As an economic scientist I protest against the censorship of science and the abuse of power by the directorate of the Dutch Central Planning Bureau since 1990. Since the Dutch apparently cannot solve the issue by themselves I ask the world since 2004 to boycott Holland till it is. Please stop buying the flowers, Gouda cheese, Heineken beer, Philips appliances, Air France - KLM airflights, Aegon insurance and so on, with the exception of the internet and other sources for the freedom of thought. All this, till the integrity of science is restored. The current economic crisis in 2009 adds to the drama. Your participation in the boycott would help to tackle the crisis since the censored analysis has much to do with it. If the world wants to resolve the economic crisis then it requires the proper economic analysis. Perhaps other economists can find the analysis but up to now there is little to show for that. The best solution would be that the Dutch government resolves the censorship. Since this apparently does not happen by itself I advise the world to boycott Holland till it is done.
Let me first outline the general problem, then indicate the economic process behind the current crisis, and then return to the advice to boycott Holland. More details can be found in my book Definition & Reality in the General Theory of Political Economy and on my website. Note that all this remains an indication only since the full analysis can only be published when I am restored in office.
When we consider the various economic crises across nations and across time we best look for common factors. The basic factor that we can identify is the Trias Politica structure of Western democracies, the separation of power over the Executive, Legislative and Judicial branches. The present checks and balances are imperfect. This structure allows too much leeway for forces that are detrimental to the economic well-being of the population at large, their economic security and their possibilities for the pursuit of happiness. The structure of economic policy making allows politicians, bureaucrats and special interest groups too much room to distort the contribution of economic scientists. The conceptual scheme of the Trias Politica was a useful ladder to climb out of the situation of feodality and absolute kings. But a ladder is not a goal in itself. Democracy is a living concept and can develop further. If we find that the Trias Politica fail with regards to our needs, then we should adapt it. The general notion is that we need a constitutional amendment for an Economic Supreme Court that will be open to the scientific community but that also has the power to veto the budget if it misstates information.
The current economic crisis fits this diagnosis. It would be a project by itself to identify the various legitimate warnings by many others over the last decades that weren’t properly used for policy. Presently it suffices to indicate the censored analysis of 1990 and translate a part to the US in 2009.
The US federal minimum wage provides for an annual net minimum of approximately $10,800. Because of taxes and FICA the gross minimum wage costs rise to about $12,700. However, nobody is allowed to work below the minimum wage and hence those $1,900 of taxes and premiums are not collected. US laws thus create a "tax void". Levies are officially declared on paper but not collected because of that other regulation. On top of that there is a sales tax with an average value of 8% that both reduces the net minimum and increases gross costs at the sales window, thus increasing the tax void on both sides. Total minimum wage costs may be as much as 25% above the actual net minimum that many would be able and willing to work for. Millions of low productivity workers are pushed into unemployment, poverty, the illegal economy or crime, and get trapped there because this experience does not add to productivity.
The situation comes about by various curious rules. FICA is collected without exemption or tax credit because it is supposed to be an "insurance". It should be obvious that it is rather nonsensical to use that label at the subsistence wage. Indeed, the tax system does not fall into that category mistake and has a proper Earned Income Tax Credit. Here, however, there is the convention to adjust tax rates for inflation. But subsistence is a social phenomenon and rises with the level of general welfare that consists of inflation and the average real growth of income. Ten years ago a poor household would not have had a computer but nowadays it seems like a requirement for participation in society, for example to apply for a job and let the kids do their homework. Hence, over the last 50 years there have been different indexations of taxes and the social minimum, which has caused tax exemption to linger behind so that an ever increasing gross minimum wage was necessary to provide for the proper net income.
Last year around this time most people tended to think that our financial system was basically sound. Banks were well respected, Fannie May a steady rock and Alan Greenspan the ultimate sage. Things turned out a bit different but that does not stop most of us to think that other parts of our social system must be sound. Perhaps only the insane assume spooks everywhere while we the normal people have to assume a minimum of stability in order to maintain that mental health. Alas, we now find that our system of taxation, social security and the minimum wage is as well managed as the financial system. The managers of our social system do not look at the overall outcome but only consider their own subsystem. The highly esteemed officials who run this system have merely missed their chance to wreak their havoc in our system of finance. In our financial system, the crash causes some attention since it are companies and the rich that suffer. In our social system, it have been the poor and powerless that have been suffering for decades but here it could be blamed on their character.
A crucial notion is that the two malfunctions hang together. Since the basic cause of the gradual rise of unemployment at the bottom was not noted, it was misconstrued as a general rise of unemployment, and then fought, first in the 1970s with vulgar Keynesianism that caused inflation, then in the 1980s with symbolic Monetarism that worked only temporarily, then since the 1990s with Deregulation. We can see a docter at work who guesses at the diagnosis and tries various treatments. Afraid that the patient would succumb under the cost of Iraq the docter allowed the non-regulation of some financial markets but thereby caused its actual disintegration. Since the 1990s stagflation has been repressed by deregulation but it will return now that we start to regulate again.
With this the underlying economic process, let us return to the management of society. We thus can distinguish regulations and the managers who deal with them, with their scope of responsibility and the required integrity at the execution. Next to the various subsystems there is the overall co-ordination that might be done by a Central Planning Bureau or the US Council of Economic Advisors. On top there is the current political structure of the Trias Politica. My book referred to above contains a theorem and proof that clarifies that the present system does not work well. The facts confirm that conclusion.
In lay terms: People say that they respect science but they choose a system that disrespects it. How many stones do the non-donkeys require to revise their Constitution ?
Finally, let us return to the situation in Holland. Stress in Dutch society has been building up, for example with the murders of politician Pim Fortuyn in 2002 and the film maker Theo van Gogh in 2004, and other events that draw less international attention. The economic crisis increases the stress but there still is no sign of respect for scientific liberty. To cut the obvious short: let the world help out and boycott Holland till this is resolved.