If Not Liberalism, And If Not Socialism ...
Chapter 6 (Part 4 of 4) of the book
The Discovery of First Principles, Volume 3
Edward J. Dodson
THE DEMOCRATIC IMPERATIVE
Principles Applied
Throughout this volume, I have attempted to explore in some detail
how the programs associated with social democracy began during the
early nineteenth century, expanded incrementally over the next
century, then accelerated after the Second World War. Many internal
and external factors combined, particularly in the United States, to
intensify the role of government in social and economic matters
previously regarded by proponents of minimal governmental interference
in the realm of property as unwarranted and a dangerous infringement
of individual rights. We have experienced the grudging advance of the
welfare state ever since, supported and thwarted on a policy by policy
basis by individuals who profess to hold either conservative or
liberal principles. Mostly the political struggle has been one over
who holds power over the division of the spoils. Both the libertarian
and the democratic socialist perspectives have emerged from the
wilderness to achieve influence at the margin. However, in almost
every one of the social democracies centrist policies have dominated
the legislative agenda during times of relative stability. More
extreme views rise to the surface during times of uncertainty and
struggle.
At and beyond the fringe of the dominant political parties are the
countless grass roots, citizen based groups whose members tend not to
identify strongly with the mainstream political parties. Here is where
many of those who also belong to alternative political movements and
parties such as the Libertarians, Ultra-Nationalists, Greens or
Fundamentalists are to be found. Thus far, the programs advanced by
these groups have not been sufficiently attractive to mount a
sustained competitive challenge in the electoral arena. There is no
consensus arising to replace the set of public policies that comprise
the agenda of liberalism. And so, we find ourselves troubled by
seemingly unsolvable social, economic, environmental, health,
educational and political problems with our elected representatives
immersed in posturing to preserve their political longevity rather
than engaged synergistically to promote and protect the rights of
constituents to access what Mortimer Adler identified as the goods
necessary for a decent human existence. Economic systems are viewed as
zero sum games, with a loser for every winner. For those of us on the
fringe who have come to hold transnational values, we believe that our
socio political arrangements and institutions must live up to much
higher standards of participatory democracy, must inherently protect
human rights, must achieve equality of opportunity, and must maximize
individual liberty. The realization of our ideals demands that we
unite to advance institutional changes that will harmoniously pull us
in the above directions. This brings us, then, to a beginning.
We have for guidance a broad base of philosophical, socio-political
and economic writings. On many but not all questions of their day,
Paine and George applied their principles. They were wise enough to
admit that the future would raise many issues they could not foresee
and trusted in democratic processes to allow an educated citizenry to
decide wisely. They were optimistic that democracy would, in fact,
provide the environment necessary for an educated citizenry to arise.
In the social democracies, revenue obtained from taxation (and
borrowing) came increasingly to support the creation of public (i.e.,
government-operated) schools, including colleges and universities. The
increased subsidization of schooling that occurred following the end
of the Second World War greatly expanded the number of people able to
attend and graduate from college, enter the sciences as a profession
and achieve a level of personal well-being far higher than anything
their parents or grandparents could have imagined. I am among the
millions in the United States who have benefited from these
opportunities. That and a life-long thirst for knowledge, for truth,
and for understanding eventually brought me to this place in my
thinking.
What follows is my attempt to apply the principles of
cooperative individualism to which Paine and George generally
ascribed, but did not comprehensively articulate. These two great
thinkers are not, however, the ultimate test of these principles; they
must stand or fall against the harsh judgment of historical evidence,
reason and our own intuitive and nurtured moral sense of right and
wrong.
CITIZENSHIP
The Nation-State as a Divisive Factor
One of the greatest hurdles our societies have to overcome is the
lingering potency of nationalism to diminish our ability to function
as global citizens. In many societies today the problem is exacerbated
by ethnocentric territorialism and by intolerance toward groups of
individuals who do not share the same culture, religion, race or
language. Even within the world's social democracies, economic
stagnation and an acceptance of scarcity provide a convenient source
of strength to all of the worst forms of bigotry and human rights
violations. Tribalism has become stronger as a counter to centuries of
progress in the spread of transnational values.
A successful campaign to purge nationalism from human relations
requires a sustained effort, with education and activism focused on
the subordination of claims to the sovereignty of groups or nation
states to transnational (i.e., universal) standards of behavior
consistent with the securing of human rights. The forging of a global
movement to counter nationalistic tendencies is, as yet, in its
infancy. At a personal level, one's attachment to one's own society as
something separate and apart from other societies is a bond not easily
set aside. How many of us are truly ready, for example, to denounce
the exclusivity inherent in the concept of nation state citizenship in
favor of rights based on global citizenship? In response to this
question, we ought to debate the practical considerations associated
with establishing a second level of citizenship based on transnational
values. Wholesale adoption of this reform would protect the liberty
to travel and live wherever one may wish - subject only to
restrictions based on health and safety considerations. Within the
United States and most other federated republics, this dual level of
citizenship has existed for a considerable period of time. And, to an
extent we seldom express, dual citizenship has been responsible for a
high level of mobility for generations of immigrants and their
descendants. In the United States, for example, New York City has been
an important point of entry for many generations of immigrants, whose
children have subsequently moved to another region of the country. One
important result has been the creation of a small number of societies
unique in history that encourage common values in an environment of
pluralism. To be sure, the process has been painful and not altogether
successful. What must be said, however, is that an emphasis on
individual rights as a central building block of government has
assisted many individuals to overcome the bias and prejudice to which
many minorities are subjected.
History and our contemporary experience demonstrate the very strong
correlation between freedom to migrate and the degree to which a
society is concerned with justice. Societies from which large numbers
of individuals wish to but are prevented from leaving will always be
found to have oppressive socio political arrangements and
institutions. Privilege for the few is the characteristic readily
apparent to the outsider. As I note above, the only legitimate reasons
for restricting the movement of individuals from one part of the globe
to another involve the health and safety of others. A person infected
with a highly contagious or communicable disease would jeopardize the
health of others and should be quarantined in some fashion. A person
who has committed a criminal license against others must not only pay
a proper debt to society but must demonstrate rehabilitation before an
unwary populace in another part of the world is exposed to such an
individual. Absent these health and behavior related issues,
citizenship must protect our human right of equal access to the earth,
the exercise of which is inherent in the right to migrate.
