Fixin The System
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PROSPERITY THEORY FOR A NEW ECONOMY
(the Pro Populi Consilium Model)
By Harrold Tuttle, CEM
The following is a loose examination of existing government-economic conditions in the U.S. and how to best improve them for everyone. The idea of looking at the resources and goals, and deciding what must be done to achieve these goals to the best benefit of all citizens has NEVER BEEN ATTEMPTED. Inorite!? I’m like “dafuq, serious!?” What HAS been tried is the dichotomous method of considering first what one wants for themselves, then considering a side story of how to sell the idea to everyone else. Our current system is one of these sales stories. Please read my following rant and decide for yourself what you think would work best for the population as a whole. The system I propose is not tied to any existing “ism”. I call it “Utilitarian” because it comes from people deciding what would work best for them. My rant is a work in progress. I haven’t written the bit on monetary policy yet but I have an outline and a pile of research that I will not bother to cite. Regard it as opinion. You can agree or disagree, I’m not selling anything. We totally need a new system though. The one we have now is like a mugger’s pistol.
The Goal of a healthy economy is maximized prosperity, and minimized predation.
What is an economic system for? This is not the same as asking how ours arose and how we fix it. If we had no system of economics, money, or trade, we would either create one consciously or one would arise from normal human behaviors. What would we consider the goal of such a system? In ancient history, the first people to create two main methods of trade and perform what would later become government functions were acting out of self interest. Ways of taking resources from others evolved parallel with those basic trade methods. Early God-Kings conned populations into giving them free prosperity for a little bit of structure and pageantry. These imbalanced resource allocation methods created the Neolithic Revolution. This is where we had the first governments, organized religion, hierarchy, imperialism, and farming. However, large trade networks existed before agriculture or the first city states. The first mesolithic trade networks occurred quite naturally during a period of climate change and rapid human population growth. Trade in real commodities quickly changed to trade in some intermediary good with a symbolic value attaching it to a real good. The currency in this kind of system can be shells, metals, notes, or really anything at all. The money is made real by it’s symbolic representation of an existing trade good. That trade good itself can even be an intermediary good, as in gold backed money. The currency was only a tool to make trade easier, and not a con in and of itself. These basic, early trade methods can be generalized as an agreement where each party feels that they have traded a good or service for one of greater value. It was only a matter of time before human societies and food acquisition became more organized. In early neolithic societies it was not unusual for a God-King to dictate taxes, class structure, and wealth distribution. The goal of this type of early system can be generalized as “resource acquisition”. The elite class provided a measure of security and prosperity to the populace in many instances, and the population provided the necessarily small elite class with prosperity beyond reason. These ancient forms of trade and government have been changed over human history to meet different goals. Some changes were effective and some were not. The type of relationship U.S. Government and U.S. Economy has with the U.S. population came about from these changes. The goals and methods of the system are not widely agreed on or understood. A great deal of prosperity is generated by this system but it is not necessarily enjoyed by the people who create it. Third world debt, poverty, and suffering are currently being created by this system and even in the U.S., there is a lack of basic life security, freedom, and prosperity potential for our poor. Our system is said to work very well by some and considered a failure or a con by others. If we don’t know the goals and we don’t know how it is measured, it is impossible to say if our system works or not. It is reasonable to assume that the goal of our economic system is to create prosperity for some people, somewhere. Otherwise, why would it exist?
The subjective experience of prosperity is the basis of all value of any good or service. Since no good or service has any intrinsic or pre-determined value, trade is possible. If you pay a dollar for a burger, for example; it is a good trade when the dollar is worth less prosperity than the burger is. It is a bad trade when the dollar could have bought more prosperity and the consumer regrets the trade-off.
Prosperity is subjective and not easy to define. Prosperity is much harder to count than money because it is different for every time and for every person. I have simplified a definition of prosperity as it will be used in the following ideas: The first type of prosperity is security. Security means physical safety from dangers including violence and starvation. The second type is freedom; specifically, it means the freedom of each individual to find what they enjoy, find what they want to do with their lives, and to make those things happen. These freedoms are never fully owned or lost but the more a person has, the better. A functional system wouldn’t take these freedoms from anyone inside or outside the system. This is necessary for utilitarian, and not just moral reasons. They work in a feedback loop with the third type of freedom: Personal Sovereignty. Personal Sovereignty is ownership of self. One who has it is completely responsible for their own actions and no one else’s. They are free to decide for themselves what their thoughts and actions are. So long as they don’t harm anyone else’s person or property(which would infringe on the other person’s freedoms) the individual’s actions cannot be hindered or dictated by any just law.
In defining prosperity it’s useful to draw a distinction between “Baseline Prosperity”, which is a balance point between reasonable comfort and anxiety-inducing shortages for individuals (as in poverty); and “Frivolous Prosperity”, in which the person can fulfill wants that aren’t necessary to baseline prosperity. The ability to provide or buy goods and services in this category only happens in a well functioning economy. A person with an extreme abundance of economic power will always be driven by self interest to use that power to attain more prosperity; and they will wind up taking far more prosperity out of the economy than they create. Likewise, someone with an extreme lack of prosperity will slip into a powerless state of poverty. People in such a state will either suffer and die in an impoverished society, which breeds corruption by creating an easily exploited labor pool and creates more poverty by encouraging more theft and blackmarket trading; or the society takes care of their welfare free of charge. This invites other problems that I will address more later.
