of individual

participants cannot be expected if or when the system of administration is in disequilibrium.

Professor Simon raises a number of other questions which no one can answer precisely unless we

use the concept of the orientation table for economics which is a methodological framework with

the identification of all possible systems reduced to seven basic models arranged as follows (Table

I).


19/35

With the help of this table we can answer with methodological precision any question that can be

raised, assuming that the question was properly formulated. Let us take a look at a few more

questions raised by Professor Simon, as follows:"

How then could one construct a theory of administration that would contain more than the

normative rules of good acting? In particular, how could one construct an empirical theory? Mywriting...has sought to answer those questions by showing that the empirical content of the

phenomena, the necessity that rises above the contingencies, stems from the inabilities of the

behavioral system to adapt perfectly to its environment - from the limits of rationality, as I called

them[37]."

Answer:

Quinta Methodica shows that there are three steps to reach the territory of "normative rules of

good acting" which belong to practical problems or matters of policy:

- (1) Economic history (looking at realities as they are in a given country and at a particular time;

- (2) Economic theory (conceiving the same realities on a higher level of abstraction using the

theory of ideal types by Weber and perceiving reality in its actual and potential existence);

- (3) Examining the same realities to see whether or not they are socially beneficial (equilibrium)

and how much so, and how much are socially harmful (disequilibrium). There is no way to solve

this problem of doing justice to the ideal of social ethics or morality except by taking as a standard

of value judgments Model M[sub]1 from the orientation table, the Walrasian model, in its most

complete form, including a perfectly stable and equitable factor "R" or adequate institutional and

legal framework; and

- (4) The domain of policies and regulations.

For the good acting that Professor Simon wants, and we would add "optimum acting" as far as

humanly possible, we have to construct the "normative rules"; we must return again to Model

M[sub]1 in theory or to M[sub]2 in practice, and of course there remains the task of converting

the given realities into potential realities of the best quality which is possible in real life

everywhere on the globe. This is the clearest way of how to construct "an empirical theory".

As was mentioned above, Professor Simon's concept of the "artificial" is not clear enough and that

is why he ends up in a territory of cloudy and dark areas. In order to escape these difficulties, he

introduces a scientific trick or artificial strategy by invoking the "inabilities of the behavioral

system to adapt perfectly to its environment - from the limits of rationality".

This artificial strategy requires more clarification. First of all practically, if the adaptation refers to

Model M[sub]2 at 95 percent or 97 percent then we do not need to worry; the problem has been

solved as far as humanly possible and that is all that we need.


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As to the limits of rationality - the concept of "bounded rationality" whose father is Professor

Simon - this also is in need of further clarification. The orientation table shows that the limits of

rationality are in Model M[sub]1 where we have ideal certainty (truth in the abstract) in the

Newtonian sense, or in Model M[sub]2 practical certainty (truth in the concrete) in the Einsteinian

sense of special relativity. We may call this the double North Pole of Knowledge; and on the other

side of the table, Model M[sub]7 with ideal truth in the abstract and M[sub]6 with truth in the

concrete which represents the double South Pole of Knowledge.

Simon's concept of bounded rationality is all right in the sense that it is valid between the two

Poles of Practical Knowledge. With further information it may refer to a system of a minor or

major disequilibrium, including the dividing line of unstable equilibrium which separates the two

possible oceans of disequilibria (minor or major).

Another interesting point in Professor Simon's presentation is the statement:"

...that artificiality is interesting principally when it concerns complex systems that live in complex

environments. The topics of artificiality and complexity are inextricably interwoven[38]."

This statement is fine but not too useful if we do not specify clearly whether the complexity refers

to a set of conditions of a minor or major disequilibrium, including the position of unstable

equilibrium, or better said, stable disequilibrium. Finally one more statement:"

Engineering, medicine, business, architecture, and painting are concerned not with the necessary

but with the contingent - not with how things are but with how they might be - in short, with

design. The possibility of creating a science or sciences of design is exactly as great as the

possibility of creating any science of the artificial. The two possibilities stand or fall together[39]."

