Question: Good afternoon, Mr. LaRouche. I'm a member of the LaRouche youth movement. For me, it is a great pleasure to talk to you, and I would like make some comments, and ask some questions.

I would like to say the following: It's true, in the face of the collapse of the world situation and the breakdown of the main economies in the world--not only us, who live in this part of the world and in this South American continent. You might know about the collapse of many economies in our countries. You have seen the economy of Argentina is coming down. The situation in Colombia, Ecuador, the breakdown of the economy is Brazil, the situation in Venezuela, but also, the apparent and false situation in Peru. It's an illusion: We have no industry and we have a policy of imports that is taking over the country.

We would like you to speak a little bit more on what you mean by "physical economy." Myself, as a student of economics, I have read a lot about the workings of classical economy, and now I have read about the marginalist theory. But this idea of the physical economy breaks down all the ideas, by means of which the world is being guided.

And I would like you to speak a lot more about what this physical economy represents and how to apply it, in this part of the continent, and the great projects of the Amazon; and how we can join the Atlantic and the Pacific together; the hydroelectric plants; how to take advantage of the energy in Brazil; and mines in many places in the American continent. And I can think of many routes for development, and many roads--as we have seen in the United States--and how this system of interconnected transport can be more efficient.

I would like to speak a lot about this, if you can talk about this. And also, as a student in San Marcos, a university here in Peru, I would ask you very much for you to come soon to Peru--you personally. For the LaRouche youth movement, you would be an inspiration, as we have seen from the video of conferences that you have done before the California youth movement, we would like you to be here in Peru. And we want to "do the impossible," where we could organize a conference where we can have you here, to talk about these themes, and many others. [applause]

Lyndon LaRouche: Okay. Now, there are three areas--actually four; but, there are three areas in principle to cover, preliminarily before getting to this question of a prospective visit to Peru.

First of all, what do we mean by economy? Economy, as we know it, civilized economy, began in the 15th Century Renaissance. Why? Under the feudal period, and under the Romans, and even earlier, most of humanity, in most countries, or most parts of the world, were essentially treated as human cattle, in which a relatively small, dominant group of people dominated the population and used them as human cattle, precisely as, for example the Physiocrat Francois Quesnay puts it.

Now, the first time you had a modern nation-state, in the sense of a true state, that is a nation-state, was the time in which finally, the law was understood, to be the law, that you do not have human cattle. That all human beings are human, And therefore, the principle, which is the principle of Socrates, in Plato's Republic, for example, called "agape"; or which is called, in Christianity, variously "agape," "general welfare," or "common good": That no state, no government, has legitimacy, except as it is committed to service of the general welfare, the common good, of all of the population and its posterity.

Now, that's the beginning of economy. There was no economy before then, because you had a situation, in which most people were being treat as human cattle, existing for the convenience, benefit, and disposal of a relatively small group of people, as in the Roman Empire, as in Mesopotamia, as in Sparta--as under feudalism, especially ultramontane feudalism. So, it was only with the great revolution in the 15th Century, that the Graeco-Christian idea of the general welfare, common good, or what is called in Greek agape, as in I Corinthians 13, was accepted as a principle of statecraft, and of national practice. It is the point at which the nation, constitutionally, or in a similar fashion, recognizes the obligation of the sovereign to serve the general welfare interests of the population, and its posterity as a whole, that the question of a functioning national economy comes into existence. And, of course, a functioning world economy as a result.

Now, this worked, but it also failed. Because, beginning with 1511-1512, when the Spanish went over to the Venetians, and began the war by the Habsburgs, essentially, against the rest of Europe, to prevent cooperation in Europe, then civilization broke down, over the period from about 1511 to 1648, a period dominated by religious wars, or similar wars. And, it was only in 1648, with Mazarin's successful intervention to bring about the Treaty of Westphalia, that the modern nation-state came into existence, and Spain was a piece of garbage by that time, as a result of the Habsburg rule of Spain; which had destroyed Spain through these religious wars, exhausting it, in that form. And, then the War of the Spanish Succession and so forth. But anyway, the Habsburgs continued to dominate Europe, into the period of, and beyond the 1812-1815 period leading into the Congress of Vienna.

But, in this process, the Venetians' operation in the 16th Century, led to a division in Europe between the so-called traditional, ultramontane faction, led and typified by the Habsburgs and their associated families, the continued feudalist tendency; and a tendency which became known as the Anglo-Dutch liberal system.

Now, the Anglo-Dutch liberal system was modelled on the Venetian system. Venice, from about the time of the Emperor Otto III, had consolidated such power as an imperial, maritime power, based on a kind of a slime-mold of financier-oligarchical interests, which was dominating the Mediterranean region and Europe, increasingly. At the end of the 18th Century, Venice's power had decline. Venice, in the meantime, had developed in Northern Europe, on the northern shores of the Netherlands and the Baltic region, and so forth, the so-called Scandinavian countries, and also in England, had developed a form of society, which was modelled on the Venetian system; that is, modelled on the idea of a ruling financier oligarchy, like the Venetian oligarchy, which was exerting an imperial quality of maritime power, in the financier interests of a financier oligarchy. This form became the Anglo-Dutch liberal model

Now, the United States was found not as a result of what the British call "capitalism," or what Marx called "capitalism": What Marx called capitalism, is nothing but his rationalization of what the British identified as the Anglo-Dutch liberal model; which is typified by the fact, that government is dominated by a financier-oligarchical interest, whose power is centered in a central banking system or the equivalent. That is, a group of financier interests, like a slime-mold, controls the central banking system. And, the central banking system, as a central banking system, then exerts its power over government. And therefore, that's what Marx called the "capitalist system," otherwise, the Anglo-Dutch system.

