REAGAN POLICY COULD PROVIDE LAST CHANCE

By Eric D. Butler
Assuming that the Reagan Administration seriously attempts to implement its much-publicised "great recovery" programme, history may record that President Reagan and his advisors, devotees of what is termed "unrestricted free enterprise", provided the peoples of Western Civilisation with their last chance to avert a major collapse.

The theories of John Maynard Keynes, skillfully promoted during the desperate days of the Great Depression in the thirties, have proved progressively more disastrous. Like a drug, the Keynesian policy of increasing government expenditure, by the simple process of creating new credits for deficit budgets, does initially stimulate an economy. But as C.H. Douglas observed in "The Monopoly of Credit", "fundamentally a financial system is a matter of pure arithmetic and the results which will be obtained depend entirely upon the arithmetical factors which are exploited and only to a very temporary extent on the particular brand of black magic which is imposed."

Keynesian policies made it arithmetically certain that with credits for deficit budgets being created as interest bearing debt, and used generally for non-consumer production, there would be monetary inflation. Some better informed Marxists early grasped the long-term revolutionary implications of what Keynes and his backers were promoting. One of the best known of these Marxists, John Strachey, correctly observed that once a nation embarked upon Keynesian policies, growing inflation and instability were inevitable.

Combined with the post Second World War technological explosion, making it possible to expand production enormously with less human labour, the governments of all industrialised nations increasingly had to use deficit budgets and associated credit expansion policies in a desperate attempt to keep their economies operating. A feature of these policies has been the provision of growing credits for exporting - even exporting to the Communist nations. Escalating financial debt has been reflected in escalating inflation. Attempts to reverse inflation by credit restrictions merely aggravate unemployment, intensify social disintegration, while having only a fractional impact upon inflation.

In his "great recovery" speech to the American Congress, President Reagan produced a roar of approval from his supporters when he pronounced the end of Keynesian economics. With Keynesian economics increasingly found a disastrous failure, it is not surprising that Ronald Reagan's promise to end them has met with a warm response from large numbers of the conservatives groups which came together to make the Reagan election victory possible. But what in essence does Reagan offer as an alternative?
On one hand tax cuts are offered, a highly desirable objective, with corresponding cuts in social welfare and other spending. But there is also a proposed big increase in military spending, justified by the Soviet threat to which American policies have made such a major contribution.

The arithmetic of the situation makes it certain that unless the Reagan Administration proposes to change the prevailing method of creating and issuing financial credit, the initial result could be to increase the estimated $38.5 billion (Australian) budget deficit for the next year. If President Reagan is to achieve his objective of an expansion of growth from zero to 5.2 per cent over the next two years, this will also require an expansionary credit policy. Hopefully, and probably, for a short period a big upsurge in economic activity will provide an increased volume of taxation, effecting tax cuts. But with an increased volume of debt pouring into the system, coupled with a big increase in production, further inflation will be inevitable along with an attempt to increase exports.

A genuine anti-Soviet policy requires the halting of all American exports to the Soviet. But such a policy would have a devesting effect on sectors of the American economy. If President Reagan can get his super-production policy under way, it can be predicted with complete certainty that it will end in a major disaster. It is highly probable that Reagan will find it impossible to do more than make a futile attempt to implement his programme. Arithmetic cannot be defied.

Whatever happens, the stage is set for a traumatic demonstration that no genuine stability is possible under present debt-finance geared to attempting to serve a production for the sake of production philosophy. And it could result in widespread realisation throughout the West that it must drastically change the present methods of credit creation and control, or collapse into complete chaos. The last chance for the West could be coming up.

GOUGH WHITLAM ENTERS CANADIAN CAMPAIGN

Mr. Jeremy Lee, currently touring Canada under the auspices of the Canadian League of Rights, reports that former Australian Prime Minister Gough Whitlam has been campaigning in favour of Trudeau's thrust for more centralised power. One hardly sets foot in Canada before realising the enormous feeling on the issue of the Constitution.
Trudeau's attempts to ride rough shod over the Canadian Provinces and their citizens have sparked a reaction, which is fast becoming both informed and motivated. Trudeau now depends on his belief that the British Parliament will conform to his arrogant demand that the British North America Act be delivered into his hands on his terms. But the massive volume of mail now arriving in London, addressed to Her Majesty the Queen, or to the British parliamentarians, has made it unlikely that Trudeau will gain the 'doormat' response he anticipated from the British.

At the meetings I have addressed so far, many now point out that mail directed to Buckingham Palace is being answered by the British High Commission in Ottowa, while others have heard back from Palace officials in London.

Recently tripping around Canada, giving all and sundry the benefit of his experience with constitutionalism has been one Gough Whitlam! Needless to say, he has backed Trudeau to the hilt, and has no doubt explained the awful injuries that can be inflicted on the divine rights of politicians by such "anachronisms" as institutions, elected senates, monarchical representatives and any sort of federal system. Canadians I have met don't seem to have been very impressed with Gough, and I have been asked more than once whether he is Australia's 'underarm problem.'