This statement also requires further clarification. First of all, "design" belongs to the arts, to the

application of certain pure ideas acquired through theoretical reasoning or inspiration (truth in the

abstract). Specifically, design belongs to the study of truth in the concrete (practical) as

distinguished from the truth in the abstract. Therefore, arts form only one part of the more

comprehensive concept of science as shown in Quinta Methodica.

Second, if we equate the "artificial" with the "design", we create a mixed bag of indeterminism

because design may refer to something which proves to be socially beneficial (consistent with or a

source of stable equilibrium conditions) but also could prove to be socially harmful (a source of

disequilibrium conditions). We arrive at the same conclusion: Professor Simon's concept of

artificiality, no matter how we view it, appears to be cloudy, does not have sufficient scientificcontent; it requires more clarification.

The reader, reaching the limit of patience, may finally ask what was the purpose of this long

dialogue with Professor Simon if all his results require more clarification? The answer is simple but

basic. The book, The Sciences of the Artificial, is a most interesting and challenging contribution

which shows what one can do with the help of modern, formal logic but also what one cannot do

if he or she uses the more recent concept of integrated logic, where not only the form but also the


21/35

content of propositions is considered simultaneously. We took the book by Professor Simon as a

challenge and we prepared summarily but still scientifically our response in the true spirit of

Toynbee's method of approach: "Challenge and Response".

Above all, we shall see that the "Artificiality" with the proper qualification, lies at the heart of our

theme, "Dehumanization of Modern Technology and Civilization".

6. Joseph E. Stiglitz: "Whither Socialism?"

Professor Stiglitz, a member of the Council of Economic Advisors to the President of the USA, also

wrote an interesting, challenging book, Whither Socialism? (The MIT Press, 1994, second printing

1995). We selected this book because in its own way it is a continuation of the same subject

matter investigated by Hindus, but this time written and interpreted in a different spirit. Whereas

Hindus portrayed the realities of the Soviet experiment in the early 1920s as they were at that

time, Professor Stiglitz uses a different approach by reinterpreting six decades later the same

realities developed between 1930 and the 1990s.

It is possible that Professor Stiglitz may be considered in the future as a candidate for a Nobel prize

because he is a forerunner of a recent movement called "The Economics of Information" which

presents and popularizes the view that the failure of both modern capitalism and socialism-

communism lies in the fact that enough or the best quality of information was not available.

Especially in the former socialist countries of Eastern Europe, this is known and referred to as

"Informatica".

The book deserves to be thoroughly examined and evaluated. Unfortunately, space is limited here

except to clarify a major proposition of the author - the application of the "new information

paradigm". In his own words:"

In summary, in this book I want to show how the perspectives of the new information paradigm

can provide at least some limited insights into the basic issues facing the former socialist

economies[40]."

A number of economists, including Stiglitz, believe that the economics of information is the

solution to the deficiencies of both capitalism or the welfare state and socialism on a democratic

basis. This conception, too, has become a quasi dogma open for debate for two reasons. First the

quantitative analysis, no matter how much statistical information is provided, is not and cannot be

sufficient to solve the economic and social problems of our time. As the great logician,

Wittgenstein, said: "The facts all contribute only to setting the problem, not to its solution"[41].

To be more specific, regardless of what social system we have, in our judgment about the situation

of the given conditions we should also consider the qualitative factor "R" from the orientation

table, respectively, the status (stable, unstable or mixed) of the institutional and legal framework.

Second, all the statistical information we may be able to get, in the welfare state (capitalism) or in

socialism of our time, is contaminated with disequilibrium bacteria and therefore not reliable,


22/35

carrying inherent instability no matter how refined are our mathematical tools (equations). No set

of equations will work (computers will refuse to consider them) unless or until we give them a

window dressing, i.e. we use some dummy variables to assure mathematical consistency. But by

doing that operation, we are hiding or covering up the inherent instability organically embedded in

the statistical data used.

7. Modern civilization contaminated by artificial (disequilibrium) elements and practices

All the sources of information we have used up to this moment point out that a sober, scientific

analysis of modern civilization, as magnificent as it may appear in certain respects, nevertheless

carries a number of artificial (disequilibrium) elements and practices which should put the

economists and social scientists on the alert that something must be done to stop the process of

erosion of the inner structure of modern society and economy before we reach a critical point of

no return.