Within the receiving societies, the presence of tensions or fears
that new immigrants will compete for available employment
opportunities or drive down wages or add to crime or the cost of
government are warnings that a difference exists between these
societies in degree only. A society whose socio political arrangements
and institutions are consistent with human rights -- that secures
equality of opportunity and maximizes individual liberty -- will
welcome immigrants as valued new producers and contributors.
As a long term objective, we must continually work for a new form of
global governance. In order to overcome the intense ethnic (often
tribal) conflicts over territory, these groups must be encouraged to
accept territorial settlements reached under conditions of binding
arbitration. Deep animosities and rivalries will not disappear
quickly. Many groups continue to think of themselves as a people
separate and distinct from others, sharing a history of external
domination and oppression that drives a deeply rooted need for
cultural independence and territorial sovereignty. Here, expediency is
warranted in order to promote peaceful intercourse between peoples
based on voluntary association. A global fund could be created
(perhaps from rents collected from the leasing of the ocean floor for
exploitation of minerals, or the auctioning of licenses to commercial
fishing enterprises) to provide some level of compensation to those
required to relocate and abandon their legitimate individual property,
or dispose of their property under conditions that do not lend
themselves to a market-driven transaction.
Another element in the struggle to purge nationalism from our
existence is to encourage large nation states to divide into much
smaller states, so that no one state within a global federation is
dominant in terms of population, natural resources or infrastructure.
For those of us living in very large countries, this would present an
opportunity to debate a more efficient construction of regional
states, each eventually becoming a member state in the global
community.
RESTRUCTURING OF GOVERNMENT
History and experience have also demonstrated that participatory
government, particularly when structured as decentrally as possible,
is inherently more likely to yield a higher degree of equality of
opportunity and liberty than any other form. Yet, even within the
social democracies there exists a considerable degree of frustration
over the role played by government at all levels. Citizens generally
feel left out of the process and unable to influence the actions taken
by quasi permanent bureaucracies, particularly at levels beyond their
immediate community. Too often, only a small percentage of those
eligible to vote in elections make the effort (unless required by law
to do so), and an even smaller number are active in community affairs.
To be sure, we have a right to expect those employed in public service
or elected to hold public office to make sure the public sector
fulfills its responsibilities. Unfortunately, time and experience have
proven that existing socio-political arrangements interfere with this
objective. What is needed to more fully realize the promise of social
democracy is to take the debate over solutions to a sustained, higher
level that focuses not simply or primarily on short run, remedial
measures, but looks at the fundamental construction of our socio
political arrangements and institutions.
Discussion of government today most often focuses on issues. We ask
how government can mitigate the social and economic problems that
plague our societies. The interest of those in government is to
maintain this focus and to discourage measures designed to alter the
structure within which government functions. Those individuals within
government who advance proposals for systemic reform or restructuring
are too often viewed (by their colleagues) not as citizens to be
praised but as whistle blowers or trouble makers. To be fair, this
conflict between those who bring to any job a high level of motivation
and principle based behavior and those who do not is not limited to
government. Those who are comfortable in their circumstance or who
benefit by the status quo will often strenuously resist even obviously
necessary changes. Their power to do so, individually and
collectively, may be great or small. Many times only a severe shock to
the system opens a window of opportunity for those who desire to
effect structural improvements.
Putting aside for the moment the structural changes needed in the
private sector, there are very specific changes that will materially
improve the quality of governance at all levels. The first objective
should be to expand the degree of citizen participation in the
governing process. In communities throughout much of the world, where
authoritarian regimes are not an obstacle, citizens do come together
in civic and neighborhood associations or as members of political
parties. A much smaller number are active in volunteer, environmental
or other public interest groups. For the great majority of citizens,
however, even the fundamental civic responsibility of voting for
elected officials is ignored. For reasons that include apathy,
disgust, a sense of isolation and the challenge of simply earning a
living, many citizens do not participate. Before this situation can be
reversed, we must recognize what the obstacles are and take action to
remove them.
Voter Registration and Voting
In the elections occurring in many countries the unfortunate reality
is that a majority of a minority of citizens determine who is elected.
In the United States, for example, far less than half of the eligible
citizens bother to register to vote in most districts. Registering
requires the citizen to be proactive rather than reactive. Now that
computerized systems of voter registration can be economically
maintained, other methods of securing citizen participation should be
pursued. A registration form could automatically be sent to anyone who
is in the data base but did not vote in the previous election or has
otherwise lost eligibility. Registration by telephone or by internet
connection should be considered, with each citizen assigned a security
number to gain access to the system and to vote. This would improve
considerably the involvement of people who work outside of the
communities in which they reside or who cannot conveniently visit a
voting location. Computerized voting stations could be installed in
numerous locations so that citizens could vote wherever they might be
regardless of where they actually reside. These enhancements to the
process are certain to increase involvement and participation.
Political Parties and Primary Elections
Our systems of law have evolved as powerful means of distributing
privilege; and, to the extent this design of law is effective, liberty
and equality of opportunity are thwarted. Even under the best of
circumstances, where law is constructed consistent with just
principles, there would still be disagreement over the degree to which
government versus private initiative should be relied upon to advance
public policy. The practical need to influence public opinion suggests
that political parties will be resorted to for a long time to come. At
issue is whether the general citizenry, who have no day to day
involvement in party affairs, should continue to be recruited to
select the party candidates for office by virtue of their party
registration and voting in -- what in the United States are called --
primary elections. If, in fact, our political parties are to be
organizations of individuals joined together to advance a
philosophically driven policy agenda, allowing otherwise uninvolved
citizens to determine a party's candidates dilutes the purpose of the
party. Political parties ought to be democratically structured, but
only those individuals who have contributed either their time, energy
or financial resources should be considered members of the party and
eligible to select candidates for office. The requirements for party
membership should be left to the party members to determine.