No doubt Prime Minister Trudeau wants to get constitutional issues out of the way as soon as possible, paving the way for activities he has planned later in the year. On January 15th, Canada ratified the Common Fund aspect of the New International Economic Order. The Common Fund Agreement was opened for signature on October 1st 1980, and, according to Canadian officials, will "come into force when 90 states accounting for two-thirds of the financing, have ratified …"
On July 20th-2lst, Trudeau will host a conference Summit of leaders from industrialised countries, at which the next stages of the N.I.E.O. will be mapped out. This will follow hard on a "North-South Summit" to be held in Mexico in June, which will be attended by many nations. These two conferences will be followed by the Commonwealth Heads meeting to be hosted by Fraser in Canberra, which will also deal with aspects of NIEO. So such irritants as constitutional issues will have to be safely out of the way by then.

Trudeau will not find it quite as easy as the thinks…Meanwhile, something of a blow-up has occurred in the Canadian House of Commons over the defeated leftwing President of Jamaica, Michael Manley. Australians will recall Prime Minister Malcolm Fraser's close co-operation with Manley in setting up the Lusaka conference, which finally torpedoed Rhodesia. Having been rejected by his own people, Manley has now been offered a fellowship to the Canadian funded International Development Research Centre. The latter costs Canadian taxpayers $38 million annually. Asked what the fellowship would be used for, the Centre's head, one Ivan Head, said Manley's use of the money would probably result in a study and book on the New International Economic Order. One M.P. Doug Neil, commented: "There's no way the Canadian taxpayers should have their pockets picked by Trudeau and his friends to finance such a leftist friend of Fidel Castro's as Michael Manley . . ."
Fraser, no doubt, will be comforted that his old buddy is being so well looked after.

THE POLISH DEBT SITUATION

The Polish drama continues to confirm what we have been saying for years: that the Communist Empire has been sustained by economic blood transfusions from the non-Communist world, the credits being provided by international financial groups. Government backed Export-Import banks have also assisted.

Polish workers have set in motion developments, which are bringing into the open the realities of Communism. The latest revelation comes as the result of criticism by one of Poland's most influential Communists, Mr. Mieczyslav Rakowski, not only a member of the Central Committee of the Polish Communist Party, but also editor-in-chief of the leading newspaper, "Politika".
Rakowski has spoken of the grave economic problems confronting Poland at the annual seminar of the European Management Forum. Although he did not speculate on what action the Soviet might take, he made the highly significant statement that he did not think Moscow would object to the Western industrialised world pouring in financial aid to prevent Poland from going bankrupt. Rakowski was specific about how much Poland required: $10 billion (U.S.) over the next few years. The polish economy has declined to the stage where, instead of being a big coal exporter, Poland could have to start importing coal in 1981. If this happened some factories would have to be closed down to conserve energy.

Rakowski said that the economic situation was disastrous in every way. He admitted frankly that "The country's indebtedness will continue to grow - it will have to - over the next few years. It is no secret that getting new credits is becoming difficult". For the first time there was an official public statement on the extent of the Polish debt, which is greater than published figures indicated. Rakowski said that medium and long-term debts now total $US 23.5 billion, which is 2.3 times higher than the yearly total of production and services exported to the West.

If the Polish workers continue with their strikes, further reducing the production, it will become impossible for the Polish Government to service its foreign debt. Those "anti-Communists" who uncritically accept the finance economic policies of the West, are being forced into a situation where they are afraid of the Communist nations disintegrating. Of course Moscow will have no objection to more massive credits from the West being made available to Poland, or to any other part of the Communist world.

The Communist leaders understand the "name of the Game". They have been playing that game ever since Lenin predicted that Western nations, unable to solve their internal problems, would compete one with the other to export to the Soviet the rope with which they could eventually be hanged. We warned at the time of the Afghanistan affair, which hit the world's headlines just over twelve months ago, that unless economic sanctions were applied to the Soviet, the Soviet would treat the West with contempt and remain in Afghanistan. This is exactly what has happened.

One of those who talked loudest about a strong stand against the Soviet over Afghanistan was "Iron Lady" Thatcher of Great Britain. Her government is currently on its hands and knees to Moscow, seeking to help British companies (those who have survived Thatcher depression) to gain their share of orders under the Soviets new five-year economic plan.

Western political leaders, who engage in strong anti-Soviet rhetoric while supporting exports to the Communist Empire, stand self-condemned as cowardly hypocrites. What is required at the moment in the West is just a little of the courage being displayed by the Polish strikers. That type of courage would enable a stand to be made at a time when it is clear that the Communists' internal problems are mounting.