The critical point may refer to bad things sneaking through the back door. The bad things may

appear in the form of an imminent social explosion, and as an excuse a political dictatorship

accompanied by a counter-cultural revolution may change the coming "Great Transformation" into

a complete dehumanization of modern civilization, a new barbaric age, as both Toynbee and

Gasset warned us. Both gave us a method of approach showing the road to be followed in order to

escape unthinkable conditions, one his "Challenge and Response", and the other "Meditation and

Subsequent Action".

This author tried to go a step further by adding a fresh, more comprehensive methodology of a

simultaneous equilibrium versus disequilibrium approach leading to a unique synthesis of classical

and modern school of economic, monetary, financial, social and political thinking. The task ahead

requires additional teamwork in two directions. First, we need a clear identification and precisedescription of the principal areas where the major artificial disequilibrium elements and practices

are located.

Second, we must proceed with analytical and practical research in showing unmistakably those

structural reforms and reasonable norms that can be accepted by the majority of citizens in a

given country so that we may turn the clock of history in the right direction.

The right direction cannot be anything else but the realization of the old and new great ideals of

man and humanity: first, personal freedoms extended up to the natural point where they will not

infringe on the freedoms of others, including the other great ideals; second, justice of equality

(when and wherever needed) and justice of equity (as a general constitutional rule) in the

distribution of national income and wealth embedded in the production process and not left to

the mercy of politicians and the ever-growing bureaucracy; third, monetary and financial stability

not by government intervention of traditional monetary and fiscal policies which by now we know

fail to work in practice but through an organically integrated and normally functioning institutional

and legal framework; fourth, full employment of available human and natural resources, not by

government deficit-spending which we know does not work properly but rather as a result of


23/35

normally functioning free but stable economic and financial markets based on full conditions of

general, stable equilibrium in its complete form; fifth, a democratic form of government of

delegated, limited powers with a judicial and parliamentary constitutional system to respect the

principle of division of powers and keep them balanced; and sixth, preserve peace and order

internally and with other nations.

On the practical side, we must take each sector of the economy and society and work out in detail

practical solutions (factor "S") which put into action will move promptly the actual, existing

disequilibrium conditions (factor "A") as close as humanly possible to the final destination of

potential realities of general, stable equilibrium (factor "P"), without creating additional problems

in the foreseeable future. In one sentence, we must apply a simple but comprehensive formula: S

= f(A,P) or S = A + P[42].

Here we have space only to identify a long chain of disequilibrium, artificial (with negative

connotation) elements and practices which permanently create problems for a modern society

and economy in every country on the globe, the difference being of degree and not of nature.

The list of disequilibrium elements and practices follows:

- (1) A large scale use of paper, artificial, cheap money which has inherent instability that cannot

be corrected by any rational policies as modern history has proved again and again, including this

century. This is the basic reason why businessmen and citizens cannot solve properly (in the short

as well as the long run) the fundamental problem of "economic calculation", specifically because

of lacking a reliable, objective monetary standard.

Since the paper monetary standard is artificial, automatically all prices and incomes are also

artificial, openly in a system of a market economy and hidden in a planned economy.

- (2) Monetized credit by private banks and other financial institutions in capitalism and by public

(state) banks in socialism belongs organically to the same type of artificial, cheap money which has

inherent instability that also cannot be corrected by any rational policies. Keynes called both paper

money and monetized bank credit "representative" money, but he thought that its inherent

instability could be corrected by now traditional monetary and fiscal policies. We know why these

policies did not work in the past, do not work in the present and certainly will not work in the

future if they are not restructured.

The reader should be aware of the clear distinction between:

ordinary, real credit always fully covered which does not change the supply of money in

circulation; whereas

monetized credit by banks and other financial institutions does change it. Credit-money in

continuation raises the ethical, moral issue that abstract purchasing power (bank credit) is created

from nothing and, therefore, ridiculous as it may sound, "nothingness" is loaned in large amounts


24/35

charged at a regular rate of interest and finances, among other unproductive things, concentration

of economic and financial power in holding companies, mergers and monopolies.