Excessively stringent requirements would, of course, virtually assure
the party a place in permanent obscurity. The right of the citizen to
vote for candidates standing for public office is appropriately
limited to the general election, where all party candidates and their
programs are weighed one against the other. Under this type of system
the candidates are far more appropriately the representatives of their
parties and what they stand for can be more consistently relied upon
as the agenda they will pursue and support if elected.
Terms of Office
Should individuals be permitted to succeed themselves in office and,
if so, how many times? This is the fundamental issue to be resolved.
On the side of providing for unlimited terms of office is the right of
citizens to select whomever they wish to represent their interests.
Against this position is the advantage of incumbency in elections and
the concentration of political power into the hands of a relatively
small number of entrenched individuals. Tocqueville observed that one
of the main safeguards of American democracy was the frequency of
elections, implying that frequent elections inherently limit the
consolidation of power. Experience suggests that when frequency of
elections is combined with unlimited potential for re election,
representative government is diminished in no small part by the amount
of time and financial resources devoted to campaigning. What, then,
are the options to be considered for a cleansing of this process and
broadening of
the Democracy? In the complexity of our modern world, serving
as an elected official requires an individual's undivided attention;
and, there is a rather long learning curve before one becomes
adequately informed on legislation under consideration. Under these
circumstances, a term of office of less than four years makes little
sense. Beyond the local and municipal levels of government, we ought
to consider setting terms in the legislature at six years, but limit
individuals to two successive terms in office. A twelve year period
within which to affect the direction of governmental programs is long
enough to encourage continuity while reducing the amount of energy and
financial resources devoted to gaining elected office. When combined
with changes in how candidates are selected, the actual election
campaign period can be shortened to no more than a few months. The
public can protect itself from serious misrepresentation by the recall
process, the particular aspects of which might be structured as
described below.
Electing Representatives By Lottery
At the far end of our options is the prospect of electing our
representatives by lottery from the eligible citizenry. Citizens would
be selected at random to serve for a stated term or until 51% of
registered voters proactively withdrew their support. The lottery
system requires that elected offices be treated more like civil
service positions. The minimum requirements for offices requiring
specialized skills would be established by a nominating committee (and
reviewed periodically for appropriateness to current conditions). For
legislative positions the requirements might include meeting a minimum
score on an examination that tests for competency in language use and
an understanding of the governmental process. Successful reliance on
such a system requires that our schools effectively prepare
individuals for citizenship, something that is sorely lacking at
present.
The Chief Executive
Critics of the U.S. political system point to the disturbing fact
that the President is frequently unable to implement the programs and
policies designed by the Executive branch because the Congress is
controlled by the opposition party. Under the constitutional model
that evolved for Britain and has been adopted by many other countries,
a Prime Minister heads the government as the appointed leader of the
majority party (or, coalition of parties). Hypothetically, one
individual might serve as prime minister for decades. Common to all
social democracies, however, is the experience that entrenched power
is frequently subject to corruption, and that only a separation of
powers provides adequate checks and balances. In the United States,
the Executive branch of government is not empowered to enact
legislation (although the initiation of legislative ideas is
considered part of the President's leadership role); rather, Executive
agencies have been created to (ostensibly) assure the fair and proper
implementation of legislative directives. The pros and cons of the two
systems (and variations thereof) ought to be examined and debated.
Common to each system, however, is the question of limited tenure in
office for a President or Prime Minister. The fact that a people feels
dependent on any one or few individuals for leadership is, I suggest,
an admission of enormous failure to prepare citizens for the
responsibilities of participatory governance.
The Courts and the Constitution
A school of legal scholars in the United States, generally described
as conservative, have argued that the Courts must (under the State or
Federal constitutions) apply a narrow, strict constructionist criteria
to their determinations of legislative constitutionality. There is,
however, an unresolved degree of ambiguity associated with the implied
powers language in the Federal constitution. In response,
conservatives suggest the Courts must refer to the framers' original
intent for guidance. The problem, of course, is that the Constitution
as a framework of government arose out of compromise. Philosophical
and moral principles, espoused by at least some of the framers as
essential to the securing of liberty and of equality of opportunity,
were subverted by the collective strength of interest groups. Other
countries with written constitutions may have a similar problem; or,
conversely, the language of the constitution is strong on principle,
but the protection of the rights guaranteed under the constitution is
weak and inconsistent. Britain and many other countries function
without a formal constitution, and are instead governed by legislative
will subjected to the pressures of public opinion and checked by
traditional values. Our first task, therefore, is to establish by
education and persuasive discussion a consensus acceptance of the
principles against which any constitution of government (written or
informal) ought to be measured for its degree of justice. A written
statement of principles ought to be prepared, from which a committee
could be formed to draft a transnational Constitution for
distribution, subsequent discussion and possible adoption as a result
of political action.
PRIVATE WANTS AND PUBLIC NEEDS
Corporations and Social Responsibility
The function of government ought to be two fold: (i) to protect and
advance the health and safety of all citizens; and (ii) to prevent the
institutionalization of privilege, the formation of monopolies, or
contrived shortages and/or price fixing among producers. High on the
list of issues to be addressed is determining what laws and
regulations ought to govern the activities of businesses, particularly
those that adopt the corporate form of ownership. We continue to
struggle with the body of law that governs the formation, treatment
and dissolution of corporations. In return for the privileges granted
under corporate charters, what obligations (if any) ought to be
imposed on the corporate owners and executives to act in a manner
consistent with appropriate societal norms?
Manufacturing businesses that have become multinational are
de facto global citizens with little or no inherent commitment
to the societies in which they happen to be incorporated and/or
domiciled. The transfer of productive facilities from one region or
country to another is far easier today than ever before. Even the less
developed countries have adequate infrastructure to accommodate the
needs of most industries. Corporate executives naturally and
appropriately stay alert to locational opportunities where profit
margins can be maximized because of much lower labor costs, lax
environmental regulations, subsidized land and energy costs and low
taxes. For individual societies and corporations and even for the
labor force in a given country the short run results appear to be
mutually beneficial. People find employment where there was none.
