What if greatest risk to future of American and worldwide brainpower is not transforming education in the 60 years (1965-2025) since moores law, jensen law, 1g to 6g designed machines with billion times more maths brain power than separate human minds and hierarchical top-down department silos including professors and doctoral students let alone k-12 societal literacy mediating digital and real life's Health*Wealth*Trust: how your time and data is spent not just money. Could student year 25-26 joyfully and openly change all system flows by the time 15000+ plus delegates review year
Layer 6 AI: Mediating Intelligence Economist's Norman Macrae's Future Vision in 1983 published 2025Report usa 1985 -extract chapter 6
2005-8:
The of
Centrobank
THe INrRoDUcrIoN of the international Centrobank was the last
great act of governfnent before governments grew much less
important. It was not a conception of policy-making governments
at all, but emerged from the first computerized town
meeting of the world.
By 2005 the gap in income and expectations between the rich
and poor nations was recognized to be man's most dangerous
problem. The satellite TC system and two-way cable television
channels in sixty-eight countries invited their viewers to participate
in a computer conference about it, in the form of a
series of weekly TC programs. Recommendations tapped in by
viewers were to be tried out on a computer model of the world
economy. If recommendations were shown by the model to be
likely to make the world economic situation worse, they were
lntroduction
t sl l
THE 2025 REPORT
to be discarded. If recommendations were reported by the model
to make the economic situation in poor couptries better, they
were to be retained for "ongoing computer analysis" in the
next program.
In 2025 it is easy to see this as a forerunner of the TC conferences
which play so large a part in our lives today, both as
pastime and as the principal innovative device in business. But
the truth about this 2005 breakthrough tends to irk the highbrows.
It succeeded because it was initially a rather downmarket
network television program. This is illustrated by the
fact that the two gold-medal-winning telecommuters who were
eventually acclaimed for contributing most to Centrobank's
birth were Mr. S. C. Hu, the thoughtful and rich retired merchant
of Taipeh in Taiwan, and Mr. Bjorn Heglund, the earnest
young subpostmaster from the Kiruna district of north Sweden.
Neither would conceivably have been consulted if a conference
on the subject had been called mainly among the best-educated
economists of 2005.
About 400 million people watched the first program, and 3
million individuals or groups tapped in suggestions. Around 99
per cent of these were rejected by the computer as being likely
to increase the unhappiness of mankind. It became known that
these rejects included suggestions submitted by the World
Council of Churches (whose "Charter 2006" was reported by
the computer to be likely to increase unhappiness among 87
per cent of the population of the world) and by many other
pressure groups. This still left 31,000 suggestions that were
accepted by the computer model as worthy of ongoing analysis.
As these were honed, and details were added to the most interestitg,
an exciting consensus began to emerge. Later programs
were watched by nearly a billion people as it became
recognized that something important was being born.
These audiences were swollen by successful telegimmicks.
The presenter of the opening part of the first program was a
roly-poly professor who was that year's Nobel laureate in economics,
and who proved a natural television personality. He
explained that economists now agreed that aid programs could
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2005-8: The Introduction of Centrobank
sometimes help poor countries, but sometimes most definitely
made their circumstances worse. When Mexico was inflating
at over 80 per cent a year in the early 1980s, the inflow to it
of huge loanable funds made its inflation even faster and its
crash more certain. The professor set Mexico's 1979-81 economy
on the model, pumped in the loaned funds and showed
how all the indicators (higher inflation, lower real gross domestic
product, and so on) then flashed red, signalling an economy
getting worse, rather than green, signalling an economy
getting better. He followed this with similar examples from
several other poor countries in Latin America and Africa during
1950-85. The professor then put the model back to mirror the
contemporary world economy of 2005, and played into it various
nostrums that had been recommended by politicians of
left, right and center, but mostly left. The dials generally flashed
red. Then the professor provided another set of recommendations,
and asked any viewers who wished to play to tap in their
own guesses for the consequent movements in twenty economic
variables in the model. Those who got their guesses right to
within a set error were told they had qualified for the second
round of a knock-out economic guesstimators' world championship.
Knock-out competitions of this sort continued for ordinary
users of two-way TCs throughout the series of programs.
In the second part of that first program the presenters dared
to introduce two political problems into the game. They said
that government-to-government aid programs had been
particularly popular among politicians during the age of overgovernment,
but there was growing agreement that government-
to-government aid was the worst method of hand-out.
The excessive role played by governments in many poor countries
was one of the barriers to their economic advance, and a
main destroyer of their people's freedom. Could anybody think
it would have been wise to give aid to President Mbogo?