- (3) Pure speculations in any form on the organized securities-, commodities- and foreign

exchange markets, as distinguished from real transactions, are also artificial or disequilibrium

elements which lead also to falsification of prices and incomes.

- (4) Government traditional monetary and fiscal policies represent artificial elements in the sense

that they also produce more disequilibrium instead of desired equilibrium conditions.

- (5) Government deficit-spending is artificial because a disequilibrium malady (unemployment) is

treated with a disequilibrium medicine and the final result is more disequilibrium than before,

even though of a different nature, shown next.

- (6) The ever-increasing national and international debt is another element of disequilibrium

when it is generated by full employment policies or to defend a weak foreign exchange rate.

- (7) Official devaluation and/or overvaluation of a currency in a system of paper money is

definitely an artificial element with subsequent negative effects on the national economy.

- (8) Holding companies, certain mutual funds and concentration of economic, financial and

political illegitimate power, all represent artificial phenomena which may create not only

economic but also social problems.

- (9) Technological innovations financed through "forced savings" of the people, actually

dispossessed of a certain fraction of their real income, economically viewed, are artificial in the

sense that they are a source of social and economic problems. We shall return to this subject.

- (10) An accelerated, rapid tempo in the development of technological innovations - contrary to

the view of many professional economists - is also a source of added economic and social

problems, when financed by paper money and monetized credit. The new machinery does not

have time to be socially useful to the full extent since it is artificially and quickly displaced by other

newly designed machines when the first ones cannot be properly amortized; and the rapid tempo

of accelerated technology finally brings about more unemployment.

- (11) New technological innovations sponsored by government may easily lead to war

preparations and political conflicts with neighboring countries and thus break the peace, again

disequilibrium.

- (12) Finally, the continuous over- or super-mechanization of mass production of goods and

services already has slipped over into the world of ideas, in our sensitive apparatus of thinking,

producing a great danger for the future of humanity. We are becoming lazy in spirit, and this

phenomenon can be observed in the younger generation, a significant number of whom are

inclined to violence, crime and destruction. Through ignorance or indifference, we are depending

too much on the computers or artificial-intelligence mechanisms to make decisions.


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Many decisions at the highest level of government not only in the USA but in the whole world, are

made based not on solid, clear human reasoning but mostly, in principle, on what computers

dictate. The same can be said about the decisions taken at the Federal Reserve System, where by

raising or lowering the official rate of interest, immediately the employment and economic activity

of millions and millions of innocent and industrious people are affected. These are all artificial

decisions which do not solve but either complicate the problems with more disequilibria or

postpone them by increasing the national debt, thus passing a cumulative burden on the next and

perhaps future generations.

In brief, we are living in a terrible state of affairs in public life, for which the economic profession

bears a large responsibility. From this point of view, the destiny of humanity the world over

depends on whether or not we can restore a truly free market of ideas, which for quite a while in

this century did not exist fully. Perhaps this is the propitious moment to establish a chain of an

"International 'New Economists' Club" in group-style discussions, to inform people everywhere

about the real nature of the problems facing modern civilization and to debate them freely with

no dogmatic constraints. Then let qualified scientists (in socio-economic and natural fields) argueamong themselves in teamwork to forge consistent, workable solutions to extricate ourselves

from the present impasse.

The ongoing pitiful argument between a USA Congress dominated by the Republican Party and a

President from the Democratic Party, daily reveals the poverty of new, better ideas and changes of

positions on both sides simply with the hope of gaining political clout in the 1996 elections.

It is ludicrous to think that merely by reducing the budget deficit during the next seven years,

attaining a balanced budget by year 2002 (at this moment only on paper) would solve all, or at

least the basic problems, of the US economy and its finances beleagured with innumerable

disequilibrium elements and practices, of which 12 are identified above. Our economists who

serve as advisors close to the seat of power in both political parties are either naive to the

maximum or are betraying the cause of millions of Americans who go to work each day without

asking philosophical questions of why, but at the same time paying taxes to maintain the

machinery of government, imperfect as it may be.

