After reading this book last summer I got in contact with the author to find out more behind the story. David was very helpful in answering my questions and giving me an insight into his beliefs and opinions on topics such as Globalisation and Communism. The question and answers are as follows:
CT. What was your reason behind the plot to this story? Do you believe something like this is capable of happening?
DL: We have had many sell-offs of stock markets in the past. Three of the largest and most important occurred in October of the year. The 1929 market collapse lasted three years and by the end the value of US shares had fallen 90%. One day drops of 50 to 70% are not unheard of when investors get the jitters. We know that events trigger psychological reactions in traders.
When I worked in New York and spent some time with the Financial Economist community that advised banks and mutual funds on economics it was not uncommon for them to talk to one another and reinforce warnings or even optimism. This works well until someone calls the bluff. This can happen as a result of a series of events, anyone of which would send markets down, are all collected in a single point in time. Combine this with the lulled community of investors used to getting their insider information from an exclusive stock market news service, Phoenix and their over reliance on METIS a market risk analysis and programmed trading system for buying and selling stocks, bonds and ETFs, and I think something like what is in the book could happen again. Mutual funds, banks, insurance companies, and pension fund managers who know that missing the timing of a downturn can mean disaster, and you can have the kind of stock market decline so important to the members of the Society of the Phoenix and Von Kleise’s plan.
CT. I feel this book, although not directly mentioned, has an underlying story about communism and capitalism. The ideology behind what the Phoenix group are trying to achieve is social equality however they themselves have the power to rule the world. In an ideal world, would communism work and do you ever see it working?
DL: Marx saw that the capitalism that emerged at the end of the 19th century was self-destructive. He concentrated on the use of capital to replace labor leading to a sudden drop in demand (this was long before we had any New Deal type automatic stimulus in the form of unemployment insurance payments, welfare, social security, etc.). As workers lost jobs or wages were cut to the bone, then the capital became redundant was sold off cheaply opening the door to new competitors as they had lower costs. This created the paradox where we had over production (too many capitalists chasing too few buyers) and workers not getting paid enough to support this extra demand. Thus there was a slow running down of the industrial system. He saw socialism and its belief in social justice and ownership of capital would guard against this. Communism was an illusion to the ideas on social engineering that he had written in his first book “The Communist Manifesto” that was published in 1848, the revolutionary year, in response to the social unrest, wars, and revolutions that occurred then.
Von Kleise is not a Marxist, but he diagnosed the problems of capitalism in its more modern form that he calls “Managerial Capitalism.” No longer was it owned by founders or capitalists, it was now shared out among a group of wealthy investors – private individuals acting collectively often through mutual funds, insurance companies, or pension plans. It had evolved to be larger than anything that a single person or family could control, and yet these growing, global power houses were being controlled loosely by chosen managers who were not, by and large, real owners of the companies they controlled. Their interests were tied to short-term goals as they were over compensated for the skill they brought to managing the company. They gained most money by keeping stock prices high and meeting Wall Street’s ever rising expectations. Thus they hoarded cash, shuttered factories and laid off workers, but even in a recession profits continued to grow. The worst part was with so much of the ownership dispersed across so many buyers through diversified portfolios and even exchange traded funds (ETF’s that didn’t carry proxy rights with ownership of a mix of assets), a manager once he had installed his tame Board of Directors could be well compensated for life.
So to save capitalism, Von Kleise had to drive down share prices to new lows and gain control of the corporations that were moribund trustees of the public trust. He believed, having been educated at Enigen by Dr. Mache, an acolyte of Rudolf Steiner’s Three Fold Social Order including its belief that capital must be continually renewed and circulated in order to provide jobs for workers who then can buy the output of these growing industries, saw that the only way to change something rotten was to expose the rottenness. So he conned the investor class into selling down their assets and buying gold. As a result the ownership shares in major global players changed drastically from a dispersed set of owners with only a few large shareholders (just over 6%) having a role to play on Boards, to an equity partnership that had for many of these firms 50 or more percent of the outstanding shares. But before the plan for reorganizing corporate leadership could be put into place, the world economy would be put through a major global recession that bordering on a depression not seen since the 1930’s.
CT. In the current climate we live in today would you say Globalisation is beneficial and the way forward in terms of economic prosperity?
DL: I'm an international economist and have been built up a private consulting practice that sells advice and global economic data from large scale models. My system of models are larger than any others available and have been installed even at the World Bank for their internal use. I have been tracking the benefits and costs of globalization now on a quarter by quarter basis using very large scale data bases on the impact of flows of international trade, not at the aggregate, but as they impact the growth of industries and employment in more than 70 countries. So I think I can speak on the benefits and costs of globalization. If I were God, and writing fiction allows one to be both God and Devil at the same time (which is very liberating) then I would force some changes in WTO rules on trade that are long overdue. I would complement these rule changes with a change in tax codes on corporations that reward companies that have a positive trade balance, i.e. they sell more outside of the country, but they source (labor and factors of production, inputs) than they buy from outside the country. I would penalize companies that sell inside the country more than they source from inside the country. The WTO rules should be changed so that countries running chronic surpluses, like Germany and China, would be required to impose a surcharge on all exports without discrimination as to where they go or what they are. Countries in chronic deficit, like most of the rest of the world, would be required to impose across the board, fixed percent, surcharges or ad valorem tariffs without discrimination as to country or products imported. If these rules were accepted and adopted then globalization could work. So the mantra for free traders should be “Free and Balanced” Trade.
CT. If you were to change one thing about the book what would it be?
DL: The Phoenix Year has evolved and changed over the last 40 years. I don’t know if there is one thing that I would change about the book but some of characters evolve in the second and third parts of the trilogy.
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The Phoenix Year is available for download and in paperback:
