WORLD GOVERNMENT:

THE BEST ECONOMIC POLICY



Toshio Suzuki



World Government Institute




(C) Copy Right Toshio Suzuki August 1999
All rights are reserved.
Toshio Suzuki
World Government Institute
c/o Japanese Branch of World Government Institute
1-158 Nakakanasugi Matsudo City, Chiba Prefecture, 270-0007, Japan
Web Site: http://www.w-g.jp/wgi/wgi.htm





CONTENTS



PREFACE

Section

I INTRODUCTION

II BENEFITS AND NECESSITY OF WORLD GOVERNMENT

1 Basic Benefits of World Government

2 The Best Economic Policy Is to Establish the World Government

NOTES

SELECTED BIBLIOGRAPHY




PREFACE



This paper is, as the title shows, to show that the best economic policy is to establish the World Government. There are some important benefits in the World Government.




I INTRODUCTION



This paper is, as written in the Preface, to show that the best economic policy is to establish the World Government. In the world, there are some NGO's which are dedicated to the establishment of World Government.*1 They are not mentioned in this paper. Only theoretical aspects of World Government are considered. Contents of paper are as follows.

In section II, benefits of World Government are explained. Limitations of the production and limitations of the effect of economics are considered. And the reason why the best economic policy is to establish the World Government is shown.




BENEFITS AND NECESSITY OF WORLD GOVERNMENT



1 Basic Benefits of World Government


Basic benefits of World Government are as follows.

1. World Government can reduce or prevent the war and so the destruction by war is reduced or prevented.

2. World Government can reduce the military expenditure.

3. Fluctuation of exchange rate will be removed because the World Central Bank will issue the international common currency.

As shown above, there are political and economic aspects in the benefits of World Government. Political aspect is a common sense among many people. So here it is not explained further. The economic aspect is the topic of this paper.


2 The Best Economic Policy Is to Establish the World Government


The causes of poverty in developing countries are the topic of many economists.*2 But the causes have not been understood. This section gives an answer for that question.

As written above, the World Government has some important economic benefits. These are explained below in terms of economics.

T.R. Malthus (1766-834) wrote in his book that the population increases geometrically but the necessities of life such as foods or clothes increase arithmetically and so the poverty is inevitable.*3 This theory is not suitable for the advanced countries while it is said that there are 19 advanced countries in the world. But in the present world, population is about 60 billion among which 800 million people are suffering from famine. So Malthus's theory cannot be denied even now when the world as a whole is considered.

K.H. Marx (1818-83) insisted the law of declining rate of profit and insisted that a class of poor laborers which is called the industrial reserve army will emerge.*4 This was denied by statistical analysis. Namely, the profit rate did not decline and the wage of laborers rose according to the rise in productivity of labor. These are known as the stylized facts.*5 But the analysis was made with regard to the advanced countries. In the world as a whole, there are many poor people which can be called the industrial reserve army. And the capacity utilization in the industry of developing countries is often low. Namely the profit rate is low. So, also Marx's theory cannot be denied.

The dependency theory has developed from the theories of K.G. Myrdal (1898-987) and R. Prebisch (1902- ). The dependency theory divides the world into advanced countries and developing countries. This theory insists that developing countries are not falling behind advanced countries but are depending on advanced countries and that so it is useless to spend time.

These theories are concerned with different aspects of economy. But in a sense, these theories seem to be concerned with same thing. Namely, "Peace" in English means "Paix" in French and "Heiwa" in Japanese. These words are different but mean same thing. Like this, these theories seem to be saying following things. Let us assume that, in a company where laborers including the president are 10, 1 million dollar must be divided to these laborers. If 1 million dollar is divided equally, each laborer receives 100 thousand dollar. But if the president takes 500 thousand dollar and 4 laborers take 400 thousand dollar, remaining 5 laborers must divide 100 thousand dollar. Same thing can be said for the world economy. There is a limit to the total production in the world according to the level of technology. So if the industry concentrates to particular regions such as Western Europe, USA, and Japan, other countries cannot succeed similarly whatever they try. South Asian and African countries are in this situation. Since the end of World War II, Japan has developed dramatically. But even if other developing countries imitate Japan, they cannot succeed similarly. Economy of Japan owes its strength to the technology. So if there is no advancement of technology as before, developing countries with low wage will catch up with Japanese technology, so industry will shift from Japan to such developing countries, and so Japanese economy will fall into long stagnation due to the industrial hollowing. Recent Asian currency crisis and prosperity in American economy can be explained by this thought. Namely, prosperity in Japan and Asia shifted to USA and therefore the recession in Japan and currency crisis occurred in Asian countries like Thailand, Indonesia, and South Korea. According to this thought, borrowing of investment fund in developing countries must be prudent. Because as written above, there is a limit to production in the world as a whole. So investment which is an imitation of advanced countries will not succeed as in advanced countries. Optimistic investment will not bring expected profit and it will lead to the accumulation of debt. Malaysia did not accept a loan from IMF. This policy is appropriate from this viewpoint.

