Dehumanization of modern civilization and a new, Schumpeterian explanation of poverty Rugina, Anghel N. International Journal of Social Economics 25.

5 (1998): 661-692. Active la funcin de subrayado de resultados en los navegadores por voz Mostrar subrayado Resumen (resea) TraducirResumen Of all the great modern economic thinkers, it was Joseph 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. Schumpeter called this phenomenon "forced savings", conceived as an additional source of capital formation, much bigger than that resulting from free, voluntary savings. It is clear from Schumpeter that "forced saving" means an ingenious reduction of people's real incomes and an increase of real capital through banking operations. If there is a phenomenon of surplus value, then this phenomenon is produced not by private property, as Marx thought, but rather by the extensive use of credit-money which in a system of free, capitalistic, imperfect markets automatically produces the inflationary effect and forced savings. Texto completo

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Anghel N. Rugina: Professor Emeritus of Economics and Finance, Northeastern University, Boston, MA, USA Introduction The economic profession during the twentieth century has taken for granted that the traditional macro-monetary and fiscal policies are the true and adequate instruments to solve economic, monetary, financial and social problems of a modern, mixed economy and society. This position and this attitude are far from the truth. In fact they are the principal source of by now insoluble economic, financial and social problems. The subject matter is presumed to be so well known that neither scientists, including Nobel prize winners, nor the public in general and politicians who are in power or expect to come to power have the slightest doubt that such policies in practice may not work as expected or may produce socially harmful effects. This subject has become a strongly dogmatic "taboo", a real "myth" which was and still is the stumbling block which impedes us (meaning those so-called official experts close to the seat of

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 failure of 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.

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

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.

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 successive generations - 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 further analysis 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

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 all possible 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 of dehumanization[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]."

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.

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".

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 he provided 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 modern civilization, 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

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 should make 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 of modern 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.

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 of technology, 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".

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 their educational 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)

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

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 Russian situation. 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 ...

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 intimate sympathetic 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 in organization 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

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 the requirement 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.

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 law and "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:

- (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 Quinta Methodica, 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 is understood 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).

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? My writing...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.

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 scientific content; 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

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 socialismcommunism 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,

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 precise description 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

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

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.

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) argue among 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.

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 possible dangers 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 overpowered by 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.

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 theory of 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. This shows that he lacked sufficient knowledge in the way modern banks were monetizing creditmoney. 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

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 second combination 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 from free, voluntary savings. There is a big difference between the two methods of capital accumulation. In the case of voluntary savings, the capital and the interest or dividends remain with the people who saved,

whereas in the second case of forced savings, the people are expropriated of capital and interest without due process of law or an equitable indemnization[48]. There we find a social problem combined with a social moral issue of immense magnitude if we add the supplementary information provided also by Schumpeter (who in his youth was also a banker) - that more than 75 percent of new investments in a modern economy were financed not by voluntary but rather by forced savings. Let us hear Schumpeter's voice:" The price-raising effect of bank money gives rise to the phenomenon of "forced saving". Without wishing to save, people are forced to do so by the reduction of their real income through the rise of prices. This releases means of production and the stock of goods at the disposal of the economy for productive purposes is increased, its fund for immediate consumption is diminished. This amends Ricardo's oft-repeated statement that capital cannot be increased by "banking operations"[49]." It is clear from Schumpeter that "forced saving" means an ingenious reduction of people's real incomes and an increase of real capital through banking operations. If there is a phenomenon of surplus value, then this phenomenon is produced not by private property, as Marx thought, but rather by the extensive use of credit-money which in a system of free, capitalistic, imperfect markets automatically produces the inflationary effect and forced savings. The mechanism of this process is simple. First, the new capital initially in the books of a bank is nominal in nature (simple numbers in favor of a borrower). When the borrowing entrepreneur uses the credit by signing a check to pay for machines, raw materials or even labor, at that moment the supply of money in circulation increases by the same amount and the inflationary effect automatically produces the phenomenon of forced saving by converting, initially nominal capital into real capital. The reader should have clear in his or her mind the difference between real credit (always fully covered) and monetized credit (not covered, artificial credit money). The first case is non-inflationary whereas the second case is inflationary because the supply of money in circulation changes. This is the story of how modern technology and modern civilization were financed in a proportion of more than 75 percent but leaving behind, among other things, the enormously complicated problem of poverty in the midst of affluence. The welfare state tried to solve this; using disequilibrium means instead of adequate social reforms, the social question has become even more complicated, crying desperately for a reasonable and humane solution. One more question remains open. It is hard to believe that a scientist of Schumpeter's stature and an open friend of socialism could not have seen the social question in the grandiose drama of modern civilization! The only explanation which this author may offer for discussion is that in defending his ego as the father of the modern theorem of innovations financed through forced savings, Schumpeter avoided involvement in this kind of argument. He probably thought that a highly industrialized economy and society without the phenomenon of forced savings could not exist. In support of this supposition, we can listen to his voice:"

