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World Without Torture: The Responsibilities of the West

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Cross-posted from Paul Craig Roberts


I was recently interviewed by Nilantha Ilangamuwa, editor of Torture, a print and online magazine published by the Asian Human Rights Commission based in Hong Kong and the Rehabilitation and Research Centre for Torture Victims in Denmark. Torture: Asian and Global Perspectives is a new initiative which focuses on torture and its related issues globally. Writers interested in having their research on this subject published, may submit their articles to torturemag@ahrc.asia  My remarks, as published in the magazine, are below...

TORTURE
August 2012

WORLD WITHOUT TORTURE: THE RESPONSIBILITIES OF THE WEST

Dr. Paul Craig Roberts was educated at Georgia Tech, the University of Virginia, the University of California, Berkeley, and Oxford University where he was a member of Merton College. He has been the Assistant Secretary of the US Treasury in the Reagan administration, a member of the US Congressional staff, an associate editor and columnist for the Wall Street Journal, and a columnist for Business Week, the Scripps Howard News Service, and Creators Syndicate. He was also a Senior Research Fellow for the Hoover Institution at Stanford University and was appointed to the William E. Simon Chair in Political Economy at Georgetown University's Center for Strategic and International Studies. He is currently the chairman of the Institute for Political Economy and has authored or coauthored ten books and numerous articles in scholarly journals. He has testified before committees of Congress on 30 occasions. Dr. Roberts was awarded the US Treasury's Meritorious Service Award for "outstanding contributions to the formulation of US economic policy," and France's Legion of Honor as "the artisan of a renewal in economic science and policy, after half a century of state interventionism."

NI: You worked at the US treasury as Assistant Secretary during the Reagan administration, when the world economy changed towards neo-liberalism, and you are famous for being a co-founder of Reaganomics. How did this happen? What was your contribution to changing the model of world economy?

PCR: Reaganomics is a term the media attached to an innovation in economic theory and policy known as supply-side economics. Supply-side economics is not an ideology and it is not neo-liberalism.

I do not think that the Reagan administration changed the model of the world economy or that the administration thought of itself as neoliberal. What the Reagan administration did was to change the macroeconomic policy that had prevailed in the post-war English speaking world. That policy, known as Keynesian demand management, relied on government fiscal policy and monetary policy in order to maintain full employment and low inflation. If unemployment was the problem, government would enact a budget deficit and the central bank would expand money and credit. The monetary and fiscal stimulus would boost aggregate demand, and the increased spending would raise the level of employment. If inflation was the problem, the government would enact a budget surplus and the central bank would reduce the growth rate of money and credit.

This was how the policy was supposed to work. For example, in the early 1960s US economists understood the reduction in marginal income tax rates championed by President John F. Kennedy as a stimulus to consumer demand. Prior to Reagan, economists did not understand that fiscal policy could increase or decrease aggregate supply.

The demand management policy broke down during the Carter presidency. Each boost to employment had to be "paid for" with a higher rate of inflation, and each attack on inflation had to be "paid for" with a higher rate of unemployment. These worsening trade-offs became known as "stagflation."

The only economists who had an answer to the problem of stagflation were the few supply-side economists of which I was one. Supply-side economics was an innovation in economic theory and in economic policy. Supply-side economists said that fiscal policy directly impacts aggregate supply. For example, a reduction in marginal tax rates (the rate of tax on additional income) changes important relative prices. It makes leisure more expensive in terms of foregone current income, and it makes current consumption more expensive in terms of foregone future income. Therefore, a reduction in marginal tax rates does not merely increase consumer demand. The lower tax rates result in an increase in labor and investment inputs, and aggregate supply increases. The demand management policy had stimulated demand, but the high marginal tax rates discouraged or made weaker the response of supply to demand. Therefore, prices rose. Supply-side economists said that the solution to stagflation was to change the policy mix: a tighter monetary policy and a looser fiscal policy. In other words, reduce the monetary stimulus and increase the supply incentives.

The policy worked, and the worsening "Phillips curve" trade-offs between employment and inflation disappeared. President Reagan had two main goals: to end stagflation and to end the Cold War. He campaigned on the supply-side policy. In order to get the policy implemented, he appointed me Assistant Secretary of the Treasury for Economic Policy. Later he associated me with his second goal by appointing me to a secret committee. Reagan thought that the Soviet economy was too decrepit to withstand the stress of a high-tech arms race. He believed that by threatening the Soviets with an arms race, he could bring them to negotiate the end of the Cold War.

The CIA told Reagan that the Soviets would win the arms race, because it was a centrally planned economy that controlled investment and could allocate as many resources as necessary to the military. Reagan did not believe the CIA and appointed a committee to make the determination. The committee concluded that the Soviet economy would be unable to compete in an arms race.

NI: The United States' image was still reeling from the Vietnam War, which ended in 1975, when President Jimmy Carter came in to power. America had learnt an expensive lesson from the loss of more than 57,000 American servicemen in the jungles of Southeast Asia. However, during Carter administration there were also tremendous conflicts from Afghanistan to Iran, Grenada to Nicaragua. It was a hot time in the Cold War. Then in 1980 Ronald Reagan won the election, and had won the Cold War by the time he left office. How was the Reagan administration different from other presidencies?

PCR: Reagan achieved both of his goals, and that is what makes him different from other presidents. The military conflicts during the Reagan years were minor, and, unlike the military conflicts of the George W. Bush and Obama regimes, were not conflicts on behalf of US world hegemony. Reagan said that if he was to be successful in bringing the Soviets to an agreement to end the Cold War, he had to draw the line in the sand and prevent any further communist expansion, whether in Afghanistan, Grenada, or Nicaragua. He said that if more countries fell to communism and became Soviet clients, the Soviets would be too confident to negotiate an end to the Cold War.

NI: Your book entitled, "Alienation and the Soviet Economy," has extensively examined the economic policy of the USSR and their weaknesses in planning. Could you please share with us how their weakness benefited the US to develop a neo-liberal economy and an identity as the leader of the West?

PCR: My book explains the Soviet economy as the outcome of an ideological attempt to remake human nature and society by substituting a planned economy for the unplanned market economy. Paradoxically, the collapse of the Soviet Union is one of the two developments (the other being the rise of the high speed Internet) that wrecked the US economy. When the Soviet Union collapsed, the American neoconservatives spoke of "the end of history," by which they meant that American capitalism was the only viable socio-economic system. The Soviet collapse caused the communists in China and socialists in India to rethink their approaches and to get on the winning side. These two Asian giants opened their vast under-utilized labor forces to western capital.

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http://www.paulcraigroberts.org/

Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan Administration. He was associate editor and columnist with the Wall Street Journal, columnist for Business Week and the Scripps Howard News Service. He is a contributing editor to Gerald Celente's Trends Journal. He has had numerous university appointments. His book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is available here. His latest book,  How America Was Lost, has just been released and can be ordered here.

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