In consequence, the most successful economic aid programs
had been those operated through the International Monetary
Fund, which imposed conditions on how borrowing governments
should operate. The professor showed that IMF-moni-
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THE 2025 REPORT
tored operations in most years had brought more green flashes
from the model than red, which few other sorts of schemes had
done. But this involved IMF officials-often from the rich countries-
in telling governments of poor countries what to do; and
one of the objectives of the initiative called for by President
Kennedy was precisely to diminish such embarrassments.
The first questions to be asked in the next few programs, said
the compilers, were (l) which countries should qualify for aid?;
and, having decided that , (2) up to what limits and conditions?;
and (3) through what mechanisms? They promised that later
programs after the first half-dozen would examine how any
scheme could be used to diminish the power of governments
and increase the power of free markets and free people.
The first stage of this computerized town meeting of the world
went remarkably well. A consensus quickly emerged that poor
countries which agreed to join a club with certain libertarian
nrles (the principal ones were that markets instead of politicians
should set prices; there should be fairly free trade, and
fairly free immigration of people and businesses from countries
richer than themselves; human rights cases should be referred
to an international supreme court) could also have access to
the benefits of a new international central bank called the
"Centrobank."
The Centrobank should be a body which relied very little on
the discretion of its governor, but much more on a computer
program. This program should authorize the Centrobank to
print enough new foreign exchange called bancor for any applicant
country below a certain income per head to allow its
internal economic growth to proceed at the fastest possible noninflationary
pace but not by one penny faster. The Centrobank's
computer would monitor each recipient country's economy to
see if inflationary or other strains were appearing, and would
signal that Centrobank must cut off new supplies of artificially
created foreign exchange if they did.
Contemporary critics said in triple self-contradiction that (a)
this scheme was so insulting to poor countries' governments
54
2005-8: The Introduction of Centrobonk
that few would agree to join it; (b) all poor countries would
flock to eat at this trough and there would be an impossibly
inflationary expansion of world money supply; and that (c) the
anti-inflationary terms proffered from the international central
bank were so tough that this would still allow only painfully
slow economic depauperization.
Now that the Centrobank has been in operation for nearly
twenty years we know that the answer to (a) is that the government
of any poor country that does not join Centrobank is
likely to be booted out by its people; that the answer to (b) is
that, despite this flood of countries into the scheme, newly
created foreign exchange for poor countries has in only one
year,2Ol3, exceeded 0.2 per cent of world-wide money supply
(WM3); and that the answer to (c) is that progress proved remarkably
fast, although that was partly because of the answers
that emerged to the second set of questions posed in the next
few programs.
The second set of questions which arose after about the eighth
program rested on what sorts of purchases should qualify for
Centrobank payments. Originally the notion had been that the
international Centrobank should open foreign exchange clearing
accounts to finance non-inflationary purchases by any persons
or any groups in qualifying poor countries. The stated aim
was that a poor country should not be prevented merely by
shortage of foreign exchange from pursuing the fastest possible
rate of non-inflationary economic growth. But under the remorseless
logic of the computer a bias was soon introduced in
favor of financing purchases by citizens in poor countries rather
than purchases by their governments.It became clear that projects
by cost-disregarding governments in poor countries led
more quickly to inflation than projects undertaken either (a)
by penny-pinching native entrepreneurs (who began to apPear
out of the woodwork in some profusion and in extraordinary
places); or (b) by competing multinational corporations on new
sorts of performance contracts.
If you ask your TCs today, "What were the main evil con-
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THE 2025 REPORT
sequences of the colonial and immediate post-colonial periods
in the poor two-thirds of the world?" two of the top answers
will be: "The fact that an entrepreneurial class could not emerge
as an important political constituency until the introduction
of Centrobank after 200 5 :' and "The fact that until Centrobank
no mechanism except uncompetitive government was put in
place to meet many of the most urgent demands of the poorest
three-quarters of the peopl e." Centrobank's solution to the first
of these problems owed much to the proposals from Mr. Hu;
its solution to the second problem owed much to the proposals
from Mr.Heglund.
Start with why Mr. Hu's proposals for encouraging entrepreneurs
were so important. Growth had taken place in Europe
and Japan and North America after 1850 because an entrepreneurial
commercial class had become a dominant political
influence, replacing the aristocracies in Europe and Japan and
the mhlange misdescribed by de Tocqueville in North America.
In the immediate post-colonial period in the poor countries
circa 1960-2005 power fell instead into the hands of a new
class of professional politicians , dt a time when they could
temporarily do damaging things inconceivable for professional
politicians before or (thank God) since.
Their most damaging act was to set "political" instead of
market prices. By statutory decree in many poor countries exchange
rates and urban wages had been kept too high, food
prices to farmers and prices for public utilities kept too low,
credit had been allocated by rationin g at negative real interest
rates, and imports had been rationed by licences that were
immensely profitable to the politicians' brothers-in-law who
were corruptly granted them. Even in 2005 every single computer
program showed that living standards were increased,
inflation brought down, and huppiness and efticiency advanced,
when these policies were abandoned. So did every practical
example.