Governments receive additional revenue. At least some people
experience greater prosperity. As has frequently been the case,
however, the heavy subsidies granted leave most citizens of the host
country with serious problems to correct where environmental quality
and public health and safety are concerned. When natural resources are
fully exploited, when workers begin to organize and begin to negotiate
for higher wages and better working conditions, or when governments
begin to enforce environmental regulations, the multinational
corporation simply closes down and moves on. Our health and our
long-term survival is dependent upon our wise use of what nature
provides. Laws are needed to protect our liberty - including our
birthright of equal access to the earth - and government is just the
extent to which such laws are effectively enforced.
Under circumstances where there are more jobs searching for workers
than workers searching for jobs, business owners compete for the
skilled workers and managers needed to efficiently produce goods and
provide high quality services. Only when communities and societies
harness this energy by fully adopted the rent as revenue
policy will everyone benefit by the freedom to move production
activities in order to take advantage of greater efficiencies. Under
existing circumstances, where industries transfer production
activities to take advantage of low labor costs and few controls over
production processes, the longer run result is a concentration of
purchasing power among owners and executive management teams
accompanied by an increase in structural unemployment in the locations
from which they departed. Practices that benefit individual businesses
in the short run eventually destroy the high wage economic environment
that allows businesses to grow and prosper over the long haul.
Government's failure to adopt win win policies in the regulation of
production and commerce is traced to one major reason: in virtually
every society, tax laws relating to property and income impose heavy
costs on production, trade and consumption while favoring speculation
and hoarding of locations, natural resource-laden lands, the broadcast
spectrum and other finite natural opportunities. A selling price
(i.e., a capitalization of the annual rental value, often with a
speculative premium) for control over these forms of assets arises
because so much of the rental value is not collected by society. This
problem involves a failure of government at all levels and today
benefits most those corporations that function as agrarian, industrial
and/or urban landlords -- those controlling extremely valuable land in
urban centers as well as tens of thousands, even millions, of acres of
forest, mining, agricultural or grazing lands without
market-determined compensation to society for the inherent monopoly
privilege enjoyed.
Industrial democracy, characterized by cooperatives and employee
stock ownership programs, mitigates the problems of land monopoly by
allowing workers to participate in the distribution of income derived
from both capital goods and land ownership. Societal stability could
be enhanced by more cooperative ownership of businesses, lessening the
pressure on executives to pursue short term profit maximization
demanded by disinterested stockholders. Industrial democracy would
also check the power of executives to compensate themselves in
multiples hundreds of times greater than other employees. This
approach to more responsible corporate behavior is far more desirable
than relying on government to adopt intrusive, regulatory or social
legislation. Employee ownership is most practical in smaller to
mid-size businesses, where the amount of financial reserves to be
raised is within the capacity of employees to provide. In societies
where rent is the primary source of public revenue, the potential to
provide each citizen with an annual dividend payment is very real.
This dividend could become the basis for a pool of financial reserves
to be invested in cooperative enterprise.
Global competition and the revolution in computer and communications
technology have greatly challenged traditional corporate hierarchies
and decision making processes. More than ever before, companies large
and small must attract highly talented and motivated individuals able
to adapt to constant change. Highly educated individuals have much
greater expectations not only in terms of compensation for their
services but in terms of stimulation, challenge and satisfaction.
Manufacturing industries have historically created many repetitive
jobs and a much smaller number of stimulating career opportunities.
Assisted by computer robotics and other technological advances, the
output of goods from manufacturing and processing operations has
rapidly expanded as a multiple of the direct labor component. To the
extent that tedious, dangerous and mind numbing jobs are shifted to
machines, this is a development to be applauded and encouraged. The
dilemma, as discussed above, is that under current conditions hundreds
of millions of workers are faced with few alternative employment
choices. Replaced by machines or left unemployed by the relocation of
their jobs elsewhere, they become dependent on social welfare programs
for a subsistence level existence or move into lower paying jobs in
the service sector. The more fortunate are able to acquire new, more
marketable skills and redirect their career into an area where the
demand for workers still exceeds the supply of qualified applicants.
The decline in purchasing power resulting from the departure of a
company representing a large portion of a region's employment base can
literally destroy communities. The citizens and leaders of smaller
communities, in particular, must learn how to diversify and eliminate
dependence on just a few sources of employment. The balance is found
when the community protects itself from the downside of the global
economy while creating the appropriate socio political climate in
which businesses can operate profitably and without subsidy or
monopolistic privilege.
Business Assets and Revenue as Sources of Government Revenue
As I have attempted to show, the study of political economy reveals
that when government places taxes on production or on commerce the net
result is a reduction in those activities, accompanied by determined
efforts at avoidance. Wherever taxes levied become even moderately
confiscatory, producers (or, more often, wholesalers and middlemen)
will engage in commerce outside government oversight and control.
Around the globe today the so-called "underground economy" -
even for goods that are not otherwise illegal -- is enormous. The
reason is that taxes add to the cost of production, and to the cost of
doing business. The record-keeping and processing, the hiring of
accountants and legal counsel who specialize in understanding and
finding loopholes in tax codes burdens commerce. Producers will
attempt to pass on the added costs to their customers, and many
external factors will determine whether or not this can be done. Among
the variables are the level of demand, the availability of less costly
substitutes and the purchasing power of potential customers. What
customers are willing to pay for most goods today is determined by a
globally determined equilibrium between supply and demand. Thus, if
taxes must be absorbed by the producer, profit margins will fall or
disappear unless the producer is somehow able to otherwise reduce the
costs of production. This may involve substituting new capital
equipment for labor, imposing higher productivity objectives on labor;
or, if these strategies are ineffective, relocating or shutting down
altogether.
