It was the end of World War Two. The U.S. was emerging as the dominant power in the aftermath. But there was a worry that the predatory free-for-all that ensued from World War One and led to World War Two would raise its ugly head again — and just create a another new era of economic blood-sucking. Politicians were once again carving up the world to pillage chaotic post-war oil-fields. International trade bullies were lining up cowering third-world countries to become destitute suppliers of cheap resources to the affluent. Everything was on track.
But some economists dissented. Most famously, John Maynard Keynes rigorously laid out how irrational and ultimately unstable that situation would be. Less famous but well known in his own right, E.F. Schumacher (Small is Beautiful) was calling for an economy that respected and reflected the human spirit. They came together in their conviction that the global economy needs to be given a structure and a mechanism that self-corrects automatically whenever winners pull out too far ahead of losers.
Economists were outraged at the suggestion that the free-market economy doesn’t do exactly that as a matter of course, and always. But Keynes had aristocratic connections (i.e., clout), and Fritz Schumacher had a loyal following. Keynes, in particular, was able to convince the British government that he could design a workable global monetary mechanism that would self-regulate international trade — that would automatically pull back predatory nations when they start to bleed their trading partners too dry. And indeed he did — a work of genius.
Here’s how it was meant to work. There would be a new world currency called the Bancor (not to be confused with a current bitcoin-type currency of the same name). The Bancor would be based on gold, whose markets had been thrown into chaos by the Great Depression. It would be lodged in a global bank called the International Clearing Union. Every country would have a line of credit there.
If some country starts hogging all the exports — to an extent more than half its ICU line of credit — it would get slammed with a 10% penalty on its ICU account. It would also have to appreciate its currency to fix its exhort-import ratio, and ease up on capital outflows to help restore balances. Since a trade balance is desirable on both sides, countries with too many imports would have similar incentives to correct them.
British economists recognized the genius of this plan, and how it would effectively rein in rogue forces in the global economy. The British government took up the cause on the world stage — recognizing a unique opportunity to set the financial system straight in a fluid post-war situation.
But the Americans would have none of it. They were riding high on victory testosterone. They were king of the world. They had glorious opportunities before them — massive trade grabs — massive cash grabs — massive capital consolidation. They weren’t going to give up those gifts just to save the butts of some inferior trade adversaries.
But that’s not the worst of it. American negotiators used their post-war clout to wangle the most outrageous trade concessions you can imagine. Not only were there no rules to stop trade bullying, not only were they free to push through trade agreements that give trade bullying the force of law — but they were made exempt from all consequences. How? All trade was to be conducted in American Dollars, so that all world debt is debt to America and all American debt is debt to itself. Talk about a rigged system.
This is immorality at its finest. No wonder I’m calling it The Profane Economy.