Fig. 1 shows the relation among the level of technology, the effect of economics, the income per capita, and the percentage of population above the poverty line. Here, the poverty line means the level below which people cannot take enough nutrition, cannot wear enough clothes, cannot live in the house, cannot receive enough education and medical care etc. In the age there was no education system, people above the poverty line could receive private education.


From the origin of figure to the right, horizontal axis OD is the level of technology. The level of technology means the technology such as electricity, car, plane, computer, etc. Vertical axis OJ is the income per capita in real terms. Horizontal axis from the origin to the left OA is the percentage of population above the poverty line. Of course, the percentage depends on both the income per capita and distribution of income. It is assumed that the income distribution is fixed to the ordinary level and the percentage of population above the poverty line depends on the income per capita. Line L1 shows the upper limit of income per capita which depends on the technology level. At the origin, the level of technology is that of primitive age but the income is OE, not zero. This is because people need necessities of life such as foods or clothes, so the income per capita in real term is not zero. Line L2 shows the percentage of population above the poverty line which depends on the income per capita.

For example, if the level of technology is C, upper limit of income per capita is CH and this is shown as OG on the vertical axis. This corresponds to BF and then to OB. Thus the percentage of population above the poverty line depends on the level of technology. In this case, the percentage of population above the poverty line is OB, namely, below 100%. If the technology level is D, the percentage is 100%. When the technology level is C, income per capita can attain CH. But there is a gap HK which must be conquered to attain CK. Here the role of economics is the range shown by the arrow marks along the line CH. If the economic policy is appropriate, income per capita approaches H. But if the policy is inappropriate, income per capita will decrease. This means that even if the best economic policy is adopted, income per capita will not reach K. Let us assume that the technology level C is that of Industrial Revolution in 18th century. It is clear that even if the technology at the level of Industrial Revolution is diffused to the maximum extent possible, only a part of people can live above the poverty line. As for the present age, it seems that the technology is still at the level too low to attain the income per capita DL. This can be said, as written above, by observing the situation of developing countries, especially countries in South Asia or Africa.

When we think about the economic growth in the world as a whole, there are two ways. One thought is that the world economy can grow up to the level of advanced countries. Another thought is that only some powerful countries can develop to the level of advanced countries. For example, Japan has developed from a poor country in Asia to one of the advanced countries in the world. The question is whether other developing countries can develop like Japan or not. Former thought insists that the prosperity in Japan can be diffused to other developing countries in the world by the power of economic theory. Latter theory insists that it cannot. As written above, there is a limit to the production in the world as a whole, so the latter theory is appropriate. So the best policy is not to try to develop the developing countries further but to save unnecessary expenditure. Here we unavoidably reach the conclusion that the best economic policy is to establish the World Government.

Considering theses things, new research concerned with the World Government is important. For example, Japan is spending about 1% of GNP as military expenditure. It seems that if Japan spends 5% of GNP for military expenditure, 4% of GNP is transferred from consumption to military expenditure. But this is not everything. If this happens, laborers who have been producing various goods will shift to the military. They will work as soldiers so they will not produce anything. So if laborers shift to the military, the production itself will decrease. This is very important for developing countries. If a conflict happens, laborers who have been producing foods and clothes will go to the military and this can lead to the famine. These aspects are a field of economics to be theorized.

Author insisted that the best economic policy is to establish the World Government. But if the benefits of World Government are achieved, the World Government is not necessary. Let us assume that there are two planets between which there are no trade and war. In this case, considering the benefits of World Government shown above, there are no benefits between above two planets. On the other hand, in case of European Union, currency is common and heavy military expenditure is not necessary among EU countries. In this case, the benefits of World Government are achieved, so the World Government is not necessary.




NOTES



*1 For example, see Toshio Suzuki, Voice for World Government - 1999, (http://www.w-g.jp/wgi/library/voice-for-world-government/voice-1.htm, 1999).

*2 For example, see David S. Landes, "Why Are We So Rich and They So Poor?," American Economic Review 80 (May 1990): 1-13.

*3 T.R. Malthus, An Essay on the Principle of Population, 1798.

*4 K.H Marx, Das Kapital, 1867-94.

*5 N. Kaldor, "Capital Accumulation and Economic Growth," in Lutz, F.A. and Hague, D.C. (eds), The Theory of Capital, (Macmillan, 1961).




SELECTED BIBLIOGRAPHY



Kaldor, N. "Capital Accumulation and Economic Growth," in Lutz, F.A. and Hague, D.C. (eds), The Theory of Capital. Macmillan, 1961.

Landes, David S. "Why Are We So Rich and They So Poor?" American Economic Review 80 (May 1990): 1-13.

Malthus, T.R. An Essay on the Principle of Population. 1798.

Marx, K.H. Das Kapital. 1867-94.

Suzuki, Toshio. Voice for World Government - 1999. http://www.w-g.jp/wgi/library/voice-for-world-government/voice-1.htm, 1999.