The naked truth is that these official advisors do not have the right solution to the pending

complex problems but they can play a bizarre computer-game, rolling over and over again the

same old marbles of traditional thinking inherited from the 1930s. They seem to be fantasizing

taking a bull by the tail in a Spanish arena and hope to win the competition.

Mesmerized by the wonders of modern technology in the physical sciences and believing that

programming through computers by trial and error could give the right answer to the urgent

problems of today, official experts in power have already developed an attitude of arrogance and

indifference to any possible new, different ideas. Those who make final decisions are confused and

incapable of forming a clear, healthy judgment of value on what is right and what is wrong in

modern society and economy at a historical junction when we are approaching "The Great

Transformation",while the public is totally unprepared for this unique event.


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It must be definitely clear that the budget deficit is just one of the previously identified 12 major

disequilibrium elements and practices. Even if the US budget by 2002 is balanced (a hypothetical

wish), the other 11 disequilibrium forces would counterbalance with negative effects by creating

other problems, not after 2002 but rather quickly, beginning with 1997, if not 1996.

Under these gloomy conditions, all economists and social scientists must be aware of possibledangers in the foreseeable future. The first immediate danger refers to the fact that we are not

paying enough attention to what is going on daily in politics, economy, finances, education, public

order and society in general. We thus fail to notice that in obscurity there is being prepared a

disguised political dictatorship through skillfully manipulated propaganda that basically all is sound

and healthy, with the illusion that pending social, economic and financial problems will be solved

by free, imperfect markets. When things will become really bad, the only alternative in the

democratic process will be to submit (as a social necessity) to government programs and detailed

regulations, all artificial and not suitable to solve the problems adequately but curtailing individual

freedoms drastically.

Those who are older and perceive the problems of the day must direct their attention to the rising

younger generation, because no matter what the elderly may say, the future depends on what the

young generation will do. To them we must pass the optimistic spirit that we are not lost, and no

matter what may happen tomorrow, we still have an inexhaustible resource at our disposal, the

human imagination to discover innovative, superior ideas. The true salvation lies in ourselves, in

our capacity to withdraw from the tumultuous world of confusion and meditate, as Gasset

recommended, on our own destiny and that of humanity, following the example depicted by

Berenger in Ionesco's play, "The Rhinoceros".

We have to correct the deficiencies of predecessors in the field of economics and the other social

sciences and rigorously proceed to work on fundamental problems to build an adequate modern

culture capable of resolving the problem of the two cultures raised by Sir Charles Snow, i.e. to

keep in natural, moderate balance modern technology and civilization. We did not develop an

adequate modern culture at the right time to match the relatively high level of civilization.

Technology dominates almost every aspect of our lives, and computers rather than human minds

are making more and more decisions about how we should live. Others, but not many, have

observed the same phenomenon. Jacques Ellul, for instance, wrote penetrating observations in his

book, The Technological Society:"

Technique has progressively mastered all the elements of civilization. We have already pointed

this out with regard to man's economic and intellectual activities. A man himself is overpoweredby technique and becomes its object. The technique which takes men for its object thus becomes

a center of society; this extraordinary event is often designated as technical civilization. The

terminology is exact and we must fully grasp its importance. Technical civilization means that our

civilization is constructed by technique...for technique... and it is exclusively technique[43]."

What else can be said? The problem of "Civilization on Trial" raised by Toynbee is there for those

who want to see and meditate.


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Part II. A new Schumpeterian explanation of poverty

Karl Marx thought that the explanation of poverty, or what he called the exploitation of the

masses, lies in the phenomenon of surplus value linked to the institution of private property

considered to be the greatest social evil of a completely rotten capitalist society. This picture of

the problem is inherited from him.

During the twentieth century after seeing what happened in the Soviet Union where the

Communist revolution indeed put an end to private property but the exploitation of the masses

continued in a much more intensive manner, there is no longer any scientific or empirical doubt

that the Marxian explanation of poverty, supposedly due to the institution of private property,

was and is false, or at least ambiguous, not true as such. And indeed this is the case.

