Bernanke's helicopter drops are not enough

The “system” has been based on a “licence to self-destruct” version of a “free market” and the accumulation of levels of individual, household, corporation and public debt, especially in the United States, that are so unprecedented that, in any earlier age, they would have been unimaginable.

The emphasis has been on runaway consumption rather than production; on uninhibited global borrowing to achieve it and massive “leverage” by often Ponzi-like financial institutions to finance it.

The only question has always been not if but when the inherently unstable structure would collapse.

Inevitably we now face a period of widespread instability and distress. Potentially, that period is likely to be as long as or longer than that of the Great Depression of the 30s and the distress even more bitter and global. The threats to human survival, in the age of nuclear and other weapons of mass destruction, are much greater than ever before.

In large measure, we must resort to “helicopter drops”. For political and social, as well as economic reasons, they are unavoidable. However, even while we are making these drops of utter desperation, we should keep our focus on whom the drops should help in the short term and on what must be our longer-term goals.

Above all, those goals must include a return to sound economic and financial policies, that is, policies which recognise again with absolute clarity that genuine prosperity in terms of income and wealth depends on real public and private, mostly fixed-capital investment, the development of ever higher productivity and real production which takes account of the real needs - food, clothing, shelter, health, education, etc - of all our people and which does so in sustainable ways.

Inevitably, a return to sanity like this is going to take time. So the helicopter drops will need to focus to a substantial extent on meeting emergencies - to rescuing those whom the financial hurricane has left, so to speak, without shelter and to finding some means of employing them in useful tasks as soon as we possibly can - in weeks rather than months and months rather than years. Even if it is only getting them to dig holes and fill them in again, that could be more productive than giving life support to financial institutions which don’t deserve it and which are, in effect, already dead in any meaningful sense anyway.

Let us be crystal clear that we surely would not dream of reviving the “financial services industry” with which we have burdened ourselves in recent years and which is now self-destructing. Urgently and most imperatively, we must create something sane and satisfying to put in its place.

In proceeding to these reconstructive tasks, we need to reflect on the economic and political system and what we must have it deliver. A capitalist system has virtues but it must be managed with care, discipline and a deep and abiding sense of responsibility. A democratic system has virtues too but it is vulnerable to charlatans and self-seekers.

A system of world security such as the United Nations also has virtues but it must do what its charter intended and not drift into inanities which only fecklessly bolster the institutions themselves rather than attend to the goals of their founders.

The United Nations has totally failed in its responsibilities under the economic and social provisions of the United Nations Charter. A whole array of other international economic and financial institutions, including the World Bank and the IMF, have similarly failed miserably. They have all been utterly useless in preventing or even slowing our feverish race to catastrophe.

The longer-term goal of a secure and stable world we must always keep in mind; but we still have an emergency situation right now with which we have to deal.