The ideal tax policy toward business is clear. Production and
commerce ought to be encouraged, while at the same time pushing that
business to maximize its use of the locations and natural
resource-laden lands under its control (subject to appropriate
regulation for protection of the natural environment). As discussed
above, this means that the taxes paid to government ought to equate to
the annual rental value of such locations and natural resource-laden
lands held. There are other sources of "rent" that must be
taxed as well. The broadcast spectrum is also a finite natural
resource, and control over frequencies should be subject to periodic
leasing under an auction system. Private access to the publicly-held
lands made available for exploitation of minerals, timber, harvesting
of animals or the grazing of cattle also ought to be awarded by
competitive bidding. If the need for government revenue exceeds the
combined total rental value of all locations and natural
resource-laden lands, any additional taxes ought to create the most
level playing field possible. Existing taxes on businesses tend to
penalize success and reward failure. The greater the expenses a
business records and the lower its declared profit, the lower are the
taxes levied. The key tax reduction strategy for a business is to
maximize as much as possible such non-cash expenses as depreciation of
buildings or equipment. Corporations have the challenge of wanting to
maximize the reporting of profits to shareholders while minimizing the
reporting of profits to taxing authorities. A more efficient approach,
I suggest, is to levy taxes at a low rate against gross revenue. In
doing so, the impact on businesses with heavy expenses will be greater
and on those with lower expenses smaller. Businesses will then be
encouraged by the tax system to maintain tight controls over expenses.
Firms would no longer receive tax advantages as a result of their
borrowing and would, therefore, borrow only on the basis of sound
business reasons. A firm's physical assets (including plant and
equipment) would no longer be taxed, nor would depreciation taken as
an expense play a role in the calculation of taxable income. From the
standpoint of the public interest, no longer would an army of
government auditors be paid to assure compliance with tax laws. At
some point in the future, this gross revenue tax could gradually be
reduced to zero as the amount of rent collected is sufficient to meet
our need for public goods and services - and then begin to provide
enough revenue to distribute as a citizens dividend.
Individual Assets and Community/Societal Revenue Needs
The same principles of just taxation and economic efficiency apply to
the individual as to companies. The moral sense philosophical
principles integral to cooperative individualism also serve as the
basis for our rights to property. Our birthright as human beings is
the right of equal access to the earth. Deeds that grant control over
nature and forms of licenses that restrict equal access create
unnatural property -- privileges that are inherently monopolistic. Our
natural right to property comes, on the other hand, from what we
produce by applying our labor our capital goods to nature and by
engaging in commerce. Justice demands that government protect our
right to use and/or dispose of our property as we choose (so long as
in doing so we do not infringe on the rights of others). Taxation of
natural property or of income derived from the use of property is a
form of confiscation. Justice demands, however, that the individual
compensate all others in society for the privilege of monopolizing
access to any location and natural resource.
Let us suppose that all individuals and all other groups who control
nature are contributing the full rental value attached to these
privileges -- that holders are competing under the auction function of
the market for deeds and licenses. Let us suppose further that, by
consensus and in accord with democratic principles, a majority of
citizens agree that additional public goods ought to be provided and
revenue raised to produce such goods. What should be the guiding
principle for the confiscation of natural property from individuals?
Here is where ability to pay ought to be given strong consideration.
One approach is to institute a graduated tax that exempts all
individuals who earn below a certain level, say, the median income in
any given year. Above that income, a graduated rate would be applied
that increases up to a maximum on very high marginal incomes. To
provide a basis for discussion, I offer the following example of how
this would work in the United States: (a) incomes below $50,000 would
be exempt; (b) a 5% tax would be assessed on incomes greater than
$50,000 up to $100,000; (c) a 10% tax would be assessed on incomes
greater than $100,000 up to $200,000; (d) a 15% tax would be assessed
on incomes greater than $200,000 up to $400,000; (e) a 20% tax would
be assessed on incomes greater than $400,000 up to $1 million; and (f)
a 25% tax would be assessed on incomes greater than $1 million. There
would be no exemptions or deductions. To be sure, there is
confiscation associated with this supplemental means of raising public
revenue; however, the depth of confiscation is moderate and would not
materially impact the individual's well-being. In time, this
confiscatory form of taxation on incomes could be scaled back as the
societal rent fund expanded to the point where agreed-upon public
services were fully funded and a surplus permitted a pro rata
distribution to each citizen as a dividend. In the interim, this
structure would operate to partially remedy the deep injustice that
has resulted in such a high concentration of wealth and income in
every society.
Protecting the Environment
We have excelled in the exploitation of the earth's resources to
achieve immediate gratification and secure our short term survival.
What many of us now realize is that our behavior has been (and
continues to be) damaging in the extreme to the operation of the earth
as an ecosystem. To continue on as we have is little short of suicidal
behavior. Pollution and over fishing threaten to destroy the food
chain in the oceans and fresh water seas. Heavy use of herbicides and
pesticides poison the land and inland waterways with toxic chemicals
that are consumed by animals and enter our own food supply. Subsurface
and strip mining operations pour even more chemicals into groundwater
supplies. The burning of fossil fuels turns our air into poisonous
vapor. The by product of energy generated by nuclear reactors is a
vast storehouse of radioactive waste for which no safe means of
storage has yet been found.
If we have any reason for optimism it is that a wide range of
nongovernmental groups are focusing time and resources on these
problems. On the other side of the equation, despite a quarter century
of activism and the passage of sweeping regulations the effort to make
our activities environmentally sensitive continues to be thwarted by
individuals, businesses and even governments acting to protect short
term profits, privilege and political power. Clearly, the struggle to
heal and preserve our ecosystem requires mobilization of the global
citizenry on a scale never before achieved. Steps are being taken in
this direction and considerable examples of progress can be pointed to
within many societies as well as a new appreciation of the need for
global cooperation. At issue, then, is how to more effectively shift
the balance of power in favor of our long term survival.
Once again, an understanding of the economics of taxation and how
societies raise revenue for public goods and services will direct us
to press for a dramatic overhaul in the existing structure. Doing so
will yield material benefits to the health of our ecosystem because
nature will be efficiently exploited and nothing will be considered
waste. Societies are faced with the choice of whether those who
control access to nature are to be permitted to build personal
fortunes by continuing to privately appropriate rent, or recognize
such access as a privilege for which society as a whole is to be
legitimately compensated. When the tax base equates to the annual
rental value of locations, natural resource-laden lands, and other
natural monopolies, the cost of regulations imposed on producers for
protection of the environment will merely lower the amount a potential
user will be willing to pay for access. If the cost of cleaning up the
environment is left to society, after the fact, the amount of rent
users will pay for access unencumbered by regulations will be higher,
but government will then have the higher revenue to use for remedial
efforts. The basis for public policy, then, ought to be whether
certain levels of pollution control are best handled by individual
land owners (or lessees of publicly-held land) or by government. For
example, regulations requiring extensive refining of fossil fuel or
conversion into natural gas is the type of public policy that will
drive down the annual rental value of fossil fuel bearing lands. Yet,
the benefit to us and our planet as a whole is much cleaner air.