Usually private property is the result of human effort, ingenuity, hard work and savings. This may

be called legitimate or the right kind of property. Of course, in capitalism, private property may

also be the result of pure speculations in the organized securities-,commodities-, and foreign

exchange markets or in free, imperfect markets in general, or oligopolies, all sort of limited

monopolies where prices may be manipulated above the real equilibrium level. These may be

called illegitimate or unjust sources of private property.

Of course, there was and still is a problem of social injustice in regard to any illegitimate private

property, but from this we cannot draw the conclusion, as did Marx, that private property must be

abolished to make room for a collectivist or communitarian type of social order. Legitimate private

property is the strongest pillar to attain and defend individual freedom, which is the principal

motor of developing a durable civilization. Social reform to repair injustice due to illegitimate

private property, in fact, whenever possible to eradicate this kind of property, remains a problem

to be debated. The vast majority of economists have correctly recognized that the Marxian theoryof labor-value is also untenable.

Yet, the "surplus value" as a social phenomenon of cheating the masses of consumers (including

the working class) by an invisible reduction of real incomes existed during Marx's time and before,

and exists today not only under capitalism but even more severely in socialism-communism.

Marx was right to link "surplus value" with the inverted order of circulation: M - C - M', where M' =

M + DM but leaving out the simple circulation of commodities: C - M - C.

What Marx failed to see, constituting a fatal scientific error in his work, is that "M" (money) in the

inverted order of circulation is entirely different from "M" in the simple circulation formula. Thisshows that he lacked sufficient knowledge in the way modern banks were monetizing credit-

money. He thought that "M" in both formulas was the same, which is not true. He remained

consistent with his statement made at the beginning of Chapter III: "Through this work, I assume,

for the sake of simplicity, gold as the money commodity"[44].

Marx's observation about the mixed nature of modern capitalism for his time was absolutely

correct. Unfortunately, he did not see that the first type of money organically belonged to the first


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form of simple circulation and the second type to the inverted order of circulation. This, we think,

was due to lack of sufficient knowledge about modern banking.

Further, he did not see or say explicitly that the first combination represented the equilibrium

form of exchange where "M" was the natural "numeraire"-currency that Walras used as a

fundamental condition in his version of the law of general equilibrium, and the secondcombination stood for the disequilibrium form of exchange where "M" represented artificial

money or anti-numeraire. For him the two "M"'s were "nothing more than a difference in their

form of circulation"[45]. This was a fatal mistake.

Indeed, he was not aware of his own observations that modern capitalism was composed of

sound, healthy equilibrium elements and practices alongside a chain of weak, unhealthy

disequilibrium elements and practices. The major problem, consequently, was not to destroy the

system by a violent, bloody revolution but rather to improve it by adequate structural reforms

using the democratic process.

It is also a pity that the economists of his time and thereafter did not undertake a dispassionate,

objective, systematic analysis of his contribution in Vol. I of Capital (the only one which was

published during his life) to discover the two personalities in Marx: one, the pure scientist, in the

first four chapters, and Marx, the political revolutionary, in the rest of the work[46].

Leaving Marx to rest in peace, of all the great modern economic thinkers, it was Schumpeter who,

in clear, precise language, described the true, mixed nature of modern capitalism with reference

to the problem of capital formation and how new investments are financed. In a long article,

"Money and the social product", (1917/18) Schumpeter showed explicitly that in capitalism there

are two methods of capital formation and two ways to finance new investments[47].

One is the common, natural capital formation, as old as humanity, composed of free, voluntary

savings by the people, which are invested either directly through the purchase of securities (stock

or obligations) or indirectly by being entrusted to the banks. The banks in turn use them to grant

loans for real investments and charge a rate of interest higher to the borrowing entrepreneurs

than the rate paid to the depositors of savings, the difference being their legitimate profit.

The other method of financing new investments is through monetized credit by the banks and

other financial institutions, i.e. abstract purchasing power which produces an inflationary effect,

that in fact means a reduction (perhaps a better term is expropriation) of a fraction of real income

of consumers, where all social classes are included, but, of course, the working class, with the

loWest level of incomes, are the hardest hit. Schumpeter called this phenomenon "forced

savings", conceived as an additional source of capital formation, much bigger than that resulting

dehumanization of modern civilization and a new

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