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BRISBANE CITY COUNCILANNUAL FINANCIAL STATEMENTS 1992-93AUDIT REPORT - QUALIFICATIONComments by David C. Jones, CPFA, FCCA (UK).International Financial and Management ConsultantResearch Fellow, Center for Urban Development StudiesHarvard Design SchoolIntroductionBecause of the public interest generated by the report of the Queensland Audit Office on the Brisbane City Council Financial Statements for the year 1992-93, I have been requested to provide professional comments. As some of the public commentary in Brisbane appears to be contentious, I feel that I should presage my remarks by a disclaimer of interest.As a non-Australian international consultant, I have no personal or private interest in making professional comments. As a United Kingdom professional accountant, moreover, I am held to a high standard of independence and ethics. Although I have met the Lord Mayor briefly, in connection with my professional work, I do not know him personally and I have no private interest in his political fortunes. I am known to the Finance Manager and the Chief Executive only in connection with my professional work, although we are on good terms.The decisions and assertions under consideration are being made against a background of Australian (and Queensland) law, together with national and local administrative and accounting practices. Clearly, I have no competence to address these matters. Thus, my comments will be based on what I assess to be standard practices and principles of public sector administration and financial management, commonly practiced internationally.BackgroundIn May 1993, at the request of the Lord Mayor I made a brief presentation at a luncheon, given for the benefit of the financial media, to explain the introduction of new budgeting and financial reporting practices for the City Council. The session was entitled: "Financial Reform Preview - Highlights of the 1993/1994 Brisbane Budget.On that occasion, I was complimentary to the Lord Mayor, in respect of his leadership in setting the framework and facilitating the work of his professional staff, in moving towards what I regarded then, and still do, a fuller and more appropriate form of financial reporting.Brisbane City Council, as I then pointed out, was taking a lead – almost world-wide – in dealing with matters which have been (and still are) under consideration by the accountancy profession for many years. In the opinion of many, these actions are none too soon, for the public has been ill-served by crude reporting and thus crudely-based decisions.In making my comments about The Lord Mayor, I likened his political leadership the that of Mahatma Gandhi, when he sought independence for India:“They are my people. I am their leader. I must catch up ith them.”For this, I was good-naturedly taken to task by the media, as using an over-blown analogy.Probably, I deserved this. However, I am still of the opinion that my principal point is valid. Whether we live in a national, regional or local communities, we owe it to each other to be fully accountable for: stewardship of public funds; performance of public service; and, security of public assets. Indeed, to quote again – this time from the Christian Bible:“Forgetting all dishonesty, let us speak the truth to our neighbour, for we are allmembers of one another.”To the extent that we fail in this, community independence is compromised. Evidence of this, in many parts of the world, is overwhelming.The International ContextWorldwide, public sector financial reporting is increasingly being criticized as not conforming to private sector practices - often held to be of a higher standard. Often, private sector practices are of a higher standard, despite inherent differences not always fully appreciated by those without public sector experience. It is towards these higher standards which Brisbane - and Australia - has been moving. Yet, for doing so, the public sector now finds itself criticized.In terms of performance, also, there is a constantly growing demand for the public sector to be more aware of market forces. Unfortunately, it is the lot of the public sector to deal with the most extreme cases of market failure. Indeed, it could be argued that this is a large part of its justification - the delivery of "public goods" and "merit goods," as well as dealing with "natural monopolies” and other situations where the private market is – sometimes inherently - inefficent in service delivery.Unfortunately for the public sector, market forces usually operate more efficiently when there is competition. They operate less well in situations of monopoly. Furthermore, market forces operate least well of all in situations of coercion. This is an almost sole prerogative of governments.A limiting case is the eminent domain power to take property for public use, although usually, though not always, there must be just compensation. Yet, despite this power of intrusion into private lives, accountability for it has been - and commonly still is - little short of abysmal.One of the most serious shortcomings in public accountability has been the disregard, in public sector accounts, of the concept of the financial, economic, social and environmental rent. This is the actual or assessed charge for the use of fixed assets - the community plant.It is this plant which forms the most significant part of a community's equity, or its capability to deliver public services. It is, using my own terminology[1], the "results" of past operations, available as "resources" for future operations. In the language of Brisbane's reporting, it is described as "Increase in Operating Capability" virtually the same thing.Brisbane's Financial Statements - The Audit QualificationIt is with some concern that I noted the decision of the Auditor to issue a qualification to the Council's Financial Statements. This was with respect to the valuation placed on "land under roads" and on the related income item for the donation of such land during the fiscal year.In my opinion, so long as the City Council is the "highway authority[2]" the roads vested in it are clearly part of its operating capability. The land on which these are built is, by definition it would seem, part of the value of this capability.It must be noted, however, that the audit qualification is very clearly bounded. It refers only to valuations placed upon the land – not to the implicit ownership responsibility. Were this to be the only issue now in the public discourse, it might well be resolved by continuing the open conversations in which many earnest professionals have been engaged. These have been part of a concern to see proper resolution of contentious issues, in a brand-new domain of professional development.The Open Letter - General ObservationsUnfortunately, the relatively constrained nature of the Auditor's comments have triggered what seems to me an intemperate and unreasonable commentary, now in the public discourse, in the form of an " ‘Open letter’ to the Constituents of Brisbane and all Professional Accountants," issued by Ms. Pauline Pender. Since I number myself among the latter, I feel that I have a right and responsibility to respond to it.Before attempting a response, however, I recall that one of my compliments about the Lord Mayor was that his encouragement of the professionals in this endeavor involved some political risk. So it has proved. In my judgement, quite unfairly.Having read the "Open letter" carefully, I would divide it into three main themes.First, there is an unbecoming use of intemperate language. This conveys to the reader a degree of anger on the part of the writer, without justifying it. I shall leave this for the reflection of individual readers. However, it does represent the kind of ungrounded rhetoric which so often becomes part of the public discourse, with the potential to inflame opinion, to no specific purpose.Second, and more serious, is the strong implication that the presentation is a deliberate attempt by the City to misrepresent its financial position, either to improve its debt ratio or to offer an inappropriate enhancement of its equity value. Since this also relates to my claim of a third theme, I shall return to this later, and in detail.Preparation and Presentation of Financial StatementsWith respect to the broad assertion of misrepresentation, I offer the following observation. My considerable experience in the public sector, with particular emphasis on local government, offers little evidence of either opportunity or ability, on the part of policy-makers, to deliberately distort financial reports for their own selfish or political ends. This is because, almost universally, preparation of such reports is the responsibility of professional officials – not elected representatives.Within the Anglo-Saxon tradition, from which I emanate – and from which Australia (as well as the United States of America) takes many of its original precepts – a very strong concept is that of "the independence of the treasurer of public funds." This holds that the chief financial officer of a public body – by whatever name called – has an independent fiduciary responsibility to the taxpayers as a body and may not plead the instructions of his political masters for the carrying out of illegal or unethical conduct[3].It must, of course, be admitted that the permanent officials may prepare statements with a great range of professional skill, from the most competent to the least competent. Also, standards and practices vary widely. Most importantly, paid officials at all levels of government can and sometimes do engage in fraud or commit errors. These, of course, create false statements of figures, as well as damaging the public trust. Surely that is not what is intended as the implication in the "Open letter". It is certainly to be hoped not; otherwise action for defamation could arise.There are also, as is well-known, countless ways in which published numbers, once presented, can be used and abused for political purposes. But that is not what is here implied. Instead, there is a much clearer implication that the figures themselves have been mis-stated. This seems hardly worthy of a fellow professional. Indeed, taken with the intemperate language, it presents the image of a professional team within the Brisbane City Council which has been behaving in an arbitrary manner.From my, albeit limited, observation, it seems clear that the converse is true. In the preparation for these new and innovative practices, the Brisbane City Council accounting professionals appear to have gone out of their way to engage in a variety of conversations on contentious and difficult issues. Indeed, I understand that Ms. Pender was, herself, a participant in this.The Open Letter - Detailed ObservationsThe third and final theme of the "Open letter" should be dealt with in some detail. This is because it is a collection of erroneous assertions regarding the accounting treatment and valuation of the assets at issue. Because this is also the main concern of the Auditor's qualification, my comments can embrace this also.Land Ownership and TitleFirst, there is reference to the treatment of land claimed as "forfeited" by the developers as revenue. The argument is made that because the land has reverted to the Crown[4], "nobody" owns