Learning and Citizenship
One important legacy of the nineteenth century reform initiatives
whether democratic, utilitarian, progressive, Fabian socialist,
communitarian or statist has been an almost universal reliance on
education to raise living standards. Millions of people have been
lifted out of generational poverty as a result. After a period of
limited success with religious and philanthropic experiments in
education, society after society created systems of publicly funded
and administered education. In the United States this system is
decentrally structured and supported by broad based taxes (collected
in large part at the local level from owners of real estate).
The motivations to establish universal education were both
humanitarian and utilitarian. Industrial landlordism could expand only
so far using unskilled labor; technical and managerial positions
required individuals who possessed not merely basic literacy but sound
foundations in the mechanical and administrative arts. German reforms
of the mid to late nineteenth century sought to produce an educated
populace for its bureaucratic, militaristic and industrializing State.
Britain was struggling with an increasingly rigid class division
between the propertied and the unpropertied and ended up with the
distinctly two tiered educational system that continues today. A real
concern of many nineteenth century Americans (meaning those of Anglo
European heritage) was that the millions of immigrants arriving from
southern, central and eastern Eurasia would jeopardize the existing
value system by introducing different social, cultural and political
norms. Providing publicly-funded and administered education was a
means of Americanizing new arrivals and bringing them into the
mainstream. A system of land grant colleges established during the
century provided additional opportunities for individuals who settled
far from the urban centers to gain a liberal education in the Western
classics and in agricultural practice. An explosion in both public and
private funds made available over the last forty five years for
scholarships and financial assistance has opened the doors to a
college or university education for tens of millions of U.S. citizens
and foreign visitors. Similar and even more aggressive programs were
implemented in many of the other social democracies, the former Soviet
bloc nations and even in nations governed by overtly despotic regimes.
The need to control what information people acquired had to be
balanced against the needs of regimes for competent persons in all
sorts of technical and administrative positions.
Despite the remarkable achievements of the educational systems as a
group, the need for reform has become apparent even to their
staunchest defenders. In the United States, far too many young people
leave our secondary schools ill equipped for the responsibilities of
citizenship. Millions more do not even complete a full twelve years of
formal childhood schooling. For a variety of reasons, far too many of
our schools are unable to meet the individual needs of youngsters.
Schools are not very good at responding to the needs of children who
do not mature emotionally, intellectually or physically according to
the norm established based on chronological ages. Moreover, the
stresses of daily life experienced by many students materially affects
their ability to learn. Although this is understood today more than
ever before, the responsiveness from government and the educational
establishment has been insufficient and has improved the quality of
education only marginally. Millions of children leave our schools as
functional illiterates, their ability to function as productive
members of society severely impaired. To a considerable extent,
teachers face an almost impossible task.
One of the reforms frequently discussed today is that of providing
choice, meaning that parents and youngsters ought to have many
more options in the selection of an educational opportunity than have
traditionally been available. For the most part, choice has
historically involved the one public school within walking distance or
to which bus service was provided, or paying tuition to attend a
parochial or other private school. Access to privately operated
schools has been largely restricted to youngsters whose families could
afford the expense of high tuition and, in many cases, full time
boarding. At the same time, all owners of real estate contribute via
the tax system to the cost of public education. Moving to a voucher
system, under which each child is supported by some amount of public
scholarship based on the income of parents or guardians, while
allowing parents to select the school would create a far more
competitive educational environment and stimulate the design of
programs directed to the needs of individual children rather than to
the needs and priorities of administrative bodies.
As we examine the opportunities to reform our educational systems, we
ought also to consider a gradual plan to phase out publicly operated
schools altogether. Schools operated according to community standards
do not necessary meet the needs of all households living in a
particular community. Moving to privatization opens the door to
greater choice; however, there are also real concerns over the
creation of a system of for profit schools that are also owned by
disinterested shareholders whose primary interest is in profit
maximization. A much better approach to privatization is the
professional association. Teachers who share the same educational
philosophy should be encouraged to come together (much the same way as
attorneys or physicians do) to form a school. These professionals
would then hire administrators to help implement policies the
teacher/owners decide upon. In our publicly operated and parochial
schools, as well as the overwhelming majority of privately operated
schools, the individuals most directly involved in the process of
education are employees who have nominal input into the development of
curriculum, selection of new staff or the establishment of standards.
At the college and university level many of the same problems exist.
Professors are rewarded not on the basis of their effectiveness as
classroom instructors but for their status as researchers or scholars.
How is it possible that students attending prestigious universities in
the United States can complete their undergraduate requirements
without ever encountering an actual full-time professor in the
classroom? Undergraduate education, arguably the place where our best
instructors are needed, is too often left in the hands of graduate
students or part time faculty, some of whom speak English as a second
language and are not able to communicate effectively in the first
language of their students. I have not performed the research to
ascertain the extent to which this still occurs in the United States;
a number of states have adopted legislation that requires institutions
of higher education to more effectively monitor the language skills
of instructors. The institution of tenure has also isolated professors
from the rigors of competitive pressures existing in most other
societal arenas. Here, again, the more appropriate structure for
colleges and universities is to have the professors associated as
equal partners, each required to perform at a high level, and that
high level determined in large part by their ability to attract and
retain paying students. As was once written by a remarkable teacher,
the difference between an educator and an educationist is that the
former hangs out a shingle and students come voluntarily, while the
latter is assigned to teach courses to students required to attend.
Where Individual and Societal Responsibilities Collide
We are constantly reminded by the reporting of the news just how
frequently individuals commit criminal acts against others. Social
scientists continue to debate the extent to which these outbursts are
a function of neglect or mistreatment during the individual's early
years when nurturing by biological parents and by others operate to
instill values and guide behavior. At birth, the rights of the
individual - who is essentially helpless -- are the proper subject of
protection by society. Therefore, the system of law and
socio-political arrangements created out to establish minimum
standards for nurturing. Where the biological parents fail to meet
this standard, government has the responsibility and should be given
the authority to intervene. In legalistic terms, a child is by nature
an incompetent party requiring parental and societal nurturing until
such time as competency is demonstrated. At that point, what had
amounted to a trustee responsibility held by society is diminished.