Predation is the inevitable result of economic imbalances. When an economy fails, wars over resources occur. When Oligarchs accumulate too much power, smaller countries and poorer citizens can easily be robbed. This robbery seems transparently immoral to modern people but it is a founding goal of all early governments and still a large part of the economy. If a person trades something of higher value for something of lower value, it is bad business and not predation. Predation occurs when one party has no choice in wether to take part in the transaction, no knowledge of what is traded, and/or doesn’t know what they are paying. Consumer protections and market regulations must be effective to prevent predation from destroying the system. Predatory economics always moves towards a lords/serfs economy. That type of system is a complete failure to meet the goal of maximum prosperity for the largest percentage f the populace.
If we could start over, knowing we would have the scale and complexity we have today, wouldn’t we call a successful economy one that created the maximum prosperity for the maximum amount of people in it? Wouldn’t we also consider the system a failure if it created atrocious human abuses, was unsustainable, or destructive to it’s own ends? If the goals of our new economy are maximum prosperity for the most people and minimum predation of citizens and non citizens; these are still goals of self interest. The shift is from an attitude of mugger-type self interest to one of inclusive group-type self interest. The business transaction entails individual self-interest but the economy itself must work for all involved.
Can prosperity exist without profit? (over-regulation)
In classical economics, self interest drives suppliers to seek profit. Without the capability to profit somehow from transactions, self-interest will inevitably create a more natural economy in the form of a blackmarket. This profit seeking is a basic, natural force driving other market forces and cannot be effectively controlled. The profits are a means to obtain prosperity. Marx exposed inherent flaws in the concept of labor-driven profits, and theorized that this unsustainable model will naturally lose profitability over time. Some modern applications of communism and socialism don’t pre-suppose that self interest or a self-defined prosperity are necessarily main driving forces. These disagreements in basics of economic thought bring up serious questions: If the producer of a good or service can’t raise their own profits by any means, can they prosper? Assuming they can constantly enjoy their “pleasant duty” and their baseline prosperity is provided, and this is true of all the industry so there is no change or competition; doesn’t this create a stagnant economy? Capitalists often criticize communist theory for the lack of motivation that could occur in a worker that has little to gain or lose from their business. If a person is so well taken care of by social services that they have no fear of impoverishment, does that remove incentives to seek profits? This supposed flaw in Marxist thought hasn’t been absolutely proven as true but it isn’t unreasonable either. In Marx’s deconstruction of capitalism, he makes a very convincing case that profits will inevitably decrease in a capitalist system. He also points out how ownership of the means of production enables the rich to siphon off a large portion of the value that workers create. This bourgeois vs. proletariat dichotomy is oversimplified, and has historically been misunderstood as showing that all upper class are parasitic on an economy. The capitalist parallel states the dichotomy of government regulation vs. personal profit. An economic system has no enemies; it only has actors that are imbalanced (resulting in predatory acquisition of prosperity) or balanced. Balance would ideally result in maximum utility toward prosperity for the maximum percentage of people in the economy.
Due to numerous problems, an ideally functioning communal state has never happened sustainably. One problem for any engineered society that wants to create prosperity without profit-driven work, is that people have different prosperity goals. They have different ways of living and different social customs. If the socio-economic system provides baseline prosperity but no means of reaching frivolous prosperity, and the nature of work and lifestyle is dictated to citizens, the personal sovereignty of the citizen is severely limited. A similar force acts on capitalist economies when people are required to work, own homes, and live the prescribed lifestyle. People with no interest in the prescribed lifestyle are usually punished with poverty. The amount of personal freedoms a citizen has is not directly related to the political “ism” their nation espouses. In oversimplified communist theory, the government can easily afford to give everyone their baseline prosperity needs because all resources, labor, and business are nationalized and managed by elected representatives of the populace. Such a system aims at making every citizen fairly well off, with no poverty or concentrations of wealth. More efficient relationships between effort and prosperity in a communal system that dispenses prosperity evenly should, in theory, result in greater time and prosperity for a greater number of people. Do all humans have a right to some measure of economic prosperity? What if the system they live in promises said security but cannot produce it because there is no effective economy? What if a system tries to provide a baseline prosperity for their poor from taxes. How would that imbalance the system? Critics of existing communism often say that the fear of moving down the economic ladder and the desire to move up the ladder is an important economic driver of GDP and overall growth. This force is said to be absent in an ideally functioning communist state. Presumably, patriotism and personal dedication would replace economic self interest in the communal laborer. In a more capitalist, privatized business climate, the risks and self interest move us farther from our prosperity goals than the communist model. If failure means complete poverty and success means power over other citizens, our goals aren’t being met because we are moving away from prosperity and toward predation. A system without rich or poor is trying to remove natural market forces. All these forces, if they can successfully be suppressed, must be replaced by direct government action on the economy or economic disparities will appear through black market trading or government corruption. Often, as in Lenin’s U.S.S.R., accumulations of political power that are necessary to that stringent public effort management, are used to create economic power. Even without the same money that creates the previously mentioned economic utility curve in free trade and capitalist systems, the curve occurs the same because money and power are both intermediary trade goods toward prosperity. If you remove power, money creates the power. If you remove the money, power creates the money. In either case the prosperity is siphoned out of the populace that creates it and the economy fails.