it. It would be more consistent with the common view of public administration to claim that "everybody" owns it – in the sense that it is administered in trust for the community as a whole. To use the concept of the Australian nation itself, it is part of the "common wealth[5]."The commonly-used terminology is that public property is "vested" in the authority with the statutory right to deliver the service. Thus, if the Brisbane City Council is designated as the "highway authority[6]" for the roads in question, it is appropriate to show all the property administered for this purpose as its assets.There is further justification. Even if there is not a titled legal ownership, the "highway authority" can be deemed to be the holder of a long term financial lease. It has, in other words, been required to accept financial responsibility for the use (and, therefore, the "rent") of the property, without which it could not deliver the service. The inclusion of a financial lease in a balance sheet, under these conditions, and to depreciate it annually[7], is wholly consistent with standard commercial accounting practice.Payment for Land by the Public AuthorityAnother contention put forward, with respect to imputed ownership, is that Brisbane City Council did not pay for the land. This is, of course, too narrow an assertion. Many assets change their legal ownership otherwise than by the actual payment of cash. To extend the example used by Ms. Pender in her text, if your friend deeds a house to you as a gift or legacy, or you recover it as part of a lawsuit, you become its legal owner. This is a very close analogy, on the one hand, to a donation and on the other, to a compulsory purchase[8].Furthermore, there is still the question of whether, at least implicitly, the public sector had, indeed, paid for the land. When property owners develop land for commercial purposes, this almost always leads, sooner or later, to a need for public sector expenditure on infrastructure, including roads. Depending on the location of a particular piece of property, this expenditure may enhance or (less commonly) detract[9]from its value.Overall, it must be asserted that the property values will, almost certainly, increase, as a result of the public expenditure. Furthermore, it must be assumed that a developer is aware, in advance, of this probability. He will also be aware that, consistent with standard practices, the portion of the land required for infrastructure - most usually, roads and drainage[10]- must be legally vested in the appropriate authority, to be subsequently operated and maintained by it - in perpetuity.For a road, this clearly represents a valuable right - access to his commercial property - for the developer. Indeed, it might even be claimed that it increases, implicitly, the capital value of the business. Yet, it has been paid for by the highway authority in exchange for the land donation. Is there always an exact trade-off? Clearly not. But neither is there in many commercial transactions, where the objective is to seek a competitive advantage at the expense of another party. Indeed, if transactions were not perceived of as seeking mutual advantage, there could be no commerce! What can usually be claimed is that the developer is not forced to make the transactions. He is aware of the involvement of the public sector interest, in advance. He will, thus, make investment decisions freely under these conditions.In the unusual case of a compulsory purchase – which governmental authorities will usually "bend over backwards" to avoid, just compensation[11] will, typically, be paid. Thus, the implication is that anything better than this, achieved by negotiation, would also be a fair deal (i.e. “just”) for the developer. This very standard practice contrasts with the implication in the "Open letter", that the Brisbane City Council must be assumed to be acting in an almost "predatory" manner.Conditionalities Restricting Assessment of Beneficial OwnershipBy an extension of my argument, the variety of conditionalities put forward in the third paragraph of the "Open letter" are not essential, in my opinion, to a designation of beneficial ownership of land, for the purpose of including it in the accounts. Indeed, in my experience, a standard practice for a public authority is that it does not – and would not normally be allowed to – mortgage public property, for fear of it losing control to a private lender in the event of default. This is usually considered contrary to public policy.There are several claims made as to legal limitations on the use of the land. These are, of course valid. However, should it become necessary to use the land in an alternative way, it is open to the public authority to invoke these legal procedures. It might also be noted that even the owners of private land do not normally have the right to use it in an unfettered manner. Under “town planning” or “property zoning” law, is standard practice, even in the most capitalistic of societies, for land use to be confined to that which is not in conflict with declared public purposes. Thus, a common practice is for loans to be raised by public institutions either by mortgage against future (general or specific) revenues, or else by the pledge of sovereign (or sub-sovereign) taxing power.A Northern Virginia ExampleThe comparison, between privately-owned and publicly-owned land offers another, defining, example. Close to my home, in Northern Virginia, there is an area known as Springfield. Its developmental centerpiece is an area which includes a main highway intersection, between two motorways. One is the Greater Washington Beltway (US – 495). The other is the main U.S. north-south route from the Canadian border to Florida (US – 95). Close by is a major covered shopping center, known as Springfield Mall. Connecting the arterial roads and the shopping center, as well as providing other local access, is a network of state roads[12].The shopping center, typical of many in the USA and Australia, comprises a central covered area, surrounded by a large parking lot and access roads. Thus, about two-thirds of the land area comprises "land under roads and parking lots." These roads and parking lots are not in the public domain. Clearly, however, the land has substantial commercial value for the owner of the shopping center(s), as it provides necessary access to and by customers.For as long as I can remember, both the road system and the shopping center have been subject to continuous reconstruction, to allow for changes in the commercial and traffic patterns. This has involved the purchase, disposal and exchange of land, as well as alterations to its use. For example, a recent change to the shopping center has involved: the acquisition of additional land on its periphery; encroachment of buildings on the existing roads and parking lots; and, construction of a multi-storey car park, to compensate for the loss of parking space at ground level. More recently, an entire wider area has been substantially redeveloped, to allow for the construction and use of light rail (subway), commuter-rail and bus facilities. Quite clearly, the planning decisions were taken with considerable regard to the relative values of the land areas.Similarly, the national and state road systems have been reconstructed, involving the acquisition of additional land, thus depriving others of its use, for alternative purposes, including shopping center expansion. Indeed, currently, the entire intersection is being reconstructed, yet again, over an estimated twelve-year time period. This is to deal with ever-worsening road traffic congestion. Thus, this valuable land is now incorporated under, or adjacent to the road improvements or the right of way. By implication, therefore, the community - acting collectively - has decided that this use of land is more valuable, for the time being, than any other alternative.Comparison of Private and Public LandIt seems clear that, under circumstances of dynamic development, shifts of land use from a private to a public purpose do not nullify its value. Instead, the value, for public purposes, is implicitly increased. Otherwise it would be used for the alternative (non-public) purpose. This decision, incidentally, comes about by the free-market purchase and sale of land. Even where it is compulsorily “taken,” in the U.S.A., the Supreme Court has ruled that “just compensation” implies “market value.”The Use of "Deprival value"The "Open letter" brings up the matter of whether it is appropriate to value the public use of "land under roads" at what is described as a "deprival" value. The claim in the "Open letter" is that this terminology is not commonly used within the accounting profession. This does not, however, invalidate it, for it is introduced to clarify a concept not hitherto addressed. After all, new terminology is being introduced all the time, especially within the domain of management information, of which accounting is a part.The question to be addressed is, therefore, whether the term is useful for effective action. In my opinion, it is. Furthermore, it is an expression which is very well grounded in economic principles, which accounting is attempting (albeit imperfectly) to reflect. "Deprival" in its dictionary definition, means "to withhold or take away something desirable or necessary." Thus, the term has a very close analogy to the economic concepts of "demand" in the sense of a scarcity of wants and needs. If there is no scarcity, there can be, almost by definition, no significant "deprival." "Deprival, therefore, withholds a "supply" which would otherwise fulfill a demand for scarce resources. This is totally consistent with the economic concepts of "opportunity cost" and "alternative use" in the establishment of value.This concept is especially important when, as in today's discourse, there is growing concern about the environment. Many are now questioning whether the motor-car has become an economic tyrant, twisting the tail of urban economies without becoming fully accountable for the cost. Whether or not this is so, the accountability issue cannot begin to be addressed unless the cost is actually determined. This cost, in turn, will not be comprehensive unless it includes the “rent.” This, finally, cannot be determined without reference to the capital value of the asset, including all of its costs, adjusted for alternative use and inflation.Thus, deprival value, for land under roads, must recognize its potential alternative use for: agriculture; commerce; industry; other public purposes; health-care facilities; recreation; and, environmental protection.There is also another issue, almost Keynesian in its implications, relating to the concept of liquidity preference. Were the cash invested in the land not used for that purpose, it could have been invested (by the government or the taxpayers) to earn a rate of return that would – in a relatively “clean and open” market – equate to (or exceed) the real value of its opportunity cost, plus (anticipated) inflation. Thus, its compounded nominal value would equate to the value of the land under the road at any point in time.Since a large part of the management of public finance consists of making choices to spend money on scarce alternatives, this approach to accounting appears entirely appropriate.It is