Noted Kalistani Economist Issues four point program for Economic Development
John King's "System of Deep Understanding" promises to dramatically increase efficiencyKaliburg, Ananto
November 17, 4442
Dr. John King vindicates theoretical Ethical Socialism and the Dual EconomyA former standard bearer of liberal economic theory in Kalistani Academics, Dr. John King of Kaliburg Polytechnic Institute, has changed his tune. He has recently released a provocative and stunningly elegant defense of the Dual Economy and the theory of Ethical Socialism.
King said, in his Keynote lecture at this year's Annual Meeting of the Society of Kalistani Economists:
John King wrote: "For Kalistan, there really can be no other system than the Dual Economy. A robust Private Sector, which manages consumer demands far better, as we see, than the Government can, and a solid public sector, to include a carefully controlled Ruble and shepherded investments, which supplies needs for the People are both intrinsic to the success of the state. The recent crisis in Kalistan which is really only just beginning to abate, and will take years, if not decades, to completely recover from, was caused by political turbulence, combined with almost no control over market forces that are subject to radical consumer and investor irrationality, especially overseas where investors neither understand, nor particularly appreciate the Dual Economy, but are chiefly concerned with the amoral quest for profit maximization. I admit my role in propping up the myth of complete market rationality and efficiency: I can no longer ignore the very basic and very obvious fact, as ironclad as the law of gravity, that market forces create political crises such as deflation, speculative bubbles, and vast joblessness, and tying the hands of the political sphere to address those crises is the sole cause of disasters of monumental proportions."
King was invited to speak to the conference as the Keynote Speaker following the publication, earlier this year, of his work, which most are still digesting, and which has taken the economic theory world by storm. The work, "Statistical Adjustment and the 4-Point Program for Efficient Development Under the Dual Economy" struck the academic world like a bolt of lightning, especially as King was the leading proponent of liberal economic theory in Kalistan over the last 50 years. The paper, which was published in the peer-reviewed journal
The Indralan Journal of Economics: Macroeconomics and International Development was a short 17 pages long, and outlined King's elegant and parsimonious argument that any developing country could escape the cycle of perpetual development through statistical adjustment in private and public sectors, and that the Government needs to lead the way with a combination of pro-business policies (lower corporate taxes, capital liberalization that allow foreign investment to flow easily in and out of the countries) and pro-labor policies (a reasonable Universal Basic Income, strong labor union policies, and National Service to bottleneck the supply of labor to the Market.)
"The best example of this we see is in Kalistan, where the Government maintains what the ruling socialists refer to as the Dual Economy. That economic program allows the private sector to flourish, while ensuring that for-profit businesses are not responsible for provision of the basic necessities of human life. When you separate out need from economic activity, then the market functions more correctly. When you change the conditions under which labor and management negotiate with one another, to take away the power to starve from the business owners, you see labor and management come to an agreement that is mutually beneficial, and you give the worker a stake in the health and success of the company. In other words, the old Metzist cannard that workers and management have nothing in common is shown to be facetious and instrumentalist on its face. The goal is to give everyone an interest in seeing all do well, rather than pitting one class forever against another." - (King 4442, 543)
The meat of King's article came in his proposal of a four-point method for efficient planning in a Dual Economy, which he called the System of Deep Understanding", because they are based on thoroughly understanding the production process and all its components before even deciding to begin production. "The four steps of The System of Deep Understanding are:
John King wrote:1. Focus on Constant improvement. This can include growth of the plant, ensuring that workers keep their jobs, increase in efficiency of the worker, ensuring that workers can afford to buy the products they produce if they wish, and improvement of the conditions and safety of work.
2. Focus on decreasing costs. This does not mean that workers must be laid off or factories must close. Instead, it means getting rid of redundancies in the sector, getting rid of non-value added steps, and increasing the value of value-added steps in production. If you increase the value of the value-added steps relative to the value of the non-value added steps, you will increase the quality and efficiency of your production processes, and the previously wasted money will either be saved to the consumer, or will be used to grow the company and protect the workers' jobs. We know, from statistical analysis that there will always be some x percent of failure in any lot. Rather than obsessing on those failures, and treating the symptoms (the failure), we should focus on decreasing the rate of failure: on consistently doing better. Decreasing the rate of failure, whether it be in product manufacturing or in worker attrition, means we save money on rework and rejection.