Marxist thought contains some very beneficial ideas for socio-economic theory. Communist and Socialist systems aim to remove the dangers of predation and exploitation to the populace. When we see a country exporting food during a famine, or huge wage disparities, or great human suffering caused by economic imbalances, human beings wonder if it is necessary. Study has shown that in most cases of extreme impoverishment, the populace has been robbed for financial gain. Marx and Engel’s idea that other economic systems came about in a haphazard way, and that humans need to envision and create one that better meets goals is particularly valuable. They envision capitalist systems as business owners defrauding workers. Their solution (one of the main stated goals of all communist systems) involves returning the prosperity created by workers back to the workers. The idea that “prosperity created by labor belongs to the laborers” was difficult to realize throughout most of economic history. It resulted in governments seizing property from large businesses, sometimes international ones. Many goods and services actually can be sold today, over the internet, by producers who own the means of production. Most of the middle men that once provided sales, distribution, capitol ownership, advertising, or management are not necessary. All that is necessary in real goods sales is raw materials, tools, skilled labor, and a shipping company. If the government subsidized education and equipment rental, even more bourgeois middle men could be taken out of business transactions, at great benefit to the economy and general public.
Self-interest is more than the will to accumulate money. Self-interest can be negative, as in our fear of impoverishment. It can entail the will to accumulate power, security, or the means to protect future interests. In the economic sense, self interest is the will to prosperity. One can prosper without money or work. Prosperity can be different for different people in different times and in different environments. Because prosperity is impossible to rigidly define for all people, and the value of all goods and services is related to the subjective experience of prosperity, exchange of goods and services is absolutely dependent on the existence of profit potential. Without the risks and potential profits of self-interest, naturally occurring, free trade cannot exist and a black market will certainly arise. The existence of self-interest and profit potential don’t drive free trade or guarantee anything by themselves but having a healthy economy while trying to quash these market forces would be nearly impossible and wouldn’t necessarily create prosperity for all. A system with prosperity and no wealth potential only exists in rich climates with limited human interaction. Even there, it only exists for people with the skills to create whatever they need for life. That homesteader model is not useful when discussing economy in societies with population concentration.
Some wage disparity will naturally occur in any economy. If we accept this and also accept that all human actors in a functional trade economy will desire prosperity, then there must necessarily exist people with less and people with more. The question then becomes “what amount of wage disparity would exist in our ideal system?”. This question becomes more complex if we consider that there is no direct causal link between wealth and prosperity. the amount of wealth created by a given quantity of money depends on the health of the economy. Systems that intentionally control the maximum and minimum amounts of wealth held face serious challenges if they also want to allow some equality of opportunity and minimized regulation that is created by market forces. How much can government control the maximums and minimums of wealth before personal freedoms and domestic business are destroyed?
Can profit exist without predation? (under-regulation)
The curious force I call the “economic utility curve” acts faster within an unregulated market and eventually destroys any such economy. Today in the U.S., many economic models are hinted at by people that barely understand them to people who don’t understand economics at all. These theories are oversimplified and misrepresented as emotional and symbolic arguments that justify complete de-regulation and oligarchy. This to me, is deceptive marketing and not economic theory. It is the same predatory type of self interest that spawned early socio-economic systems.
The pro-corporate right has gained huge influence in the U.S. , as of the writing of this paper in 2012. This trend is very worrying. It has been called a “coup de tat in slow motion”; but there are some ideas in their economic theory that the public likes. Their influence is so strong in media that they are able to strongly influence the general zeitgeist. This influence has shown itself in popular movements calling for deregulation of business and tax breaks for the super rich. The pro-corporate right movements (this is a wide generalization) have asked for de-regulation, smaller government, privatization, checks for constitutionality of new laws, simplified tax codes, lower taxes on businesses, and less government debt. Some wings have pushed an Austrian Libertarian economic models. Wikipedia lists main tenets of Austrian economics as :
“(1) Methodological Individualism: In the explanation of economic phenomena we have to go back to the actions (or inaction) of individuals; groups or “collectives” cannot act except through the actions of individual members.
(2) Methodological Subjectivism: In the explanation of economic phenomena we have to go back to judgments and choices made by individuals on the basis of whatever knowledge they have or believe to have and whatever expectations they entertain regarding external developments and especially the consequences of their own intended actions.
(3) Tastes and Preferences: Subjective valuations of goods and services determine the demand for them so that their prices are influenced by (actual and potential) consumers.
(4) Opportunity Costs: The costs with which producers and other economic actors calculate reflect the alternative opportunities that must be foregone; as productive services are employed for one purpose, all alternative uses have to be sacrificed.
(5) Marginalism: In all economic designs, the values, costs, revenues, productivity, etc., are determined by the significance of the last unit added to or subtracted from the total.
(6) Time Structure of Production and Consumption: Decisions to save reflect “time preferences” regarding consumption in the immediate, distant, or indefinite future, and investments are made in view of larger outputs expected to be obtained if more time-taking production processes are undertaken.”