interesting to note that, in theSpringfieldcontext, the competition for land use covers almost all the normal urban development possibilities. Under separate ownership and control, for almost every separate purpose, are the following: mall shopping; neighborhood shopping; housing; schools; offices; hotels; a light-rail (metro) system; communter-rail; long-distance (inter-city) rail; commuter bus; inter-city bus; inter-neighborhood taxi-van; taxis; van-pooling; car-rental; vehicle dealers; and, freight rail. In addition, there are (interstate) trunk highways; intermediate roads, and, local roads, each carrying freight and passenger vehicles, both local and long-distance. There is privately owned and publicly-owned parking space – free, subsidised and market-rate. Finally, publicly-owned school buses run peak services to convey the school-children back and forth.If land cannot be said to have alternative uses – and therefore values – in these complex circumstances, how can choices possibly be made? Moreover, these circumstances demonstrate, beyond all reasonable doubt, that land cannot have values which are different merely because it is owned or controlled by the public sector, rather than the private sector.The Debt/Equity RatioThe "Open letter" has asserted that one purpose of claimedly overstating the asset value of the "land under roads" was to improve the debt/equity ratio. There are two points to consider here.The first point is that the ratio itself should not assume an overblown importance. It is only an accounting ratio, capable of useful assessment within the domain in which it is used. To claim, for example, that an alternative commercial entity, with a different activity, raising its capital by different methods and subject to different disciplines, would not view the ratio with favour is not really very useful.The second point addresses the ratio calculation itself. The claim that it is "spectacularly good" must, as already implied, be assessed against the concern: "relative to what?" However, what is also true is that the debt/equity ratio does improve dramatically under circumstance where fixed asset and debt values are both influenced by inflation. This, however, has nothing to do with the action of the Brisbane City Council, nor of any other individual entity. Instead, it is a result of the fact that "assets" and "debt" are treated in different ways by the commercial market-place.A fixed asset is, initially, brought into the books at its original cost. When and if its value changes, either because of alternative use or inflation, it will stay in the books at this cost, unless it is deliberately and periodically revalued. This, currently, would be done only under a regime of current cost (or current value) accounting. Such a regime is now being introduced and practiced by Brisbane City Council[13]. Therefore, it is appropriate for fixed asset values to be either indexed or individually revalued, as now done in the Brisbane City Council accounts. The use of a "deprival value", as already indicated, appears to be a reasonable way of achieving this.Long-term liabilities are typically treated by the financial market-place in quite a different manner. Here, the principal sum is retained in the books and never, normally, revalued, unless indexing is used, in situations of severe inflation. It is adjusted, of course, when paid off, whether in a lump sum or periodically. However, the interest rate includes not only the expected real return for the use of money and operational risk. It also includes an element for anticipated inflation. Thus, the interest really includes a component for "adjustment of principal."Whenever inflation occurs, debt repayment and interest payments represent continuously decreasing values, in real terms[14]. Thus, in these real terms, the public debt is being discharged at faster rates than asset values are being depreciated (used or destroyed). Land, of course, is not depreciated at all, so the effect is even more startling than for other fixed assets.The Single Reporting NumberFinally, the "Open letter" makes far too much of the concept of a single reporting number. One advantage of a more comprehensive set of financial reports is that the information can be conveyed to the reader in a variety of ways. The use to be made of this will depend on the purposes of the various observers.Modern financial statements almost always draw clear distinctions between "cash-flow" and "net income" concepts. This does not make one "right" and the other "wrong." Instead, it provides alternative presentations for a wider range of useful and effective actions. Instead of making a claim to re-state the financial position of Brisbane City Council in a revised form, it would be much more useful, in my opinion, merely to appeal to the intelligence of the normal observer.Thus, it could be said, by way of explanation or footnote, something like:"If the land under roads, valued at its assessed "deprival value" were to be excluded from these accounts, the net assets would be shown at only $3 billion, instead of $10.5 billion. Concurrently, this would require the omission of new land acquisitions for this purpose, amounting to $24 million, which would reduce the declared "increase in operating capacity." However, since the reduction relates to the non-monetary part of this operating capacity, it does not reduce the value of liquid assets currently available for this purpose. It merely omits certain of the fixed asset values from valuation and recognition."The Urban Transport ContextAs a final set observations, I would like to address, somewhat more broadly, the importance of valuing the resources which are appropriated to any particular purpose by public sector institutions. Because this issue deal with roads, a principal reference-point is a paper entitled: "Environmentally Sustainable Urban Transport – Defining a Global Policy." by Ismail Serageldin – (then) Vice President, Environmentally Sustainable Development, The World Bank. Ironically, it was delivered in Sydney, Australia, at the UITP 50th International Congress, on May 3, 1993. It opens with a statement of concern for sustainable development. This, it defines by a quote from the Brundtland Commission:"Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs."It is interesting how close this idea comes to the Brisbane concept of its equity as an "Operating capability." In effect, this is "the ability of a generation to meet its own needs."With particular reference to transport issues, the paper goes on to say:"Environmental issues in the urban transport sector stem mainly from the proliferation and use of private motor vehicles and the failure of Governments to address the real costs that these vehicles place on our society.""The private automobile, which makes up the largest proportion of the world vehicle fleet, is a major consumer of resources. It consumes 60 percent of all natural rubber, 20 percent of steel production, 10 percent of aluminium products, and requires between 5 and 10 meters of road for every vehicle in the major cities."Clearly, there is a need for costs to be addressed by public sector accounting systems, in ways which have – hitherto – been largely ignored or significantly distorted. This is one of the things which Brisbane's new accounting system is attempting to remedy. In particular, Mr. Serageldin emphasizes how much road-space is needed for each vehicle in major cities. This is a direct function of land-use and – by extension – land availability and cost.Mr. Serageldin goes on to say:"Infrastructure Needs: The studies of Newman and Kenworthy[15], mentioned previously, examined 31 cities around the world and divided them into five categories. At one end of the spectrum were the heavily auto dependent cities (Los Angeles, Houston, Detroit, Perth and Brisbane) and at the other were the transit orientated cities (Munich, Singapore, Paris, Hong Kong and Tokyo). In the "auto" cities, the provision of road space was eight times greater than in the "transit" cities and the provision of parking was three times greater...."Reference to the case ofBrisbane, as one of the "auto" cities, should not go unnoticed. Clearly, a substantial proportion of the city's land is being appropriated for the use of the motor vehicle. This is depriving the land of other, alternative, uses. If this is the wish of the city's residents, well and good. However, they can only make sound judgements, through the ballot-box and by other public and collective processes, if they are as well-informed as possible. One important component of this information ought to be how much, in current dollars, has already been invested in road construction, including the use of land for this. Clearly, one major source of this information is that of financial reporting.The Lord Mayor, again at some political risk, has given his authorization to the city officials to make the publication of this information as transparent as possible. Stockholders of public companies must receive comprehensive financial information on which to base their financial investments. In making the choice of where to place their funds, they are making assessments about whom to trust - and to what extent.In the same way, stockholders in the public sector – the electorate – must make similar judgements about whom to trust, for the next several years, with the stewardship of their funds and the delivery of the services which those funds help to provide. The provision of this information is the mandate of the City's Finance Manager. It is my belief that he is taking this responsibility seriously and discharging it with integrity.Municipal Accountability for Costs (Results) and ResourcesMost large or medium-sized private businesses are legally required to keep their financial accounts in compliance with national or international accounting standards. Thus, although neither financial nor economic costs of activities can be directly derived from these, they usually provide sound bases for the development of cost accounting computations and of the cost accounting systems necessary to generate these.As discussed in many places elsewhere, financial accounting systems used in the public sector, and particularly in local government units, may be of two main forms. Firstly, for activities that are revenue-seeking and possibly intended to earn profits, the financial accounting systems are often quite similar to those used in private sector enterprises. This is especially so if the public sector revenue-seeking activities are performed by an entity with some degree of legal separation from core local government activities, funded mainly from taxes and other general revenues.Secondly, financial accounting systems for activities to be funded from general revenues have often been much simpler in form from those used in the private commercial sector. However, although the form may be relatively simple, the substance of the accounts may be very complex, covering a huge variety of activities, possibly ranging from “archive management” to “zoos”! Some of these services, moreover, are very large. Many are very capital-intensive. For example, outside of national defense services, education is one of the world’s largest public sector or private sector activities, with “teachers’ salaries” probably by far the largest single