The best treatment of the problem I know is that of the late Fran�ois Perroux, who brought out into the open what no serious economist could have been unaware of. '; Unless you do so at this late hour, you will get nowhere towards a solution. Compro-mise is fine, but unless there are benchmarks left to give the deal-makers a sense of what is feasible, it is a futile affair. Only serious economic analysis can provide those bench-marks.

Perroux provides the framework for such analysis.

"The European Occident has passed through successive periods of development, each characterized by a particular morphology of distribution and by a dominant revenue.

"In turn the dominant revenue has been that of the landowners, then industrial profit, then financial and industrial profits in a mixed economy, in which the rate and mass of profit are functions of a complex combination of public and private, of market and extra-market actions.

"During a specific period of develop-ment, the dominant revenue is the one to which the others adapt themselves. In an apologetic doctrine it is represented as the revenue that determines whether the given economy functions properly. In the given institutional framework, that in fact is the case; but in another context it would be otherwise ."3 The dominant revenue is first served. If its supporting assumptions are false, there is less or nothing left to trickle down to subordinated revenues.

Since Perroux wrote these lines the role of dominant revenue has passed first to the money-lenders, and then to speculative finance.

Private money played a relatively minor role in financing WWII. The banking system in the US and elsewhere had not only completely discredited itself by its mindless greed in the 1920's, but 38% of US banks had closed their doors by the beginning of 1933. Breadlines snaked around city blocks. In contrast to more recent bailouts by govemment, in rescuing the banks Roosevelt did not let them dictate their deregulation. They were, on the contrary, put on short leash and restricted to banking. Firewalls were thrown up to keep them out of anything having to do with the stock market.

The war was financed at 2 to 3%. The banks - both the commercial ones and the central bank - indirectly financed the vast bond issues that sopped up civilian buying power. That - along with price controls - kept inflation low. The dominant revenue became the profit of the nation's industries backed by a combination of public and pri-vate initiatives, with the trade unions as jun-ior associates. The great absentee were the banks that languished in the dog-house. But health was restored to the banks from this simple regime. and by the early 1950s they experienced a mighty resurgence of their li-bido. In 1951 the Federal Reserve, behind President Truman's back, asserted its inde-pendence in setting interest rates without Treasury interference.' Marshall Plan aid had been refused the Latin American countries. In effect they were proclaimed the pre-serve of the US banks. There was to be no more wonderful way for banks to gamble themselves into trouble again than lending money to corrupt Latin American dictators. The latter were also kept in good supply, courtesy of the US State Department.

Price controls which had been lifted pre-maturely in the US after WWII, were not reimposed during the Korean War.

Blocking Society's Pluralism

But it was the sixties that provided the banks with their grand opening for scrap-ping the Roosevelt restrictions. It was a period of massive public investment not only to catch up with 15 years of neglect during depression and war, but to cope with the vast immigration and domestic population explosion. Institutions for a pluralist society and the new technologies were set up. Government accountancy, moreover, treated public investment as current expenditure, thus accentuating the price effect of these outlays. Classifying these as "inflation" offered the financial interests a tool for blocking the growing pluralism of the economy. Interest rates became the blunt tool for stabilization. Thus in Canada, the central bank since 1967 could no longer alter the statutory reserve that banks had to deposit with the BoC as a proportion of the deposits they received from the public, without an act of parliament. By the early 1980s interest rates rose as high as 20% and devastated government finances. Because of these supposedly prudent provisions, the federal debt has risen from $33B in 1973 to around $547B currently.

Today the federal government pays $42 billion annually in interest on its debt. This was due not only to high interest rates, but to the phasing out of the statutory reserves between 1991 and 1993. The bill authorizing the end of reserves was slipped through the House of Commons sans debate or press release.

In 1988 the Bank for International Settlements' had issued its Risk-Based Capital Requirements Guidelines that declared the debt of OECD countries risk-free, requiring no additional capital for banks to hold. Between these two measures Canadian banks acquired some $60 billion additional federal debt without putting up any significant legal tender of their own.