Free market arguments revolve around the idea that basic market forces like supply and demand, unfettered by government meddling, will naturally balance inequalities in our system and result in greater prosperity for all. Arguments for lower business taxes generally point to how increased business drives an economy. In theory, when the largest money makers and job creators are attracted into our system by deregulation and tax breaks, our entire economy will be improved. More money earning means more spending and the money they spend will “trickle down” through the economy through the purchase of goods and services. The “trickle down” theory supposes that profits for the top tier mean slightly higher profit to everyone else as well. These theories are said to make economic sense by many.
The new, far right ideologies are valuable in their efforts to save work and money for public institutions, their infiltration of mainstream politics by a fringe group (Tea Party), and their promotion of the U.S. Constitution. Some Libertarian economists have even touched on issues of Personal Sovereignty and monetary reform. It is regrettable that the most powerful actors behind the current right and left wing powers are exclusively concerned with the accumulation of wealth and power.
The accumulation of all political and economic power with the wealthiest actors in an economy is nothing new. Economists know that as wealth redistributes upward, aggregate demand decreases. Production goes down as the middle class disappears and the lower tier gets poorer. Government regulations, fiscal regulations, and other market forces all decrease as power redistributes upward with the money. In human history, when there was no regulation of markets, all power and wealth accumulated to a few hands and the direct result has always been a lords/serfs economy. This is a dead economy in which a small percentage enjoys the small amount of produced prosperity while the rest of the population has little chance at any prosperity. Since profits all rise to the top, hard toil produces a disproportionately small amount of prosperity for the worker. Such systems see little growth unless through war. War for profit is a predatory and abusive economic activity that is even more damaging to human prosperity than rigid class structure, slavery, and serfdom. In cases where no luxury goods are produced, the economy can’t produce what the ruling elite wants and these things are often stolen or imported. Great harm is sustained on many levels. When there are few goods or services being produced, the money loses real buying power and all that is left to give the lords power over the serfs is power itself. As goods, services, and money decline in a system military power and land ownership become more important for the top tier to keep their power. This is why the poor are abused so often when diversity of goods and GDP is very low. In a lords/serfs economy, there is lots of inefficient work without much GDP. Agriculture and military become the principle occupations, but pay is not certain in these economies. The middle tier is predated into the lower tier. The top tier shrinks until the amount of available passive profit matches their ideal imagined prosperity entitlement. A small elite class makes up the second tier. Since overall demand and production is very low; war, religion, and control of the mostly agricultural serfs are their main occupations. This tiny second tier becomes a warrior class in most lords/serfs systems. Lastly, there is an enormous third tier of toilers. This disadvantaged majority usually can’t contribute as much to the economy as they could if there was more prosperity available to them. There is less prosperity available because they cannot produce enough. In this extreme example of a dark-ages socio-economic system it is easy to see that predatory acquisition of prosperity is the goal and eventual result of this system. In real life modern cases, it is harder to recognize. In more recent history, whenever wage disparity was predicted to increase, the top accumulators of money could predict that the economy would decline and the money would lose utility. Powerful elites can hedge against economic collapse by accumulating land and business capital. These things are very cheap in a declining economy. This gives them power to inflate the economy again, this time with more power and lands. The cycles of boom and bust could empower the elite class for centuries like this, but the inevitable end is still a lords/serfs economy. It is the only way for the rich to retain power in a destroyed economy. Increasing wage disparity is the first symptom in an economies’ decline towards lords/serfs economy.
The lords/serfs economy is the natural end result of predation. Self-interest profit seeking, when unchecked by other forces, results in predation. If predation is limited to parties outside the State, the result is oppressive imperialism, or a state of continual war. In any case, the forces needed to create a lasting functional economy can easily destroy it. As discussed above, this utility curve is the rule and not the exception. When effective regulation and fiscal policy are present, self-interest to profit only creates concentrations of prosperity and doesn’t create accumulations of power. A balance must be struck between the will to profit and the will to power. For this to happen there has to exist some separation between money and the regulating body. This is hard to accomplish because governments need money to function and wealth always creates concentrations of power. While all classes within this system can be made complicit in the slide toward a lords/serfs economy, the most important and avoidable part of the process always involves the rich. It happens at the vertex and upper limit of the curve. This vital step occurs when those with the most prosperity begin to tip the balance by seizing control of the economy.
For supply and demand to drive an effective economy the consumers must be informed and rational actors. Rational actors have to know what they are buying and how much they’re paying. for that to happen, there must be laws about transparency and labeling.
No trade can be legitimate when the consumer doesn’t know what they are buying, what the price is, and/or can’t opt out.
Avoiding the downward utility curve requires effective regulation. No businesses can be expected to regulate each other or themselves because profit is always the main driving force for businesses. An insulated and publicly paid regulating entity must be created without influence from campaign finance or special interests. These regulators would work like a law enforcement agency, with federal prosecutors, economists, and investigators. There would be experts on call for each industry specialization and offices for things like labeling laws, truth in advertising, illegal market influence prevention, human rights, accounting oversight, environmental rights, etc. Legal fines that courts take from offending businesses could go into the taxpool and regulator’s pay could be tied to GDP. Good wages and built in checks and balances between offices could be used to prevent corruption. A large bureaucracy would require public money to run, but I feel strongly that effective regulation, along with a complete monetary overhaul and elimination of the huge wastes that currently plague our system, could easily pay for such government expenses. The goals of these various regulating public entities will be to preserve level competition between businesses, protect the public, the environment, and maintain a wall between wealth and political influence. All campaign finance and movement of public dollars must be completely transparent. If the top tier of most successful money earners can buy highest quality goods and services, frivolous prosperity, but not power over the system, they will choose to prosper or be fined into the bottom tier.