cost element.Unfortunately, however, even more than within the private sector, public financial accounting systems typically fall short of what is necessary to achieve cost measurement, either for pricing or for other policy decisions. Moreover, the huge quantities of capital resources, held as “fixed assest” are often treated, for accounting purposes, with disdain. Yet, in the public sector, the concepts of “costs” and “resources” are almost constantly used in the policy discourse. They are also frequently misunderstood and misused concepts. Decisions that should be based on costs or resources are based on almost anything but these.In all sectors of business and public activity, therefore, cost accounting systems are needed, in addition to financial accounting systems. Ideally, cost accounting systems should be capable of providing accurate information about the consumption of economic resources for specified activities. These should either be the economic resources actually consumed or at least those attributed, allocated or ascertained, in some mathematically acceptable way. Cost accounts, almost always, produce financial and other information about more activities, in much more detail and sometimes in different ways, than financial accounts. Thus, although soundly-based financial accounts are necessary, they are usually not sufficient for the purposes of costing.Comprehensive cost accounting systems can be perceived of as being firmly “bolted on” to the related financial accounting systems. They should derive much of their necessary information from the financial accounting and be capable of being wholly reconcilable with them. Accounting systems, complete or incomplete, are expected (system-wise) to balance debits against credits and (more conceptually)to match resources against results. This is as true of cost accounting systems as of financial accounting systems.There are at least two approaches to the need to set up cost accounting systems. The first is to derive from the financial accounting system whatever information is available in it, in whatever form it exists. Then, an attempt is made to arrange the information in forms that will be useful in calculating costs. This may well require the addition of supplementary information that is not currently available in the financial accounting system, at least in usable form. Indeed, where financial accounting systems are crude or incomplete, the balancing of cost accounting systems against these may prove to be difficult, sometimes impossible, and often futile to attempt. In other words, the costs of deriving costs may exceed the benefits of having them available.With many accounting systems currently in use in local governments, in many different countries, this is typically the case. Therefore, costs derived from these accounts will only be partial. They may, indeed, be relatively useless as a basis for many policy decisions. However, “the perfect is the enemy of the good,” it is sometimes said[16]. Therefore, as a second alternative, one does what one reasonably can with the information and systems available, producing figures that, while not closely approximating costs, are at least more useful than mere cash payments or expenditures. They are, however, likely to be more useful if taken from the accounting system than if derived, more or less informally, from a variety of other documents, of varying and dubious credibility.In recent years, the “magic of the market-place” has been held out to all as an unbridled paragon of virtue in financial and economic management. Thus, deregulation, privatization, contracting out, public-private partnerships and (as in UK) the “Private Finance Initiative,” have all been used as adjuncts to more traditional methods. These largely relied on the financing of fixed assets by long-term public debt and operating them by public employees.The newer approaches have often been a mixed blessing. Without doubt, they have provided useful alternatives in financing and operating public services. They have also opened the public sector more widely to many innovations and efficiencies, hitherto seeming to be largely exclusive to the private sector. One particular domain where this has been so, is to increase the pressure for more accurate accounting, within the public sector, to facilitate more rational comparisons of cost and resource use with those offered by the private sector. However, the world is now littered with disasters relating to privatization and deregulation. The “California Energy Crisis,” the “British Rail” debacle and the financial failure of the “Channel Tunnel” are just a few of the most obvious that come to mind. Moreover, many major frauds and financial failures have been in sectors highlighted as good candidates for privatization: electricity[17], telecommunications, water and solid waste management. So far as accounting is concerned, after Enron, Worldcom and Waste Management Inc. to mention just a few, is it necessary to say any more?Greater accountability has also been demanded by the voting and taxpaying public. As the private sector’s superiority has been emphasized, less financial resources have been available to the public sector. Clearly, in improving public sector accounting, we are at early stages in most countries. Relatively few are currently setting the pace, such as New Zealand, Australia and the United Kingdom. There is still much to be done and this work is continuing. The International Federation of Accountants is also involved. Unfortunately, the private sector has hardly covered itself with glory, either in the private delivery of public services or in credible and effective accounting.It used to be thought that the private sector was clever and innovative, in contrast to a dull and cumbersome public sector. Indeed, the relatively perceived “rough and ready” attitude of the public sector engendered the expression: "Close enough for government work!" Unfortunately, this is, now, not nearly close enough! The Economist, some time ago, stated as follows:"The government has gone wrong, however, on the first point -- the mix of its spending between investment and consumption. To see this, the idea of a public-sector balance-sheet is helpful. It would be a short-sighted company that minimized its liabilities and ignored its assets. So, too, for governments. Like companies, they should aim, at least, to maintain their net worth -- the value of assets less liabilities. This highlights the distinction between borrowing to finance spending on (say) salaries (which reduces net worth), and borrowing for investment (which generates future income, so should leave net worth unchanged)…The balance-sheet approach also exposes tricks such as selling public assets, which most governments wrongly treat as cutting their deficits".The issue of greater accountability – within both public and private sectors – was also addressed by a well-known economist, Kenneth Boulding, as follows:"Although I...with all modern economists, owe an enormous debt to Keynes' brilliance of insight and imaginative sweep, his system shows a number of weaknesses that have not been corrected by his followers. One of these weaknesses is a general failure to distinguish between two very different processes in economic life, the exchange or payments process, on the one hand, by which existing assets, including money, are circulated among various owners, and the processes of production, consumption, income and outgo on the other, by which assets are created, destroyed and accumulated”[18].Elsewhere, Professor Boulding writes:"The usual marginal analysis treats the firm as if it had nothing but an income account; it has no balance sheet, no capital problems and no dynamics;...Consequently, the economist has been able to give only fragmentary accounts of inventory changes, investment structures, liquidity positions and like problems[19]."Over a century ago, a judicial ruling in the United Kingdom stated the following:‘A full and fair balance sheet must be such a balance sheet as to convey a truthful statement as to the company’s position. It must not conceal any known cause of weakness in the financial position, or suggest anything which cannot be supported as fairly correct....[20]’Finally, in my own writing[21], I emphasize the points made by the Economist and Professor Boulding, by the following:“An accountant records and interprets variations in financial position. He or she records, in money values, the results of variations during any period of time, at the end of which he or she can balance net results (of past operations) against net resources (available for future operations)”.The results of past operations – the use, consumption, transformation, degradation and destruction of economic resources – are costs. The resources available for future operations are the assets and liabilities that remain, after the costs incurred during the preceding accounting period have been fully accounted for. Integrating these, for useful and effective purposes, is “A full and fair balance sheet [that] must be such a balance sheet as to convey a truthful st[1] Municipal Accounting for Developing Countries, by David C. Jones, a joint publication of The Chartered Institute of Public Finance and Accountancy and The World Bank – 1984 (Now being republished) [© David C. Jones and The World Bank][2] Since the ownership of assets has not been questioned by the auditor, only their valuation, I choose not to treat this as a contentious issue. In any case, as it is a legal matter, I am not competent to comment on this.[3] The leading case on this is from the U.K: “Attorney General v. De Winton,” otherwise known as the “Tenby Case.”[4] For British Commonwealth countries, in Her Majesty’s Dominions, “Crown” is a legal term for “Government.”[5] Interestingly, the term “Commonwealth” is still used, also, for four states of the U.S.A., including Virginia.[6] As indicated in the text, no claim is made as to the legal status of the Brisbane City Council in this regard.[7] The "land" element, of course, would normally not be depreciated.[8] In the U.S.A., this is referred to, from the Constitution, as the “taking of private property for public use.”[9] This could happen, for example, if a road split a commercial property, with consequent restriction of easy access.[10] Many other infrastructure assets, such as undergroung pipes, will not require the perpetual appropriation of land, merely an easement.[11] In the U.S.A., this is specifically required, under the Federal Constitution.[12] Interestingly, the local government for the area – Fairfax County – is not – in general – the highway authority, despite being (arguably) one of the most affluent – and better run – local government units in the USA (AAA Bonds!). The highway authority (notably for this particular improvement) is the Commonwealth (State) of Virginia. This does not affect the basic premise.[13] “Accrual at current value” accounting is now legally required, for example, in U.K. local Government.[14] For example, assume Brisbane City Council to borrow $1,000 for 20 years at (say) 15.5%. Further assume that this nominal interest rate includes (by compounding) a 5% real rate and 10% for inflation. Using the “annuity” or “level-payment” method, the nominal annual payment, usually dictated by the lender, would be $164. At the end of year 1, the price index would be 110, so the level payment would be equal to only $149 in real terms. Moreover, at the end of year 20, with a price index of about 673, the real value of the annual payment would be only about $24, only about one-seventh of the real value in the first year.[15] Transport and Urban Form in Thirty-two of the World's Principal Cities, Peter W.G. Newman and Jeffrey J. Kenworthy, Transport Reviews, 1991, Vol 11, No. 3, pp. 249-272.[16] In cost accounting, this may be a necessary postulate only because of the inadequate quality of input data. However, for cost outputs, the emphasis should be the converse. Thus, the “merely good” is the enemy of “as near perfect as one can get.”[17] A former senior trader at the Enron Corporation pleaded guilty yesterday to engaging in a conspiracy that illegally manipulated theCaliforniapower market during the state's energy crisis, driving up prices and generating millions of dollars in excess profits for his employer. [New York Times,18 October, 2002][18] A (1950) text "A Reconstruction of Economics," by Kenneth Boulding (1910-1993)][19] Boulding (Op. Cit.)[20] Re London and General Bank (No2) [1895] 2 Ch 673, 692[21] Municipal Accounting for Developing Countries, by David C. Jones [© The Chartered Institute of Public Finance and Accountancy and the World Bank (1984)]