The banking world constitutes a central authority of the economy whose directives put the necessary means of production at the disposal of innovators in the productive organism. A monetary process, the creation of money which is only a "claim ticket" and not also a "receipt voucher", and the rise of prices to which it leads, become a powerful lever of economic development[50]." It is our view that the Schumpeterian vision of a "powerful lever of economic development" associated with his theory of innovation prevailed over the social question. Otherwise, Schumpeter is a master of observation and a powerful writer in the German tradition of Kant or Weber. To our knowledge, Schumpeter is the unique, great modern economist who in simple but masterful language has described explicitly the true nature of modern capitalism:" The essence of modern credit lies in the creation of such money. It is the specifically capitalistic method of effecting economic progress. It gives scope to the capitalistic function of money, as opposed to its market economy function[51]." The two concepts used here by Schumpeter - the "capitalistic function of money" versus the "market-economy function" - is closer to, if not the same as, that which Marx, the pure scientist, used in his concepts of "money that becomes capital" and "money that is money only". If so, then forced saving is nothing but a different name for the phenomenon of "surplus value" without any Marxian connotation. The final question which remains for further debate: Is there another, better alternative for the "capitalistic function of money" used to foster economic development which does not carry on its back the social question and the whole drama of the modern civilization now on trial? The answer is: of course, there is a better alternative available at any time and everywhere on the globe, and this alternative has been mentioned, again and again, in this paper. It is to apply rigorously and systematically the law of general stable equilibrium in its most complete form, as a sort of northstar guide in the simple formula of certainty given earlier in the text: S = f(A,P) or simply S = A + P. For the rest, the author hopes that others will take the problems exposed here as a challenge, study them more and come to better results. As Max Weber so eloquently said: "To be overcome scientifically is not only our destiny but also our own purpose. We cannot work without hoping that others will come further than us"[52]. References 1. Rugina, A.N., "Principia Oeconomica: new and old foundations of economic analysis", International Journal of Social Economics, Vol. 13 No. 7-8, 1986. 2. Toynbee, A., Civilization on Trial and the World and the West, Meridian Books, New York, NY, 1958, p. 22. 3. Toynbee, A., ibid, p. 33.

4. Toynbee, A., ibid, 5. Gasset, O.Y., The Dehumanization of Art and Other Writings on Art and Culture, Doubleday Anchor Books, 1956, p. 12. 6. Gasset, O.Y., ibid, p. 6. 7. Gasset, O.Y., ibid, p. 11. 8. Gasset, O.Y., ibid, p. 12. 9. Gasset, O.Y., ibid, p. 21. 10. Gasset, O.Y., ibid, p. 164. 11. Gasset, O.Y., ibid, p. 166. 12. Gasset, O.Y., ibid, pp. 175-6. 13. Gasset, O.Y., ibid, pp. 169-70. 14. Snow, C.P., The Two Cultures and the Scientific Revolution, The Rede Lectures, Cambridge University Press, Cambridge, 1959, p. 4. 15. Snow, C.P., ibid, p. 12. 16. Yudkin,M., Two Cultures? The Significance of C.P. Snow by F.R. Leavis, with a New Preface for the American Reader, Pantheon Books, New York, NY, 1963. 17. Snow, C.P., The Two Cultures and the Scientific Revolution, Cambridge University Press, Cambridge, 1959, p. 5. 18. Snow, C.P., ibid, p. 23. 19. Snow, C.P., ibid, p. 43. 20. Snow, C.P., ibid, p. 49. 21. Snow, C.P., ibid, p. 50. 22. Snow, C.P., ibid, p. 51. 23. Snow, C.P., ibid, p. 53. 24. Hindus, M., Humanity Uprooted, (1929), 14th Printing, 1931, pp. ix and xi. 25. Hindus, M., Humanity Uprooted, New York, NY, (l929), 14th Printing, 1931, p. xv. 26. Hindus, M., ibid.