The following stratifications of income levels are generalized to discuss their relative size and function. Economic policy should aim to make these conditions arise naturally, and not force them as a matter of outcome-based egalitarianism. In a system with true equality of all self-sovereign adults in a system, our notions of class will hopefully be disposed of.
If we accept that the economy we want will have self interest and profit potential as driving forces, we have to accept that there will be rich people. Just as military power has to be restrained from taking over the government with military power, the rich must be restrained from buying into the power structure and making the government and law tools of their business. Prosperity requires different amounts of buying power for different people in different times and environments. A rich person statistically doesn’t become twice as prosperous when they double their income. This means that richness, as desired by the self interested businessperson, doesn’t need to entail enormous wage disparity. If regulation prevents large wage disparity without trying to remove the possibility of frivolous prosperity, corruption-capable concentrations of power may be carefully avoided. If the successful businessman can buy the kinds of high quality goods and services that a functional economy is capable of producing, the moderately rich would be able to prosper more than the unreasonably rich currently do in the U.S. Currently, market forces and monetary disfunctions drive all businesses to minimize costs and lack of regulation makes it difficult for consumers to know what they are buying; so the rich and poor have approximately the same quality of products and services available. People become richer because they want power and influence, or the prosperity that money symbolizes continually eludes them. If we can create an economy and market where the moderately rich can acquire great luxury and prosperity, and the super rich cannot gain political/legal power to corrupt the economy, any remaining reasons to seek extreme wealth would be rooted in psychological problems. There would be no good reason to have super-rich actors in the economy, or seek huge wage disparity.
The function of the top tier in the new economy will be to buy what they see as top quality goods and services. The presence of rich people seeking top quality goods and services in a healthy economy can exert a positive force on that economy because they create a demand for more varied and higher quality goods and services that wouldn’t be produced in a less healthy economy. In the ideal economy, there will be no super-rich (because the oligarchs, cartels and monopolies are out of power) but instead a larger number of moderately rich. These top tier consumers will buy higher quality goods and services that are produced by middle tier, highly skilled labor, at higher prices. The most successful of the middle tier skilled laborers enter the top tier, who’s demand for high quality goods and services drives more middle tier producers. The true class mobility of such a system could only happen in the presence of effective market regulation and human rights protections.
How do some people become outrageously rich, over many generations, without doing anything useful for the economy besides buying things? This happens because imbalances in our system allowed some small group to accrue enormous power that was used to do imbalanced and predatory business. This kind of extreme wealth, that ensures the de-facto wealth of all proceeding generations, is a sign of imbalance and ineffective economic structure. While the government could never create and enforce a meritocracy without further imbalance and harm, it also can’t allow any person to have de-facto power over others from birth. If this extreme wealth, and the associated ideas of class, are done away with forever, attractive levels of prosperity can still exist. In a system without predatory wealth, the prosperity of the rich will be re-defined but won’t necessarily be less prosperous.
A few times in history, lords/serfs economies have been unravelled by disaster and the rich have had to adjust. After the Black Death, labor became more scarce, and therefore more expensive. While previously poor laborers formed labor organizations and built a new middle class, many previously rich land owners had o learn to farm their own land. After the American Civil War, most freed slaves had strength and skills while many newly destitute land owners had no marketable skills. In both cases, adjustment was possible because there is no intrinsic difference in the rich and the poor. Class is an unworkable social construct built to ease predatory economics. In periods of economic re-adjustment where the rich were harshly eradicated, someone else quickly took there place. The demonization of the rich contained in many revolutionary ideologies is only an emotional argument used to recruit large numbers to the cause. It is transparently false that predatory economics comes from the immorality of the rich people. The tendency is there because of self interest and the possibility of imbalance is there because power and wealth are not effectively separated in the system.
The middle tier is characterized by trades that require specialization, education, and/or experience. Their wages are high enough that immediate security and fear of impoverishment are not pressing concerns. It is this group that buys products and services not necessary for survival but they still compare prices and avoid wasteful expenses. The size of the middle tier is a good indication of the health of an economy. It is from this group that most new technology, invention, businesses, and true production comes from. In general. the more a population has of this group, the more economic growth is generated. In order to pay for the comfortable lifestyles they already have they must carefully budget and continue showing up to their stable jobs. If they want some frivolous good used for amusement only, those things will be within reach for many. To truly be middle tier, however, they must also have a good chance at top tier prosperity through some creative innovation or rare skill.
The first thing a functional system must do to encourage middle tier growth is to stop them from being robbed. Currently, in the U.S., the shrinking middle class pays disproportionately large taxes. Debt from education, and a corrupt medical system are also heavily taxing the middle class. Their punishing debts are an important part of our current monetary system, and I will get into that later. The fact that our current system takes so much from the middle tier and so little from the richest and poorest is a symptom of our progress towards a lords/serfs economy.