1 IntroductionThe economy of the United States has demonstrated itself to be one of the most flexible, inventive and innovative in the world. It has had magnificent leadership at key times by many of its presidents. Unfortunately it has also suffered from appallingly bad presidencies at some critical times. A brief look at the history of the USA will illustrate these points.2 Abraham Lincoln, 16th President, Republican, 1861–65The greatest president in the 19th Century was Abraham Lincoln. He led the North into the American Civil War, and he fought and won that first industrial war - the first war in which deadly hand-held weaponry was possessed and used by both sides - and he won that war conclusively. Then he did something that proved to be suicidal. He ordered his guards to stop protecting him, because he did not want to live behind the pretorian guard of his personal military.Lincoln must have known he was likely to be assassinated. He had several hats with bullet holes in their brims, the results of previous attempts to kill him. But he was the ideal self-sacrificing mother of a man. He wanted the Union of the United States to be eternal, and for the United States to stop tearing itself apart on the issues that had produced the war. He did three things.2.1 The Incomes of the Northern and the Confederate StatesFirst, he was furious with some of his staff who produced two accounts of the economies of the Northern and the Southern states, which could have been (and perhaps were proposed as) the basis of getting the South to pay reparations for the war. I have not been able to find any reliable sources for what he said, but I think he probably would have said something like this:“Why have you prepared these accounts? These people are us! I have not brought this bloody war to a successful conclusion only to lose the peace because we can add economic suffering to the woes of the South! Please stop recording the financial records of the South as if it were an independent country! It is not! We are one people forever! And please start to think about how we can help all of our people without adding an unnecessary source of difficulty and division to our national victory.”2.2 The Gettysburg AddressSecond, on Thursday November 19 1863, Lincoln went to the battlefield of Gettysburg to dedicate the Soldiers’ National Cemetery for Union Soldiers, composing a short and outstandingly effective speech on the train.He left to history the speech beginning “Fourscore and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty and dedicated to the proposition that all men are created equal,…”. He continued “Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived, can long survive” and “but we cannot dedicate, we can not consecrate, we cannot hallow this ground.”In ten sentences and in about two minutes he delivered one of the most important speeches in human history- it’s right up there with funeral speech of Pericles as perhaps the most important statement of the ideals and purposes of war, the US Civil War, as a war for the union, that it should have “a new birth of freedom, and that the government of the people, by the people, for the people, shall not perish from the earth.”2.3 The Visit to the TheatreThen on April 14, 1865, five days after General Robert E Lee, the commander of the Confederate Army of North Virginia, surrendered to LieutenantGeneral Ulysses S Grant, Lincoln went to Ford’s Theatre in Washington and was assassinated. His death sealed the the Union of the United States as one nation.3 Franklin Delano Roosevelt, 32nd President, Democrat, 1933–45By far the greatest 20th century American president was Franklin Delano Roosevelt (1882–1945). He acted in the interests of all his people (which is the major component for the achievement of maximum economic growth) and he left the world two outstanding developments - the key to great wealth, the investment-credit procedure for very high economic growth and the keys to the graveyard, the atomic bomb technology which could destroy life on Earth.3.1 FDR’s Economic Miracle 1938–44Most Americans (perhaps due to their media’s constant right-wing bias) do not seem to be well informed about FDR’s economic miracle, 1938–44, when the USA doubled the size of its real economy. For a brief article about this seeFDR’s American Economic Miracle 1938-44, or the First Economic Bomb - The USA from 1938 to 1944 (Part 1)3.2 Shimomuran-Wernerian MacroeconomicsIt could be argued that this fresh-to-the-West high growth economic system I am calling Shimomuran-Wernerian macroeconomics should be called Rooseveltian-Galbraithian macroeconomics after the 32nd President and his economic advisor John Kenneth Galbraith. I have answered that comment here:“Why do you refer to “Investment Credit Economics” as ‘Shimomuran Economics’ if it was first…As some sources have pointed out, American manufacturing was just getting started in 1945 when Roosevelt died and the order came from the 33rd president Harry Truman to down tools and stop investing via the investment credit creation system in US industry. Some industrial companies were very disappointed, one source saying that the enemies of America should take due note, that once a determined US government got together with its industries, an even greater economic growth was possible. But Truman did not understand what Roosevelt had done, and to the extent he did, he did not approve of it.3.3 FDR’s Economic and Other ResultsRoosevelt was an utterly focused man. He was determined that no investment required for the war effort would be held up by lack of funds. The Japanese came to believe that in some respects they were fighting an alien and superior technology. When the Japanese over-ran the major rubber plantations in the world in South-East Asia, it would have been logical to believe that the US forces would be held up for lack of rubber. The US rubber barons thought so and said so. The major steel producers of the United States told Roosevelt his steel production plans were unachievable. Roosevelt moved these despairing businessmen out of the upper circles of his policy committees and the US government built many massive steel plants and over 50 artificial rubber factories with government money.When the steel producers asked John Kenneth Galbraith for a rise in prices, he laughed at them. Galbraith knew much more about the costs of steel production than the producers did. They never forgave him for that.The artificial rubber produced in the new wartime factories had great advantages compared with the natural product. It did not have insects or dirt in it. It wasn’t eroded by oil, it could be designed with inbuilt properties optimal for its intended purpose. The advance in producing high-strength aluminium was another great US production success.3.4 The Quality of US Fighter AircraftThese successes were not theoretical - they were reflected in the outcome of some dogfights between the better range, faster Mitsubishi A6 Zero fighter plane and the US Grumman aircraft. As the Japanese air ace Saburo Sakai commented:“I had full confidence in my ability to destroy the Grumman and decided to finish off the enemy fighter with only my 7.7 mm machine guns. I turned the 20mm cannon switch to the 'off' position, and closed in. For some strange reason, even after I had poured about five or six hundred rounds of ammunition directly into the Grumman, the airplane did not fall, but kept on flying! I thought this very odd—it had never happened before—and closed the distance between the two airplanes until I could almost reach out and touch the Grumman. To my surprise, the Grumman's rudder and tail were torn to shreds, looking like an old torn piece of rag. With his plane in such condition, no wonder the pilot was unable to continue fighting! A Zero which had taken that many bullets would have been a ball of fire by now.”See Mitsubishi A6M Zero - Wikipedia from which this quote is taken.As that source comments, in 1940 the Mitsubishi A6M zero was the most capable fighter aircraft in the world, and in early combats achieved a kill ratio of 12:1.US fighter aircraft - slower, less manoeuvrable, and with a lesser range and therefore less time-in-the-air - were better designed in terms of pilot protection, better fuel protection and were made of stronger aluminium than their Japanese counterparts, so their pilots tended to survive. These factors counted for more as the war went on.3.5 Embedded Technological Progress in US Production LinesThe Americans were the first nation to confront the difficulty of the effects of rapid technological progress on the mass production of complex goods. The advance of science in the first investment credit economy was so rapid within the SMEs that the production lines for aircraft (fighters and bombers!) had to be continually stopped to replace an obsolete sub product by inserting its just-developed and superior equivalent. The aircraft the USA produced were the first production line items which contained up-to-date embedded technological progress regardless of the operational inconvenience and difficulty of placing a superior and improved sub-product part into the aircraft. The initial superiority of the Mitsubishi A6 Zero was reduced then removed due to that process. The Japanese continued with the production of the A6 Zero which was the best fighter aircraft in the world in 1940 but by mid-1942 new tactics and the introduction of new Allied fighters matched the A6 Zero with US aircraft which possessed“greater fire-power, armour and speed and approached the Zero’s maneuverability”And the ultimate confirmation of the US technological superiority came in the sheer volume of US armaments which won the war in Europe and the two terrible atomic bombs dropped on Hiroshima and Nagasaki.3.6 Albert Speer’s Post-War ConclusionPerhaps the most effective comment on the great growth of the US wartime manufacturing industry can be left to Albert Speer, Hitler's Minister for armaments production in