27. Hindus, M., ibid, p. xvi. 28. Hindus, M., ibid, p. xvii. 29. Simon, H.A., The Sciences of the Artificial, The MIT Press, Cambridge, MA, (1969), 2nd ed., 1981, 5th printing, 1988 p. ix. 30. Rugina, A.N., "The quest for independence of principia logica, toward a third revolution in logic", Rivista Internazionale di Scienze Economiche e Commerciali, Anno XXXVI, N.3, Marzo, 1989. 31. Simon, H.A., The Sciences of the Artificial, MIT Press, Cambridge, MA, 1988, p. ix. 32. Simon, H.A., ibid, p. x. 33. Simon, H.A., ibid. 34. Simon, H.A., ibid. 35. Rugina, A.N., "The third revolution in economic thinking: a new methodology of orientation, clarification and development of new knowledge", Rivista Internazionale di Scienze Economiche e Commerciali, Anno XXXIV, No. 6, Giugno, 1987. 36. Simon, H.A., The Sciences of the Artificial, MIT Press, Cambridge, MA, 1988, p. x. 37. Simon, H.A., ibid. 38. Simon, H.A., ibid, p. xi. 39. Simon, H.A., ibid. 40. Stiglitz, J.E., Whither Socialism?, MIT Press, Cambridge, MA, 1995, p. 6. 41. Wittgenstein, L., Tractatus Logico-Philosophicus (1921), Routledge & Kegan Paul, New York, NY, 1961, p. 149. 42. Rugina, A.N., "A losing battle with the impossibility theorem in practice, an open letter to the President of the United States, William J. Clinton, and to the Economic Profession", International Journal of New Ideas, Vol. II No. 2, 1993. 43. Ellul, J., The Technological System, tr. by Neugroschel, J., Continuum, New York, NY, 1980. 44. Marx, K., Capital, A Critique of Political Economy, Vol. 1, The Process of Capitalist Production (1867), nternational Publishers, New York, NY, 1975, p. 94. 45. Marx, K., ibid, p. 146. 46. Rugina, A.N., "There are two Karl Marxes!", Eastern Economic Journal, Vol. IX No. 3, JulySeptember 1983.

47. Schumpeter, J.A., "Money and the social product", tr. by Marget, A.W., International Economic Papers No. 6, Macmillan Company, 1956. 48. Rugina, A.N., "The theory of the cheating of the masses in modern times, the institutional roots of social immorality under capitalism and socialism", International Journal of Social Economics, Vol. 15 No. 8, 1988. 49. Schumpeter, J.A., "Money and the social product", International Economic Papers No. 6, Macmillan Company, London, 1956, p. 205. 50. Schumpeter, J.A., ibid, pp. 205-06. 51. Schumpeter, J.A., ibid, p. 206. 52. Weber, M., "Wissenschaft als Beruf", Gesammelte Aufsatze zur Wissenschaftslehre, 1922, p. 534. Further reading 53. American Association for the Advancement of Science, Scientific Freedom and Responsibility, Washington, DC, 1975. 54. Arnold, M. (1960), Culture and Anarchy, Dover Wilson, J. (Ed.), Cambridge University Press, Cambridge. 55. Becker, C.L. (1955), Freedom and Responsibility in the American Way of Life, A vintage book.. 56. Brandt, R.B. (Ed.) (1962), Social Justice, Prentice-Hall, Englewood Cliffs, NJ. 57. Bronowski, J. (1978), Magic, Science and Civilization, Columbia University Press, New York, NY. 58. Buchanan, J.M. and Wagner, R.E. (1977), "Democracy in deficit", The Political Legacy of Lord Keynes, Academic Press, New York, NY. 59. Clough, S.B. (1960), Basic Values of Western Civilization, Columbia University Press, New York, NY. 60. Colodny, R.G. (Ed.) (1962), Frontiers of Science and Philosophy, George Allen & Unwin, London. 61. Colodny, R.G. (Ed.) (1965), Beyond the Edge of Certainty and Philosophy, Prentice-Hall, Englewood Cliffs, NJ. 62. Colodny, R.G. (Ed.) (1972), Paradigms and Paradoxes, University of Pittsburgh Press, Pittsburgh, PA. 63. Durant, W. and Durant, A. (1968), The Lessons of History, Simon & Schuster, New York, NY. 64. Einstein, A. (1950), Out of My Later Years, The Wisdom Library, New York, NY.