The second important thing government can do to help create a stronger middle tier is to allow, regulate, and even encourage a new kind of guild/union system for all trades. Guild members would compete openly with non-guild members. The guilds for a trade could tax an agreed upon percentage from workers that they help to educate (through school sponsorship, in shop training, or apprenticeship). They could provide advice and job placement. They could certify and pedigree labor for hiring entities. These would be privately run for profit with special tax status and allowed to compete within companies and industries. Retirement and emergency funds could also be handled by the guilds. Open competition for members and an effective legal framework would remove many of the incentives for corruption. These trade unions wouldn’t serve as the beginning of revolution and public seizure of private capitol as Marx and Engels prescribe in their famous manifesto. Instead, disputes between labor and ownership (in cases where they are separate), will have a framework for argument and non-violent leverage of similar proportion. With the context and ability for negotiation and competition, destructive relationships between labor and ownership will be less necessary. If the law provides that anyone can leave a trade guild freely, and employers cannot discriminate on the basis of membership, membership itself will act like a trade commodity. Since basic market forces will act on labor in a more varied way, the unions will have an interest in making their members more attractive to employers. This will encourage these trade organizations to take a much more active roll in education, management, medical/maternity leave, etc. than trade unions have traditionally.
A socialized public health system can prevent most middle class economic disasters, but it will be fought very hard in the United States. Medical insurance companies are the largest contributors into our corrupt campaign finance system. To keep these powerful companies from sabatoging our future medical or economic systems, we will have to raise public support and show that such a system can work. This could be accomplished through the unique ability that U.S. states have to independently handle important government functions. We would only need one state, with an already functional healthcare system for the poor, to expand that system and let any state resident buy into it. Such a tax supported supported system could out compete private companies and serve as an example of viability if pressures from the currently existing medical-industrial cartel are checked by government regulation. A Canadian/European style public health system would be better than what we have now, but it is possible that we could do even better. Criticism of socialized medicine holds that government waste and cost cutting results in very low quality medical care. Low quality medical care, and ineffective government management could result in destruction of the industry and fatal negligence. These ideas may sound unrealistic, but they have huge support in popular press, campaign finance, and hey are backed by billions of dollars. They must be loudly and publicly disproven over and over in a propaganda campaign if the public will ever be allowed to seize control of our medical industry. The people currently running hospitals won’t necessarily lose in the nationalization. Monetary and educational reforms can end student loan debt (ex post facto) while reforms of business oversights can reduce or eradicate the costs of malpractice insurance. Even if nationalization reduces the wages of hospital staff, their net income could increase.
The current state of poverty in the U.S. is symptomatic of economic, moral, and political failures. They are rejected by our system as useless non-players. Their concerns and welfare get no political support. What is a U.S. Citizen entitled to as a new social contract? Are they entitled to an income, a car, or a use to the economy? Are they entitled to self-determination, safety, or freedom from oppression? Do we have a right to prosperity and can the system provide it?
Just as the rich in an effective economy wouldn’t need extreme wealth, the poor in this new economy won’t need poverty or suffering. Extreme poverty of even a tenth of a given population would harm the rest of the system if it were handled incorrectly. Damaging psychological and physical effects of poverty can feed into a wide range of diverse social problems like drugs, fire safety, mental illness, disease, and environmental damage. These problems are expensive for the entire system. Individuals in various levels of poverty face challenges that make every function of daily life more difficult and dangerous. This taxes the ability of individuals to escape poverty, prosper, work, avoid legal problems, and avoid physical dangers. An effective system would raise overall prosperity enough that the public could throw money at the problem but social good programs are only effective when they are well planned and managed. When they aren’t, they cost more than they save. Most current federal and state programs for the poor in the U.S. are ineffective at helping individuals empower themselves, find work, and avoid financial pitfalls unique to the U.S. poor. With the other reforms in place, social services for the lower tier could be managed by sending public money to competing private businesses who would provide assistance with education, small business startup, medical, childcare, care of the disabled, and care of the very old. Lessons learned from J.M.Keynes economics and Scandinavia’s Social Democratic Welfare States can inform our construction of a cost-neutral or cost-negative social welfare system that doesn’t further disempower or commoditize the poor. In our new effective economy, communist goals of eradicating all income inequality will not be pursued. Unregulated markets where businesses are allowed to become rulers is a trap that our new economy must avoid at all costs.
“If there was hope, it must lie in the proles, because only there, in those swarming disregarded masses, eighty-five percent of the population of Oceania, could the force to destroy the Party ever be generated.”
If the reforms suggested here can effectively separate power from wealth, our society can closer reach the Egalitarian Democratic Ideal. In this idealist democracy, every person has equal worth and treatment from the law and government. This has been historically opposed by concentrations of power because one vote per person would imbalance the minority power that must exist in a lords/serfs economy. In most economies, even fairly good ones, the poor outnumber the other classes. In countries where debt based economy creates large debts and long work hours for most adults, the chronically underemployed poor are the only ones with abundant time and energy. In the marginally effective systems, the poor also have the greater plurality in the population. This means that the traditional class structure is inverted because the lower tier is often the most numerous. In a system that is dysfunctional according to our utilitarian measurement, the poor greatly outnumber all others. If this huge group of citizens, with free time and much to lose or gain in politics, were to create political action groups around issues that concern them, these groups could serve as a political counterbalance to the inevitable concentrations of power that wealth creates in the upper economic tiers. Used in this way, voting becomes a check/balance force and a decentralization of power that serves our overall goal. In an egalitarian democracy, there is equality of personal power to effect the system. In essence, one person equals one vote and one vote is the limit to political power that a private sector citizen can hold. So in egalitarian democracy the poor are empowered but not always. Greatest voting power would be concentrated with the greatest numbers of people, separated by a particular opinion on a particular issue, and not necessarily separated by class or overall ideology.