the Third Reich, who commented after the war:"When the United States of America entered the war not only Hitler laughed but so did many experts over the reports of war production plans reaching us from America.To start from nothing and within five years to produce more than 10,000 bombers seemed to us on the basis of our industrial experience to be Utopia, or, as was said at the time, typical American bragging.But the Americans exceeded their goal."3.7 The Peak Years Of US Output GrowthDuring FDR’s American economic miracle, there were three years of very high economic growth - 17.1% in 1941, 18.6% in 1942, and 16.4% in 1943 - which may be the highest rate of economic growth ever achieved by any economy. These three years alone account for about 62% of FDR’s economic miracle of doubling the real size of the US economy from 1938–45.3.8 The Possible Effect of the 22nd Amendment to the US ConstitutionIt should be noticed in passing that one of the possibly negative consequences of FDR’s four-terms presidency is the (proposed 24 March 1947, ratified 27 February 1951) 22nd Amendment to the American Constitution, that no president can be elected more than twice. If that change to the US Constitution had been in force from 1940, America would almost certainly have lost the FDR presidency during the Second World War. That would have been disastrous and America would probably have lost the Second World War.In a large economy like that of the USA, it may take two terms before a new president becomes fully effective. That is no longer possible in present day USA.3 John Fitzgerald Kennedy, 35th President, Democrat, 1961–63The book written by Robert Kennedy, 13 Days in May, summarises the American response to the Cuban Crisis.3.1 Avoiding An Atomic War With RussiaJFK avoided the third world war - an atomic war with Russia - by successfully negotiating with Nikita Kruschev during the 1962 Cuban Crisis.At the height of the crisis, there were four Soviet submarines, each equipped with ten atomic missiles, patrolling off the Eastern coast of the USA.3.2 Curtis LeMay’s Advocacy Of Atomic WarThe military commander who consistently argued for war with Russia was the formidable US Air Force General Curtis Emerson LeMay (1906–1990) who went to his grave believing JFK was a wimp because he would not agree to “killing a nation” by implementing LeMay’s proposal for the atomic destruction of every city, town and village in Russia. LeMay proposed to do to Russia what he had already done in the firebombing of Japanese cities during WWII, but using atomic bombs on all major and minor centres of Russian population.Robert kennedy’s horrified response to LeMay’s proposals was to ask“Are these people human?”His older brother Jack replied“Don’t be too hard on him, Bobby. If he wouldn’t fight, who would?”Amazingly, LeMay thought that the Russians would not respond to a US Army invasion of Cuba. JFK did not accept that.3,3 What the Kennedys DidWhat the Kennedy brothers did was ignore the most recent warlike comment from Kruschev and respond to an earlier more diplomatic communication suggesting that the Soviets would withdraw the missiles from Cuba if the USA withdrew its Jupiter-class missiles from Turkey. That deal was done.A hotline was introduced between Moscow and Washington to prevent future misunderstandings.3. 4 A Good Night For The TheatreJFK knew full well that his solution to the Cuban Crisis was the highest point of his presidency. The day the Crisis was ended, JFK said to his brother Bobby Kennedy “Tonight might be a good night to go to the theatre.”A few months later, the theatre came to him on Friday 22 November 1963 during his visit to Dallas.4 Great Presidential FailuresBecause the American Presidents after 1944 did not understand the key process of investment credit economics they can all be listed as failures. The major function of US Presidents is the production of higher economic growth and if they don’t understand that, it almost doesn’t matter what they do understand or what they do.4.1 Harry S TrumanIn many respects, Truman was a great president. He supported the Marshall Plan for the recovery of Europe, he originated the Truman Doctrine, and did much else that was useful.But he completely stopped the rapid economic development of the USA because he didn’t understand FDR’s investment credit creation macroeconomics.4.2 Ronald ReaganRonald Reagan introduced Reaganomics, which is the neoclassical theoretical macroeconomics now known as the Washington Consensus (WC) was called at first.That WC economics “solved” the problem of low economic growth by government legislation against the unions and the consequent reductions on the proportion of the annual US economic growth going to wages and salaries.4.3 Donald Trump?President Donald Trump has said that he will reverse the economic decline of the USA. There is no evidence that he or his advisors know how to do that. He could - for example here’s how:George Tait Edwards's answer to How could Trump create the restoration of the American economy as he promised while campaigning?The jury is still out on whether Trump will be a significant president or a mediocre one. His denials of the scientific evidence showing that global warming is a reality and that rising sea levels are likely to destroy the best futures of mankind, seem very wrong. SeeIs there really a consensus on global warming?It does seem that there certainly is, and anyone who doubts it may have a defective information system. One of the illustrations for that report above states:5 US Presidents and US Economic Growth5.1 American Leadership Has Caused Low Economic GrowthLow US economic growth during the post-war period is an American self-inflicted injury.Truman started it in 1945 by ceasing in the USA the investment credit creation system which had produced FDR’s economic miracle. He stopped it in the same year that Japan adopted it.Reagan sealed the low-growth fate of the USA by introducing his system of political preference for the increase in incomes of the already rich. The political awarding of most of the gains of economic growth to the already rich, however much the influential rich might like it, cannot become the foundation of a broad based economic miracle.5.2 The Loss of The “Mandate of Heaven”Three thousand years of Chinese history illustrates that the continual battle for the political control of the economy is between the “Conservatives” and the “Innovators”. The decline of dynasties (and governments!) occurs when the Government is captured by the Conservatives and rules, often corruptly, in the interests of the rich and privileged.The highest level of cultural, social and economic progress occurs when the Innovators are in charge and when they rule in the interests of all the people. The Chinese say such governments have “The Mandate of Heaven.”The American and British governments have lost that mandate, SeeThe United Kingdom and the United States of America Have Both Lost “The Mandate of Heaven”Of course, you could say that Western Governments didn’t lose it because they didn’t know they had it.6 Concluding Remarks6.1 How Powerful Could The US Economy Potentially Be?If FDR had lived, or if Harry S Truman had understood FDR’s investment credit economics, then US growth could have been much higher during the last 72 years.FDR’s economic miracle - 1938–44 - had an average economic growth rate of 12.2% a year. All kinds of barriers would have emerged to the continuation of that very high rate of growth, but I think maybe the USA could have had an average long-term annual growth rate of between 5% at worst or maybe 7% at best.The USA grew from a one trillion dollar economy in 1938 to a two trillion dollar economy in 1944, both in 2005 prices. A five percent growth rate over seventy-two years would have produced a US economy 33 times its 1945 size, so a 2017 $66 trillion dollar economy, while a seven percent economic growth rate over the same period would have produced a 2017 economy of 130 times two trillion or a $260 tr. dollar economy. I could adjust both of these from $2005 prices to those of $2017, but that illustration fully makes the point, and I don’t think these illustrative order of magnitude estimates are much improved by price adjustment.The US economy is currently estimated to be about $18.5 tr, and my estimates suggest it could have become between three times to over thirteen times larger.The current GDP of the world is probably about $125 trillion, so if Truman had not stopped the investment credit creation growth of the USA, it might have become as large as somewhere between half the current size of the world economy to over twice its size.The implications of these calculations are massive. If the USA economy were that large, it would have bases on the Moon and Mars and would be developing starships. It would be an economy of abundant capital, and all of its cities would look new. Its current rustbelt would shine with amazing buildings and modern factories. Its population would have increased to (I estimate) about half a billion people and income per head would probably be somewhere between $133,000 and $500,000. That’s about 2.2 to 8.3 times the current level.6.2 Can America Change Its Mindset?One would have thought that after the technological failure of the Challenger Disaster and after the economically disastrous Credit Crunch the leaders in the USA would have realised that reality cannot be fooled and there is always a need to have a realistic physics and an economics which is soundly based on the observed realities.The major problem facing the people of America, its leaders and its economists, is that the Washington Consensus macroeconomic “understanding” - which the Reagan administration assumed was “as sound as physics” and therefore could be applied everywhere - is as unsound as the theory of Phlogiston and has not worked anywhere.The post-Reagan years have demonstrated that the “Nobel Prizes” awarded in Economic Sciences are usually utterly worthless except to the recipient. The Nobel prize-holders do not appear to understand high-growth economics at all. The Severidges Riksbank Prize in Economic Sciences in memory of Alfred Nobel 2013 awarded to Robert F Engel III and Clive W J Granger for “methods of analysing time series with time-varying velocity” or for the step improvement in statistical understanding which enables data analysis producing Granger Predictive Causation was well merited, but nearly all the rest are just so much churn - major prizes for minor improvements in theoretical understandings.If economists do not understand how to make an economy grow more rapidly, it doesn’t matter much what they do understand, because they cannot devise policies to produce what people want and need, which is higher prosperity within a stable environmental and financial background.In order to re-establish itself as one of the greatest economies in the world, the leaders and economists of America need to change their minds. The late Alice Hoffenberg Amsden (1943–2012) has questioned whether America is capable of that: seeThe West Is About To Lose The World Because Of Faulty Economic Understanding6.3 Keynes’ Comment on Changing his mind?The Western economies seem to have been led by leaders who would rather lose power than lose face by changing their minds. Or perhaps they would rather