Call up on your TCs the practical example of Taiwan in the
second half of the twentieth century; analysis of its success was
the basis for Mr. Hu's proposals for Centrobank. Taiwan in
56
,N -;
.I, tII
20054: The Introduction of Centrobank
1950-2000 had multiplied its real income twentyfold and its
dollar exports four-hundredfold because in the 1950s an invading
warlord and his soldiers had been impelled by odd circumstances
into laissez-faire economic policies against their
will; and because Taiwan had thereafter been kept dynamically
entrepreneurial largely because of nasty protectionism by rich
countries against its exports.
When in 1948 the armies of General Chiang Kai-shek fled
from the Chinese mainland to Taiw&r, swelling its population
overnight, they found an island which relied for over 90 per
cent of its exports on rice and sugar. These were two commodities
whose sales could not be greatly increased on world markets
by dropping their international price. It therefore seemed
natural to the incoming soldiers to follow the mistaken policies
adopted by so many other authoritarian governments in poor
countries all through 1950-2005. For a while they exploited the
farmers by keeping internal farm prices too low and Taiwan's
international exchange rate artificially high. The soldiers also
granted cheap credits to themselves to set up manufacturing
businesses.
The results of such folly were the usual ones: food production
and exports fell; inflation soared to three-digit figures; and
foreign exchange holdings collapsed despite huge American aid.
The soldiers met this by restricting imports further to protect
their infant industries and their disappearing exchange reserves;
this sent inflation even higher. As sugar and rice production
used up much land in the overcrowded island, real
estate prices in particular went through the roof.
This economic mess was sadly typical of many newly independent
countries at the time, but Taiwan was lucky in being
newly dependent instead. General Chiang Kai-shek was at this
time entirely dependent politically on the Americans, and he
unwillingly agreed to propitiate them by accepting their good
advice. He moved in the late 1950s pretty abruptly from the
then usual developing-country wrong policies (low prices to
farmers; protected home market for manufactures but overvalued
exchange rate; subsidized interest rates) to the unfash-
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THE 2025 REPORT
ionable and precisely opposite right policies (market prices for
farmers and market-determined exchange rates and interest
rates; trade liberalization).
The results exceeded all expectations. With its market-determined
exchange rate, Taiwan found that its cheap-labor exports
of umbrellas et cetera expanded smoothly-until foreign
umbrella-makers objected to Taiwan's penetration of their domestic
markets; then Taiwan's expansion in that particular
product would abmptly stop. So Taiwan grew through its industrial
miracle of 1955-2005 knowing that its businesses must
find new products for new markets all the time, and that last
year's successful firm would often have to close down this year.
In consequence of its recognition that bureaucrats cannot know
what will be profitable next minute, Taiwan subsidized only
one thing apart from its over-large army: its tax and social nonwelfare
policies were directed to raising savings from 5 per
cent of national income in the 1950s to a Japan-beating 25 per
cent in the 1980s.
Mr. Hu recommended that the policies furthered by Centrobank
in poor countries should be those that had "been furthered
by accident in my country, Taiwan:' and he suggested some
of the relevant software by which the Centrobank's computer
model could put these incentives into effect. He was rather too
inclined to argue that "anybody who does not follow these
policies should not get Centrobank aid," but the process of
ongoing computer analysis synthesized most of this into the
messag€, "If you are following Taiwan-type polici€s, then the
computer will allow a much higher level of internal expansion
before it flashes the signal that inflation is being fostered so
that further Centrobank creation for you must stop." As the coordinating
Nobel laureate said when presenting Mr. Hu with
one of the two gold medals:
His software provided one of the two quantum leaps that
turned Centrobank into a success. Although the 1955-2005
Taiwan-type policies hugely expanded national income, the
pressure groups in favor of them are entrepreneurs who do
58
2005J; The Introduction of Centrobank
not come into being until the policies have already been introduced.
In most poor countries that have been following
the old and opposite policies of import substitution and pricerigging,
the political constituencies in favor of the old policies
are by definition more powerful. This is a main reason why
these old-fashioned countries remain poor. In some Latin
American countries right-wing generals have periodically
seized power, and put into effect policies that are supposed
to be laissez-faire. But these generals generally have to rely
for their political mandate on the few old families who already
own big businesses in these countries. Even with the
best will in the world (which these right-wing generals rarely
have) they tend therefore to support and protect yesterday's
big capitalists, rather than the grubby entrepreneurs in back
rooms on whom growth most depends. Mr. Hu's proposals
managed to make Centrobank's computer programs mirror
the dependence on entrepreneurs created by historical accident
in the 1950-2005 success stories of Japan (which
ploughed through yesterday's powerful families in 1945 and
had to rely on entrepreneurs thereafter), Singapore (which
benefited from not having any farmers or mral classes to
exploit), Hong Kong (which did not have any political constituencies,
only entrepreneurs) and Taiwan.