What dangers to the larger economy are possible when public funds are used to raise the prosperity level of the lowest tier? The question of weather a system can exist without poor people is related to the question of weather prosperity can exist without the self-interest to profit. Before J.M.Keynes, the general consensus was that government welfare could never be profitable since it essentially entails giving away tax dollars, but when the losses that poverty causes to society at large are better understood, and if an attempt is made to measure prosperity as well as wealth, it becomes harder to see public assistance as an economic loss. Keynesian models account for the overall health of the economy and how it relates to the prosperity of individuals, including the poor. In an effective economy that doesn’t dictate the lifestyles to it’s citizens, or require full participation, the overall prosperity of the poorest can be very high without removing the important market forces. It is completely possible to have a system that removes the social damage of poverty without removing the economic motivations that fear of poorness induces. Huge wage disparities are not necessary to a functional economy, in fact they ruin it. If our social services are designed towards the maximized prosperity goal instead of from a charitable goal, they can be managed more effectively. If we consider the new definition of prosperity as a goal, and the legally simplifying freedom definitions afforded by a new Personal Sovereignty, it becomes obvious that an economy that punishes citizens that don’t take part in it means slavery to the poor. Opting out of the economic system was fully possible before large populations. This “homesteader model” where people make all their own goods and services from their immediate environment is no longer possible because human societies at large have made that option ecologically irresponsible. The ideal system therefore does owe it’s citizens, in a sense, access to healthy food, shelter, clean water, and personal sovereignty. Through decreased infant mortality and increased food production, the existence of the social structure has removed the natural right of the citizen, as an animal on Earth, to the environmental goods and self-sustained life outside the structure. This is more of a moral argument than an economic one; but a system that denies a large part of their population any access to baseline prosperity and personal choice of lifestyle has little use to the population as a whole.
In Sweden, interesting solutions to these problems have been implemented with some degree of success. Higher taxes are put back in to the country’s social services. Many of these services are administered by private businesses. A surprisingly wide range of services are provided free of charge. The following partial list of Swedish social programs is lifted from Wikipedia on October 30th, 2013:
- “Barnbidrag” and “Föräldrapenning”: Monetary support for children up to 16, and benefits to be able to be home from work to take care of their children for up to 480 days per child. It also includes special benefits to care about sick and disabled children.
- “Bostadsbidrag”: Housing allowances for anyone who otherwise can’t afford housing.
- “Sjukpenning”, “Sjukersättning” and “Handikappersättning”: Benefits if you are ill or disabled and can’t work.
- “Ålderspension”, “Garantipension”: Benefits for those who have retired.
- “Försörjningsstöd”: Benefits for anyone (incl their children) who otherwise can’t get a reasonable standard of living. This is given out purely on a need-bases and handled by each municipality‘s social service.“
Analysts in the Baltic have recognized the role of actual prosperity apart from wealth, and have come up with statistical methods to measure prosperity for international comparisons and social goal measurement. In Denmark, prosperity of citizens is rated very high. Their social welfare programs are incredibly generous to all income levels, but taxes are also very high. These services are not restricted to the lowest income levels. They are so generous that many people opt out of working and live on social services. The level of prosperity they live is similar to the upper middle class in the U.S. As of the writing of this paper, Denmark was in the process of trying to adjust their system to reverse record high unemployment and falling GDP. It appears they have solved most of the worst problems of poverty; but there are some disadvantages to this type of system. The tax burden is fairly high, the money is still debt-backed, and continued sustainability of their system is very uncertain. Some Danish report that the education system affords Businesspeople seeking grandiose profits often leave the country for a place with less taxes on the rich and less regulation. Certain markets (like cheap housing and education) lack fair and open competition because public funds and offices have such large influence there. Someone developing pharmaceutical drugs or destructive “urban renewal” projects is not likely to start a company in one of these Scandinavian countries. A private university or medical insurance company (for example) couldn’t exist in that kind of system. This is said to be bad by medical insurance companies and private universities. Some of these private business concerns who hold so much power in the U.S. will lose in our new economy; but the overall benefit to the population will far outweigh the lost taxdollars from the loss of these huge businesses. Many of these shortfalls in the Swedish Welfare Model wouldn’t exist if a more complete revolution of economy could be realized. The resource richness and diversity of climate zones in North America could also make a less generous and far cheaper welfare system for the U.S. be less problematic.
It is important we get this right, if we do, we will serve as a positive example of greater equality and prosperity for the world; if we don’t, or our entire society will suffer. Considering all the various factors discussed above; It seems obvious to me that ineffective social services can be a destructive force on a society. A social welfare system that creates too much free prosperity or too little helps to make the poor a dead, latent limb of society. When they are exploited, they become a tool of those who wish to redistribute all wealth upward. When their work creates no prosperity, they become depressed and disengage from the business of society at large. Counter-intuitively, ineffective free money programs can actually be a force toward disempowerment and de-voicing of the poor. The new, effective economy will provide medical care, an equal political voice, elder care, and education free to anyone who wants it. Considering this, and other reforms, it is possible that the lower tier of the new economy could sustain a reasonable amount of prosperity and human dignity even without money.