3. Focus on leapfrog development and export oriented growth. Developing nations traditionally have trade deficits as wealthy nations rush to take advantage of cheap labor and raw materials in developing nations, and import in their wake expensive finished goods. What leapfrog development means is that the developing world needs to acknowledge that it will always lose to economies of scale, especially in cutting edge areas of development. So the developing nation will take the ubiquitous technologies of the developed world, the technology and processes that they are now dumping on the world as they attempt to deal with the crisis of the business cycle, and improve it. We should use our strengths to make those technologies better, and add value to them which we will then feed into our economy, rather than sending it to them.
4. Focus on use of weakness as strength. This builds on point 3. The Developing world is usually flush with potential which is not tapped. There are a million reasons why not, but in fact, they represent a source of strength for the developing world that the developed world cannot exploit without our say-so. We may have cheaper labor in the developing world. But this can be a strength to attract investment. We should do what we do well, and become the leaders of that thing, so we occupy a niche. It is possible to do several things well, to occupy several niches. But the most important point here is that we not compete with economies of scale. We work to compliment them, to bring consumers across the globe our own goods and services which are significant improvements, both in terms of quality and quantity, but also in price point over the previous generation of the same thing still being half heartedly produced by economies of scale. Producing old technology for them is an inefficiency. They incur and bear alone the opportunity cost. Producing the exact same thing for the developing world is an opportunities. Since the R&D has already been completed, we merely have to take it apart, find out how it works, reduce redundancies and non-value added steps, and build one of our own, much cheaper than it cost them to build theirs. They are then free to make new things, while we continue to improve on what they have already built. In this way, the profit for those older technologies is re-direfted toward the developing world, rather than being monopolisitcally held by Developed nations." - (King, 546-48)
This program, where public and private sectors work together to treat the economy as a Total Economy, will help developing countries escape the cycle of perpetual development, offering them a clear way out of the trap. King's work has been widely hailed in Kalistan since it was published, by socialist economists.
Liberals, however, who still represent the majority of economics faculty at Kalistan's institutions of higher learning, roundly rejected King and his hypotheses. Said leading liberal economist Timmons Algernon: "This is heresy. It almost feels like a betrayal for King to speak for the Dual Economy, when he so recently worked with us to dismantle it through atrophy. If you read his published statements, he cheered the collapse and the monetary crisis as proof of the failure of socialist economics and the Dual Economy. He was our standard bearer: He once said that society needs to be bent to demonstrate the assumptions of our economic models. Now, he goes to the other side." Much of the audience in attendance at the Keynote Speech walked out on Dr. King.
John King wrote:"I was wrong. Forget everything I ever wrote: Liberal Economics is a completely dead-end ideology, at least in middle economies like Kalistan's who wish to get out of the perpetual middling position they constantly find themselves in. Blind faith in Markets is a death sentence. But again: so is full planning. What we need is an economy which is flexible enough to allow consumers to obtain whatever they want from the Market, but protection from the sorting mechanisms of the markets which will always take wealth from the many and hand it over to the few. We need a strong public sector side by side, to ensure that the Four Steps are enforced. Doing otherwise should legitimately create an existential crisis for private sector investors. There can be no other way, unless there is a significant enough cushion to absorb market shocks, and for the vast majority of the population of Terra, that insulation simply does not, cannot exist, because the society is mitigating risk incorrectly."
Following the convention, a group of Liberal academics attempted to have King thrown out of the SKE. The petition made it to the floor of the Plenary session, but narrowly failed on a non-ideological vote of 43-47. Most of those who voted to keep King were Socialists, but they were joined by a dozen or so liberals, who spoke against the motion by decrying it as creeping fascism and "...a disgrace for professionals to even hint at such a thing."
"Liberal Economics works for some countries," said Dr. Sarah Matel of Neveras. "But King's argument is convincing, even for me, a dyed in the wool market liberal. At any rate, we can't just throw him out because we disagree with his findings or methods. Our concern is in what is good for the economy, while most of my colleagues seem intent simply on forcing their viewpoint down everyone's throat."
The conference ended with King's reputation cemented as one of the greats, and his membership still in tact. Meanwhile, three Liberals resigned from the professional organization in disgust.
References
King, John. 4442. "Statistical Adjustment and the 4-Point Program for Efficient Development Under the Dual Economy," in
The Indralan Journal of Economics: Macroeconomics and International Development. Vol 141.1 (Spring): 452-469.