Competency entitles the individual to full benefits of citizenship
(i.e., freedom of action subject to the constraints of just law). The
exercise of citizenship is the exercise of liberty; actions that
infringe on the liberty of others are by definition licenses. What has
been most difficult for societies to resolve is to distinguish between
liberty and license and to structure law accordingly.
Of almost equal difficulty has been the question of how to deal with
incompetencies voluntarily (or nearly so) brought on by the actions of
an individual who was at one time fully competent.
As societies, we have yet to come to terms with the two major causes
of voluntary incompetency: alcohol and substance abuse. The minimum
level of societal involvement ought to center on the impact the
behavior of these individuals has on others. An individual under the
influence of alcohol or drugs is far more likely to act in ways that
result in the exercise of criminal licenses from failure to provide
appropriate nurturing to dependent children, physical and mental abuse
of a spouse, and assault or worse against others. While addiction to
alcohol and drugs is certainly an illness, the issue facing society is
how to balance treatment of the individual with the responsibility to
protect citizens from criminal license. Does society have the
responsibility (and should government be given enough authority) to
act proactively when the risk of criminal license is high? Or, must
society wait until someone actually commits a criminal act as
justification for isolating that individual from others? We already
make these decisions every day, but the dynamics of our socio
political arrangements, our institutions and our enforcement agencies
provide neither liberty nor security. When society does a better job
of protecting the rights of our incompetent members and in creating a
socio political environment that secures equality of opportunity, we
will experience fewer and fewer cases of criminal behavior occurring
because of an individual's financial desperation. Anti societal
attitudes will diminish when community is strengthened and the sense
of belonging nurtured. At the same time, enforcement of just laws acts
as a break on the individual whose actions exceed the bounds of
liberty regardless of cause.
The issue receiving more public attention and debate than almost any
other is what, if any, rights are possessed by the unborn child. Is
the life growing within the womb of a woman by nature part of that
woman until the child is actually born? Or, is the biological parent
merely a host, who by virtue of pregnancy, acquires nurturing
responsibilities to a human life in the process of formation? Modern
technology has added a dimension of complexity by replicating the
physical environment within which human life can successfully develop.
The biological mother is, in fact, no longer absolutely essential
after around the sixth month of development. Extremists on one side of
the debate take the position that life begins when a sperm enters an
egg and a zygote is formed; extremists at the opposite end argue that
life begins only after the fetus leaves the womb as a result of the
natural birthing process.
To satisfy the moral principles espoused by the first group, a woman
must primarily be considered a biological host and only secondarily as
a mother. This distinction is crucial, in that if the first
circumstance becomes the basis for law, then the decision of the woman
to continue nurturing beyond delivery of the child must be voluntary.
Society would have the primary responsibility for nurturing once birth
has occurred. In the second instance, the decision of whether or not
to accept the condition of pregnancy and the superior right and
responsibility of nurturing would rest with the woman, as biological
mother. In either event, society retains both the obligation and
authority to intervene on behalf of the child; however, the
responsibility to do so is immediate and primary when the woman is
required, as biological host, to subordinate control of her body to
the rights of the growing child.
From the perspective of forming appropriate public policy, the most
important responsibility of society is to instill sound moral values
in young adults, who, as a group demonstrate a strong desire to
experience sexual fulfillment but who do not yet possess the emotional
maturity and economic means to provide positive nurturing to children.
What must be said, however, is that this responsibility must
accommodate a diversity of sentiment on the subject of sexual
activity. Some individuals believe strongly that sexual activity
outside the marital relationship is morally unacceptable. Others see
sexuality as merely one aspect of our humanity that has no attachment
to gender or formalized relationships. Here, again, the interest of
society is in the health and safety of citizens, and all schools (and
specifically those receiving any form of public subsidy) ought to be
required to provide education on the diseases that can result from
certain patterns of sexual activity and what measures need to be taken
for prevention. When schools are formed by educators with similar
philosophies in mind, schools will advertise to parents that they
attempt to instill particular values in the students, and parents will
have the opportunity to choose which sexual curriculum and value
system they wish their children to be exposed to. Safeguards, in the
form of minimum standards, are appropriate and must be guided by the
principle of protecting the most vulnerable of our citizens from
physical or mental mistreatment.
Protecting Our Purchasing Power
By Making Money and Credit a Private Affair
One of the most consistent ways governments have historically
affected the purchasing power of individuals is by the imposition of
taxes. As has already been discussed, when revenue is raised by taxing
individual labor or the wealth we produce with our labor and use of
capital goods, these policies represent attacks on natural property.
Where socio political arrangements allow for adequate debate on public
policy choices and require something greater than a simple majority
before implementing taxes on assets, matters of greater public good
may generate a consensus to impose taxation beyond primary sources of
revenue (i.e., the annual rental value of locations and other forms of
license). The second means by which governments transfer purchasing
power from individuals to themselves is by requiring the use of a
central bank's paper currency as legal tender and, further, by the
self creation of credit. This occurs when the central bank prints
currency in exchange for government bonds. Government pays its
employees with this new currency and spends the remainder into
circulation - without having to provide public goods or services in
exchange.
Whether government is in the hands of a monarchy, an oligarchy, a
representative body or a bureaucratic state, one consistent behavior
is the propensity to spend more than is received in revenue. Sitting
governments have always willingly spent to build monuments to
themselves with funds taken from private individuals and entities.
And, all too often the public is required to pay for adventuristic
wars or colonialism, to the enrichment of the few at the expense of
the many. We also know from experience that socio political power and
the accumulation of personal fortunes feed off each other, with the
result that those who benefit most by government spending manage to
shift the cost onto others by the mechanism of government borrowing at
interest.