An effective money system and new market regulations will remove many of the hurdles that keep the poor in low incomes. Destroying agriculture monopolies and cartels, legalizing drugs (The existence of consensual crimes is an affront to personal sovereignty and causes more harm than they prevent.), removing liability fears and restrictive labor standards, greater environmental protections, decreased oil importing, and removing agricultural subsidies would open up the way for small family farms and other new small businesses. People who are currently working poor would have a much easier time reaching middle tier, and the dangers of having no income would be far less severe. Many working poor would have the option of subsistence farming and seasonal labor in the new small farm labor markets. Food crops could diversify and small farms could compete for local business, as higher quality foods become cheaper, many unemployed will be moving to rural areas. This puts the healthiest foods, cheapest properties, poorest unemployed, and most new low-skill labor jobs close together. For the poorest of the marginally employable, people could gain valuable work experience by volunteering on civil engineering projects for the public or private sector. Over all, in the new economy, there would be more jobs and less need for large incomes. The serious dangers of poverty would be removed by social programs, but not the self-ownership and pride in successes. Most importantly, the nature of loans, debt, and currency would be changed by radical monetary reform so that people without money or property would no longer be shut out of the system and required to participate at the same time.
Does our current money system serve the needs of an effective economy?
Our current system is well known to be fraudulent but it is allowed to continue because it extends easy credit to national powers, and seems to cause an exponential increase of overall wealth. The first corrupt invention to become ingrained in our cultures’ currencies was fractional reserve banking. When it was first invented, money was in the form of wealth based intermediary goods (probably metals). In this crazy story that must have happened at some point, an unscrupulous banker is caught lending out more than he has in the bank vault. Guards arrest him and bring him to the local royal. After a brief discussion on the banker’s justifications for his scam, the banker is set free and the royal suddenly has a bunch of low interest loans. The local economy seems to grow, because the overall money supply has suddenly increased. Medieval European economies were under a lot of pressure to bring in goods from the far east when fractional reserve banking first began to become the norm. Governments needed the fake money to fund expansion and predatory imperialism, so the banking scam was enlarged rather than punished. Today, in the U.S., the percentage of a given bank’s loanable money that has to exist as money is set by a regulatory commission.
The idea of “real” vs. “made up” money was never resolved. By allowing fractional reserve banking to continue and grow, the bankers were able to amass the kind of extra-national power only talked about in conspiracy theories. These powerful banking cartels created a currency called debt-based currency. Debt-based currency is even less real than the fractional reserve loans. In debt-based currency, the now super powerful bank creates the idea of the money and loans it into existence. Previous systems (I call them “real money”.) were based on an intermediary good like gold, that was theoretically traded into existence by the labor of the gold miners, then traded into money by exchange with a real good like cattle or tupperware. In real money, nothing is ever created or destroyed. The value of the intermediary gold coin is there as a backup, in case the economy goes bad and there is less to trade. In bigger economies, this backup value isn’t always necessary and anything hard to fake and easy to transport and divide will do just fine. There is nothing inherently wrong with paper money or even bank notes, but when the initial value of the currency is in a loan from a person who never had the initial value, the currency is fraudulent at it’s core. Like the fractional reserve problem, legal powers never resolved this debt-based currency problem because they wanted the free money. In early U.S. history, congress, bankers, the central U.S. Bank, and presidents all argued and fought over the fake money vs. real money issue. In the U.S. Constitution, the right to create money is given to congress but early American Colonies had many real currencies co-existing. This tradition was allowed to continue well into the 19th century, when runs, booms, and busts played havoc on the unregulated banking and currency systems. Enemies of private-bank-created currency systems were gradually bought out of existence. By the time Woodrow Wilson came in to the Presidency and allowed large monetary reforms, the idea of private-bank-created currency was accepted by most. The ability of the global banking cartels to control U.S. currency gave them huge power over our nation. Debt backed currency was gradually ushered in as an answer to apparent scarcities of government money. Fractional reserve loans now create money into an exponentially increasing debt-backed currency supply where the “real” percentage of the loaned out money is still backed by debt. The U.S. Government can never pay off the supposed “debt”, so most tax revenue goes directly to the central bank. The fake money is used to further accumulate power and slide the system further along the curve into a lords/serfs economy. The mathematical impossibility of paying off all or most of the debts means that there is no way to take the banking cartels out of power without the threat of extreme poverty. It sounds like kook theory but those who attempted to do damage to this system in the past have suffered coup, assassination, and war.
What kind of money system would be most useful to an effective economy?
Neutral medium of trade created by public office economists/fiscal regulators, not debt based. Allow free use of local, existing goods/services backed credit on digital media. Regulate the banks into regular businesses/allow anyone to be a bank. Nationalize all physical currency and distribute (bottom up) through social good programs…
Gresham’s law can be generalized as a tendency for crappier currencies to push out better ones. This happens because in a multi-currency system, we want to spend the worst currency and keep the best currency. This eventually de-values the less used one and it becomes the crappiest currency. Could two currencies be used to balance each other in a system?