continue using neoclassical economics to serve the interests of the rich rather than improve the prosperity of their people. A more kind interpretation might of course be that these leaders didn’t or don’t know what they are doing and they were not provided with the key information required to change their minds and adopt a better policy for the prosperity of their people.There are many reports about the alleged response of John Maynard Keynes to the accusation that he had changed his mind. This is the 1978 version in which Samuelson credited this response to Keynes:“Paul Samuelson, the Nobel laureate from the Massachusetts Institute of Technology, recalled that John Maynard Keynes once was challenged for altering his position on some economic issue. “When my information changes,” he remembered that Keynes had said, “I change my mind. What do you do?””See When the Facts Change, I Change My Mind. What Do You Do, Sir?There is legitimate doubt whether Keynes said this, but the lengthy investigation trying to chase down the source may lose the relevance of the message in the hunt to correctly ascribe the quotation.Whoever said it, it is the best defense of changing one’s mind. The only other response is to continue in error, with mistaken information leading to wrong action and a less useful result.I hope that major world economists can become as wise, but there is insufficient evidence that they can and will. But they could.6.4 Neil deGrasse Tyson’s Response to Lincoln’s Gettysburg AddressAs the Wikipedia site on Abraham Lincoln records:“’In 2015, the Abraham Lincoln Presidential Library Foundation compiled Gettysburg Replies: The World Responds to Abraham Lincoln's Gettysburg Address. The work challenges leaders to craft 272 word responses to celebrate Abraham Lincoln, the Gettysburg Address, or a related topic.One of the replies was by astrophysicist Neil deGrasse Tyson in which he made the point that one of Lincoln's greatest legacies was establishing, in the same year of the Gettysburg Address, the National Academy of Sciences, which had the longterm effect of "setting our Nation on a course of scientifically enlightened governance, without which we all may perish from this Earth"’.But it must now be asked: Is the United States of America under President Trump on a course of “scientifically enlightened governance”?Does his withdrawal of the USA from the Paris Agreement on limiting world temperatures not worsen all our prospects of survival?6.5 The Future of the American PeopleThe Americans are among the most inventive and innovative people in the world, but the post-1945 and worse still the post-1980 lack of macroeconomic understanding at the highest levels of their government and the wrong turning of their economists into the blind alley of neo-classical economics has constricted their growth and development.On current trends, China is becoming everything the USA could have been. The brightest and best future for the USA could still come about but although I have written to each US president since about 1980 I have had no acknowledgements, let alone a positive response.But as always things are changing. Hope springs eternal, and persistence ultimately succeeds. Lord Harold Lever once said to me, with an immense grin,“You are going to be an overnight success any decade soon!”If success should occur, it will be for the highest form of this new branch of heterodox economics, for Shimomuran-Wernerian macroeconomics.We’ll see.

I just started in the 1800’sSojourner vTruthHuman rights, preaching1797-1893As a preacher, Truth campaigned nationwide for the abolition of slavery and important women’s rights. Also raised money for black Union soldiers.Dorothea DixSocial reform and war nursing1802-1887An advocate of asylum, poorhouse and prison reform, she also helped alleviate Civil War misery as Superintendent of Female Nurses.Phoebe Palmerwriting, evangelism1807-1874One of the founders of the Holiness Movement, Methodist evangelist Palmer advocated Christian perfection or the cleansing of original sin prior to death.Harriet Beecher StoweAntislavery,fiction1811-1896Famous for her controversial novel, Uncle Tom’s Cabin, an antislavery story based on her experiences. Also spoke against slavery.Elizabeth Cady StantonAbolition and women's rights1815-1902Stanton (and important friend Susan B. Anthony) fought for women’s suffrage when the 14thand 15thamendments excluded gender equality.Biddy MasonBusiness, real estate and philanthropy1818-1891Winning freedom from slavery, she worked as a nurse/midwife, and became a canny, wealthy entrepreneur. She lavished money on charities.Lucy StoneWomen's suffrage and abolition1818-1893A pioneer in the movement for women's rights, she lectured against slavery and advocated equality for women. Famous for becoming the first woman in Massachussets to earn a college degree.Julia Ward HoweAuthor, suffragist, abolitionist1819-1910A poet, lecturer, author of the "Battle Hymn of the Republic." She also helped form the National American Woman Suffrage Association.Susan B. AnthonyAbolition and women’s rights1820-1906A tireless campaigner for gender equality, Anthony (and friend Elizabeth Cady Stanton) inspired a nationwide suffrage movement.Harriet TubmanAbolition1820-1913A “conductor" on the Underground Railroad, she led more than 300 slaves to freedom. Also served Union forces in coastal South Carolina.Elizabeth BlackwellEducation, medicine1821-1910The first woman physician in the U.S. (MD, Geneva College, 1849). She opened a slum infirmary and trained women in medicine.Mary Baker EddyReligion, writing1821-1910Founder of the Church of Christ, Scientist. Wrote Science and Health with Key to the Scriptures, her famous adjunct to the Bible.Clara BartonAid to soldiers and free education1821-1912Organized and delivered important aid to Union and Confederate soldiers. Started the American Red Cross. Started a free school in New Jersey.Mary WaltonPollution control, invention1829-1906This Manhattan inventor devised a method to reduce factory smoke emissions and reduced the track noise from elevated trains.Louisa May AlcottWriting, women's suffrage1832-1888An American literary icon of the 19thcentury, Alcott was also involved in women's suffrage.Hetty GreenFinance1835-1916She inherited her father’s fortune and invested it so that she was reputed to be the richest woman in the world at the time.Mary Harris "Mother" JonesAmerican Labor Movement1837-1930“Mother" Jones was present as a labor organizer and speaker at many significant labor struggles of the 19thand 20thcenturies.Frances Elizabeth WillardTemperance and women’s suffrage1839-1898A tireless campaigner, she was a founder and president of important organizations that fought for prohibition. Also work for women’s suffrage.Ellen Swallow RichardsChemistry and engineering1842-1911First woman to enroll in a technical institute (MIT), in 1870. Founded the science of home economics and promoted science for women.Carry A. NationTemperance1846-1911Notorious for violent disruption of alcohol sales. She was jailed often, but her courage and eloquence impressed many people.Annie Smith PeckWomen’s suffrage, mountaineering1850-1935She scaled the 21,812-foot Peruvian mountain Huascaran, the loftiest Western Hemisphere peak climbed by an American man or woman.Annie OakleySharp-shooting and entertainment1860-1926Gifted with uncanny marksmanship and star of Buffalo Bill's Wild West show, she established herself as a famous western folk legend.Jane AddamsSocial Reform1860-1935Noted for Hull House, an influential haven for disadvantaged people. Active in a variety of causes, she shared the 1931 Nobel Peace Prize.Grandma MosesFolk Art1860-1961Discovered by the New York art world in 1939, Moses’ style is noted for evocative themes and pleasing figure arrangement.Florence BascomGeology1862-1945First woman and female geologist to earn a Ph.D. from Johns Hopkins. A pioneer in microscope viewings of minerals and rocks.Winifred Edgerton MerrillMathematics, education1862-1951First U.S. woman to earn a Ph.D. in mathematics (Columbia, 1886; highest honors). Founded the famous Oaksmere School for Girls in 1906.Nellie BlySocial justice, investigative journalism1864-1922As an often-undercover journalist, Bly sided with poor and marginalized people. Also noted for a famous 72-day race around the world in 1889.Anne SullivanTeacher1866-1936Overcame childhood obstacles to become Helen Keller's teacher and lifelong companion.Emily Greene BalchSocial Activism1867-19611947 Nobel Peace Prize winner, founder the Women's International League for Peace and Freedom and was an important woman advocate for peace during WWI and WWII.Molly DewsonWomen's suffrage, politics1874-1962An author, and head of the Democratic National Committee's Women's Division, Dewson also fought for a minimum wage law.Margaret SangerSocial reform and family planning1879-1966Dismayed by infant mortality, Sanger became a vocal advocate of contraception and established an important medically supervised family planning clinic.Helen KellerSocial reform, writingand lecturing1880-1968Deafened and blinded by a childhood disease, she overcame her disabilities, then worked for the blind and numerous progressive causes.Jeannette RankinPolitics1880-1973Jeannette Rankin was the first woman ever elected to Congress. She was one of few congressional members to vote no on WWI and WWII.Frances PerkinsPolitics1882-1965Perkins was the first woman Cabinet member in the U.S. She served as FDR's Secretary of Labor, and played a key role in New Deal legislation.Eleanor RooseveltActivism, traveling and speaking1884-1962Enormously effective wife of FDR, she was a Democratic Party activist, worked for racial equality and was U.S. Representative to the U.N.Georgia O'KeeffePainter1887-1986Widely regarded as one of the great modernist painters of the 20thcentury, O'Keeffe was a major figure in American art for more than 70 years.Aimee Semple McPhersonBroadcast evangelism1890-1944Southern California evangelist famous for her Temple and “illustrated sermons." Founded International Church of the Foursquare Gospel.Zora Neale HurstonWriting1891?