THE RECORD

August 11, 1999

Fiat Lux

by Ed Deak

In the Summer of 1945, I was an 18 year old war veteran of the Hungarian army, without a family, home, language, or country, with a worthless education, stranded in a POW German MASH hospital in Austria.

Some of the orderly staff had several years of war service by then and may have been wounded several times before they were transferred to hospital duties. Soon after my leg wound permitted me to start walking, one of the orderlies came into the room, virtually in tears, looking for somebody to take his place so he could be discharged as a POW and go home. The job offered an extra piece of bread and jam per day, so I took it.

The hospital was being reorganized at the time to specialize on leg wounds and amputations. The Germans had no antibiotics and we were starving, so the wounds wouldn't heal and many legs had to be amputated literally years after the victims were wounded. Also, in all cases they had to be operated on at least twice to remove all chances of infection.

One of my duties was to stand by the operating table and hold, twist and turn the patients' legs while the doctors were removing them. That was when the full idiocy and horror of war, any war, really came home to me and I never got over it to this very day.

As I stood there for almost a year after the end of the war, day after day, holding leg after leg often covered with blood from head to toe, I slowly came to the decision to search for a common denominator for the causes for history's errors and mistakes, no matter how long it takes.

It took me 40 years to find it in an Economics 1-01 textbook: The common denominator has always been and still is the misdefinition of economic efficiency. In thousands of years humanity has never learned the lesson that energy inputs, used for any reason, will cause equal amounts of negative reactions, cancelling out the benefits.

It may sound unbelievable and even crazy, but every economic system, every empire and every ruling aristocracy of history collapsed and died for this same reason: The miscalculation, or the ignoring of the reactions caused by energy inputs. In short, their activities caused gross and growing inefficiency until they imploded.

Nazism and communism collapsed and now capitalism is committing suicide, because of the growing inefficiency and the waste of resources to maintain the power of a self appointed ruling class.

Every business person knows that one of the main keys for the survival of a business is an accurate and cold blooded accounting system. A business that doesn't keep track on the depletion of stocks and resources is going to go bankrupt. In a way it is far more important to keep track of debits than credits, as without the full knowledge of what is going out of the door, why and where, the business is a dead duck.

Tell this to the professors of economics at any university on Earth, or to our so called "prestigious conservative economic think tanks," like the Fraser Institute, or even to the keepers of our national or regional statistics, like StatsCan, or to our politicians at every level. To keep corporations happy and "creating wealth" they are on a resource extraction binge as if there was no tomorrow and without any accounting of depletion. The more the waste, the more the "growth" in their world of unrealistic dreams.

In the misbegotten world of neo-classical economics everything that brings in some form of a money to somebody is counted as a benefit or income. The Gross National Product (GNP) and Gross Domestic Product (GDP) are the figures used to measure the health and growth of economies. The problem is that no matter how those monetary figures have been achieved, they are always accounted as credits, without any depletion or debit discounts.

For example, the recovery costs of the rebuilding of communities after natural disasters, like floods, fires and earthquakes are all counted as "growth", without any deductions for losses. The GDP of Manitoba has been up for two years on account of the rebuilding after the floods. The same goes for countries hit by earthquakes, or even wars.

In our resource based economies the production and export figures do not account for the depletion of the material. The forest industry claims that it bring in figures like $4.5 billion to the BC economy, but has no figures on the costs of the depletion of the resource, because the true facts would shock the public. The same goes for mining and fishing. Everything goes on, but nothing comes off.

I am asking my fellow business people who may be clamouring for the easing or regulations and the expansion of these industries, how long would they last in business if they would keep on selling from inventory, without keeping count of the depletion and replacement costs?

As a chartered accountant friend said to me once: "A third year accountancy student could drive a truck through our economic theories."

Having studied the subject for many years I can say without any reservations that he was right. Economic theories may have started off on the wrong track through the lack of knowledge and erroneous concepts, but based on what we know today proves that they have become the biggest fraud in history.

Copyright (c) 1999, West's International