Question Socrates: Part I. Back to the Future (Issue #483)

As the country searches for a solution to our economic meltdown, it becomes more apparent that we have to examine some deep-rooted causes and not just events of the past few years. Indeed, America’s declining competitiveness has been at least partially visible for decades, albeit the last time the country seriously addressed the issue from a strategic standpoint was during the Reagan years in the 1980s.

Pundits and policy-makers alike throughout 2010 continued with their myopic fascinations, focusing on manipulation of funds to the detriment of every other approach—i.e., calling for stimulus packages, more tax revenues, sundry cost-cutting measures, etc.  What they miss or do not know is that our country’s former economic greatness came about through techniques involving technology, not selfish or stupid shell games with money.  Understanding the difference between economic-based planning and technology-based planning is perhaps the key to identifying what we have been doing wrong.  More importantly, shifting our thinking away from the accepted economic-based solutions enables us to find real and more complete answers to our financial crisis.

Under the Reagan administration, Michael C. Sekora initiated and directed a program called the Socrates Project within the U.S. Intelligence community, in order to address America’s declining competitiveness.  The first part of the Socrates mission was to determine the true source of America’s declining competitiveness.  To accomplish this, the Socrates team utilized all-source intelligence to assemble for the first time in history a bird’s-eye holistic view to understand competition worldwide.

In terms of scope and completeness, this bird’s-eye view went far beyond the narrow slices of data that were (and still are) available and sadly thought to be sufficient to the professors, professional economists, and consultants who traditionally address the questions of competitiveness.  Conclusions that the Socrates team derived about competitiveness in general, and about the U.S. situation in particular, turned out to be in direct opposition to the preponderance of what most of the professors, economists and consultants had been saying for years and which decision makers in the U.S. had accepted as irrefutable and as underlying, presumptive truths.  Had the Socrates Project team been adequately supported and empowered and had their observations informed national policy in terms of economic strategy and investment, the current crisis may have been averted.  At this juncture, moreover, it is only a technology based strategy and associated data mapping from the modern equivalent of Socrates that will save the United States of America, enabling it to win in global competition against China and any other country.

What the Socrates team determined was at the source of the nation’s economic decline was that at the end of WWII decision-makers throughout the U.S. shifted away from technology-based planning, which had been used to build the U.S. into an unequalled superpower.  The U.S. began adopting more economic-based planning and, in just a few years after World War II, the same had become the standard and unchallenged foundation for decision-making throughout US industry, government and academe.  At the same time, the rest of the world continued using and refining a technology-based approach—including especially China and India, which aggressively used it to start building themselves into the next economic superpowers.

In economic-based planning the foundation of every decision is a matter of how to most effectively acquire and utilize funds, either to generate maximum profit as in the case of a company, or in the case of government and non-profit organizations to accomplish certain objectives.  For a country this can mean changing tax rates and interest rates; tax incentives for home ownership or research and development; portfolio management of federal R&D funds; or seed capital for start-up companies.  The measure of the effectiveness of said manipulation of the funds is also fund-based, i.e., a country’s trade balance, its GDP, standard of living, budget deficits or surplus, etc.  As a result, the person viewed as the one most capable of making decisions for the nation’s economic health is the economist.  The economist determines how to correctly manipulate funds on the front end of something (for example, to decrease interest rates) in order to generate a particular measure of success on the back end (such as, to decrease unemployment payments).

The empirical reality, however, is that there is rarely agreement among economists about what kind of manipulation of funds on the front end is required to generate any particular measure of success on the back end.  Even when a general consensus is reached on a particular course of action, the chosen course of action produces results that, more often than not, only roughly match what the economist predicted.