Now, the American System has nothing to do with that. The American System as such, was a nation-state system, as for example, Friedrich List emphasized. Under the national economy system, or the American System of political economy, the nation-state, the sovereign, is absolutely sovereign. That is, there is no authority, in the nation, which has any higher authority than the nation-state as such. The nation-state is obliged to serve the general welfare, as the Preamble of the U.S. Federal Constitution specifies. There are three principles--two fundamental principles, and one qualification, which are set into the Preamble of the Constitution: 1) The state is absolutely sovereign. There is no other sovereignty. 2) The function of the state is to serve the general welfare. 3) The interests of the posterity shall rule in defining the interests of the general welfare.

So, those are the principles. Therefore, in a nation-state economy, you will find that most of the nation's economy involves basic economic infrastructure, which is either maintained and conducted by government, or by franchises from government, such as public utilities. And the rest of the economy is regulated by that. The currency and banking system of the nation are controlled by the Federal government, and regulated. That's the nation-state, the system of national economy. Which is totally opposed to the Anglo-Dutch liberal model, which is the neo-Venetian liberal model.

So, most of the problems that come up, about so-called "traditional" this, "traditional" that--it's all hogwash! There's no truth to it. There are only two real versions of economy, in modern Europe: One, is the Anglo-Dutch liberal model, of which the Marxist or Soviet system is a variant. That is, as Marx himself insisted, what he saw in socialism, and what the Soviet authorities interpreted as his interpretation, is nothing but a variation of the Anglo-Dutch liberal model. Whereas the American model is the completely different model, the system of national economy, in which the nation-state is primary--and in which all financial authority is subordinate to the enforcement of the principle of the general welfare, for the existing and future population of the nation.

So, these are the conceptions, which you have to start with, in economy. And, in debating these with other people, you have to emphasize this clearly, in order to get the decks cleared from all this garbage interpretation. Because, you look at the axiomatics: Axiomatically, the others are all variants of an Anglo-Dutch liberal economy, which is the neo-Venetian model--as opposed to the American System, which is essentially a national economy system, consistent with the principle on which the nation-state was founded, in the case of Louis XI and Henry VII back in the 15th Century.

That's the great conflict on this planet. You take the Soviet system, the so-called "Marxist" system, which is generally susceptible to, and reflects, a kind of special effect, a special reaction, to and within the context of the Anglo-Dutch liberal system. It's a sort of a "non-liberal liberal" system. We look at things in those terms.

Now, once we make that clear, then the idea of physical economy becomes obvious. The function of economy is not monetary. The function of economy is to maintain the general welfare. Now, the general welfare is not measured in money: The general welfare is measured in the conditions of life of people, and the future welfare of the entire population of the nation, and of other nations, as well. So therefore, how do we improve the productive powers of labor? How do we improve the standard of living? How do we increase the potential population-density of a nation, in terms of standard of living? How do we increase the level of education? Because in a poor population, you can't educate people at a university level, because they've got to be working, long before the age of 25, because they're going to die at the age of 40 or 45! So, how can you have full education up to a university level, in that kind of population?

Therefore, the physical development of the nation, of the infrastructure, of the conditions of life, of the productive powers of labor per capita, these things are predominant. And the monetary systems, and the credit systems, should be simply subordinate, instruments of administration, to those ends. Therefore, in defining economy, you don't define laws of monetary systems, or laws of credit systems: You define laws of physical systems, of man's relationship to nature. With these kinds of objectives: How do you increase the potential population-density of the human species? Increase life-expectancy, with the effect of increasing the standard of living that you can provide, in terms of intellectually and otherwise, to all the members of society? That's physical economy, to which monetary and credit systems must be subordinated, under national government. Or, a consortium of national governments, who agree to come to common purposes through the exercise of their individual sovereignties.

Now, what we can do--I don't know in Peru, exactly. Obviously, you know, I'd like to be there. That's not a problem! They're keeping my kind of busy lately--which is good (it's also bad, because it prevents some things from happening).

No, but we have to think in terms of strengthening the youth movement, in many ways, including whatever my presence might contribute to that--by writing, by discussion. And also by some exchanges, temporary exchanges of people from one part of the world to another, so that you have a sharing of the experience of the youth movement and its educational ventures, in different parts of the world. So, you have a world-sense, of what we're doing. I think it's very important. I think, perhaps, that we should be thinking of some kinds of goals, in terms of institutional activities, which will actually further that step, in the case of Peru and other countries.

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