65. Einstein, A. (1961), Relativity, The Special and General Theory, Crown Publishers, New York, NY. 66. Freillich, M. (Ed.) (1972), The Meaning of Culture, Xeros College Publishers.. 67. Fukuyama, F. (1992), The End of History and the Last Man, Avon Books, New York, NY. 68. Hague, D.C. (Ed.) (1958), Stability and Progress in the World Economy, Macmillan, London. 69. Hayek, F.A. (1952), The Counter-Revolution of Science, Studies on Abuse of Reason, The Free Press, New York, NY. 70. Hofstadter, A. and Kuhns, R. (1964), Philosophies of Art and Beauty, University of Chicago Press, Chicago, IL. 71. Howson, C. (Ed.) (1976), Method and Appraisal in the Physical Sciences, Cambridge University Press, Cambridge. 72. Keynes, J.M. (1971), A Treatise on Money, The Pure Theory of Money, The Collected Writings, Vol. V, (1930). 73. Keynes, J.M. (1973), The General Theory of Employment, Interest and Money (1936), Collected Writings, Vol. VII. 74. Knight, F.H. (1957), Risk, Uncertainty and Profit (1921), 8th Impression. 75. Koopmans, T.C. (1957), Three Essays on the State of Economic Science, McGraw-Hill Book Co., New York, NY. 76. Kosko, B. (1993), Fuzzy Thinking, the New Science of Fuzzy Logic, yperion, New York, NY. 77. Kuhn, T.S. (1970), The Structure of Scientific Revolutions (1962), 2nd ed., University of Chicago Press, Chicago, IL. 78. Kurtz, P. (Ed.) (1969), Moral Problems in Contemporary Society, Prentice-Hall, Englewood Cliffs, NJ, 1969. 79. Latsis, S. (Ed.) (1976), Method and Appraisal in Economics, Cambridge University Press, Cambridge. 80. Mankiw, N.G. and Romer, D. (Eds), New Keynesian Economics, 4th ed., The MIT Press, Cambridge, MA, (1991). 81. Marshall, A. (1952), Principles of Economics (1890), 8th ed., Macmillan, New York, NY. 82. Miller, P.J. (Ed.) (1994), The Rational Expectations Revolution, Readings from the Front Line, The MIT Press, Cambridge, MA.

83. Mora, J.F. (1960), Philosophy Today. Conflicting Tendencies in Contemporary Thought, Columbia University Press, New York, NY. 84. Newton, I. (1962), PRINCIPIA Mathematica: Principles of Natural, Philosophy and His System of the World, revised by Cajori, F., University of California Press, Berkeley, CA. 85. Rogge, B.A. (1979), Can Capitalism Survive?, Liberty Press.. 86. Schumpeter, J.A. (1954), History of Economic Analysis, Oxford University Press, Oxford. 87. Simon, H.A. (1982), "Models of bounded rationality, economic analysis, and public policy", Vol. 1 The MIT Press, Cambridge, MA, 1983, Behavioral Economics and Business Organization,Vol. 2. 88. Toynbee, A.J. (1955), A Study of History, Vol. 12, Oxford University Press, Oxford, (1934). 89. Veseth, M. (1990), Mountains of Debt, Oxford University Press, Oxford. Illustration Caption: Table I; An orientation table for economics Nmero de palabras: 15739 Copyright MCB UP Limited (MCB) 1998