-1960Folklorist, anthropologist and novelist. Most prolific black woman writer of the 1930s.Pearl S. BuckAdoption advocacy, writing1892-1973Author of books reflecting her life in China. Won the 1938 Nobel Prize in Literature. Buck worked for the adoption of unwanted children.Amelia EarhartAviation1897-1937Famous for flying across the Atlantic and Pacific oceans. She attempted to fly around the world, then disappeared July 2, 1937.Dorothy DayCatholic-based Social Service, writing1897-1980Founded Catholic Worker Movement with Peter Maurin in 1933, an important outreach to disadvantaged and marginalized people.Marian AndersonRacial amity, singing1897-1993She used her rare voice to advance race relations. First black Metropolitan Opera star. Alternate U.N. delegate. Honored many times.Margaret Chase SmithPolitics1897-1995Maine’s first congresswoman and re-elected four times, she was U.S. senator from 1949-73. Remembered for independence and character.Louise NevelsonSculpture1899-1988Best known for her abstract-expressionist boxes grouped together to form a new creation. She used found objects and everyday items. One of her works stands three stories high.1900stop of pageMargaret MeadAnthropology and psychology1901-1978She became famous for her gender role studies of the cultures of the Pacific Islands, Russia and the U.S. Authored several classic books.Ella BakerHuman and civil rights1903-1986Helped form Southern Christian Leadership Conference of which Martin Luther King Jr. was president, important for organizing Student Nonviolent Coordinating Committee.Clare Boothe LuceWriting, politics and diplomacy1903-1987She was managing editor of Vanity Fairand author of several successful plays, including The Women. Ambassador to Italy, 1953-56.Esther RossNative American rights1904-1988Ross devoted 50 years to winning federal recognition of the Stillaguamish Tribe in the Puget Sound area of Washington State.Margaret Bourke-WhitePhotography and photojournalism1904 or 1906-1971Important international photographic chronicler of people and events in war and peace. One famed picture: "Gandhi at His Spinning Wheel."Ayn RandFiction, philosophy1905-1982Russian-born, Rand wrote important fiction, notably The Fountainhead, and Atlas Shrugged. She espoused a philosophy of rational self-interest.Grace HopperComputer science1906-1992A Ph.D. from Yale (1934), Rear Adm. Hopper was one of the earliest computer programmers and a leader in software development concepts.Maria Goeppert-MayerScience1906-1972Goeppert-Mayer won the 1963 Nobel Prize in Physics, professor of Physics at UCSD, La Jolla, California, National Academy of Sciences member.Rachel CarsonThe environment, marine biology1907-1964Author of lucidly written books on ecological themes. Most famous for Silent Spring, a critical examination of chemical pesticides.Virginia ApgarObstetrics1909-1974Dr. Apgar developed the Apgar Score, whose five items help physicians and nurses to determine if a newborn requires emergency care. The score is now standard worldwide.Katharine HepburnStage and screen1909-2003Four-time Academy Award winner for best actress, Hepburn combined her statuesque looks with a bold, plucky acting style.Babe Didrikson ZahariasMultiple athletics1911-1956This superathlete won three track and field Olympic medals and 31 LPGA titles. Famed for self-confidence and competitive spirit.Claudia Taylor (Lady Bird) JohnsonPolitics, environment1912-First lady during Lyndon B. Johnson's administration; instrumental in promoting the Highway Beautification Act, founded Lady Bird Wildflower Center.Patricia Ryan NixonPolitics1912-1993First lady during Richard M. Nixon's administration; after her father's death at 18, Pat worked part time to obtain her degree, graduating cum laude from USC.Barbara TuchmanHistory1912-1989Tuchman was a two-time winner of the Pulitzer Prize (The Guns of August, and Stillwell and the American Experience in China: 1911-45).Rosa ParksCivil rights1913-Parks' refusal to give up her seat on a segregated bus in Montgomery, Alabama, on December 1, 1955, sparked the modern civil rights movement.Daisy Gatson BatesCivil rights and journalism1914(?)-After segregation was ruled unconstitutional by the U.S. Supreme Court, she led the fight to integrate Little Rock, Arkansas, schools from 1954-1957.Martha RayeEntertainment1916-1994An actor, comedienne and singer, Raye entertained and even nursed troops for 50 years. Presidential Medal of Freedom honoree.Florence ChadwickSwimming1917-1995The premier distance swimmer of the1950s, she became the first woman to swim the English Channel both ways (1950, ’51, ’55).Katharine GrahamNewspaper and magazine publishing1917-2001She was the influential president and publisher of the Washington Post from 1963-93. The paper is famed for its Watergate investigation.Ella FitzgeraldJazz singing1918-1996Master of scat singing, she toured with such greats as Duke Ellington and the Oscar Peterson Trio. She performed internationally.Elizabeth Bloomer FordSocial activism1918-First lady during Gerald R. Ford's presidency, co-founder of the country's leading treatment center for alcoholism and drug dependency.Bella AbzugPolitical activism, writing1920-1997Attorney and Congresswoman, Abzug worked for a variety of progressive causes, especially women’s issues. She was a noted author.Marie Maynard DalyBiochemistry1921-First African-American woman to earn a Ph.D. in chemistry (Columbia University, 1948). Holder of various professorships. Focus: nucleic acids.Betty Goldstein FriedanFeminism1921-2006Author of the revolutionary book: Feminine Mystique, co-founder of National Organization for Women (NOW).Nancy Davis ReaganSocial activism1921-First lady during Ronald Reagan's presidency and championed the "Just Say No" to drugs program for school-aged children.Rosalyn Sussman YalowPhysics, Medicine1921-Co-winner of the 1977 Nobel Prize in Physiology, assisted in developing a technique to measure minute quantities of insulin in the blood.Judy GarlandEntertainment1922-1969Made famous as Dorothy in "The Wizard of Oz," Garland was one of the greatest stars of Hollywood's Golden Era of musical film.Helen Gurley BrownFeminism and writing1922-Author of Sex and the Single Girl, a book about the positive benefits of single life; revived foundering Cosmopolitan magazineAlice CoachmanTrack and field1923-At the 1948 Olympics in London, Coachman was the first black woman and only American woman to win a gold medal in that year's Games.Shirley ChisholmSocial activism, politics1924-2005A Democrat, she was the first black woman elected to Congress (1968). Also the first black woman to run for president in a major party (1972).Phyllis SchlaflyPolitical activism,writing1924-Republican activist against the feminist movement. Testified against the Equal Rights Amendment. Author of several books.Barbara Pierce BushPolitics1925-First lady during George H.W. Bush's presidency, warmly received by public and press as "everybody's grandmother;" mother of six children; articulately frank.Marilyn MonroeActing1926-1962Completing 30 motion pictures, Monroe became an American icon and worldwide sensation before her mysterious death.Rosalynn Smith CarterActivism1927-First lady during Jimmy Carter's presidency, vice chair of The Carter Center, which promotes peace and human rights worldwide.Maya AngelouWriting, civil rights1928-A poet, historian, author, civil rights activist, producer and director, she composed and read verse at the Clinton inauguration in 1993.Sarah CaldwellOpera direction and conducting1928-She founded the Opera Company of Boston in 1957. In 1976, she became the first woman to conduct at the Metropolitan Opera House.Shirley Temple BlackDiplomacy, acting1928-Becoming a diplomat later in life, Shirley Temple was perhaps the most famous child star in history.Audrey HepburnAid to needy children; actor1929-1993Special ambassador to UNICEF, she worked to help poor children. 1953 Academy Award winner for Best Actress in “Roman Holiday."[3915Politics, society1929-1994First lady during John F. Kennedy's presidency. By "inspir[ing] an attention to culture never before evident at a national level," she brought grace and sophistication to the White House.Coretta Scott Kingcivil rights, music1929-2006Known as the First Lady of civil rights, Coretta carried on the dreams of her husband, Martin Luther King Jr.Carolyn ShoemakerDiscovery, astronomy1929-Holder of the record for the most comet discoveries (32) as well as more than 800 asteroids. Took up astronomy at the age of 51.Sandra Day O'ConnorLaw, justice1930-She became the first woman justice on the U.S. Supreme Court. She felt the court's role was to interpret the law, not legislate it.Barbara HarrisReligion, social outreach, civil rights1930-She became the first woman bishop of the Episcopal Church (also a first for Anglicanism, Roman Catholicism and Eastern Orthodoxy).Mary DawsonPaleontology, mammals1931-Curator of Vertebrate Paleontology, Carnegie Museum of Natural History, 1970. Arnold Guyot Prize honoree for Arctic research.Alice RivlinFederal budget1931-The founding director of the Congressional Budget Office (1975), she has held several other governmental and professorial positions.Barbara WaltersTelevision journalism1931-The first woman to anchor TV nightly news, on ABC. Correspondent, then co-anchor of 20/20. She has interviewed numerous famous people.Toni MorrisonLiterature1931-Won the 1993 Nobel Prize in Literature and a Pulitzer Prize in 1988, she is a master of dialog and richly depicts Black America.Sylvia PlathLiterature1932-1963Plath wrote poems of stark self-realization and confession, was the first to win the Pulitzer Prize posthumously.Ruth Bader GinsburgLiterature1933-First Jewish woman and currently only female justice on the Supreme Court. Strong advocate for women's rights and civil rights in general.Gloria SteinemFeminism, journalism1934-Articulates women’s issues with lectures and on TV. Helped found several women’s organizations. Founder of Ms. Magazine.Marian Wright EdelmanChildren’s and civil rights1939-Founder and president of Children’s Defense Fund. Originally a 1960s civil rights activist. Awarded the Presidential Medal of Freedom.Wilma RudolphTrack and Field1940-1994Winner of three gold medals in the 1960 Olympics in Rome.Space does not allow a complete list of all the important and famous women in American history, but from the days when women could not be one of the "founding fathers" and annual awards would exclude women when calculating the "Man of the Year," important women have made huge strides, the significance of which cannot be overestimated.- - - Books You May Like Include: ----Bristol, Vermont by Kerry K. Skiffington.Skiffington describes Bristol, Vermont’s history through brief essays highlighting its most remarkable people and moments, from the rise of Outlook Cl...Women of the Revolution Bravery and Sacrifice on the Southern Battlefields by Robert M. 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Excellence at flying, courage, intelligence, resistance to stress, top physical shape — any checklist would incl...Mothers of Invention: Women of the Slaveholding South in the American Civil War by Drew Gilpin Faust.When Confederate men marched off to battle, southern women struggled with the new responsibilities of directing farms and plantations, providing for f...Our Mothers' War: American Women at Home and at the Front During World War II by Emily Yellin.Our Mothers' War is an eye-opening and moving portrait of women during World War II, a war that forever transformed the way women participate in Ameri...Flapper: A Madcap Story of Sex, Style, Celebrity, and the Women Who Made America Modern by Joshua Zeitz.Blithely flinging aside the Victorian manners that kept her disapproving mother corseted, the New Woman of the 1920s puffed cigarettes, snuck gin, hik...America's Women: 400 Years of Dolls, Drudges, Helpmates, and Heroines by Gail Collins.Well researched and well written, America's Women: 400 Years of Dolls, Drudges, Helpmates, and Heroines is a powerful and important book. Starting wit...Women's Diaries of the Westward Journey by Lillian Schlissel.An expanded edition of one of the most original and provocative works of American history of the last decade, which documents the pioneering experienc...report this adSponsored ContentChiropractors Baffled: Simple Stretch Relieves Years of Back Pain (Watch)healthtoday.onlineBig Twist Loopity Loops Yarn - PastelJo-Ann Fabric and Craft Stores2015 TOYOTA PRIUSCARFAXWomen travel cosmetic makeup storage bag hanging organizerNewchic.com