A considerable part of the problem in the United States can be traced
to legislative and administrative laws that went far beyond the powers
granted to the Federal government under the Constitution. Although the
Constitution permits the government to borrow money, the original
definition of
money as gold and silver coinage has been subverted by the
issuance of Federal Reserve notes as legal tender for all government
debts. Not since the early years of the Bank of Amsterdam in the
sixteenth century has any society experienced the enormous benefits of
sound money and honest banking. Within a few decades after its
creation, the Bank of Amsterdam's directors discovered the short run
ability to issue bank notes not backed by gold or silver coinage held
on deposit. This is what is meant by fractional reserve banking. Every
banking system subsequently established has followed the Bank of
Amsterdam down this fraudulent path, producing frequent and often
catastrophic panics. Today, when the United States government desires
to borrow currency from private investors, the Treasury Department
offers government securities for sale which, in effect, are claims
against future tax revenue (and, more frequently, against the revenue
raised by the issuance of even more securities). The Federal Reserve
Banks are under no obligation to hold as reserves gold or silver or
any other commodities - or contractual claims to such commodities --
to which the redemption of Federal Reserve Notes ought to be tied. The
Board of Governors of the central bank attempts to make use of its
authority to control the supply of currency and how much currency
banks must hold in reserve to keep the purchasing power of currency
relatively stable. What is also interesting is that if the Federal
government's need for revenue is sufficiently high, the funds borrowed
by commercial banks from the Federal Reserve might very well be
reinvested in the securities issued by the Treasury Department.
Under the existing structure, the stability of the world's financial
system is dependent upon public confidence. Increasingly, this also
includes confidence by foreign investors that U.S. government
securities represent a safe harbor for their financial reserves. As
the national debt of the U.S. government continues to escalate year
after year, the amount of revenue that must be raised from taxation
just to service this debt is staggering. As of early in 2004, the U.S.
government debt stood at over $7 trillion and climbing. Assuming an
average annual cost of funds of just 3 percent, the amount of tax
revenue required annually to service this debt comes to $210 billion.
Before the government is able to spend one dollar on programs that
actually maintain or improve the nation's physical, social or
intellectual infrastructure, each household must be taxed nearly
$2,000 on average. Inasmuch as almost 16 percent of all households
receive incomes insufficient to pay Federal income taxes, the average
tax payment required of the remaining 79 million households is nearly
$2,700. As Federal government borrowing increases, the rate of
interest tends to increase, raising the above figures accordingly. In
no country today is there any serious consideration given to
retirement of national debt, and economists generally seem to be
either silent on the seriousness of this problem or argue that the
debt is not a real drain on economies so long as the debt is not
increasing as a percentage of gross domestic product. Perhaps. We
will, of course, discover in due course whether this assertion holds
true over the short run, the medium run or the long run (the long run
taking us out to the time when most current taxpayers have died and
the problem is handed to the next generation).
We must introduce measures to reign in the ability of government to
spend without having to gain direct permission from the electorate.
The first step is to prohibit by constitutional amendment government's
self creation of credit. The revenue for all current expenditures must
come from taxation. Physical infrastructure, such as highways, mass
transit, bridges, public facilities, ought to be financed by fully
amortizing bonds issued for periods tied to the anticipated life of
the improvements constructed. The annual budget would then include
taxes levied sufficient to cover all interest and principle payments.
Getting the Central Banks out of the business of issuing currency can
be accomplished by the creation of a competitive system of banks of
deposit. These banks would have no lending powers; rather, they would
take in currency and purchase precious metals and other commodities,
establishing for members an account balance against which purchases
from other members would be recorded electronically. Over time, a
network of these banks would link producers and consumers together in
a system that automatically debits and credits member accounts when
transactions between members occur. Losses for bad debts would become
a thing of the past. Eventually, vendors could condition contracts
with government agencies on their membership in the system. The banks
of deposit would earn fees charged to each member for the management
services provided. Many existing commercial banks would become members
as well out of self interest. With a global system established,
Gresham's Law is made to work in reverse: good money will drive out
bad, as market participants opt to exchange goods and services only
with other bank of deposit members. Over time, the central bank
currency will circulate at increasingly deep discounts - unless they,
too, reorganize as banks of deposit. For transactions of relatively
small amounts, national mints could be contracted by the banks of
deposit to produce gold and silver coins of a standard metallic
content.
A FINAL WORD
I have finally come to the end of this very long and detailed
analysis of our history and our socio-political arrangements and
institutions. To the best of my ability, I have provided the reader
with the tools of analysis I have found useful in my own search for
understanding. For me, the challenge now is to do whatever I can to
assure the torch of
cooperative individualism remains lighted and passed on to as
many others as possible. My hope, of course, is that you will find
reason to join me on this journey. There is much to do and, perhaps, a
not very wide window of opportunity for action. While many thoughtful
people have come to accept the appropriateness of a transnational
system of values as the basis for law, we are experiencing a strong
counter-movement embracing moral relativism. Whereas we had reason to
hope that with the collapse of Soviet state-socialism the world's
resources would be redirected to the improvement of our well-being,
ancient and modern hatreds have been unleashed. The words of Eric
Hoffer, written in 1977, continue to have the ring of truth:
A disconcerting aspect of our time is that we do not
know what is happening to us. Rapid, drastic change means the
intrusion of the future into the present with the result that the
present has become as unpredictable as the future. We do not know
whether the present crisis is an ending or a beginning; whether we
are descending or ascending.
Increasingly we are being separated from our past. We are a
different people living in a different country, and we know that we
shall become more different as time passes. There is a vague fear
that even if we manage to solve all our problems we shall be less
than what we have been. We shall merely survive.[114]
Throughout the world there is this conflict between those who hold to
the basic equality of all persons and those who hold to the
sovereignty (and superiority) of their own specific sub-group. At the
same time, the human attack on the earth's life-supporting systems
seems to be accelerating. A great worry for me is that we are running
out of time. This dilemma did not occur to Paine or George in their
time. As George looked over his completed manuscript of Progress
and Poverty, he added a powerful footnote:
The truth that I have tried to make clear will not find
easy acceptance. If that could be, it would have been accepted long
ago. If that could be, it would never have been obscured. But it
will find friends - those who will toil for it; suffer for it; if
need be, die for it. This is the power of Truth.[115]
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