Although Mr. Hu was rightly decorated for "enabling Centrobank
policies to speak with a Taiwanese accent," the later
stages of the first computerized town meeting of the world were
carried on more like one of today's many million computer
conferences than like the original television network program
in which Mr. Hu joined. People after about program fourteen
did not put in their views instantly, but after some days' consideration
and after checking with the database which showed
what was the presumed best form for Centrobank at the moment.
The computer still rejected the 99 per cent of proposals
made to it that were nonsense; it still incorporated for ongoing
analysis the less than 1 per cent of suggestions that seemed
sensible and relevant; but it also now introduced a new cate-
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THE 2025 REPORT
gory. It picked up those contrary views that seemed plausibly
sensible, but not suitable for the emerging form of Centrobank's
consensus, and put proposers of such ideas in touch with people
holding similar views around the world.
From the views of this constructive opposition to "Hu plus
33,I79 people's telecommunicated and accepted improvements,"
one new consensus objection began to emerge. "f,Jnder
the Taiwanese system," wrote one objector, "the main incentive
to entrepreneurs in poor countries is to produce for fairly
rich consumers, abroad or at home. If most of the seventy to
eighty countries in the Centrobank scheme started exporting
cheap-labor umbrellas as Taiwan did in the 1950s , a glut of
umbrellas would rather soon appear. It would be better if new
entrepreneurs could be encouraged to provide more of the things
desperately needed by the poorest three-quarters of the people
in these poor lands."
How to do this? It was no good saying that poor countries
should follow more egalitarian tax policies so as to direct more
of their internal demand to things needed by their own poorest
people. In the United States in the second half of the twentieth
century, marginal tax rates generally took around one half of
earned incomes above about six times gross national product
per head. Even this only managed to reduce Gini coefficients,
the best measure of wealth inequality, from something like 0.39
to something like 0.34. In Africa in 2000 GNP per head was
around $500 a year. Any egalitarian tax policy which promised
to halve all incomes above $3,000 a year would have (a) killed
all initiative; (b) stirred politicians' brothers-in-law, civil servants
and-most important-army officers (who got over $3,000
a year) into instant coups d'€tat Moreover, ro mechanisms existed
in these countries to provide cheaply the complicated
services the very poor needed most urgently.
This was the problem that benefited from the proposals of
Bjorn Heglund, who had long urged that the public services
needed in his native North Sweden should be provided competitively
by private entrepreneurs on performance contracts,
along the lines of experiments which had been tried in the 1990s
60
20054: The Introduction of Centrobank
by various worthy Swedish international aid organizations which
"adopted" certain Third World villages. As was said at the
presentation of Heglund's gold medal:
We at Centrobank began to realize that poor countries could
best grow richer by selling simple cheap-labor goods to the
rich world-a process that did not involve them in using our
proffered foreign exchange at all, although it had become
possible only after they responded to Centrobank's initial
incentives d la "Hu plus 33,179." The right way to use their
new foreign exchange was often to provide mechanisms d la
Heglund whereby Western firms are encouraged to make
money by providing the services that the poorest three-quarters
in the poor world most need.
The time was ripe for this experiment, especially in such
fields as medicine. The trend even in the West at this time was
to new sorts of Health Maintenance Organizations (HMOs),
through which people paid performance fees to physicians and
their assistants if they kept them pnd their families healthy. It
was early decided to put the competitive services provided by
multinational HMOs into the pool which would qualify for
Centrobank payments.
Sophisticated computer measurements of people's health were
coming into fashion, and three young doctors just out of medical
school at the University of Minneapolis drew the largest
single Centrobank payment in 2009 when their HMO, resting
heavily on telecommunicated X-rays and long-range computer
analyses, plus quickly trained local paramedics and some helicopter-
carried Western doctors on call, plus recommended dietary
changes and some environmental changes which new
staffs personally put into effect (cleaning wells, etc.), brought
an extraordinary improvement in the health indices of people
over a wide stretch of Africa's desperately poor Sahel. Since
the Centrobank scheme rightly meant that you could now get
as much money for increasing the health and lifespan of a Sahel
camel-driver (which was quite easy) as for increasing that of a
Texan billionaire (which was rather hard), these three young
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THE 2025 REPORT
doctors became very rich men-and other sorts of performance
contracts quickly came in vogue.
This revolution in attitudes and |
